Picking Funds | The 3 Big Mistakes Everyone Makes (Pension/ISA/401K)
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- เผยแพร่เมื่อ 8 มิ.ย. 2024
- I am not recommending any of the funds featured in this video. They have been chosen purely for illustrative purposes and may not be appropriate for your personal situation.
This video is relevant for both UK and international investors (Pension, ISAs, 401K etc).
Financial Planning
I am a Chartered Wealth Manager and Partner in a financial planning practice based in the UK. If you would like to find out more about our services, please follow this link: go.novawm.com/getintouch
DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice. Any opinions or assessments expressed are James’ own opinions or assessments, which are not affiliated with any third party. Any representations stated as facts or views based on such facts are relevant to circumstances applicable at the time of publication. This information should never be relied solely upon to make decisions, and James accepts no liability for any investment actions undertaken by viewers. Please seek regulated financial advice or an advisor if you require assistance. The value of an investment and the income from it can go down as well as up and investors may not get back the amount invested.
0:00 Intro
1:53 The Funds
3:24 Fees
4:26 Performance
6:05 Thematic/Style
8:16 Active vs Passive
14:14 Geography
16:17 One Fund
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Please ask me any questions in a comment below!
Hello James, thanks for the video. I am currently only investing in Vanguard's Lifestrategy 80 fund. I put £300 in it every month and I am planning to do this for the next 30 years of my life (with only the view to save more money for retirement). I know the VSL80 is a huge fund of funds but my question is do you think it's "okay" to just invest in this as a means of investing money so it will grow? Or should I start to invest in an s&p fund also (as this has done well but I know that past results arent a reliable indicator). I am slightly worried by V's bias towards UK market given the current shit show of UK economic policy too. Cheers and keeo making these super helpful and informative videos!
@@DanielTeacherUK That would mean you're taking an active decision that you should be overweight on the US, given the LS80 already contains the US. Which is contrary to what James says at the end of his video.
Hi James I’m in a life strategy fund that is quick moving me into uk guilts as a de risking strategy but, guilts are now level 5. At the moments gilts are not performing that stabilising and security function. I know you can’t give specific advice but what are the general thoughts about gilts, why are life strategy funds doing this, can they still present a useful option, and if not how can you scope out bond investments that are more likely provide that function. Great video always good to listen to a new one
@@Whoop0 that’s true but could you also look at this as trying to balance out some of the uk bias in LS although I guess if you wanted to do that you’d look for a global ex Uk
@@czeital To do that properly you'd need to buy all of the world not just the US indeed. I think at that point if the slight bias bothers you it'd be easier to just sell LS80 and replace with a All-World index fund, and an appropriate bond fund with annual/whatever rebalancing.
I’m so glad TH-cam recommended me your channel - I’ve had many questions about all of this, and you’ve answered them all brilliantly. Thank you so much.
Great video thanks James, you’ve put into words many of the thoughts that run through my head when choosing investment options. How good to have this summarised in a short video and so much more eloquently than I could ever present 👍
100% global all cap in my SIPP and ISA, no crypto, no meme stocks. Boring perhaps but in 30 years time I'll be glad I chose this strategy. Thank you James, you produce tremendous educational content and are a shining light amongst a sea of finance youtuvbe charlatans.
Let's hope so!!!
I have some index funds that I contribute to regardless each month, individual stocks as well on another platform, a couple of small caps as well as various cryptos and now and again I take a risk on a short term crypto trade
@@alba8060 ¿porqué? Cuando eres scammer y ese persona no habla español...
Don’t you worry that despite the all world all caps, it’s highly correlated to every other fund. E.g. the small caps are 5% so aren’t going to do anything if a mega cap has a blip.
Same here !
One of the best videos I've seen on this subject, James. It should be mandatory viewing for all investors!
Another fantastic video James, keep them coming please!❤
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Great video James, a clinical dissection:-). I'm a big Vanguard fan too due to their low costs and fund options (for my Shares ISA) but my pension is with L&G (UK) and there are not the same options - any principle based advice? For me, it's a judgement on the hassle of trying to manually replicate a global tracker within L&G and associated complexity of management versus transferring out, with associated costs etc...
Absolutely phenomenal!
These videos are excellent - thank you.
I picked 11 different funds to fit within my company pension, each gets an equal part of the incoming money each month (i.e., 9%). 5 are what I would term 'benchmark' index funds (different risk levels, and an onshore equity tracker fund + offshore equity tracker fund), the remaining are as diversified as I can make them (regional equity index funds + specialist funds), all 6 of those are at the higher end of the risk scale, and all with low fees. So far I am consistently beating the 'adventurous' benchmark fund, although by a very small amount (5% or so, after 5 years). If I only had one fund it would be the 'adventurous'.
