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Sources of wealth

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.

How did you accrue your capital?

Routine investments from income/salary
85
57%
Infrequent investments e.g. annual bonus, commission
18
12%
Inheritance
24
16%
Lump sum, e.g. sale of a business
8
5%
Irregular lump sums, e.g. property development
5
3%
Property investments e.g. BTL, commercial units
1
1%
Something else
4
3%
What wealth??
5
3%
 
Total votes: 150

tjh290633
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Re: Sources of wealth

#390188

Postby tjh290633 » February 26th, 2021, 10:33 am

GoSeigen wrote:Yep, and if you'd embraced fixed interest as well as shares:

Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc   GS Acc   GS Wife Acc
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1.00 -1.00
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 7.69 16.22
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 10.74% 14.95%


[GS dates: 2001-2021]

;-)

GS

Thank you for adding that. Not a subject that I follow.

TJH

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Re: Sources of wealth

#390189

Postby Urbandreamer » February 26th, 2021, 10:34 am

AleisterCrowley wrote:What is HIX?


Google is your friend.
https://www.google.com/search?client=fi ... nt=gws-wiz

https://www.morningstar.com/cefs/xnys/hix/total-returns

Since, for some reason we are having the passive/active debate, it was nice to see an active fund for comparison with the trackers.

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Re: Sources of wealth

#390197

Postby bluedonkey » February 26th, 2021, 10:54 am

I've not analysed this in great detail, but basically:

-Owning my own home/s in London since 1982, about to downsize to the shires, releasing spare capital.
-Putting aside as much as I could from my earnings and investing it into the stock market since 1987.
-Payout settlement from an employer in 1992.

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Re: Sources of wealth

#390201

Postby GoSeigen » February 26th, 2021, 11:07 am

tjh290633 wrote:
GoSeigen wrote:Yep, and if you'd embraced fixed interest as well as shares:

GS

Thank you for adding that. Not a subject that I follow.

TJH


Funny for someone who sees fit to comment on it at every opportunity possible!

GS

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Re: Sources of wealth

#390204

Postby AleisterCrowley » February 26th, 2021, 11:11 am

Urbandreamer wrote:
AleisterCrowley wrote:What is HIX?


Google is your friend.
https://www.google.com/search?client=fi ... nt=gws-wiz

https://www.morningstar.com/cefs/xnys/hix/total-returns

Since, for some reason we are having the passive/active debate, it was nice to see an active fund for comparison with the trackers.



I did find that, but wondered why that fund in particular was chosen out of tens (hundreds) of thousands?
Western Asset High Income Fund II Inc.
Offers a leveraged portfolio of high-yield corporate debt securities from both the U.S. and non-U.S. corporations, with strategic allocations to emerging markets and derivatives

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Re: Sources of wealth

#390215

Postby kempiejon » February 26th, 2021, 11:33 am

Nah HIX is the FTSE350 high income index.
https://markets.ft.com/data/indices/tea ... =HIX.T:FSI

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Re: Sources of wealth

#390218

Postby AleisterCrowley » February 26th, 2021, 11:37 am

That would make more sense !

vagrantbrain
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Re: Sources of wealth

#390280

Postby vagrantbrain » February 26th, 2021, 2:46 pm

Thanks all who voted and/or commented, most definitely food for thought - must admit I was surprised by how overwhelming the result was for regular investing in shares, but then given it's primarily an investing website perhaps I shouldn't be!

In any case her early years experiences of having a skint mum and more recently volunteering in the local foodbank have given her the motivation not to spend everything she earns, and the millions her future in-laws made from selling their business has given her some demonstration of what's possible with hard work and luck, so i'm hopeful me and her mum wont have too many sleepless nights, about her finances anyway

tjh290633
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Re: Sources of wealth

#390330

Postby tjh290633 » February 26th, 2021, 4:43 pm

GoSeigen wrote:
tjh290633 wrote:
GoSeigen wrote:Yep, and if you'd embraced fixed interest as well as shares:

GS

Thank you for adding that. Not a subject that I follow.

