hazellend
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Jul 6, 2019 19:06:39 GMT
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Post by hazellend on Jul 6, 2019 19:06:39 GMT
Have you considered splitting that? Obviously I don't think Vanguard are anything like Equitable Life, Lehmans, GFI...., and the chance of a problem is very small, but the cost of splitting is also very small and you might be able to sell £12k of capital gains worth each year for the next couple of years, a bit more if you have losses elsewhere,... Considered replicating the all world with individual ETFs to reduce the expenses slightly but too lazy to rebalance with new money
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Post by samford71 on Jul 6, 2019 19:16:45 GMT
r00lish67 . I have nothing against equity index funds. The majority of my equity exposure is in them. Nonetheless, I think the liking for of passive trackers is moving from perfectly reasonable to verging on something like fanaticism. 1. The theoretical argument that active investment is a zero net sum game and therefore, in aggregate, active managers cannot outperform passive managers is based upon William Sharpe's paper "The Arithmetic of Active Management", 1991. Unfortunately, this theoretical justification comes with a number of assumptions the biggest of which are that there is no primary market, the index is never reconstituted and that their are no non-economic agents. Practically, none of these assumptions is valid.
2. While evidence against the value of active management for S&P500 managers has existed for over 20 years, you need to be careful not to extrapolate this to all other equity markets and asset classes. In particular, there is relatively strong evidence in favour of the idea that active bond managers do outperform passive managers link. Academic work by the likes of Pedersen has shown that bond markets have persistent forms of risk premia that can be exploited by active managers. Moreover, the impact of primary issuance concessions, index reconstitution and activity by non-economic agents (central banks, reserve managers etc) is much larger in bond markets than equity markets.
3. The trend for lower and lower cost passive funds has now tipped from a positive to being a negative in my view. To keep cutting costs, funds are cutting corners. They use cheaper or lower performing indices to hide their costs. They cuts costs through using lower credit quality custodial banks and fund administrators. The do excessive amounts of stock or bond lending, creating substantial counterparty risk. This is all done to shave 5-10bp off the costs and protect their margins, which are under enormous pressure.
4. The issue of active vs. passive management does not solve the issue of the correct asset allocation. You still need to decide what proportion of different assets to hold, geographical distribution etc. The recent tendency toward targetting global market-cap weighted index funds has little justification in liability driven terms. In debt terms, market cap weighting is clearly dumb. You really want to hold more Italian government debt because they issue more? Or hold more junk debt of a company just because it's issuing more just to survive? Perhaps it's completely valid to have a home bias in your assets if your liabilties are in GBP, yet a global market-cap weighted fund will not do this. Asset allocation needs to be driven by the objective of hedging future liabilities. Anything else is speculation.
5. Furthermore, this idea that you should reduce equity exposure and increase bond exposure as you age is not really supported by the evidence. What matters most is sequence of return risk vs. your forward liability curve. If anything, the evidence points that once you are in retirement you should start with a decent chunk of less risky assets (bonds and cash) but then increase equity exposure; this is termed a reverse equity glidepath.
With regard to Woodford. He essentially gave his UK clients what they wanted: an income fund that paid above index dividends. The corollary is that these companies are not necessarily ones that hold their capital value. To offset that issue he then proceeded to buy illiquid private equity in the hope it would generate growth. This was clear mandate drift. The clients wanted a flawed investment proposition and hence the product was flawed from day one. Nonetheless, it's just one small fund of a few £ billion. Let's not overemphasize it's importance.