I'm all in on Fidelity Index World in both my ISA and SIPP.
“I know I don’t know.” Possibly the wisest words on so many things
Great content James.
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Great analysis James 🙏
I like this vid. Good insight and interesting analysis.
👍 Great video @James Shack. I have been a 'member' of Vanguard for a while now and very happy with it.
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I am new to the stock market. Every stock that I bought so far, I was out of luck because I bought them when they were expensive. I feel I missed out on all the stock opportunities so far for the tech stocks.I believe having 75K yearly income would be a good investment so I want to plug all my savings into the stock market. I know this sounds a bit dull but I would like to know if I should learn investing or let somebody else (more capable like a FA) do it for me? Please share your thoughts. I am kind of tired of searching for a good stock to buy and losing all the good opportunities
@jay pritchett Hi , please who is the expert assisting you and how do I reach out to them?
@jay pritchett Thanks for sharing, I just looked her up online and I would say she really does have an impressive background on investing
Very nicely put James.
Thanks for sharing. I chose to invest 70% in S&P500 excluding large tech stocks, (these have been hammered over the past few years) and 30% in large cap tech stocks so if they continue to do well as I expect, I still benefit, if smaller cap stocks do mediocre return, I disproportionately benefit.
Hi @James. So my VWRL is a great choice? I'm in Europe and will retire in Europe too.
Fundsmith's benchmark is the MSCI All World, not the S&P. Since inception, there have been quite a few times where it did beat the index; recently, it's struggled a bit more. The thing is, whatever point one wants to convey about X being better than Y, you will often find a time horizon during that held true, and another one when it didn't!
James mate, love your videos! Amazing to see how much your channel has grown since the start and your delivery and charisma have been highlights since the first time I met you! I have just maxed out both my own and Mai's NISA's in Miyazaki Japan this week at the local bank! Would be great to catch up some time when you are free. Much love - Si
Neil Woodford and Anthony Bolton (Fidelity) put me off managed funds. I have used low cost tracker funds for years
Hi James, as a cautious investor who needs to get her skates on in terms of building enough wealth for the future, I want to pick funds that are going to give me reasonable to high growth over the next 20 years. Although you very helpfully discuss the pros and cons of each fund, you haven't mentioned any defining factor that would make one fund better than the other. How can you choose a fund?
The biggest mistake is to not track living costs. How can you retire early (or at any time) without knowing how much it costs to live? The amount you need falls over time (less years to go) while the amount you have rises. When the lines cross, you are able to retire.
I cannot stress enough how dogsht most default workplace funds are. Do yourself a massive favour, choose a cash only option, and as soon as you get paid on a monthly basis, transfer it out immediately to a a decent SIPP. This assumes there is no transfer fee (usually not but check) but often makes sense even if there is a transfer fee. Even if there is no cash only fund, it usually still makes sense to just choose the absolute lowest fee fund you can with the options you have to work with and transfer out every month anyway. Can be an admin ball ache depending on the provider but well worth it - most are not too bad admin wise, only a few require actual paperwork. I once worked for a company whose fund literally required me to fill in paper forms and mail physical copies in order for them to do the transfer, absolutely ridiculous but well worth it and i made me even more determined to see the back of them
Good video James.
I don't think the size of Fund smith is a problem at the moment. As Terry points out himself the fund is invested 74% in US equities and Fundsmith wouldn't even be in the top 10 biggest US funds.
Your video is very interesting but it also sums up why so many people neglect their pensions and dont bother with delving into fund selection. Its all too complicated, there are too many options and there also isnt really a right answer in terms of the 'best fund'. That is why so many ppl just park their money in the default
Thanks James. Regarding your point at the end - by choosing a global index fund you would significantly overweight the US at about 60%, underweight UK, Japan, Europe, EMs etc, but for what reason? What about choosing 10 (or a decent number to diversify) of globally differing indexes but allocating to them equally, say 10% each? Would this not be a more logical approach if we're really unable to predict the winners and losers?
I'm an autodidact when it comes to investing and find content like yours incredibly helpful. Thank you. Do your recommendations for wealth management change for limited company contractors? I make full use of SIPP and S&S ISAs allowances each year, priortising the Vanguard All Cap as my sole fund. I prefer lump sum investments over 'dollar'-cost-averaging, as the literature suggests that is more effective. So do any of your recommendations change for limited company contractors?
Generally not from an investment perspective, but of course you have other tax concerns and options re pensions.