TJH


Funny for someone who sees fit to comment on it at every opportunity possible!

GS

I would be interested to see how your figures are worked out. Obviously not for a stock bought at Par on issue in 1999 and held until today, which would be a fair comparison with the other indices.

TJH

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Re: Sources of wealth

#390378

Postby hiriskpaul » February 26th, 2021, 7:54 pm

tjh290633 wrote:
dealtn wrote:
tjh290633 wrote:If youn buy tracker funds you are condemned to mediochre results. Compare the FTSE100 on 31st Dec 1999 to today.


So what is the Total Return of the FTSE100 from that date to today?

As Captain Mainwaring would have said, I'm glad you asked that question, Pike.

Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69%

There you have a comparison of the ordinary and TR versions of UKX and HIX, with the FTAS-TR and my own HYP accumulatins units thrown in for good measure.

Is that clear enough?

TJH

Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%

GoSeigen
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Re: Sources of wealth

#390396

Postby GoSeigen » February 26th, 2021, 9:08 pm

tjh290633 wrote:
GoSeigen wrote:
tjh290633 wrote:Thank you for adding that. Not a subject that I follow.

TJH


Funny for someone who sees fit to comment on it at every opportunity possible!

GS

I would be interested to see how your figures are worked out. Obviously not for a stock bought at Par on issue in 1999 and held until today, which would be a fair comparison with the other indices.

TJH


Sorry, don't understand. They are IRR figures like all the others. Pretty easy calculation for ISAs because the cashflows in and out are explicit.

GS

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Re: Sources of wealth

#390402

Postby Lootman » February 26th, 2021, 9:39 pm

GoSeigen wrote:
tjh290633 wrote:
GoSeigen wrote:Funny for someone who sees fit to comment on it at every opportunity possible!

I would be interested to see how your figures are worked out. Obviously not for a stock bought at Par on issue in 1999 and held until today, which would be a fair comparison with the other indices.

Sorry, don't understand. They are IRR figures like all the others. Pretty easy calculation for ISAs because the cashflows in and out are explicit.

I think that TJH is articulating the idea that the returns you are claiming from a 100% bond portfolio do not fit with the easily identifable return on a bond issued at par on the cited start date.

Now, maybe you have been spectacularly lucky trading in and out of bonds on an active basis. That is fine but then a similar amount of luck trading in and out of equities might have done even better.

The point is more that bonds have not done as well, in terms of a bond index, as your numbers indicate. And that is despite the fact that the chosen time period is almost ridiculously favourable towards bonds. Whereas now we have already seen US Treasury 10-year bond yields double in just a few months, and could easily double again.

In the year 2030 or 2040 I doubt that anyone will be attributing their "source of wealth" to indiscriminately being 100% in bonds at the start of 2021. Bonds were a massive destroyer of wealth in the 1960s and 1970s, despite starting out at higher yields than today. The last 40 years have been very flattering to fixed income which, inherently, cannot grow but rather only bounce around a mean.

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Re: Sources of wealth

#390450

Postby GoSeigen » February 27th, 2021, 6:23 am

Lootman wrote:
GoSeigen wrote:
tjh290633 wrote:I would be interested to see how your figures are worked out. Obviously not for a stock bought at Par on issue in 1999 and held until today, which would be a fair comparison with the other indices.

Sorry, don't understand. They are IRR figures like all the others. Pretty easy calculation for ISAs because the cashflows in and out are explicit.

I think that TJH is articulating the idea that the returns you are claiming from a 100% bond portfolio do not fit with the easily identifable return on a bond issued at par on the cited start date.


I was assuming good faith on his part. Why would I be lying?

EDIT: Certain investors for the past decade and more believed and have been vocal on these forums that only disappointing returns could come from fixed interest. I've often showed that the opposite is true: gilts have had several years of 30%+ gains, while corporate bonds, especially bank bonds were unbelievably cheap for long periods.