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carolus
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Post by carolus on Jul 7, 2019 6:38:21 GMT
IMO the story that some people won at Blackjack by counting cards was probably spread by casino operators. The margin to the house from Blackjack is far higher than Roulette for example, and any possible improvement in the punter's chances by counting cards will be slight in comparison, spasmodic in occurrence and easily detected if the casino was worried about it. I'm aware this is at risk of diverging from the actual purpose of the thread, but what you've said isn't true. The house edge on standard (European) roulette is 1/37, or roughly 2.7%. The house edge on Blackjack varies a littel depending on the exact rules in use, but is normally about 0.5% (assuming you play with correct strategy). It's certainly believable that counting cards (was) a method of play that would give you positive expected value. The major problem nowadays, I believe, is that most casinos will shuffle a large number of decks together, and will reshuffle very frequently, making it difficult to get enough penetration into the deck to get a big edge.
As it is, there are better ways to beat the house edge at casinos and bookmakers, so I don't think the decline of card counting is really a problem.
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littleoldlady
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Jul 7, 2019 7:23:22 GMT
Post by littleoldlady on Jul 7, 2019 7:23:22 GMT
IMO the story that some people won at Blackjack by counting cards was probably spread by casino operators. The margin to the house from Blackjack is far higher than Roulette for example, and any possible improvement in the punter's chances by counting cards will be slight in comparison, spasmodic in occurrence and easily detected if the casino was worried about it. I'm aware this is at risk of diverging from the actual purpose of the thread, but what you've said isn't true. The house edge on standard (European) roulette is 1/37, or roughly 2.7%. The house edge on Blackjack varies a littel depending on the exact rules in use, but is normally about 0.5% (assuming you play with correct strategy). It's certainly believable that counting cards (was) a method of play that would give you positive expected value. The major problem nowadays, I believe, is that most casinos will shuffle a large number of decks together, and will reshuffle very frequently, making it difficult to get enough penetration into the deck to get a big edge.
As it is, there are better ways to beat the house edge at casinos and bookmakers, so I don't think the decline of card counting is really a problem.
Your assumption is an easy get out. If you play using the same strategy as the dealer is forced to the edge will be about 5%, but of course it's not difficult to improve on that a little. If you can ever manage to see a casino's internal accounts of profit per game you will probably see that they make more on BJ than R because players in general cannot beat the edge. Casinos generally have plenty of BJ tables, more than R, and they are not there for any other reason than to make money for the casino. There are plenty of books claiming to know "the correct strategy" which to my cynical mind suggests that there is more money to be made out of writing books for gullible punters than in playing BJ. If there were a sure winning strategy anyone who knew it would make a living out out of it and would be most anxious that knowledge of it did not leak out causing casinos to change the rules back in their favour. The last thing they would do is publish it. On the other hand, suggesting that there is one, known only to a few, is a good way for casinos to encourage play.
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r00lish67
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Jul 7, 2019 7:48:54 GMT
Post by r00lish67 on Jul 7, 2019 7:48:54 GMT
5. Furthermore, this idea that you should reduce equity exposure and increase bond exposure as you age is not really supported by the evidence. What matters most is sequence of return risk vs. your forward liability curve. If anything, the evidence points that once you are in retirement you should start with a decent chunk of less risky assets (bonds and cash) but then increase equity exposure; this is termed a reverse equity glidepath.
Some interesting food for thought, thanks. Just as your point 5. chimes with something else I read recently (and if we can divert to casinos then we can certainly divert to this  ) then there's an excellent blog called Early Retirement Now, which ran a very comprehensive study of safe withdrawal rates for early retirees. I've linked to part 19 below just as it touches on the same, but it really covers every aspect. earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/This made me feel much better about my 50% equity allocation, as I can now pretend all along that I'm following a reverse equity glidepath instead of being hideously underweight in equities for my age!
