FCIT, what am I missing?

[1nvest]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

The average retail investor does much worse than this with returns perhaps only 4.1% per year - if they are lucky, due to buying high and selling low. Taking inflation at 3%, the shareholder of FCIT is effectively increasing their wealth by 5.2% per year. The hardest thing for a novice investor to do is to sit on their hands for the next 20+ years.

I have been sitting on my hands and doubled my money every 9 years. The rule of 72 is useful - 72/average annual percentage increase = number of years to double.

I have about 98% in FCIT and the rest in cash.

Are you saying that you basically have a one share portfolio?

I suppose the idea is that you can run a one-share portfolio as long as that share is some kind of global fund or tracker.

It seems to me that something like FCIT could make sense as the first share you buy. But if you already have a globally balanced portfolio of some or many shares/funds, then adding FCIT won't do a lot more for you.

So perhaps it makes sense for beginners and for those who don't want a number of holdings to manage?

What are the perceived/actual risks of FCIT, a form of conservatively managed active index fund, compared to a passive/mechanical ETF index fund such as a 'world' index?

If one owns their own home, say £600K value, imputed rent benefit; Has perhaps £24K/year inflation linked pension income - that at a 4% assumed rate = £600K value; And £600K in FCIT, that at 1.5% dividend yield generates £9K ... then £33K/year with all 'rent' paid/liability matched = diversification of thirds each land/stock/bond type asset allocation. Under such a situation a choice of 100% FCIT would seem perfectly reasonable to me.

I am not saying it is not reasonable but I am not sure that I would want it as my only share for the long term. It is not a tracker, it is, at least in theory, an actively managed investment trust and whilst it has a good culture I think, it is a different beast from say 30 years ago.

Dod

Assuming broadly similar rewards viewtopic.php?f=54&t=25798 a play off between a mechanical world index fund, where the weightings are directed by millions, versus a active world fund such as FCIT, directed by 5, 10, whatever trustees, has the latter having higher risk, index fund being the better risk-adjusted reward.

Also do you need to hold world stocks. The US is pretty much the heart of capitalism and its S&P500 stocks invest globally. Warren Buffett and Jack Bogle both were content to hold just that, with other stocks held in other stock markets being seen as likely involving regulatory, withholding tax ..etc. risks. Buffett suggests 100% S&P500 for investor who are in the position of owning their own home, no debt, kids flown the nest, pension income streams. More precisely saying if I (he) had $1M that was generating $30,000 of dividend income and in ... (that position) - there was no need to have cash. Taking that advice over a world index fund and since 2009 has seen a 4% annualised difference PV

[Dod101]

Are you saying that you basically have a one share portfolio?

I suppose the idea is that you can run a one-share portfolio as long as that share is some kind of global fund or tracker.

It seems to me that something like FCIT could make sense as the first share you buy. But if you already have a globally balanced portfolio of some or many shares/funds, then adding FCIT won't do a lot more for you.

So perhaps it makes sense for beginners and for those who don't want a number of holdings to manage?

What are the perceived/actual risks of FCIT, a form of conservatively managed active index fund, compared to a passive/mechanical ETF index fund such as a 'world' index?

If one owns their own home, say £600K value, imputed rent benefit; Has perhaps £24K/year inflation linked pension income - that at a 4% assumed rate = £600K value; And £600K in FCIT, that at 1.5% dividend yield generates £9K ... then £33K/year with all 'rent' paid/liability matched = diversification of thirds each land/stock/bond type asset allocation. Under such a situation a choice of 100% FCIT would seem perfectly reasonable to me.

I am not saying it is not reasonable but I am not sure that I would want it as my only share for the long term. It is not a tracker, it is, at least in theory, an actively managed investment trust and whilst it has a good culture I think, it is a different beast from say 30 years ago.

Dod

Assuming broadly similar rewards viewtopic.php?f=54&t=25798 a play off between a mechanical world index fund, where the weightings are directed by millions, versus a active world fund such as FCIT, directed by 5, 10, whatever trustees, has the latter having higher risk, index fund being the better risk-adjusted reward.