Actually I think all fixed interest enjoyed a certain undervalue because the consensus argued that as a class it was inferior to shares (inflation, forced buying, yada yada), a psychological hangover of the wonderful 80s and 90s for stocks when equity investors developed their Pavlovian responses.

GS

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Re: Sources of wealth

#390458

Postby Bubblesofearth » February 27th, 2021, 7:36 am

hiriskpaul wrote:Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%


This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE

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Re: Sources of wealth

#390471

Postby GoSeigen » February 27th, 2021, 8:14 am

Bubblesofearth wrote:
hiriskpaul wrote:Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%


This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE


I don't think that is what TJH and I are doing: those were actual real time portfolios, with all the mistakes one makes as well as the successes. e.g. my wife's ISA suffered an almost 100% loss of an investment in a corporate bond with a minimum nominal purchase size of US$200,000 -- bought well below par but still, ouch!

What TJH was arguing -- which I agree with, and which was the foundation philosophy of TMF -- is that private investors are in a special position where they can get better returns than available via either active funds or trackers by carefully allocating their funds to individual shares or bonds and learning from their successes and mistakes.

GS

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Re: Sources of wealth

#390480

Postby Bubblesofearth » February 27th, 2021, 8:49 am

GoSeigen wrote:
Bubblesofearth wrote:
hiriskpaul wrote:Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%


This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE


I don't think that is what TJH and I are doing: those were actual real time portfolios, with all the mistakes one makes as well as the successes. e.g. my wife's ISA suffered an almost 100% loss of an investment in a corporate bond with a minimum nominal purchase size of US$200,000 -- bought well below par but still, ouch!

What TJH was arguing -- which I agree with, and which was the foundation philosophy of TMF -- is that private investors are in a special position where they can get better returns than available via either active funds or trackers by carefully allocating their funds to individual shares or bonds and learning from their successes and mistakes.

GS


I was responding to hiriskpaul's post regarding the S&P.

BoE

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Re: Sources of wealth

#390522

Postby tjh290633 » February 27th, 2021, 10:57 am

GoSeigen wrote:
Bubblesofearth wrote:
hiriskpaul wrote:Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%


This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE


I don't think that is what TJH and I are doing: those were actual real time portfolios, with all the mistakes one makes as well as the successes. e.g. my wife's ISA suffered an almost 100% loss of an investment in a corporate bond with a minimum nominal purchase size of US$200,000 -- bought well below par but still, ouch!

What TJH was arguing -- which I agree with, and which was the foundation philosophy of TMF -- is that private investors are in a special position where they can get better returns than available via either active funds or trackers by carefully allocating their funds to individual shares or bonds and learning from their successes and mistakes.

GS

Yes, point is taken about the index with the best historical return. The FTSE250 has flown compared with the FTSE100, and what one needs is consitency.

GS has shown a rate of return from fixed interest which obvious indicates a method of buying with a higher yield, holding until the yield has fallen and then switching to a similar bond. I have done something similar in a small way in the past with my mother-in-law's small portfolio, when interest rates were very high. I only have paper records, unfortunately, and the period covered was from 1975 until 1993. One of the gilts bought at the outset was T97 8.75%, standing at £64.50 with a runing yield of 13.6%. It was sold in 1993 at £108.72, when the yield had fallen to 8.05%. Another was T93 13.75% bought at £94.75 and sold in 1986 at £126.00, the yield having fallen to 10.91% as it headed for redemption.

Among those bought to replace the gilts sold was T98 15.5%, which was standing at £147.25 when bought, with a yield of 10.87%. Sold in 1993 at £137.75, the yield having risen to 11.25%. It would take me some time to recreate a cash flow, which I may do for interest. I am sure that the IRR would have been quite high.