Hi James. I took your recommendations and we had a great time in London. We got stranded in London for two extra days due to a hurricane in the U.S. Getting back to the U.S. was not fun when the Tube shut down due to a train strike as we were riding to Heathrow. We sprinted through the terminal at Heathrow to get to the last gate where our plane was waiting for us. It was not for the faint of heart. I loved London. We stayed in Victoria Station neighborhood before moving to Russell Square for two days and we visited SOHO which I loved. Our flight cancellation to the U.S. sucked but we turned those lemons into fish and chips.
Great video. I'm using Vanguard index funds. I'm watching the market and only once in while now because it's too painful to see what's going on and for more worry to add to the pile, now we may have a global banking crisis coming. I've been buying "I Bonds" this year to try to get some return. I'm ready for some better news for investors.
That’s great to hear. I’m glad you had a good time. Everything over here probably seems cheap to you now ?! With the crash of the pound. It’s a great place for Americans to visit now.
@@JamesShack I will admit that I noticed the difference in the currency when paying and took advantage of the savings. The pound plummeted right before we got there. It's very rare that the pound would be lower or equal to the dollar. I think your new government may have sh*t the bed a little. I watched BBC Question Time broadcasting from and audience in Manchester and noticed that even the Tory voters in the audience were not having any of it. Every time the Tory government rep got asked a question, he tried to segway to the energy relief measures but the audience was not fooled. I was impressed with the broadcast and how the British people were holding officials accountable.
Thanks for another great video James. My pension was fully invested in expensive activity managed funds that were chosen by my company's pension advisor. By switching to passive index funds my overall fees decreased from 1.2% to 0.5% (including platform fees). Past performance figures are also better so it's a win. It's a shame that FTSE all cap isn't available on Standard Life and so need to buy developed world ex UK+ UK + emerging markets to make up the global investment.
We’ll that’s sounds like a good start from a fees perspective
Hi James. I’m an active investor so, whilst I disagree with many of the points, I thought this was a really good video. Thought provoking in areas. Your points around fund size in particular are possibly more powerful than you realise. Especially in relation to discretionary managers and model portfolios that are sleepwalk into the rear view quants you discussed. Not quite sure on your comments around ‘luck’ as this is quite insulting to the good ones. Although I appreciate that there are more bad than good. I only invest in Multi Asset funds so what are your thoughts please on HSBC’s global multi asset index funds, Premier Miton’s Diversified range & LGIM’s Multi index? Premier and HSBC consistently beat Vanguard and are also low cost and more diversified. My personal preference is because I like this active overlay from all three as I’m more in the skill than luck camp.
@@bobdunn3222 You can’t really say one index fund beats another, if they’re tracking different indexes then you can’t compare them. That’s like saying a S&P 500 fund has outperformed the rest do that’s what your should invest in.
You should choose an index fund based on asset allocation, ignore past performance, other then tracking error.
Which premier fund are you speaking of, they either look poor performing or have short track records ?
@@JamesShack Premier Diversified Growth. Ahead of Vanguard 60% over 1, 3 and 5 years. Re passive funds depends on asset allocation so it’s easy for one to outperform another. Plus they have a AA tilt whilst Vanguard I believe are passive, passive (although AA set out, at outset?) LGIM I concede is not really passive but index. From what I understand active AA and SS but executed via indexes to keep cows down.
Brilliant as always! I would love to see a video on how to approach sustainable investing - more and more people (myself included) are trying to be more conscious about which companies receive the benefits of our investments, and whether they are doing "good" - or at least not doing "bad". There are a few funds I have spotted that are marketed as sustainable - however these often have worse returns, or are limited in terms of diversity.
Do you have any advice on maintaining a successful diverse portfolio, while being conscious of the sustainability and impact of these investments? It's hard to know where to start!
Thanks!
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Can’t have your cake and eat it.
Excellent video and good explanation. I have a question: if you bought the Vanguard all world fund as a UK investor, should you also hold UK gilts, or is doing so an active investment call on the UK government? Would you be better off buying US Treasuries as your "safe asset" as the US dollar is still the world's reserve currency?
Buying gilts doesn’t count as active as you’re not trying to beat the market, just diversify your asset classes. Don’t buy Treasuries as you’ll have FX risk better to get gilts.
Amazing content James 👍😀 Thanks for creating these videos for us....I wanted to request if you can share your views or create a separate video on tilting our portfolio towards small cap value for home market (US, UK) and international both. It would be great if it addresses these points:
1) Small cap value/Factor investing is a lifelong commitment and there can be decades where they underperform the market and sometimes beat the market. But can't SCV act as then portfolio diversification tools only? Doesnt this same logic apply to people who say some decades US market wins and others for international?