Also do you need to hold world stocks. The US is pretty much the heart of capitalism and its S&P500 stocks invest globally. Warren Buffett and Jack Bogle both were content to hold just that, with other stocks held in other stock markets being seen as likely involving regulatory, withholding tax ..etc. risks. Buffett suggests 100% S&P500 for investor who are in the position of owning their own home, no debt, kids flown the nest, pension income streams. More precisely saying if I (he) had $1M that was generating $30,000 of dividend income and in ... (that position) - there was no need to have cash. Taking that advice over a world index fund and since 2009 has seen a 4% annualised difference PV

And your point?

Dod

[elephanthunt11]

Hi all,


There were some mentions of FCIT, which I have seen mentioned in other threads with the subtext being that FCIT is a good option to form part of a balanced portfolio.

I hold FCIT, along with a spread of other ITs, OEICs, and ETFs.
Why do I hold FCIT? It is a large, long established IT with a very large range of global investments. A reasonable comparison would be a Global Tracker ETF - e.g. Vanguard VWRL (which I also hold). Over 5 years, the total return of FCIT is 58.91%, while VWRL has managed 55.61%. If you would prefer a global fund which is more selective, then I also hold Fundsmith Equity - an OEIC. It has returned 74.7%, but it has been more volatile.
I'm not sure what you mean by "holding a position" - how long will you hold a position, and can you hold your position over a substantial downturn? Equity investment is always subject to risk, but probably (on past performance) FCIT has reasonably followed the Global Investment Market with a slightly higher return than a simple tracker.

I know that many of us use the tools on the Hargreaves Lansdown Site (free of charge) to make decisions on our investments. So I'll repeat the slightly convoluted formula, as to how you can plot ITs, OEICS, ETFs and company shares, all on the same page - just in case you haven't used it. From the Hargreaves Lansdown main page choose Funds - and select an OEIC - e.g. Fundsmith Equity Class I. From the displayed page, select Charts & Performance. The Fundsmith 5-year graph will be displayed, and you can choose other Funds (i.e. OEIC/Unit Trust/IT etc), or alternatively an Equity, Sector or Index. As well as the graphs you will also see the numerical performance over 5 years. If you have a look at FCIT vs VWRL, you will see that they follow one another fairly reasonably, with FCIT usually a little bit higher. If you want to see a high flyer with high volatility - have a look at Scottish Mortgage (SMT) which I also hold.

Some great information here. When I say 'hold a position' it will be indefinitely unless there's a fundamental change in the asset. I've invested through the inverted yield curve of 2018, Trump's trade-war with China of 2019, Covid, the tech selloff of september '21 and through the current bear market. Always maintaining or upping my contributions. I do hold Baillie Gifford American class b units in my SIPP and didn't want to be over exposed. Any advice I ask for here always relates to my ISA..

I do use HL's tools but only for cursory glances at potentials, my actual research is (probably overdone) heavily drawn out over a period of months before I pull the trigger where I use all sorts of resources to make sure my conviction is rock solid. Which is why, along with my index trackers, I only hold 4 direct equities.

[tjh290633]

Are you saying that you basically have a one share portfolio?

Dod

I have bare trusts for my grandchildren, each invested in a single IT, 2 in FCIT, one in WTAN and one in ATST. They cover various date ranges, from 2001 starting to 2011. Rates of return is best for FCIT, since 2003 at 13.4%. WTAN is lowest since 2001 at 9.4%.

Wheb they eventually get their hands on them, I shall tell them to just hold on and keep reinvesting dividends. Doubling in value every 7 years or so is not to be sneezed at.

TJH

[LooseCannon101]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

The average retail investor does much worse than this with returns perhaps only 4.1% per year - if they are lucky, due to buying high and selling low. Taking inflation at 3%, the shareholder of FCIT is effectively increasing their wealth by 5.2% per year. The hardest thing for a novice investor to do is to sit on their hands for the next 20+ years.

I have been sitting on my hands and doubled my money every 9 years. The rule of 72 is useful - 72/average annual percentage increase = number of years to double.

I have about 98% in FCIT and the rest in cash.

Are you saying that you basically have a one share portfolio?

Dod

Yes - that is correct. The value of FCIT is more than than the value of my house (mortgage paid). The dividend is practically guaranteed and beats the rate of inflation.