TJH

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Re: Sources of wealth

#390558

Postby 1nvest » February 27th, 2021, 12:06 pm

Bubblesofearth wrote:
GoSeigen wrote:
Bubblesofearth wrote:
This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE


I don't think that is what TJH and I are doing: those were actual real time portfolios, with all the mistakes one makes as well as the successes. e.g. my wife's ISA suffered an almost 100% loss of an investment in a corporate bond with a minimum nominal purchase size of US$200,000 -- bought well below par but still, ouch!

What TJH was arguing -- which I agree with, and which was the foundation philosophy of TMF -- is that private investors are in a special position where they can get better returns than available via either active funds or trackers by carefully allocating their funds to individual shares or bonds and learning from their successes and mistakes.

GS


I was responding to hiriskpaul's post regarding the S&P.

BoE

FT All Share investor from the start of 2000 to the end of 2020, who withdrew 4% SWR (4% inflation adjusted income) would have 26% of their inflation adjusted original 2020 start date portfolio value remaining (excluding costs/taxes). For a US investor who did the same with the S&P500 they'd have 27% of the inflation adjusted start date value remaining. https://tinyurl.com/ejmnyrac For UK RPI £4.00 2000 value when inflated is recently £7.20, whilst the available capital is down to around 25% of its former value. Not good.

UK investors investing in US$ would have had the advantage of getting $1.62 per £ at then end of 1999, and only having to give $1.37 to receive a £ back again at the end of 2020 i.e. currency differences moved in their favour over that period. Over other periods however that works the other way around.

Many opine that its not realistic to look to consistently beat the index. That very few active fund managers actually achieve to do so for prolonged periods after costs and taxes. If it were easy then the numbers that did succeed in doing so would tend to reflect that ease. Rather the actual numbers tend towards indicating luck.

In the way of comparison, 50/50 stock/bonds did OK over that period https://tinyurl.com/vh3jccv7 ending with 72% of its inflation adjusted start date value. Much the same for all-bonds. Gold did even better and even after a 4% SWR a investor ended with 2.3 times more in inflation adjusted value. No one single asset/class consistently does relatively well, over other periods bonds and/or gold would be poor single asset holding choices. Diversification helps lower risk. There is a degree of multi-year inverse correlation between the likes of stocks and gold and over some periods stocks will be the winner and gold will do poorly, and over other periods vice-versa.

Sequence of returns also matters. Go back to start from 1972 for instance and 50/50 stock/gold has compared in total return to all-stock - both providing around 10.6% annualised rewards. Apply a 4% SWR to that however and the outcomes were 1.7 times more inflation adjusted value at the end of 2020 for all-stock compared to 10.2 times more for 50/50 stock/gold.

The above all assumed that yearly rebalancing back to target weightings was employed. Broadly however rebalanced versus non rebalanced can yield similar overall rewards, rebalancing (or not) doesn't reliably add or detract from rewards, but again over sub-set periods one or the other will often prove to have been the better (worst) choice. Drawing some more often yields better results than not drawing at all. SWR + gain tends to sum to be greater than just gain alone.

The broad conclusion that Jack (John) Bogle arrived at was to hold a broad balanced portfolio (diversify) and not to bother with rebalancing.

Terry's (TJH) HYP has been a relatively good case outcome. Others I believe have seen much poorer outcomes even when looking to manage their portfolio much the same way. Using Terry's total return (accumulation) historic figures back from 1988 and I see similar overall total return outcome to that of a more balanced/diverse portfolio, but where Terry's portfolio was the more volatile. Which for measures such as Sharpe Ratio is a poorer risk adjusted reward - such as being more exposed to sequence of returns risk factors. Of the order standard deviation in yearly total returns, worst year, best year ...