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bigfoot12
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Jul 7, 2019 8:32:54 GMT
Post by bigfoot12 on Jul 7, 2019 8:32:54 GMT
IMO the story that some people won at Blackjack by counting cards was probably spread by casino operators. The margin to the house from Blackjack is far higher than Roulette for example, and any possible improvement in the punter's chances by counting cards will be slight in comparison, spasmodic in occurrence and easily detected if the casino was worried about it. I'm aware this is at risk of diverging from the actual purpose of the thread, but what you've said isn't true. The house edge on standard (European) roulette is 1/37, or roughly 2.7%. The house edge on Blackjack varies a littel depending on the exact rules in use, but is normally about 0.5% (assuming you play with correct strategy). It's certainly believable that counting cards (was) a method of play that would give you positive expected value. The major problem nowadays, I believe, is that most casinos will shuffle a large number of decks together, and will reshuffle very frequently, making it difficult to get enough penetration into the deck to get a big edge.
As it is, there are better ways to beat the house edge at casinos and bookmakers, so I don't think the decline of card counting is really a problem.
I fully believe Ed Thorp's accounts of his blackjack system. But it is hard to do well. When the early papers emerged the casino increased the number of packs (and discarded a large proportion), but it turned out that (just as with P2P on this forum) many are over confident of their own abilities. And so the casinos reduced the number of packs again. Blackjack became more popular, but most people were bad at counting cards. Some could do the maths and vary their betting, but they were obvious and so the casinos could easily exclude them.
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Greenwood2
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Post by Greenwood2 on Jul 7, 2019 9:14:08 GMT
I'm aware this is at risk of diverging from the actual purpose of the thread, but what you've said isn't true. The house edge on standard (European) roulette is 1/37, or roughly 2.7%. The house edge on Blackjack varies a littel depending on the exact rules in use, but is normally about 0.5% (assuming you play with correct strategy). It's certainly believable that counting cards (was) a method of play that would give you positive expected value. The major problem nowadays, I believe, is that most casinos will shuffle a large number of decks together, and will reshuffle very frequently, making it difficult to get enough penetration into the deck to get a big edge.
As it is, there are better ways to beat the house edge at casinos and bookmakers, so I don't think the decline of card counting is really a problem.
I fully believe Ed Thorp's accounts of his blackjack system. But it is hard to do well. When the early papers emerged the casino increased the number of packs (and discarded a large proportion), but it turned out that (just as with P2P on this forum) many are over confident of their own abilities. And so the casinos reduced the number of packs again. Blackjack became more popular, but most people were bad at counting cards. Some could do the maths and vary their betting, but they were obvious and so the casinos could easily exclude them. I used to have a neighbour who was a pit boss in a casino, part of his job was to spot people using systems so he knew them all and was extremely good at counting cards etc. He wasn't allowed to gamble in casinos in this country, but reckoned he could easily win his holiday spending money from casinos when he was on holiday abroad (without being too obvious).
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bigfoot12
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Jul 7, 2019 9:15:24 GMT
Post by bigfoot12 on Jul 7, 2019 9:15:24 GMT
...but surely "rule number one" trumps all other perspectives on the matter of investment. You know, the rule that goes "never invest more than you can afford to loose". I don't think I've ever heard of that rule. I don't see how it could be a rule. How could most of us get close to that? My cash percentage is at an all time high, but I must be about 80-85% invested. As I can't afford to lose 80% of my wealth should I switch to 90% cash, and split it across multiple bank account earning 1-2%?
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Jul 7, 2019 9:46:03 GMT
Post by wallstreet on Jul 7, 2019 9:46:03 GMT
...but surely "rule number one" trumps all other perspectives on the matter of investment. You know, the rule that goes "never invest more than you can afford to loose". I don't think I've ever heard of that rule. I don't see how it could be a rule. How could most of us get close to that? My cash percentage is at an all time high, but I must be about 80-85% invested. As I can't afford to lose 80% of my wealth should I switch to 90% cash, and split it across multiple bank account earning 1-2%?
I will give you the benefit of the doubt that you are pulling my leg. 
The reason that "rule" is so oft-repeated is to encourage people away from greed and gluttony and over-investing.
Put it this way, if the proverbial bottom fell out of the market tomorrow (or you found yourself in a Woodford-esque situation where you invested in the wrong thing at the wrong time), what would happen ?
