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Growth for the next decade...passive
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Growth for the next decade...passive
Disclaimer this is a follow up post of growth for the next decade based on an active portfolio. Have tried to attach link but not allowed - post is under growth strategies.
For those who haven't read the previous post as the title suggests looking everyone's thoughts, critiques and advice on maximum capital growth in the next decade and beyond this time through passive investing. Fairly new to investing so please excuse some youthful naivety. To assist everyone a little bit about me - I'm in my 20s, UK based investor, current value of stocks and share ISA £60,000, no requirement to touch this money aiming to leave it at least 15+ years likely significantly longer, planning to contribute £1667 a month to maximise yearly ISA contributions and also help to drip feed money in. Prepared to tolerate significant levels of risk and volatility in the hope of maximising end value and in light of this have chosen to go with 100% equities at present this will likely be reviewed at a latter stage. All monetary funds will be held within stocks and shares ISA on Interactive Investor platform.
The target aim is thus of: - maximising capital growth with acceptance of high levels of risk and volatility
- drip feeding money monthly to maximise yearly ISA allowance
- holding equities for a minimum of 15 years
I am hoping to create a balanced portfolio of both active and passive assets. Partly I suppose to compare performance with the active assets and to reduce overall annual charges. The exact balance of passive to active has yet to be decided.
Active assets
- SMT Scottish Mortgage: Annual Charge 0.34%, Annual Dividend 0.25%
- Pacific horizon investment trust, Annual Charge 0.92%, Annual Dividend 0.03%
- Bailie Gifford US Growth Trust Annual Charge 0.75%, Annual Dividend N/A
- JP Morgan Emerging Market Trust – Annual charge 0.9%, Annual dividend 1.09%
- Standard life Uk smaller companies - Annual charge 0.88%, Bi-annual Dividend 1.2%
- Fundsmith Equity - Annual Charge 0.96%, Annual Dividend 1.3%
A starting point for the balanced passive portfolio has been kindly offered up by a fellow user:
VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%
Blended costs ,14% all accumulation class
Any opinions, criticism or advice is all welcomed. Have a lot to learn about passive investing so all information appreciated.
For those who haven't read the previous post as the title suggests looking everyone's thoughts, critiques and advice on maximum capital growth in the next decade and beyond this time through passive investing. Fairly new to investing so please excuse some youthful naivety. To assist everyone a little bit about me - I'm in my 20s, UK based investor, current value of stocks and share ISA £60,000, no requirement to touch this money aiming to leave it at least 15+ years likely significantly longer, planning to contribute £1667 a month to maximise yearly ISA contributions and also help to drip feed money in. Prepared to tolerate significant levels of risk and volatility in the hope of maximising end value and in light of this have chosen to go with 100% equities at present this will likely be reviewed at a latter stage. All monetary funds will be held within stocks and shares ISA on Interactive Investor platform.
The target aim is thus of: - maximising capital growth with acceptance of high levels of risk and volatility
- drip feeding money monthly to maximise yearly ISA allowance
- holding equities for a minimum of 15 years
I am hoping to create a balanced portfolio of both active and passive assets. Partly I suppose to compare performance with the active assets and to reduce overall annual charges. The exact balance of passive to active has yet to be decided.
Active assets
- SMT Scottish Mortgage: Annual Charge 0.34%, Annual Dividend 0.25%
- Pacific horizon investment trust, Annual Charge 0.92%, Annual Dividend 0.03%
- Bailie Gifford US Growth Trust Annual Charge 0.75%, Annual Dividend N/A
- JP Morgan Emerging Market Trust – Annual charge 0.9%, Annual dividend 1.09%
- Standard life Uk smaller companies - Annual charge 0.88%, Bi-annual Dividend 1.2%
- Fundsmith Equity - Annual Charge 0.96%, Annual Dividend 1.3%
A starting point for the balanced passive portfolio has been kindly offered up by a fellow user:
VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%
Blended costs ,14% all accumulation class
Any opinions, criticism or advice is all welcomed. Have a lot to learn about passive investing so all information appreciated.
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- Lemon Slice
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Re: Growth for the next decade...passive
morefoolthanlemon wrote:I am hoping to create a balanced portfolio of both active and passive assets. Partly I suppose to compare performance with the active assets
I’m never sure why this can’t be done on paper.
The exact balance of passive to active has yet to be decided.
Blake, D., Caulfield, T., Ioannidis, C. & Tonks, I. (2015). New Evidence on Mutual Fund Performance: A Comparison of Alternative Bootstrap Methods. Journal of Financial and Quantitative Analysis,
Source: http://openaccess.city.ac.uk/12673/1/wp1404.pdf
This study from universities in London and Bath, on UK and US active funds over a 10 year period compared returns with the market return. Their performance is usually poor, as we know from the SPIVA and Morningstar active/passive barometer reports. Part of this study’s conclusion:
"Taken together, the above results provide powerful evidence that the vast majority of fund managers in our dataset were not simply unlucky, they were genuinely unskilled."
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- Lemon Slice
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Re: Growth for the next decade...passive
Just an idea, although it's not far removed from the way I run my SIPP.
How are you going to decide what proportion to keep passive and what for active? You could consider making limits or bands to make a link between the active and passive parts of your portfolio.
For example, you could say:
50% of my portfolio will be passive, and 50% will be active.
Therefore on current 60,000GBP ISA, 60,000 x 85% x 50% will be VHVG, and 60,000 x 85% x 50% will be between SMT, Pacific, BG US and FS (could do them all at 20%)
The emerging will be split 50/50 VFEG and JP morgan
Etc.
It certainly makes allocating capital on a monthly basis a lot easier.