TJH HYP Accumulation 21 -42 +68
Balanced Portfolio 11 -13 39

That all said and yes I also agree that
private investors are in a special position where they can get better returns than available via either active funds or trackers by carefully allocating their funds to individual shares or bonds and learning from their successes and mistakes

Much of longer term rewards are a factor of start date valuations. Buying gold for instance in 1980 when it cost a little over one ounce of gold to buy the Dow, compared to 2000 when it cost 40 ounces is indicative of relatively high/low valuations. Similar extremes can be see if you compare house price to gold ratios. Or whatever other valuation measures you might utilise. If over a 20 year period you managed to buy a asset after a 33% drop, and sell after a good +33% run up then that timing would have doubled the overall reward. In contrast if you bought after a 33% run up, sold after a -33% retraction then that halved rewards. Comparing a good case outcome with the bad case outcome and that's a four-factor difference, which over 20 years is a 7% annualised difference. Private investors are better placed to adjust their assets/allocations than are funds that often are obligated to hold certain ranges/proportions of assets. A factor however is that often PI's make poor asset allocation/valuation decisions, typically opting to buy-high (greed) and sell-low (fear) that broadly has most PI's lag the broader 'Index' and in some cases by massive amounts. As such common mantra is that many PI's would be better served by just cost averaging in and out of Index fund type investments.

High yield can be a indicator of value, but can also be risky. Possibly indicative of demise, in other cases strong rebound/upside potentials. That risk is generally reflected in HYP's by the higher overall portfolio volatility. Such volatility isn't good for sequence of returns risk however, such as if drawing a regular income/pension. Typically you'll find for those that are in retirement whilst they might be seen to be all-in on stocks (HYP) that in reality they'll have a decent slice of 'bonds' in one form or another, such as actual cash reserves to cover multiple years or other sources of income such a pensions. Factor in those 'bonds' also into the total assets/returns and comparing like-for-like such a using SWR based withdrawal measures (or whatever) is the more ideal means to compare different choices of assets/allocations. Such 'equalised' comparisons are however very rarely seen/stated.

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Re: Sources of wealth

#390579

Postby hiriskpaul » February 27th, 2021, 12:51 pm

Bubblesofearth wrote:
hiriskpaul wrote:Or just invest in an S&P 500 tracker and let the market do the work for you.
Date       UKX         UKX-TR      HIX         HIX-TR      FTAS-TR     TJH Acc  SP500TR(£)
31/12/99 -6,930.20 -3,140.73 -3,163.00 -2,370.30 -3,050.21 -6.85 -1249.56
25/02/21 6,651.96 6,384.64 3,109.52 6,537.88 7,317.55 26.99 5805.27
Change -4.01% 103.29% -1.69% 175.83% 139.90% 294.01% 365%
XIRR -0.19% 3.41% -0.08% 4.91% 4.22% 6.69% 7.53%


This is always going to be the optimal approach. Select a stock market that has performed the best at the end of the investment period. :D

BoE

Yes, another good approach is to pick a start date that is particularly advantageous to whatever the strategy is that is being promoted, such as value/dividend investing starting just before the dot-com bust.

I don't know whether the S&P 500 was the best by the way, the Nasdaq or other markets might have beaten it (possibly not the Nasdaq though due to the chosen start date and subsequent horrific meltdown of technology stocks), but for completeness, the total £ return of the MSCI World index over the period was 6.31%.

Incidentally, the Gilts return for the period was 5.97%. That's taking the Barclays Equity Gilt data from End 1999 to end 2015 and VGOV performance thereafter.

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Re: Sources of wealth

#390581

Postby Bubblesofearth » February 27th, 2021, 12:57 pm

tjh290633 wrote:Yes, point is taken about the index with the best historical return. The FTSE250 has flown compared with the FTSE100, and what one needs is consitency.

TJH


IMO if you want to estimate the relative performance of any equity portfolio then the benchmark to use is a Global tracker. All portfolios will be a subset of this but carry higher risk, either stock-specific or country-specific. Note - I'm not saying private investors can't beat the Global index just that it is the best yardstick to measure against.

Unfortunately I'm struggling to find a Global tracker that goes back very far, they seem to be a relatively recent innovation. If anyone has access to one that goes back to 1999 or earlier please post a link.

BoE


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