The Lemon Fool

Arh, more Jam tomorrow.

Although I added JAM to my ISA/portfolio, I'm thinking of adding VUSA to my wife's ISA. As she is not financially astute that will give her a broader based holding focused on the US., that she shouldn't need to monitor. She also holds JGGI, BUT and ATST and FCIT.

Cross post to JAM's Annual Report:
viewtopic.php?p=656285#p656285

I added VUAG (Vanguard S & P 500 ETF USD Accumulation GBP) into my ISA recently for more USA growth exposure sitting beside JAM and JGGI. Any dividends accumulate into my ETF without further external complication costs.
I reckoned I didn't need the dividend distribution version, VUSA, given its yield is so low and I hold the likes of JGGI (JPMorgan Global Income IT) for that purpose.

midgesgalore

Well FWIW I'm holding all of the following BRSA, GBDV, JAM, JGGI & NAIT. JAM I'm just holding to get some Mag 7 exposure without holding the single stocks - yield isnt worth worrying about. The others have yields of 3-5% ish. All are nicely total return positive.

While I dont go much on Trump if (when ?) he gets in I suspect that US stocks will do very well given his "america first" approach.

ATB

Pref

Managed funds - Vade retro Satana!

JGGI: 1.6% "average" annual OGC (according to HL). Managed funds are so 20th century. Why would you want to give your money to some City chinless wonder?

OK I have quite a bit in BRK.B. But most is in global index funds.

Re US exposure. I recently took a punt by buying some US mid-cap index and US small-cap index (choice of ETF is limited for a UK investor). Not timing the market, honest! Oh no, no: I call it "factor investing".

But when the Magnificent 7 froth unfroths that money has to go somewhere, and some say that *other* US stocks are undervalued ... BRK.B is 22% AAPL. But as a matter of a fact AAPL is the least frothy of the Mag 7.

mrodent wrote:JGGI: 1.6% "average" annual OGC (according to HL). Managed funds are so 20th century. Why would you want to give your money to some City chinless wonder?

I assume OGC = OCF? According to my broker, the OCF is 0.66%. I do understand the importance of charges, and the usefulness of trackers, but surely the important thing is your net return? In this case, JGGI has blown away it's benchmark (MSCI AC World Index) over all time periods, so I would ask a slightly different question:

Why would you chose an OCF of 0.2% and get an 11% return on your money when you could get 15% with an OCF of 0.66%?

CryptoPlankton wrote:Why would you chose an OCF of 0.2% and get an 11% return on your money when you could get 15% with an OCF of 0.66%?

Because... I'm no expert in JGGI but a quick glimpse suggests that it is heavily weighted to the US, so perhaps comparing its performance to a global benchmark over the past year (when the S&P500 has done spectacularly) might be a little bit dodgy. VUSA for example has gone up 27% over the past year.

The principle is simple: active managers come and go, and even if you believe, for whatever reason, that your chosen team can do better than a passive, you have to keep monitoring them. Apart from BRK.B the last active fund I held was FUQUIT (still love it if only for the ticker), but there is some reason to believe that Fundsmith largely benefited from going heavy in the US over the years and thereby benefiting from exchange rate effects for a UK investor. In any event, it's tiring and boring to keep monitoring an active manager, and I don't know what tools or techniques I might use to assess their proficiency. As has generally been accepted, something like 80-90% fail to outperform the appropriate benchmark.

To be fair, having looked into it some more, JGGI has indeed been very impressive consistently over the years. And last year, according to this (https://www.morningstar.co.uk/uk/report ... E0GBR00VWJ) its total return was ... 27%. Nor can you grumble with 15.3% over ten years. VUSA's performance is 15.7% over that period ... but that is avowedly US-based.

My conclusion: pick a good 'un, 'orses for courses.

It's worth keeping in mind (whatever the charges are), that the performance figures are calculated after charges.