2) Review of Avantis Investors products like AVUV
3) How much portfolio tilt to Small Cap Value is optimal 10%, 20% etc to avoid too much risk but still get the value? premium?
Thanks for the comment. It's more of an art rather than a science. The more you tilt the higher your expected returns, but the more concentrated to are the deeper you'll underperform during down cycles. Which may get much. 100% SCV/Factor would in theory produce the best long-term return, but there would be loooooooong period of dramatic underperformance. So you need to dial it back. It also depends on the concentrations of the products you use. Some products have a slight tilt within them. Others are very concentrated on one factor. I will do a more details video in the future,
Great content James! Past performance is no guide to future returns as the usual warnings tell you but isn't it fundamental to momentum investing (which i understand has been shown to be a successful strategy)?
Momentum is interesting, some theories suggest it goes against efficient markets others say it can be explained within the model , but it’s not that successful. It’s a high turnover strategy and the transaction costs eat up most if not all of the gains to be had.
Survivorship bias just BLEW my mind.
A 4th mistake people make is not evaluating their attitude to risk correctly. When I first got interested in investing, I thought "I'm generally a very cautious person, so I'm going to put those 20K£ in a lifestrategy fund with 20% stocks and 80% bonds". Until I watched more videos and understood that risk-aversion was less about my personality than it was about the consequences of loosing my investment. With a very stable job paying 80K£/year, no dept, and more money on the side, there was no reason for me not to be on a much "riskier"" fund (and by this I mean 80 to 100% in Vanguard All Caps, of course I didn't go towards crypto).
Excellent.
Excellent Advice, have to say every Fund I’ve invested in had tanked I’ve got 2 at the moment 18% & 12% down. The only Fund I’ve made money with was Woodford equity income and that was because I removed my money very early to purchase a house . The other outcome would have been my usual
Hi James.
I am looking to identify and to pick company stocks or ETA purchases based on specific industries and commodities which I believe will do well in the next year or more - based on the assumption that we are already on verge of currency and stock market crashes. So I am identifying investing in things like agriculture, energy, copper, lithium and companies which are involved in alternatives to fossil fuels because clearly the politicians want to push so called renewable energy production.
However, my question for you is....
...Assuming my intuition is correct that the £ and other currencies will devalue lots and many nations' economies and stock markets are possibly about to crash fast and hard, how do I hedge my bets on what to invest in, so that I cover both the possibility that regardless of how such companies or natural resources may rise in value, I hedge also for circumstances where the £ does devalue against the Dollar, versus also circumstances where the $ might be the one to devalue against the £.
I mention the above since if we ignore the investing opportunities, my day job running a tour company is hugely reliant on inbound USA tourists visiting the UK. While the £ loses its value against the $, my clients spend more money than they would otherwise. Thus, I really should be choosing to invest my savings, as I see it, to perform well in exactly the opposite circumstance of a cheap £ for US tourists.
Overthinking it mate. You might be in to something regarding the concepts but one of the main points of the entire video is that it doesn’t mean you or anyone else knows how to capitalize on it. If you try something and it “works”, it could just be dumb luck. Have a good cash reserve, globally diversify your portfolio, and call it good
Which “vanguard global all cap” are you referring to? There’s a few I can see on the vanguard site.
The accumulation global all cap. Re invests dividends automatically.
I have global all cap fund as my core fund but also satellite funds, such as emerging markets fund and high dividend yeald fund.
Maybe I am biased but I think that if I hold more than one equity fund in my portfolio, then I will benefit from rebalancing to my target weights. I basically force myself to sell high and buy low by rebalancing. This must be only good. So now I am selling global fund to buy emerging market fund. That last one underperformed more than the others.
If you were only in a global all cap then that rebalancing would be done for you, albeit not within your target weights but the market determined weights
What will be the effect of de dollarisation? It's going to happen
It's like your talking straight to me.
Great video, you have made me rethink my fund allocation to the s&p 500. Do you have any thoughts on emerging market funds hold for 40+ year time frame?
You know me, I'd just go for an index fund! But emerging markets is one of the areas where active management can do well, because information about these businesses is not freely available.
If it is not possible to invest an index such as the IA Global index what is the point of making comparisons to it, as surely you should only make a comparison against something you could have had? Or have I got this wrong and one can invest in the IA Global index?
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Rarely do global funds outperform the US funds. When that day comes Ill switch but until then Ill stick with the US fund.
