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Savings and Investments thread

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  • I would love to add my thoughts onto this thread, but as a regulated individual & IFA anything I say may be misconstrued as advice...and also I will need to be paid !!



    But if you give your thoughts for free, we know you have no vested interest, which is the problem hanging over every IFA...

    :-)
  • 62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.
  • I would love to add my thoughts onto this thread, but as a regulated individual & IFA anything I say may be misconstrued as advice...and also I will need to be paid !!


    Surely your own view as an individual is allowed, just put a disclaimer on.....
  • For those who like to pick their own stocks or who are interested in how to judge company fundamentals you might want to read this article and invest in the Graham and Dodds book?
    Warren Buffet recommends it and he seems to know what he's doing :smile:

    http://business.financialpost.com/investing/global-investor/its-fundamental-why-warren-buffett-beats-the-stock-market-how-have-investors-missed-it-for-so-long?__lsa=6cc5-07f2

    Been looking into the different types of funds and came across the following.

    Warren Buffet is in the last 2 years of a 10 year $1M bet for charity where he bet that a simple low cost tracker fund would out perform any managed hedge fund. Apparently his fund has performed better every year and for most years significantly better. Still quite a bit ahead apparently. A lot of it simply down to the fees and %'s that are charged on individual funds compared to tracker funds.
    He also has publicly stated that 95% of people should just stick to trackers.
    Just found someone like him saying and doing that interesting.



  • Rob7Lee said:

    62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.

    Sorry if we've been through this before, but if the US tracker is a UK fund, and therefore priced in £'s, surely the exchange rate is working against us?

  • Rob7Lee said:

    62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.

    Sorry if we've been through this before, but if the US tracker is a UK fund, and therefore priced in £'s, surely the exchange rate is working against us?

    The underlying holdings are in $, you can't change that.

    i.e. buy a share at $1.50 when it was 1-1.5 means that 1 share cost £1.
    Now same share is still worth $1.50 exchange rate means that share is now worth £1.15

    15% gain yet the share hasn't moved.
  • Rob7Lee said:

    Rob7Lee said:

    62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.

    Sorry if we've been through this before, but if the US tracker is a UK fund, and therefore priced in £'s, surely the exchange rate is working against us?

    The underlying holdings are in $, you can't change that.

    i.e. buy a share at $1.50 when it was 1-1.5 means that 1 share cost £1.
    Now same share is still worth $1.50 exchange rate means that share is now worth £1.15

    15% gain yet the share hasn't moved.
    yes, I see that for shares. But is that how it works for funds? Just that when I started investing in funds focused outside the UK in the early 90s my so called IFA was always warning me about the exchange rate factor. He was, it has to be said, an idiot, who lost both me and my Mum a bit of money, but even so, at the time, what he said appeared to make sense

  • DRAddick said:

    For those who like to pick their own stocks or who are interested in how to judge company fundamentals you might want to read this article and invest in the Graham and Dodds book?
    Warren Buffet recommends it and he seems to know what he's doing :smile:

    http://business.financialpost.com/investing/global-investor/its-fundamental-why-warren-buffett-beats-the-stock-market-how-have-investors-missed-it-for-so-long?__lsa=6cc5-07f2

    Been looking into the different types of funds and came across the following.

    Warren Buffet is in the last 2 years of a 10 year $1M bet for charity where he bet that a simple low cost tracker fund would out perform any managed hedge fund. Apparently his fund has performed better every year and for most years significantly better. Still quite a bit ahead apparently. A lot of it simply down to the fees and %'s that are charged on individual funds compared to tracker funds.
    He also has publicly stated that 95% of people should just stick to trackers.
    Just found someone like him saying and doing that interesting.



    I've always thought that & only ever invested in trackers.
  • 'Funds' is a bit of a general term.

    But I read what Rob7lee wrote and it made sense to me.

    You buy £100 of units in a US equity fund in 2005 and get USD 150 of underlying investments.

    You do nothing and the underlying assets do nothing, today with the exchange rate at 1.30 say, your fund is worth £115.

    Now if you really want the money in euros then you have to reconvert.
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  • Rob7Lee said:

    62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.