I feel confident owning just a one share portfolio as the underlying portfolio has 400 companies, FCIT has low borrowings and the fund manager (Paul Niven) has a great deal of experience and personally owns over £1.5m worth of FCIT shares.

[Dod101]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

The average retail investor does much worse than this with returns perhaps only 4.1% per year - if they are lucky, due to buying high and selling low. Taking inflation at 3%, the shareholder of FCIT is effectively increasing their wealth by 5.2% per year. The hardest thing for a novice investor to do is to sit on their hands for the next 20+ years.

I have been sitting on my hands and doubled my money every 9 years. The rule of 72 is useful - 72/average annual percentage increase = number of years to double.

I have about 98% in FCIT and the rest in cash.

Are you saying that you basically have a one share portfolio?

Dod

Yes - that is correct. The value of FCIT is more than than the value of my house (mortgage paid). The dividend is practically guaranteed and beats the rate of inflation.

I feel confident owning just a one share portfolio as the underlying portfolio has 400 companies, FCIT has low borrowings and the fund manager (Paul Niven) has a great deal of experience and personally owns over £1.5m worth of FCIT shares.

Well at least you make less noise about it than Pastcaring with his (apparently) two share portfolio. I could not do that though. You can of course make a good case for it but what if Niven falls over tomorrow in front of a bus? Anyway you are clearly so sure of FCIT's future that even if he does he will be replaced no problem. Wow! I could not do that. A single share worth more than your house? No. Not for me. You have very strong nerves.

Dod

[BullDog]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

The average retail investor does much worse than this with returns perhaps only 4.1% per year - if they are lucky, due to buying high and selling low. Taking inflation at 3%, the shareholder of FCIT is effectively increasing their wealth by 5.2% per year. The hardest thing for a novice investor to do is to sit on their hands for the next 20+ years.

I have been sitting on my hands and doubled my money every 9 years. The rule of 72 is useful - 72/average annual percentage increase = number of years to double.

I have about 98% in FCIT and the rest in cash.

Are you saying that you basically have a one share portfolio?

Dod

Yes - that is correct. The value of FCIT is more than than the value of my house (mortgage paid). The dividend is practically guaranteed and beats the rate of inflation.

I feel confident owning just a one share portfolio as the underlying portfolio has 400 companies, FCIT has low borrowings and the fund manager (Paul Niven) has a great deal of experience and personally owns over £1.5m worth of FCIT shares.

I don't really have a problem with that. F&C is very diversified. Far more than many self managed portfolios that get aired here. It's simple to understand and and run, fairly cheap, never going out of business and a reliable if not stellar performer. There's nothing much to dislike really. Good luck with F&C. You could do far worse in my opinion.

[absolutezero]

The dividend is practically guaranteed and beats the rate of inflation.

I see this a lot. Even from finance journalists. 'An inflation busting dividend'.

It's a common fallacy.

Dividends are not extra money, unlike interest.

Dividends are a return OF your capital, not a return ON your capital.

So what difference does it make if the dividend beats inflation or not? All they are doing is giving a slice of your own money back to you.

For what it's worth, FCIT is a good proxy for Vanguard's Developed World Tracker, VEVE. Their graphs pretty much overlay one another.
VEVE is cheaper to run though at 0.10% annual fee.
I own both FCIT and VEVE - purely for diversification between two different assets.

[monabri]

The dividend is practically guaranteed and beats the rate of inflation.

I see this a lot. Even from finance journalists. 'An inflation busting dividend'.

It's a common fallacy.

Dividends are not extra money, unlike interest.

Dividends are a return OF your capital, not a return ON your capital.

So what difference does it make if the dividend beats inflation or not? All they are doing is giving a slice of your own money back to you.

For what it's worth, FCIT is a good proxy for Vanguard's Developed World Tracker, VEVE. Their graphs pretty much overlay one another.
VEVE is cheaper to run though at 0.10% annual fee.
I own both FCIT and VEVE - purely for diversification between two different assets.

VEVE v FCIT....5 Year Total Returns..graph....one I prepared earlier!

viewtopic.php?p=518159#p518159

I'm coming to the view of ETFs for growth, ITs for income, HYP for excitement, SMT for spice.