I have x3 co DB pensions and am receiving conflicting advice. One IFA suggests don't transfer a DB, the other suggests understand the numbers, a different fund can perform better. I also want to draw down 25% for property development. However, to understand the numbers, the quote from the IFA are so huge, i've been spooked. Even if the recommendation came back as hold, I would have a significant bill for the pleasure. The global economy is turbulent, locally in the UK also. I'm stuck and don't know how to make the right decision and I feel my pensions are fairly conservative and may be holding me back. Where do I go for advice?
Your unlikely to find free advice on this - as you said ifa's charge a significant amount.
I believe this is because they become somewhat liable for said advice. ie if you can prove you became financially worse off through said advice you have grounds to make a claim (I am UNSURE of this particular point.
The only things I personally can suggest is trying pensionwise they arre free and quite good at talking through potential options even if they cannot be terribly specific for the aforementioned reasons. They may also be able to point you in an alternate useful direction
Great advice for the beginner on what to be aware of. Index or passive funds are a great starting place but they are an average of good and poor. So the challenge is can you spot a fund that is consistently just above the average. If you have,t the time or the financial energy a selection of passive funds covering different market themes might serve you well as one of those themes will turn out to be a good theme whilst others just return average performance
The going in point is hold on to the DB. The "index linking" to a point and pot guarantee are significant benefits. Unless you have overriding reasons that may make the risks of transferring more acceptable and they are happy you appreciate and understand that risk.
A lot of IFAs will only "front" the advice gathering data as they do not wish to or can't get the level Professional Indemnity cover required which is expensive. They would transfer the case to "super IFAs. In recommending a switch they leave themselves open to subsequent claims from you for poor advice if things go belly up. That insurance cover is expensive for the IFAs to buy and that reflects in the price as well as their higher level of competence and two teams needing to be fed.
Fidelity used to offer a fixed amount fee advice service that went through the advice process and could still provide the necessary "rubber stamp". Not sure if they still do. The downside they could only provide advice on their own products. You were still able to make your own choices from the Fidelity platform and make drawdown as you wanted.
The advice to hold may well be right for the vast majority. So the fee may actually be money well spent even if high especially when you have a full pot!
Did Scottish Mortgage do better than Nasdaq 100?
I understood that one generally shouldn't invest in a fund greater than about £500m, as they become unweildy and entrenched. Is that what other people took from that section? Thanks.
It was my understanding that Scottish Mortgage Investment Trust fee was 0.32% plus 0.07% transaction fee?
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There seems to be a lot of groupthink on the internet whereby only some version of an all-country world index is true passive investing, and any tweaking to that is a judgment call, so how can you know more than the markets, etc. In fact, any allocation decision, including to passive index funds, is a judgment call. Do you go for an all-country index? Do you exclude emerging markets because they are to volatile and you don't know enough about them? Do you go for market cap weighting or equal weighting? Do you reduce the allocation to your own country (especially if it's not the US) because between house job etc you are already too exposed to it? The truth is, there are no right or wrong answers. No one has a crystal ball.
Rather than chasing returns, it can be a more rewarding journey getting reasonable returns consistently over the long-term.
Time in market vs timing the market.
Hmmm. Your analogy about heads and tails is wrong. Each toss of the coin has a 50/50 chance, so if you get a run of tails, that doesn't increase the chance of a heads.
My sipp is with many different funds aegon platform via a separate advisor. All fees add up to 1.6% is this a bit steep?
Feels like I'm paying a lot of money on ongoing basis considering pension value is still less than 3 years ago when I transferred my company pensions into it
Thanks James, I've watched many of your videos which. Investing in funds always scares me. I've made some big clangers over the years and yes I've invested in both Fundsmith Equity and Scottish mortgage but the worst performer has been Edinburgh Worldwide which has plummeted. I always find the hardest decision is knowing when to sell. I was wondering whether you would ever do a video on investing in commercial property via a SSAS. My thinking is that whichever way I look at my pension, I don't think it will outlive me and I wondered whether a SSAS would be a better solution. I could buy a commercial property and live off the rent which (if I'm clever) will increase in line with inflation each year. This way my pension will definitely outlive me.
Buy stuff you won't need to sell
It's much easier to stick with a global index fund because then the only time you sell is when you want to spend the money!
SSAS can be useful in certain situations, especially if you own a business.
Commercial property is not my area of expertise. I know that there are enticing yields out there, but then again, that's because of higher risks.
Personally, I don't property just because of the hassle factor!