    Sorry if we've been through this before, but if the US tracker is a UK fund, and therefore priced in £'s, surely the exchange rate is working against us?

    Would you buy grapes rather than bananas just because £1 buys more grapes than bananas?

    It doesn't matter how many units you get, it's how much you get when you sell them relative to how much you paid.

    Your UK fund is also exposed to exchange rates, it's just that you don't see the exchange rate conversions on the dividends remitted in various currencies and converted to sterling, only the fund manager sees that. He can buy shit stocks and look good because the exchange rate went in his favour and vice versa.

    The stronger your local currency the harder it is to profit from overseas investment and vice versa, but it's the trading not the act of buying that is impacted by exchange rate differences.

  • Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

  • edited August 2016

    Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    One would have thought so. But, of course with sterling down against the euro and the champagne crop quantity down a third this year as it was badly affected by the weather, it will cost you more to celebrate.
  • Rob7Lee said:

    62% is that odd part on earnings between £100 and £120k that is taxed at 62% (as you lose your tax free allowance hence adds another 20% on).

    If you have any shares abroad (i.e. a US tracker) the exchange rate will have helped, same on Euro.

    Sorry if we've been through this before, but if the US tracker is a UK fund, and therefore priced in £'s, surely the exchange rate is working against us?

    Would you buy grapes rather than bananas just because £1 buys more grapes than bananas?

    It doesn't matter how many units you get, it's how much you get when you sell them relative to how much you paid.

    Your UK fund is also exposed to exchange rates, it's just that you don't see the exchange rate conversions on the dividends remitted in various currencies and converted to sterling, only the fund manager sees that. He can buy shit stocks and look good because the exchange rate went in his favour and vice versa.

    The stronger your local currency the harder it is to profit from overseas investment and vice versa, but it's the trading not the act of buying that is impacted by exchange rate differences.

    Grapes, always. Bananas are the work of the devil.
  • Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    Yes
  • Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    If you look at what it is tracking it is a World Index fund not the Dow Jones Index. The Dow Jone Index only measures 30 of the largest US corporations.

    Only 87% of the North America fund is in companies which make up the Dow Jones Index, and your fund includes companies trading all over the world, including the UK. Don't ask me why its called a North America Fund. If you want Dow Jones tracking it would have to be a specific Dow Jones Tracker fund. So for many reasons, including global exchange rates, not just dollar rates, your performance bears no correlation to the Dow.

    You should ask the fund manager for an attribution chart showing returns by region and sector and in local currency as well as sterling equivalent.

    If it was an active fund you would want a whole lot more attribution information that would show how much performance was down to luck such as timing of cash flows, and how much was down to their strategy being right and how much was contributed by poor or good decisions. If it performed well because one bet came off out of 50 that failed, that's an important piece of information around attribution of performance.

    There's a measure called tracking error which shows the deviation between target returns and the strategic benchmark they are seeking to outperform. The higher the tracking error the more risk is being taken to achieve the target return. Every single manager maintains such measures. It might be counterintuitive, but choosing managers on how much they beat the benchmark last year is naive. If returns are higher than they are targeting, then either they are not investing in line with their strategy, or they have achieved returns through wrong decisions that by chance came good.

    Which is why crap managers rely on uninformed investors who only look at performance, to attract business, and then the fund crashes. It's why the industry would rather investors remain uninformed, and, sorry @golfaddick , not you personally, but why IFAs, who are only interested in a sale, have traditionally been part of the conspiracy to keep savers uninformed and feed them what clinches a sale.

    The reasons for Buffett recommending tracker funds to regular investors is in part because active managers prove they can't consistently beat the tracker funds after costs are taken into account, but more importantly, savers are not sufficiently informed to discriminate between good investment managers and bad ones, when the only metric savers are inclined to rely on is absolute performance figures.

    Anyone choosing funds who is not looking at attribution characteristics is playing the game blind. If more people asked for them it might lead to more informed decisions.
  • Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    If you look at the link Richard you will see the top 10 underlying holdings and then by country, 86% is in the US and will be held in Dollars.