For you, 80%+ invested I suspect you would be cowering in a corner licking your wounds. I suspect we would see you on this forum trying to finger the blame on someone else other than yourself.
For me, or anyone else sensible ? Sure, I'd notice it. But I wouldn't be panicing, I could even ride it out if I decided to. Why ? Because I've got the necessary cash reserves to take care of my liabilties and therefore am unphased by periods of turbulence in the market.
Over-investment is a path that leads straight to the cliff edge. Many have tried following it. But it always comes to bite them in the backside in the end. Generally always at the most inconvenient time in your personal life.
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bigfoot12
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Jul 7, 2019 9:50:07 GMT
Post by bigfoot12 on Jul 7, 2019 9:50:07 GMT
... without any reference to the actual point of investing which surely is to hedge your future liabilities.
There is no "right answer" Whilst I'm sure you're right and I know you have plenty more knowledge than I in this arena, isn't that though a rather overcomplicated definition for the humble retail investor? No I don't think so. Assuming that you are making some savings it is important to think about what you are saving for. look at JamesFrance a few posts earlier:- My greatest regret when I moved to France was that I had no knowledge of what type of investment worked well for their tax system A 35 year old worrying about school fees in the near future, but still with a good job and a house, might want a very different strategy from someone who is provided with accommodation with the job, or someone else who plans on retiring to Spain in a few years. I think that also ties samford71 later point about increasing bond holdings towards retirement. Less likely now, but if you have a defined contribution pension, with a compulsory retirement age, and were forced to take either 100% annuity, or 25% cash and 75% annuity on a single fixed - often your 60th birthday then tapering towards bonds or a mix of cash and bonds made good sense - from a risk point of view, not necessarily a maximum expected return point of view. These sort of pensions used to be quite common, but fortunately they are generally more flexible now. And to add to samford71's point about active funds is that in many markets they (the median or mean) do outperform the index, just not after their fees. Edit: Added word "active" in last line (ahead of funds)
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bigfoot12
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Jul 7, 2019 10:23:47 GMT
Post by bigfoot12 on Jul 7, 2019 10:23:47 GMT
Put it this way, if the proverbial bottom fell out of the market tomorrow (or you found yourself in a Woodford-esque situation where you invested in the wrong thing at the wrong time), what would happen ? For you, 80%+ invested I suspect you would be cowering in a corner licking your wounds. I suspect we would see you on this forum trying to finger the blame on someone else other than yourself. For me, or anyone else sensible ? Sure, I'd notice it. But I wouldn't be panicing, I could even ride it out if I decided to. Why ? Because I've got the necessary cash reserves to take care of my liabilties and therefore am unphased by periods of turbulence in the market. Over-investment is a path that leads straight to the cliff edge. Many have tried following it. But it always comes to bite them in the backside in the end. Generally always at the most inconvenient time in your personal life.
My 80% is split across several platforms, countries and investment managers and product - equities in UK, Europe, USA, Japan,..., Gilts and Tips, Gold and other commodities, and a few other strange bets/investments. I don't have any art, classic cars or crypto currencies, but i have much of the rest. (I have had bitcoin in the past.) If the bottom falls out of all of these it probably means something truly terrible has happened and I will have bigger worries than posting on this forum. Assuming that it just a normally recession/financial crisis I will tend back towards 100-120% invested (highly diversified with a bit of gearing is fine for me - no tears if I mess up). On the character point, you clearly haven't read many of my posts. I take credit for my successes (sometimes helped by luck) and the blame for my mistakes (again sometimes with luck). I don't panic; sometimes I make a quick decision to change my mind. I was long Russia and Turkey when Turkey shot down a Russian plane. I was still long Turkey when there was an attempted coup. In the second case, I had little idea who was going to win that coup, what the impact would be on the market, and I could easily exit so I did. I did make a gain on Turkey, but that wasn't important to my decision to exit. I also made a quick decision to exit FC when they withdrew the downloadable loan book; 341 loan parts sold in a few minutes.