Structured loan notes have had a better short term performance , medium to long-term funds in my opinion are all out for themselves, not clients retirement plans
Hello James, thanks for the video. I am currently only investing in Vanguard's Lifestrategy 80 fund. I put £300 in it every month and I am planning to do this for the next 30 years of my life (with only the view to save more money for retirement). I know the VSL80 is a huge fund of funds but my question is do you think it's "okay" to just invest in this as a means of investing money so it will grow? Or should I start to invest in an s&p fund also (as this has done well but I know that past results arent a reliable indicator). I am slightly worried by V's bias towards UK market given the current shit show of UK economic policy too. Cheers and keeo making these super helpful and informative videos!
A life strategy fund is designed as a one decision fund. It’s designed to be either the only thing you hold or the core 80-90% of it.
The home bias is not that big of an issue, I’d personally rather it was more globally balance. But if there alternative is having to builds you own multi fund portfolio then the convenience factor often make the LS a easier choice.
@@JamesShack Thanks for your help!
I would buy some premium bonds, a few lottery tickets, then put £200 in Vanguard or whatever. Spread your risk. Frankly you are likely to lose your investment in real terms. But your premium bonds are secure. Basically the stock market is gambling, just like your pension. Read the small print you may not get back what you put in. They told you so. Basically spread your risk.
Subscribed. Love your style -- very clear and straightforward. Keep on sharing!
When I look at the chart at 5:07 in the video, the fund that has performed at 325% is not S&P 500; but the Scottish Mortgage (SMT) fund. Which is a massive mistake. There needs to be a correction here. But since this movie was made the SMT fund has fallen badly back to the level it was in Jun 2020. In summary, there is no outstanding funds at this time presented in this video. They all suck. The whole fund market sucks all the time .... if you focus on short term gains. Long term, well just look at the performance of global markets over the last 100 years to get a feel for the direction they are going in. Plan for long term, not the short term
Warren Buffet advised the average investor to use as a main base the S&P 500. I invested $14,000 around 20 years ago, it now sits at $83,000, not great but very steady
Exactly what i'm doing
11:12 - picking fund managers and the inference its luck, therefore ... sort of... diversify/hedge/index etc.
TBH - I've learned the hard way that active funds are not great :)
Q
In that context, How do you pick wealth managers and/or pension advisors?
You're locked in with a large, in monetary terms if not portfolio %, fee and it feels like a similar decision at the start/decision point.
People often come to financial planners expecting to see a performance "track record" like you would get from an actively managed fund.
The value a financial planner delivers is not predominantly related to investments. It's tax planning, goal setting making better financial decions, feeling confident in those decions.
So it's like going to an accountant or a physiotherapist and asking to see their performance "track record".
They can tell you about similar clients they've worked with, and point you to reviews, but there is no generic performance because very client is unique.
One of the main reasons I do do youtube is to show my work, so that people have a very good idea of what they're going to get before they even get in touch.
Referrals from a friend is often the best way to find a financial adviser. Other than that, just like buying any other service, shop around, have initial meetings with 2 - 3 and you're get a good sense of who you like and who you don't.
Typically, in an initial meeting with us, we are able to point out mistakes and missed opportunities that a prospective client has made over the last 5 years. Which often demonstrates that they would have been in a net better position having worked with us over the prior 5 years.
As for the financial risk, you should never work with a financial adviser that has exit fees. It should be a relationship where each year your review and assess if you want to keep working together.
For the right person, the potential value of advice can be huge. The equivalent of multiple percent per year net of fees. Which compounds to a huge amount of value over 15 - 20 years.
I discuss the potential risk reward trade off of trying out a financial adviser here: th-cam.com/video/HjzoCCFkJm0/w-d-xo.htmlsi=elKfA7FQXO8B7e83&t=1340
@@JamesShack Many thanks for the long and comprehensive reply.
I was watching the content you linked - and had paused very near the end when you talk about the down/upside graph of planner costs vs. returns.
I'm really enjoying your youtube content - just working/thinking through that mental shift from previous experience of financial advisors (sorry planners), and even current experience of intro meetings with potential firms - hence the question.
The videos are excellent.
Amazing video. Very honest. Very well presented.
Glad you liked it!
I wouldn’t write off active funds. Yes, expensive and struggle in the boom years but in the bust period, I’m sure they will come back. My active fund for pension is a glorified large cap screened and more evenly balanced. It beat the main indexes in past 12 months. I pay 0.37 fee. Fear is mega caps stagnate, do enough to stay listed but drag indexes.
Luck?
A really interesting video. I’m starting to get into ETFs gradually and now have ISF, IUSA and VHYL. Keep up the good work.
Thank you, I will!
When you say that the funds were shut down, did the investors lose all of their money?
No, the assets were sold and cash handed back to investor.