    Of course the opposite can happen (which to be fair may have been what your IFA was referring to), when the exchange rate movement flips the other way you will lose value.
  • Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    If you look at what it is tracking it is a World Index fund not the Dow Jones Index. The Dow Jone Index only measures 30 of the largest US corporations.

    Only 87% of the North America fund is in companies which make up the Dow Jones Index, and your fund includes companies trading all over the world, including the UK. Don't ask me why its called a North America Fund. If you want Dow Jones tracking it would have to be a specific Dow Jones Tracker fund. So for many reasons, including global exchange rates, not just dollar rates, your performance bears no correlation to the Dow.

    You should ask the fund manager for an attribution chart showing returns by region and sector and in local currency as well as sterling equivalent.

    If it was an active fund you would want a whole lot more attribution information that would show how much performance was down to luck such as timing of cash flows, and how much was down to their strategy being right and how much was contributed by poor or good decisions. If it performed well because one bet came off out of 50 that failed, that's an important piece of information around attribution of performance.

    There's a measure called tracking error which shows the deviation between target returns and the strategic benchmark they are seeking to outperform. The higher the tracking error the more risk is being taken to achieve the target return. Every single manager maintains such measures. It might be counterintuitive, but choosing managers on how much they beat the benchmark last year is naive. If returns are higher than they are targeting, then either they are not investing in line with their strategy, or they have achieved returns through wrong decisions that by chance came good.

    Which is why crap managers rely on uninformed investors who only look at performance, to attract business, and then the fund crashes. It's why the industry would rather investors remain uninformed, and, sorry @golfaddick , not you personally, but why IFAs, who are only interested in a sale, have traditionally been part of the conspiracy to keep savers uninformed and feed them what clinches a sale.

    The reasons for Buffett recommending tracker funds to regular investors is in part because active managers prove they can't consistently beat the tracker funds after costs are taken into account, but more importantly, savers are not sufficiently informed to discriminate between good investment managers and bad ones, when the only metric savers are inclined to rely on is absolute performance figures.

    Anyone choosing funds who is not looking at attribution characteristics is playing the game blind. If more people asked for them it might lead to more informed decisions.
    Interested in your views on Tracker Funds please.

    I have this probably naive concept that they are likely to be slightly worse than bland. This because they are forced to track. So, if you take a FTSE100 tracker, it is (presumably?) obliged to dump shares that fall out of the index (which means the share has performed less well than the rest of the index and is possibly at a low point) and buy the new entrants (which, by definition have already just had a big price hike (which is what got them into the index in the first place). Does this not mean that tracker funds are buying and selling holdings at precisely the wrong time? That is, after the movement in price has already happened. Take Berkeley Group as an example. Currently in the FTSE100 but actually ranked by capitalisation as only 112.

    I also guess that being a tracker, they are weighted according to market capitalisation of the constituents (as is the FTSE itself)? So, FTSE funds are by definition top-heavy in a small number of companies and a very small number of sectors. So risk is not very well spread. Maybe impact is tiny because the stock rated in the 100 position has only around
    3% of the value of the stock in position 1.
  • Tracker funds or tracker exchange traded funds I think are currently thought to give better performance in most circumstances for most investors.

    You may not choose the tracker fund that is tracking the right index, and FTSE 100 trackers may not be what you want.

    However, generally, well matched tracker funds that hit their benchmark still have much lower costs than actively traded funds and it is the costs that make the difference particularly in the current persistent low yield environment.

    Active fund managers charging 3% would have to create a lot of alpha return to beat a tracker or selection of trackers charging 0.5%. Particularly if total yield is around 5-7%.

  • Tracker funds or tracker exchange traded funds I think are currently thought to give better performance in most circumstances for most investors.

    You may not choose the tracker fund that is tracking the right index, and FTSE 100 trackers may not be what you want.

    However, generally, well matched tracker funds that hit their benchmark still have much lower costs than actively traded funds and it is the costs that make the difference particularly in the current persistent low yield environment.

    Active fund managers charging 3% would have to create a lot of alpha return to beat a tracker or selection of trackers charging 0.5%. Particularly if total yield is around 5-7%.