I think, as a process, having roughly fixed weights helps keep me from getting carried away, and takes away a lot of agonizing and regret.
You don't have to trim anything - so letting winners run - just invest into the areas that are weaker at that time, waiting for reversion to norm.
torata
How are you going to decide what proportion to keep passive and what for active? You could consider making limits or bands to make a link between the active and passive parts of your portfolio.
For example, you could say:
50% of my portfolio will be passive, and 50% will be active.
Therefore on current 60,000GBP ISA, 60,000 x 85% x 50% will be VHVG, and 60,000 x 85% x 50% will be between SMT, Pacific, BG US and FS (could do them all at 20%)
The emerging will be split 50/50 VFEG and JP morgan
Etc.
It certainly makes allocating capital on a monthly basis a lot easier.
I think, as a process, having roughly fixed weights helps keep me from getting carried away, and takes away a lot of agonizing and regret.
You don't have to trim anything - so letting winners run - just invest into the areas that are weaker at that time, waiting for reversion to norm.
torata
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- Lemon Quarter
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Re: Growth for the next decade...passive
Personally I would not bother with actively managed funds at all unless I was prepared to be active about it. ie prepared to chop and change as time goes by. For both active and passive, if I wanted to take a punt (and on the whole I don't), I would go for what has not done well over the last 10 years rather than what has done well. For passive, that means overweight EM, small caps and value. For active look for poor performing ITs trading on big discounts to NAV, mainly in EM, small caps and value, but also in funds specialising in bombed out sectors, such as oil, commodities, tobacco if you can stomach doing that.
Essentially don't follow the hurd into overcrowded areas as you appear to be wanting to do.
Essentially don't follow the hurd into overcrowded areas as you appear to be wanting to do.
Re: Growth for the next decade...passive
HSBC FTSE All World C bought on something like iWeb. Read up on investing a bit more and you’ll realise a global equity fund watered down later in life with deposits / bonds is the way to go. Keep it simple and stay the course.
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- Lemon Slice
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Re: Growth for the next decade...passive
hiriskpaul wrote:Personally I would not bother with actively managed funds at all unless I was prepared to be active about it. ie prepared to chop and change as time goes by. For both active and passive, if I wanted to take a punt (and on the whole I don't), I would go for what has not done well over the last 10 years rather than what has done well. For passive, that means overweight EM, small caps and value. For active look for poor performing ITs trading on big discounts to NAV, mainly in EM, small caps and value, but also in funds specialising in bombed out sectors, such as oil, commodities, tobacco if you can stomach doing that.
Essentially don't follow the hurd into overcrowded areas as you appear to be wanting to do.
Personally, my beliefs, are that Small Cap can smooth overall returns as there are periods when large cap does well and others when small caps so I am all for holding them. However I am increasingly of the view that EM is completely different from DM investing and the risk of the appropriation of assets or misallocation of capital are very high, combined with higher charges, leaving me to conclude that one should be underweight EM. However there are plenty of people who would disagree. I just lack confidence in EM. For a long time China looked like the best bet EM to me and I held FCSS but I sold out as the Chinese authorities got more interventionist and I got increasingly concerned by their behaviour in Hong Kong. I wont invest in China now until they stop persecuting artists and political dissenters. Other people have other political beliefs. I just cannot finance totalitarianism.
https://www.nytimes.com/2021/06/11/worl ... rship.html
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- Lemon Slice
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Re: Growth for the next decade...passive
The OP might consider making his monthly contributions into a subset of funds say Monthly, bi monthly or quarterly to reduce costs if the % going to each fund varies.
Ie funds A, B, C, D, E, F , G, H, J, K might not receive equal contributions
If fund A has a large contribution then contribute each month,
Funds B to G smaller contribution then bi monthly with say B to D in the even months and E to G in the odd months and then H , J, K are quarterly ( the smallest contributions) with one of each every month sequentially
So 10 funds on a regular investing basis but only 5 purchases each month.
Ie funds A, B, C, D, E, F , G, H, J, K might not receive equal contributions
If fund A has a large contribution then contribute each month,
Funds B to G smaller contribution then bi monthly with say B to D in the even months and E to G in the odd months and then H , J, K are quarterly ( the smallest contributions) with one of each every month sequentially
So 10 funds on a regular investing basis but only 5 purchases each month.
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Re: Growth for the next decade...passive
I am paying 40k into my pension from my company, maxing out my ISA. I am 100% Scottish mortgage trust and the gains have been insane but the risk is also really high
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- Lemon Pip
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Re: Growth for the next decade...passive
I suggest using an 80/20 equity/cash split. The projected return is not materially different, but;
- it's really helpful psychologically to be able to invest more after drops in the market or to top-slice and take some profits after a big run-up. Using 80/20 makes this automatic.
- it gives the option of going 100% if there's a big drop in the market. If you get good ideas from e.g. these boards, those investments can get you really good gains
Of course, then you have to decide how to choose the equity allocation and when you might consider changing it. But just using 80/20 all the time is solid on its own, so the 100% option is just that, an option open to you if all hell breaks loose. Which it generally does occasionally in the stock market ...
- it's really helpful psychologically to be able to invest more after drops in the market or to top-slice and take some profits after a big run-up. Using 80/20 makes this automatic.
- it gives the option of going 100% if there's a big drop in the market. If you get good ideas from e.g. these boards, those investments can get you really good gains
Of course, then you have to decide how to choose the equity allocation and when you might consider changing it. But just using 80/20 all the time is solid on its own, so the 100% option is just that, an option open to you if all hell breaks loose. Which it generally does occasionally in the stock market ...
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