[Dod101]

The dividend is practically guaranteed and beats the rate of inflation.

I see this a lot. Even from finance journalists. 'An inflation busting dividend'.

It's a common fallacy.

Dividends are not extra money, unlike interest.

Dividends are a return OF your capital, not a return ON your capital.

So what difference does it make if the dividend beats inflation or not? All they are doing is giving a slice of your own money back to you.

For what it's worth, FCIT is a good proxy for Vanguard's Developed World Tracker, VEVE. Their graphs pretty much overlay one another.
VEVE is cheaper to run though at 0.10% annual fee.
I own both FCIT and VEVE - purely for diversification between two different assets.

I have sympathy with that view. I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

[absolutezero]

I have sympathy with that view. I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

I view the risk of an ETF provider going pop as negligible but not zero.

I hold the FTSE 100 trackers ISF from iShares and VUKE from Vanguard
and S&P500 trackers VUSA from Vanguard and IUSA from iShares
etc etc

They are pretty much carbon copies of each other from a performance point of view.
A slight extra dealing cost for a bit of insurance is £5-£10 well spent.

I hold FCIT as an almost duplicate for Vanguard VEVE for diversification reasons and also because my tax shelters are full and I don't want to hold the iShares version for foreign (Irish domiciled) tax reasons.
(Foreign dividend of £2000 would be breached and the Excess Reportable Income faff.)

[MrFoolish]

I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

Presumably though any new manager would be unlikely to make quick, significant changes to the portfolio. You'd expect the directors to demand the ship continues in basically the same direction.

[Dod101]

I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

Presumably though any new manager would be unlikely to make quick, significant changes to the portfolio. You'd expect the directors to demand the ship continues in basically the same direction.

I agree which is why I wrote about the culture in an earlier post. It is difficult to change. Most likely they would recruit someone with similar views.

Dod

[mc2fool]

I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

Presumably though any new manager would be unlikely to make quick, significant changes to the portfolio. You'd expect the directors to demand the ship continues in basically the same direction.

I agree which is why I wrote about the culture in an earlier post. It is difficult to change. Most likely they would recruit someone with similar views.

Dod

I'm not sure how that actually works in this case. F&C Asset Management, who used to be the manager (Niven & Tigue before him being employees), was taken over by Bank of Montreal in 2014 and then they sold their asset mgmt operations (inc F&C) to Columbia Threadneedle (who Niven now works for) last year. So it's gone from the long time Scottish ownership to Canadian to American in the last few years. The board must (?) have approved all this shuffling but it seems to have all happened by corporate trading rather than by their active choice.

Aside from a resultant culture change, the other problem with the one-egg-one-basket approach is good old unknown unknowns. We've seen a number of "can't possibly fail" institutions do so over the years, for a variety of really unpredictable (at least, unpredicted) reasons, and it would be foolhardy to think that any is immune, no matter how low risk.

And when did F&C's website go all trendy, with cheesy smiling pseudo-people posers on every page?!? Was that with BMO or CT?

[Dod101]

I could never have but one holding even in an actively managed asset like FCIT. Everything is riding on one manager ( and the culture of course which should not be readily discounted) The dividend is almost irrelevant these days though.

Dod

Presumably though any new manager would be unlikely to make quick, significant changes to the portfolio. You'd expect the directors to demand the ship continues in basically the same direction.

I agree which is why I wrote about the culture in an earlier post. It is difficult to change. Most likely they would recruit someone with similar views.

Dod

I'm not sure how that actually works in this case. F&C Asset Management, who used to be the manager (Niven & Tigue before him being employees), was taken over by Bank of Montreal in 2014 and then they sold their asset mgmt operations (inc F&C) to Columbia Threadneedle (who Niven now works for) last year. So it's gone from the long time Scottish ownership to Canadian to American in the last few years. The board must (?) have approved all this shuffling but it seems to have all happened by corporate trading rather than by their active choice.

Aside from a resultant culture change, the other problem with the one-egg-one-basket approach is good old unknown unknowns. We've seen a number of "can't possibly fail" institutions do so over the years, for a variety of really unpredictable (at least, unpredicted) reasons, and it would be foolhardy to think that any is immune, no matter how low risk.