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JamesFrance
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Jul 7, 2019 10:31:58 GMT
Post by JamesFrance on Jul 7, 2019 10:31:58 GMT
5. Furthermore, this idea that you should reduce equity exposure and increase bond exposure as you age is not really supported by the evidence. What matters most is sequence of return risk vs. your forward liability curve. If anything, the evidence points that once you are in retirement you should start with a decent chunk of less risky assets (bonds and cash) but then increase equity exposure; this is termed a reverse equity glidepath.
Some interesting food for thought, thanks. Just as your point 5. chimes with something else I read recently (and if we can divert to casinos then we can certainly divert to this ) then there's an excellent blog called Early Retirement Now, which ran a very comprehensive study of safe withdrawal rates for early retirees. I've linked to part 19 below just as it touches on the same, but it really covers every aspect. earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/This made me feel much better about my 50% equity allocation, as I can now pretend all along that I'm following a reverse equity glidepath instead of being hideously underweight in equities for my age! Whenever I have had a bond investment during the 25 years since retiring I have found the average return to be poor and with current continuing low interest rates I believe this will continue or get worse.
Other than P2P where the funds came from unspent income, all my investments are in equities, mainly ETFs and Investment trusts and at 81 years old I am not planning to change this now. This has given a good increase in income over the years and I don't worry about market fluctuations. If we should find ourselves with a Corbyn government I will try to align my final exit with a market crash to save my children from the massive inheritance grab which will probably occur, hopefully this will not be anytime soon.
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macq
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Jul 7, 2019 10:33:34 GMT
Post by macq on Jul 7, 2019 10:33:34 GMT
Put it this way, if the proverbial bottom fell out of the market tomorrow (or you found yourself in a Woodford-esque situation where you invested in the wrong thing at the wrong time), what would happen ? For you, 80%+ invested I suspect you would be cowering in a corner licking your wounds. I suspect we would see you on this forum trying to finger the blame on someone else other than yourself. For me, or anyone else sensible ? Sure, I'd notice it. But I wouldn't be panicing, I could even ride it out if I decided to. Why ? Because I've got the necessary cash reserves to take care of my liabilties and therefore am unphased by periods of turbulence in the market. Over-investment is a path that leads straight to the cliff edge. Many have tried following it. But it always comes to bite them in the backside in the end. Generally always at the most inconvenient time in your personal life.
My 80% is split across several platforms, countries and investment managers and product - equities in UK, Europe, USA, Japan,..., Gilts and Tips, Gold and other commodities, and a few other strange bets/investments. I don't have any art, classic cars or crypto currencies, but i have much of the rest. (I have had bitcoin in the past.) If the bottom falls out of all of these it probably means something truly terrible has happened and I will have bigger worries than posting on this forum. Assuming that it just a normally recession/financial crisis I will tend back towards 100-120% invested (highly diversified with a bit of gearing is fine for me - no tears if I mess up). On the character point, you clearly haven't read many of my posts. I take credit for my successes (sometimes helped by luck) and the blame for my mistakes (again sometimes with luck). I don't panic; sometimes I make a quick decision to change my mind. I was long Russia and Turkey when Turkey shot down a Russian plane. I was still long Turkey when there was an attempted coup. In the second case, I had little idea who was going to win that coup, what the impact would be on the market, and I could easily exit so I did. I did make a gain on Turkey, but that wasn't important to my decision to exit. I also made a quick decision to exit FC when they withdrew the downloadable loan book; 341 loan parts sold in a few minutes. Bit confused but then it is Sunday morning - you are obviously an active investor by whats in this post but the last line of your previous post something along the lines of funds can outperform the index but not after fee's i assume you mean trackers not active funds?