Property? Renting a flat out can provide a pretty reliable 5% which can track inflation.
My mother died without a will, or any indication of prefered funeral arrangements. As someone who experienced that I wish to organise myself so that my family may avoid the pitfalls of the administration and harrowing decisions during the grieving process.
Good evening James, really useful information as always. Unfortunately as I have had no one in my family to educate me for future, I have just stayed looking into ETFs and have invested in Vanguard Stocks and shares ISA Lifetime Strategy Funds 2040 as I am currently 50 years old. What are you thoughts? In addition I was thinking of investing in Vanguard FTSE All world cap. I value your advice.
Fantastic video. A really great balance of simple and clear explanations of rigorous and researched information.
Thank you for saying so, it means alot!
Hi James I'm currently with Vanguard and my account fee is capped at £375 ..Is it worth transferring over to interactive investor to hold the same vanguard fund for a monthly flat fee of £9.99 (£11.99 from Sept this year)...so about £144 as opposed to £375 per year ..I know it's a straightforward process but it's how long I'm out of the market which concerns me ..
That's not a big difference. I would settle with whichever platform you like the feel of more.
You could do an in-specie transfer so you transfer across the funds you hold into you ii account. But Vanguard would probably charge you for this.
Thanks for your prompt reply ..yes you're right it's not such a big difference especially when you are looking at long term around £20 less per month ..I may just stick with Vanguard as it would be different if I wanted a fund that wasn't on the Vanguard website ..Much appreciated James 👍
Great video James, you always make sense. 👍
Currency Risk?
Thanks for Watching..Write me To participate in our current investment offer’s📊🤙🏻. .
I understand the theory behind putting everything into a single world all cap fund but do you have any suggestions how to overcome the fear of putting all your eggs in one basket? Indeed is it "safer" to swa spread among several world trackers?
The layers of protections these funds and have in place means it’s very safe to keep thousands or millions in one fund.
But, it could be argued that these if still some risk and the effort required to own two funds is small. Personally, I don’t bother.
Vanguard Global All Cap is still 60% US stocks. Not a massive diversification from the US.
because the US is 60% of the worlds market capitalisation. If you want to change the % then it wont be a world index fund. Totally agree you can argue thats no diversified and is risky or " overleveraged" adn you can go for an ex-USA world index. However the index is self correctng so if the US drops then the fund allocation will also drop allocation.
It’s constantly adjusted though based on market cap. So will adjust globally with wherever is performing that’s the beauty of it.
Just compare their performance over the last 30 years.
update: I rewatched the video and now I can see the point. those are very valid points and examples. glad you have patience to explain.
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this video is disappointing to me. why did you start suggesting actively managed expensive funds looking at the past performance. past performance doesn't guarantee future returns. especially for actively managed funds. 4 funds: us total, local market, international market and bonds.
It's James's presentation style. He builds up a positive simplistic argument then points out the facts that undermine those arguments with a smile on his face. I really enjoyed it.
That’s the point. Illustrate the conclusions a novice investor would draw on first inspection to demonstrate why mistakes are so easily made.
But as you’ll see if you watch to the end. The active funds get thrown out.
@@JamesShack thanks for your patience and time you spend helping people!
James - You stated Scottish Mortgage has nothing to do with Scotland ( @2.58mins) Ehmm.... It is run by a Scottish Investment house, Baillie Gifford, which was founded in Edinburgh in 1908 and still has its headquarters there.
I know - but that what it says on the fact sheet
“These days the trust is Global rather than Scottish and has nothing whatsoever to do with mortgages.”
Hi James, I'm a bit confused by your closing statement. Did you say most people would have a terrible time if they invested in the Vanguard global fund?
I’m assuming only because they will want to cash out with potential volatility
I’m confused to, many self educated personal finance people just have the FTSE Global All Cap (or very similar funds) for good reasons. Please could for explain the comment?
.
I believe what he is referring to is the risk and volatility you would experience if just investing in a 100% equity fund like the Vanguard global fund. You would (historically) experience less risk and volatility by also investing in bonds. The global fund itself is very good (low cost & highly diversified).
Guilt of a bit of a cliff hanger, but as others have pointed out most people cannot stomach the risk of a 100% equity fund.
But Japan was huge because it rested on Japanese businesses US now has worldwide businesses.
So it seems to me, don’t pick a fund with a fund manager just pick a fund with solid holdings which are passive. I find that US funds tend to be the better performing funds. U.K. funds = hopeless. Far east = forget it, just go to the casino.