And when did F&C's website go all trendy, with cheesy smiling pseudo-people posers on every page?!? Was that with BMO or CT?

I have not followed all the ins and outs of the changes of ownership but it illustrates some of the things that can happen. If the changes are just cosmetic in terms of who owns what in the background but the front man and his back up operation the remain unchanged (do they ever?) then all should be fine but I could never be as relaxed about the situation as LooseCannon appears to be.

Dod

[DrFfybes]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

Great..for all those bicentennials amongst us!

My thoughts exactly - these figures are lovely for historic interest, but only really of use to a Galapagos Tortoise.

More important to most people is the 30-50 year performance, these days easily compared with a Global tracker. As the first 130 + years was under different ownership to the last few then the recent performance will be a better indicator of the direction things are heading.

Berkshier Hathaway is another one - historically fantastic, but with an average age of 95 at the top of the company, what will happen when Charlie and Warren shuffle off? I'm expecting a very short buying opportunity will arise.

Paul (60% VEVE/VWRL/VMID, 20% cash for the dips, and circa 20% BRKB for a bit of excitement).

[tjh290633]

For what it's worth, FCIT is a good proxy for Vanguard's Developed World Tracker, VEVE. Their graphs pretty much overlay one another.
VEVE is cheaper to run though at 0.10% annual fee.
I own both FCIT and VEVE - purely for diversification between two different assets.

I think that those graphs will be after charges, so the level of charges is immaterial. Bear in mind that those annual charges are not the whole story. There are other charges besides. If FCIT can at least match VEVE, its level of charges is immaterial.

TJH

[1nvest]

Dug out data for FCIT, MSCI World, FT All share, FT250, BRK, S&P500 ... since 1997

Equal weight those, yearly rebalanced, and non-rebalanced pretty much compared the same in both reward (total return accumulation gain) and risk (standard deviation in yearly total return gains).

FCIT and S&P500 broadly compared to that multi-way set.

Terry's calendar year accumulation HYP also yielded similar rewards, but did so with more volatility. Tended to pull-ahead for a while, but then see deeper declines that realigned it to the 'average'.

Individually there were some considerable deviations, for instance FT250 did well/better, FT100/All-Share lagged.

Investors look to dilute concentration risk, be that currency, asset, country, provider/fund. Also investors look to average, not lumping all in or all out at one point in time, maybe holding some bonds/cash to add shares as prices dip, sell those shares again later after rebounds, that helps average down the bottom line (average cost of stock).

Whilst FCIT may very well achieve the average, do OK, it is still a single point of concentration risk. As Jim/Susan might attest (who IIRC bet the farm on a single stock (Lloyds Bank?)), concentration risk can be one if not the greatest of risks. Uncompensated risk, that can easily be diversified away.

As I see it I prefer Paul's (DrFfybes) approach/choice over that of being all-in on just FCIT alone. But even Paul's does look too V'ish concentration risk - 60% single factor (Vanguard) risk. I'd be more inclined to swap out VMID for iShares offering instead to reduce Vanguard risk down to 40%.

[richfool]

FCIT Portfolio Update:

https://www.investegate.co.uk/f--38-c-i ... 36071489W/

[77ss]

FCIT is a one-stop shop if you are looking for a world equity portfolio.

The average returns of 8.2% per year over 154 years has turned £100 into £18m.

The average retail investor does much worse than this with returns perhaps only 4.1% per year - if they are lucky, due to buying high and selling low. Taking inflation at 3%, the shareholder of FCIT is effectively increasing their wealth by 5.2% per year. The hardest thing for a novice investor to do is to sit on their hands for the next 20+ years.

I have been sitting on my hands and doubled my money every 9 years. The rule of 72 is useful - 72/average annual percentage increase = number of years to double.

I have about 98% in FCIT and the rest in cash.

I agree - one could do a lot worse than FCIT.

I have held it since 1994. I wasn't a good record keeper in those days, but since moving my holding into a SIPP in May 2015 the share price has gone from 453 to 929 - more than doubling in just over 7 years.

With dividends, my ATR since May 2015 is 10.43%.

It is only one of my holdings, but as I age I am considering simplifying my life by moving more of my dosh into this steady performer.