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  1. #1

    Charges strategy


    I have a feeling that the good returns I have been making are not going to continue as the fiscal stimulus winds down, and have started to consider fund/IT charges more. It hasn't been too much of a worry over the last few years, but will have a big impact if returns are say <5% annually.

    My SIPP is currently valued at around 500K and I don't intend to draw on this for about 15 years or so. I have 5 funds and 15 IT's which are well spread. I also have 7 individual stocks BP; Shell; GSK; PFG; CNA; PFC; MGP; which account for about 8% of my assets currently - and I'm intending to reduce/sell individual holdings due to risk.

    I'd appreciate some opinions on what members of this forum have decided to do? I'm considering putting about 50% of my pot into Lifestrategy 80 to 'buy' the market at very low charges then sit back and forget for a while. (Or 25% in LS80 & 25% in LS60).

    This will hopefully allow me to keep some of my investments that I think may add value by being actively managed.

    I have 12% in SIGT & RCP (6%+6%) which I intend to keep despite the high costs for diversification. In addition to my 'racier' holdings, I also have RICA and PNL - I was particularly unimpressed with PNL during the last market wobble, so that is going when it recovers.

    Are any of you using the LS range, and what are your expectations if the market starts to show increased volatility or falls? Both active management and trackers look good when the wind is behind us - is it worth paying extra for a chance to outperform the market in 2018/19?

  2. #2
    I've had significant VLS80 and 60 holdings for some years now and been very happy with them.

    The main thing I'd be wary of currently is that the high exposure to the US (around 50% of equity exposure if I remember right?) means that if the funds you're liquidating to buy VLS have a significantly different geographical exposure, you might be making a big move into what some claim is a rather overvalued market right now. Personally, with new money I've started buying L&G's multi-index funds instead, which don't have such a high exposure to the US.

    Much as I like the idea of going all low-cost passives per the advice of people like Warren Buffet and Lars Kroijer, I just can't resist a bit of active management and other gimmicks like sector-specific ETFs. Most useful thing I've found is to be aware of the total level of charges on my portfolio - ~0.5-0.6% last time I crunched the numbers (although that was before all the MFIIDII stuff came out) - and work to drive it down, not up.

  3. #3
    One thing I am doing is looking to move to a fixed fee platform.

    That's effectively 0.25% that I don't have to worry about or more depending on the platform.

  4. #4
    Investors can take note of expenses, but be careful IMHO to not let them dictate the Investment Plan.
    Research suggests that Asset Class Allocations (ACA) through market cycles as by far the major significant decision on the degree of portfolio success or failure, so is worthy of attention.

    LS range is fine in its' way, but not for an investor who eschews these and 'balanced funds', due to a preference to focus and take direct control of that all important ACA, and to a lesser extent the underlying instruments.
    But then flicking between LS options through cycles could be a half-way house albeit with a restricted menu?

  5. #5
    Hmmm.... I've no doubt that if an investor correctly and consistently identifies where they are in a market cycle and skews their asset allocation appropriately at the right time, then they can significantly boost their returns vs a more "steady as she goes" stable asset allocation. However I'm also under the impression that most investors - even the professionals - are pretty lousy at doing this... if they were any good, LS would be getting trounced by active multiasset managers... and AFAIK it isn't (and even trustnet had to admit they were top decile in their sector a couple of years ago).

    Personally the LS funds suit me because I don't trust myself to rebalance in and out of fixed interest... so for me they're actually a way of taking more control of ACA than I think I'd have if I just held separate bond and equity funds. I draw the line at dialing up-and-down the LS 20%40%60%/80%/100% equity spectrum on a hunch about what the markets might be about to do though (although of course as noted in my previous post in this thread... I am doing just that with regard to US exposure by choosing to buy another multiasset passive now instead).

  6. #6
    Perhaps it may be possible to develop this debate at some point?
    Suffice it to say for now, that as individual private investors, it seems OK to be valuations aware of competing Asset Classes and hence vaguely right rather than precisely wrong.


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