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r00lish67
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Jul 7, 2019 10:47:37 GMT
Post by r00lish67 on Jul 7, 2019 10:47:37 GMT
Some interesting food for thought, thanks. Just as your point 5. chimes with something else I read recently (and if we can divert to casinos then we can certainly divert to this ) then there's an excellent blog called Early Retirement Now, which ran a very comprehensive study of safe withdrawal rates for early retirees. I've linked to part 19 below just as it touches on the same, but it really covers every aspect. earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/This made me feel much better about my 50% equity allocation, as I can now pretend all along that I'm following a reverse equity glidepath instead of being hideously underweight in equities for my age! Whenever I have had a bond investment during the 25 years since retiring I have found the average return to be poor and with current continuing low interest rates I believe this will continue or get worse.
Other than P2P where the funds came from unspent income, all my investments are in equities, mainly ETFs and Investment trusts and at 81 years old I am not planning to change this now. This has given a good increase in income over the years and I don't worry about market fluctuations. If we should find ourselves with a Corbyn government I will try to align my final exit with a market crash to save my children from the massive inheritance grab which will probably occur, hopefully this will not be anytime soon.
I confess in reality, I don't have any other bond investments either. I have 50% equities, 20% BTL, 20% cash, 10% P2P, with a view to expanding equities and decreasing cash if the market ever comes down again. (happy to take a shoeing from wallstreet (or anyone) if required on this, as I seem to always struggle with whether I really should hold bonds at present or not)
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carolus
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Jul 7, 2019 11:10:26 GMT
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Post by carolus on Jul 7, 2019 11:10:26 GMT
I'm aware this is at risk of diverging from the actual purpose of the thread, but what you've said isn't true. The house edge on standard (European) roulette is 1/37, or roughly 2.7%. The house edge on Blackjack varies a littel depending on the exact rules in use, but is normally about 0.5% (assuming you play with correct strategy). It's certainly believable that counting cards (was) a method of play that would give you positive expected value. The major problem nowadays, I believe, is that most casinos will shuffle a large number of decks together, and will reshuffle very frequently, making it difficult to get enough penetration into the deck to get a big edge.
As it is, there are better ways to beat the house edge at casinos and bookmakers, so I don't think the decline of card counting is really a problem.
Your assumption is an easy get out. If you play using the same strategy as the dealer is forced to the edge will be about 5%, but of course it's not difficult to improve on that a little. If you can ever manage to see a casino's internal accounts of profit per game you will probably see that they make more on BJ than R because players in general cannot beat the edge. Casinos generally have plenty of BJ tables, more than R, and they are not there for any other reason than to make money for the casino. There are plenty of books claiming to know "the correct strategy" which to my cynical mind suggests that there is more money to be made out of writing books for gullible punters than in playing BJ. If there were a sure winning strategy anyone who knew it would make a living out out of it and would be most anxious that knowledge of it did not leak out causing casinos to change the rules back in their favour. The last thing they would do is publish it. On the other hand, suggesting that there is one, known only to a few, is a good way for casinos to encourage play. This isn't correct, and it's not an "easy get out". There is a known, and specific, strategy "basic strategy" or "perfect strategy" tends to be how it's described. This describes exactly what the highest expected value play is in a given situation, and if followed correctly will minimise the house edge, resulting in a house edge of ~0.5%. Of course this is on its own just means you lose money slowly, you still need a further edge to make it profitable. You can read more about it on Wikipedia here. At a guess, casinos will have more BJ tables because a) fewer people can play blackjack at once and b) they typically play for longer (a blackjack hand takes much longer than a roulette spin). As mentioned, there are practical reasons why card counting is no longer particularly easy or profitable at most places, but that doesn't mean it isn't a real method. As for why you'd right a book about it - I assume once casinos have clamped down and the opportunity largely lost, you might wish to make more by selling the story.
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) then there's an excellent blog called Early Retirement Now, which ran a very comprehensive study of safe withdrawal rates for early retirees. I've linked to part 19 below just as it touches on the same, but it really covers every aspect.