I also keep in mind that in the event of market falls or indeed a crash, a tracker can only track the market down. Whereas an active manager, (in theory anyway) can take defensive actions.

richfool wrote:I also keep in mind that in the event of market falls or indeed a crash, a tracker can only track the market down. Whereas an active manager, (in theory anyway) can take defensive actions.

You're a rich fool (by your nick!), which means you can't be all that foolish. But that's the kind of mentality which makes the Sage of Omaha wince. How would you know you were in a correction / downturn / slump / crash? And just as importantly, when and why would you choose to start buying again? I mean some teams will get those things right, some of the time. Maybe the best teams would get those decisions right most of the time. But on the face of it that angle seems no different to the other pros and cons of passive vs active.

mrodent wrote:

richfool wrote:I also keep in mind that in the event of market falls or indeed a crash, a tracker can only track the market down. Whereas an active manager, (in theory anyway) can take defensive actions.

You're a rich fool (by your nick!), which means you can't be all that foolish. But that's the kind of mentality which makes the Sage of Omaha wince. How would you know you were in a correction / downturn / slump / crash? And just as importantly, when and why would you choose to start buying again? I mean some teams will get those things right, some of the time. Maybe the best teams would get those decisions right most of the time. But on the face of it that angle seems no different to the other pros and cons of passive vs active.

I trust you weren't being "ratty" with your remarks. The point is that an active manager can take a view on his holdings, or the market, and if, for example, he considers either to be over-cooked, he CAN reduce his exposure (whether he gets it right or not). As I understand it a tracker generally "tracks". So if a stock, or the index goes down, his tracker will/must do the same. Or are you suggesting otherwise.

richfool wrote:I trust you weren't being "ratty" with your remarks.

No rattiness intended... merely amused by your nick...

Or are you suggesting otherwise.

Not at all. Passive investing is banking on what I might call a rather cynical view that, in the long run (per Keynes), we're all dead ... and much richer.

mrodent wrote:

richfool wrote:I trust you weren't being "ratty" with your remarks.

No rattiness intended... merely amused by your nick...

Or are you suggesting otherwise.

Not at all. Passive investing is banking on what I might call a rather cynical view that, in the long run (per Keynes), we're all dead ... and much richer.

Mr R, please be reassured, I wasn't being snide with my above post. I was trying to make a witty remark, in the light of your username. The system wouldn't allow me to post a wink emoticon.

Re the topic, I hold JAM as I prefer actives, but we may add VUSA to my wife's pf.

CryptoPlankton wrote:

mrodent wrote:Why would you chose an OCF of 0.2% and get an 11% return on your money when you could get 15% with an OCF of 0.66%?

It's a game of risk and probability. Statistically it is highly likely that that the tracker will outperform 90-95% of funds you can pick now over 20 years. This is a consistent pattern across time and markets.

Statistically you also know that there is a wide dispersion of performance for active funds, whereas the tracker will track the index minus a few bps. IOW, with a tracker you completely eliminate the risk of significant underpermance. The price you pay for the elimination of underperformance risk is of course is that you cannot outperform with a tracker.

From statistical analysis, one final thing you know is that past performance of funds is no guide to the future. So if you are investing for the long term, studying past performance is not going to help you pick out a winning fund. This is perhaps the hardest fact to accept as we are all fooled by randomness.

hiriskpaul wrote:

CryptoPlankton wrote: Why would you chose an OCF of 0.2% and get an 11% return on your money when you could get 15% with an OCF of 0.66%?

It's a game of risk and probability. Statistically it is highly likely that that the tracker will outperform 90-95% of funds you can pick now over 20 years. This is a consistent pattern across time and markets.

Statistically you also know that there is a wide dispersion of performance for active funds, whereas the tracker will track the index minus a few bps. IOW, with a tracker you completely eliminate the risk of significant underpermance. The price you pay for the elimination of underperformance risk is of course is that you cannot outperform with a tracker.