    Read and take note.
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  • From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

  • LenGlover said:

    From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

    You can invest in trackers from as little as £50pm or say a lump sum of £500.
  • LenGlover said:

    From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

    You can invest in trackers from as little as £50pm or say a lump sum of £500.
    just about to post the same. Although I'm not an advocate of trackers they can play a part in a portfolio & have a couple of vanguard funds invested for my clients.
  • edited August 2016

    LenGlover said:

    From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

    You can invest in trackers from as little as £50pm or say a lump sum of £500.
    just about to post the same. Although I'm not an advocate of trackers they can play a part in a portfolio & have a couple of vanguard funds invested for my clients.
    I don't profess to know much at all but this is what I found:

    https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9666&assetCode=BALANCED##overview

    The Key Fund Facts refer to a minimum initial investment of £100K.
  • LenGlover said:

    LenGlover said:

    From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

    You can invest in trackers from as little as £50pm or say a lump sum of £500.
    just about to post the same. Although I'm not an advocate of trackers they can play a part in a portfolio & have a couple of vanguard funds invested for my clients.
    I don't profess to know much at all but this is what I found:

    https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9666&assetCode=BALANCED##overview

    The Key Fund Facts refer to a minimum initial investment of £100K.
    I'll ask my butler to look into it and report back.....
  • On digging a bit deeper I think the £100K requirement refers to individual direct investors.

    If you use a 'platform' then smaller sums can be invested.

    I guess the question then is which platform (s) is/are 'good' both in terms of not ripping you off for charges and getting a decent return?

    Yes I know 'cake and eat it' but isn't that the true aim of all investors if they are honest?
  • cafcfan said:

    Sorry if I am being thick.

    Lets take this Blackrock North Amercian Equity Tracker, which you buy and sell in £s

    It has risen steeply since Brexitday. 17%. As far as I can see from the graph the Dow Jones has risen just under 8%. So does that mean that the difference is a result of the sterling fall?

    If you look at what it is tracking it is a World Index fund not the Dow Jones Index. The Dow Jone Index only measures 30 of the largest US corporations.

    Only 87% of the North America fund is in companies which make up the Dow Jones Index, and your fund includes companies trading all over the world, including the UK. Don't ask me why its called a North America Fund. If you want Dow Jones tracking it would have to be a specific Dow Jones Tracker fund. So for many reasons, including global exchange rates, not just dollar rates, your performance bears no correlation to the Dow.

    You should ask the fund manager for an attribution chart showing returns by region and sector and in local currency as well as sterling equivalent.

    If it was an active fund you would want a whole lot more attribution information that would show how much performance was down to luck such as timing of cash flows, and how much was down to their strategy being right and how much was contributed by poor or good decisions. If it performed well because one bet came off out of 50 that failed, that's an important piece of information around attribution of performance.

    There's a measure called tracking error which shows the deviation between target returns and the strategic benchmark they are seeking to outperform. The higher the tracking error the more risk is being taken to achieve the target return. Every single manager maintains such measures. It might be counterintuitive, but choosing managers on how much they beat the benchmark last year is naive. If returns are higher than they are targeting, then either they are not investing in line with their strategy, or they have achieved returns through wrong decisions that by chance came good.

    Which is why crap managers rely on uninformed investors who only look at performance, to attract business, and then the fund crashes. It's why the industry would rather investors remain uninformed, and, sorry @golfaddick , not you personally, but why IFAs, who are only interested in a sale, have traditionally been part of the conspiracy to keep savers uninformed and feed them what clinches a sale.

    The reasons for Buffett recommending tracker funds to regular investors is in part because active managers prove they can't consistently beat the tracker funds after costs are taken into account, but more importantly, savers are not sufficiently informed to discriminate between good investment managers and bad ones, when the only metric savers are inclined to rely on is absolute performance figures.

    Anyone choosing funds who is not looking at attribution characteristics is playing the game blind. If more people asked for them it might lead to more informed decisions.
    Interested in your views on Tracker Funds please.