Thank you James. I thought you were talking directly to me at some points especially regarding timing the sale of SMT. I liked the way you used SMT as an example of a thematic style but doesn't it use gearing and sales to increase the value of its assets as it's an investment trust rather than open ended like the other examples. Very good video. I enjoyed it very much
Investment trusts have a few extra quirks like gearing and often move flexibility on hold illiquid assets. Not that these things are necessarily good.
SMT is not a wedded to it's style as some, but it's so focused on it's niche it would be very hard to turn it around.
It's so hard to ignore the past performance tho, our greed sometimes gets the better of us!
is this all taken from Benjamin Graham's book - chapter 9 about investment funds?
Hi James, thank you another great video. I’m a high risk investor but unsure whether to go for Lifestrategy 100 or a global index fund. The latter has done better due to the UK home bias of lifestrategy 100 and whilst that trend might reverse, which one would be the best long term option?
I'm in the same position and also looking for an answer to the same question.
Same
Great video. Thanks 👌🏿
Thanks for watching!
All funds did well because its been a bull market since 2009.
Better to track the S&P or Nasdaq
I personally love GGRG.
Why
@@rsb8653 I like their algorithmic approach and it seems to have worked, given that over the last 8 years is has outperformed VWRP with lower volatility. No guarantee it will continue to outperform but I prefer it. For an active fund it has low fees. Focusing on dividend-paying stocks with a growing dividend and factoring in momentum and quality means it's a real elite 600 list in their holdings. It also avoids flaky tech companies like TSLA and bad companies like Vodafone that a global tracker is obliged to include. Obviously you might want to include EM and smallcap exposure as GGRG is largely large cap and developed world, but GGRG is a great part of a core portfolio, or even a great 1-fund portfolio imo.
Great, thanks
SMT had a big Tesla allocation when it 20x'ed. I strongly believe Tsla will 10X again and SpaceX is going to be huge. So I'd be happy with SMT. Nio is a dog though.
Tesla is overvalued so don’t hold your breath on future returns being any good and are more likely to be disappointing.
The only reason I chose to invest in companies (rather than property, wine or other asset classes) is that everything I see around me is produced and delivered by a company.
I don't think that's going to change in the next 40 years. Companies are going to be the building blocks of civilisation (and of course, if civilisation does end, then we've got bigger problems than our stock fund value).
Having said that, I don't have the first clue which companies are going to do well, so I just buy the whole market in the UK and US.
I invested 15 years into making TH-cam videos.
It was a total lost and completely waste of my 15 years with absolutely zero return on investment.
I'm not investing in anything ever again.
Past performance is the ONLY thing you can use to inform any decision you make in life - if not, what else?
Funds often have bad years after good years so if you invest just by prior performance you will often underperform. For example ARKK.
I think your comment could be viewed as true in the sense that everything we humans know today is a result of the 'performance' of things that have happened in the past.
But when it comes to funds, past performance is not a good predictor of future returns.
Long term past performance is a decent indicator, but short term is not good as you will end up buying into bubbles. If you chose funds for recent performance you would have got NASDAQ as it was peaking, and then lost a lot when it crashed a couple of months ago. What you want is lower volatility and 'decent' performance over a long period. If it seems too good to be true (tech stocks recent surge) then it probably won't continue that trajectory. Boring generally wins out over the "flavour of the moment"
Also, remember that the underlying share prices do not contain any information about the past.
The price of say Apple today reflects the collective consensus on the future performance of that company. Of course, that consensus may change tomorrow, but then it still reflects the forward view.
Given that funds are just collections of individual shares, all priced with a forward view, there's no reason at all to suggest that past performance has any bearing.
When you use timeline to backtest drawdown, what fund does that simulate?
It uses historical index returns rather than a specific fund. But the equity portion is based around a global all cap index.
Link to the video you referenced at the end please?
th-cam.com/video/lGQ9KyQq8Jw/w-d-xo.html
I only subscribe Cus I love that Kitchen 😂
It is nice!
I'd rather have luck than skill 😂
What does a good balance look like regarding the cap weighting? Small mid large.
Also a globally balanced equity fund would like..? Taking into consideration the majority of the market each country holds.
Thanks for any help
Good point overall about the regression to the mean but I have point out that the coin toss example (heads & tails game) is not really a valid analogy mathematically. Unlike investments, in the coin toss example the experiments are independent, therefore, for example, if you did end up with 10 heads in a row (unlikely), the probability for you to return to the previous baseline is actually similarly pretty low. Since the experiments are independent, after every experiment the current position becomes your new "baseline" - that is, previous experiments do not affect future ones. The point you're making is correct but the graphics that you presented (with reverting to zero trend) is not.
P.S. Love your videos 🙂
Agreed!