From statistical analysis, one final thing you know is that past performance of funds is no guide to the future. So if you are investing for the long term, studying past performance is not going to help you pick out a winning fund. This is perhaps the hardest fact to accept as we are all fooled by randomness.

My point was simply that the only figure that matters is your net return, not what it nominally costs to achieve it.

And I'm sure Taleb is right. However, I do find that studying the past performance of funds that I hold does help me work out how well (or badly) I've done!

Incidentally, if past performance "is no guide" to the future, how useful is a comparison between the past performance of active and passive funds?

Another gleaming positive for JGGI is that there is zero AAPL within.

I have not and never will be part of Apple's self-centred ecosystem.

CryptoPlankton wrote:Incidentally, if past performance "is no guide" to the future, how useful is a comparison between the past performance of active and passive funds?

"No guide" is just talking about the statistical significance of future performance of a fund relative to an appropriate benchmark compared to that fund's previous performance. This becomes apparent when the past and future performance of thousands of funds over multiple time periods is analysed. "No guide" does not mean that the past is not a guide to the future in other circumstances. The danger for investors is that they fool themselves into thinking that a fund that does appear to show consistent outperformance, which are highly likely to exist, means the "No guide" finding does not apply to that fund.

Statistical significance is found when comparing the historical performance of tracker funds with actively managed funds. This means that an investor in a market tracker is highly likely to be in the top decile of performance compared with similar actively managed funds over 10 years. A tracker is unlikely to be the top performer, but is likely to be in the top 10%. For many investors, being in the top 10% is good enough.

Another advantage of a market tracker fund for some investors relates to behaviour. Many retail investors fail to achieve the performance of the funds they invest in. The reason for this is they tend to sell after a period of underperformance, locking in lower returns than they would have achieved if they held for the long term. Retail investors in market trackers tend to bail out less often because market trackers do not go through periods when their funds significantly underperform the market. There is not the same incentive to churn if you accept you are getting market returns (minus a few bps) and accept you are likely to achieve top decile performance over the long run and that performance is "good enough". That is not to say that investors in market trackers may not panic following a big market fall of course.

clunk wrote:Another gleaming positive for JGGI is that there is zero AAPL within.

I have not and never will be part of Apple's self-centred ecosystem.

That’s not to say that there never will be any Apple in JGGI. Holdings in these kinds of ITs change all the time.

Guessing your not much into BRK.B either then, thats heavily into Apple.

Well we have used Apple devices for many years and are very happy with them. And are NOT so happy with allowing things such as third party App Stores which may impact on security, which has always been one of the key features of the Apple ecosystem. Will Microsoft & Google have to do the same I wonder ?. A retrograde step IMHO, if you don’t like Apple stuff then buy something else. Its not as if there is no choice of tablets of phones it seems to me.

But each to their own I guess…..

ATB

Pref

hiriskpaul wrote:

CryptoPlankton wrote:Incidentally, if past performance "is no guide" to the future, how useful is a comparison between the past performance of active and passive funds?

"No guide" is just talking about the statistical significance of future performance of a fund relative to an appropriate benchmark compared to that fund's previous performance. This becomes apparent when the past and future performance of thousands of funds over multiple time periods is analysed. "No guide" does not mean that the past is not a guide to the future in other circumstances. The danger for investors is that they fool themselves into thinking that a fund that does appear to show consistent outperformance, which are highly likely to exist, means the "No guide" finding does not apply to that fund.

Statistical significance is found when comparing the historical performance of tracker funds with actively managed funds. This means that an investor in a market tracker is highly likely to be in the top decile of performance compared with similar actively managed funds over 10 years. A tracker is unlikely to be the top performer, but is likely to be in the top 10%. For many investors, being in the top 10% is good enough.

I was actually being a little tongue in cheek with that comment. However, this response raises some big questions for me. We are well off topic, and I don't have time at the moment but, when I do, I shall start a new thread...