    I have this probably naive concept that they are likely to be slightly worse than bland. This because they are forced to track. So, if you take a FTSE100 tracker, it is (presumably?) obliged to dump shares that fall out of the index (which means the share has performed less well than the rest of the index and is possibly at a low point) and buy the new entrants (which, by definition have already just had a big price hike (which is what got them into the index in the first place). Does this not mean that tracker funds are buying and selling holdings at precisely the wrong time? That is, after the movement in price has already happened. Take Berkeley Group as an example. Currently in the FTSE100 but actually ranked by capitalisation as only 112.

    I also guess that being a tracker, they are weighted according to market capitalisation of the constituents (as is the FTSE itself)? So, FTSE funds are by definition top-heavy in a small number of companies and a very small number of sectors. So risk is not very well spread. Maybe impact is tiny because the stock rated in the 100 position has only around
    3% of the value of the stock in position 1.
    First of trackers will not make sense to you if you think that the secret of investment success is stock picking. In theory, active management. that's stock picking, should be the route to optimising returns. The problem is no one can predict the unknown unknowns that can render every piece of financial analysis worthless once in a while.

    Secondly many active funds are little more than tracker funds with window dressing. An active fund manager must beat the market or he has failed to deliver. To reduce the risks of not beating the market he will invest most of the funds in the stocks that comprise the index, or use instruments to hedge against missing the market returns. The then just plays with a small portion of the fund to make overweight or underweight allocations by sector or asset class. Tracker funds are only sneered at by active managers who believe their own hype that they can beat the market, or people who believe the hype.

    At wholesale level you can buy tracker funds for 50p per £1,000 of holdings. As the tracker return is measured after charges, and it hits the benchmark, you are paying no premium for getting outperformance equal to your charge. You have to look at nothing else but net returns after charges, not headline performance before charges.

    For an active fund, charging upwards of 3.50p and nearer to 6.50p per £1,000, the part of the fund not tracking the index has to massively outperform the market to make up loss in return represented by charges just to get NET returns form a tracker. So if an active manager obtains 90% of his returns by tracking the index and 10% from being out of line with the index it would have been cheaper for you to put 90% of your money in a tracker and give 10% to an active manager who chooses less than say a 100 stocks.

    Thirdly, if you understand that in an active fund, what asset classes are selected will account for 90% of the impact on returns, 5% will be contributed by manager skill in selecting stocks or asset class and 5% will be luck. All anyone talks about is the 5% bit of manager skill that only gives a return above the index 50% of the time.

    A tracker fund is simply a way of making bets on asset class selection without taking any risk on manager skill which is as likely to screw returns as enhance them. A tracker fund is a way of not paying a manger active management charges for running most of the fund in line with an index.

    So the answer to your concerns about trading in and out of the index is that it is a cost that is borne by the manager and if his tracking error is zero after charges why are you concerned about his costs. He has delivered what you paid for, it has zero impact on your returns. If you are in a tracker you are seeking index returns, nothing else is relevant if you actually get index returns.

    Risk around performance of companies that are in the index is not being managed in a tracker fund, what you are describing is what accounts for unpredictable volatility in the index. If you buy a tracker you are buying the volatility that goes with it.

    Tracking error is so poorly understood in the retail sector that you will find tracker fund that miss the index return, accounted for purely by hidden charges. So don't assume a tracker fund is a tracker fund unless you ask to see details of its tracking error.
  • LenGlover said:

    From what I can see you need serious money to get involved in trackers. Vanguard is the one I looked into briefly and their minimum investment is £100K!

    I know some CL posters are able to employ a fleet of domestic servants from previous threads but I'd wager that for most of us a minimum entry of £100K makes this a discussion of academic interest only.

    You can invest in trackers from as little as £50pm or say a lump sum of £500.
    Via a platform or IFA I assume?
  • Does anyone have an investment in Fundsmith? From what I've read it looks a pretty sensible long-term option in a low growth world.
  • I haven't "quoted" but thank you @Dippenhall

    I'll get myself a wet towel* wrap it round my head and see if I can grasp that lot.

    * Not Richie Towell, of course.
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