Investment, stick or twist ?

[YorkshireTyke]

Good day all,

Brief history: I will be 60 next year, I retired at age 51 (made redundant) and no pension until I am 65. I know nothing about investments , stock market etc so I normally take the 'safe' route. In the past, say 5-15 years ago, I was investing in offshore fixed term bonds paying 3-6% which I was happy with. In the last 5 years as my bonds matured the ones to replace them with were only 1-2% and I limit my investment in each one to 50k GBP to comply with the compensation scheme.

I was introduced to a UK Broker by another guy who had invested with his company and was pleased with his investments. I told the broker (company name on request) I wanted low risk, I was happy to clear 3% p.a. after charges. He came up with 2 plans, one he estimated to make 5.39% one 4.22% after charges. This was July 2017. I put 25k GBP in each. They immediately lost money. In October this year, after over 2 years, they finally broke even. As at today they are cumulatively 880 GBP to the good, which is about 3.5% whereas it should be around 20% after 2.25 years. At the same time I put 10k GBP in Fundsmith with the same broker on a recommendation from someone else which has grown by 28% !

The companies he invested in are :

Fidelity Emerging Markets Fund W Acc  (GB00B9SMK778)
Fidelity Index US Fund P Acc  (GB00BJS8SH10)
First State Asia Focus Fund Class B (Acc) GBP  (GB00BWNGXJ86)
Franklin UK Mid Cap Fund W Acc  (GB00B7BXT545)
Invesco Corporate Bond UK Z Acc  (GB00B8N44Z77)
iShares Corporate Bond Index Fund (UK) D Acc  (GB00B84DSW83)
L&G UK 100 Index Institutional Acc  (GB00B0CNH502)
L&G UK Property Feeder I Acc  (GB00BK35F408)
Legg Mason Brandywine Global Fixed Income X Acc  (IE00BSZLQJ44)
Legg Mason IF Japan Equity Fund X Acc  (GB00B8JYLC77)
Royal London Cash Plus Fund Y Acc  (GB00BMNR1H58)
Royal London Short Term Money Mrkt Y Acc Inst Hdg  (GB00B8XYYQ86)
Schroder European Z Acc  (GB00B76V8C37)
Schroder High Yield Opportunities Z Acc  (GB00B83RDY83)
Slater Recovery Fund P Acc  (GB00B90KTC71)
TB Amati UK Smaller Companies B Acc  (GB00B2NG4R39)   After doing some reading on the internet I want to invest some money in LF Blue Whale Growth, Lindsell Train Global Equity and increase my investment in Fundsmith.   So my question to you knowledgeable people is do I use additional funds (currently in a current account paying 0.4%) and trust that the above investments will reach 3% p.a. over the next few years or move the 50k from the above into the 3 mentioned investments ?   As I have stated I do not want high risk investments, 3% p.a. will offset a lot of my fixed costs here in Thailand. All replies welcome.

[topt]

Firstly if you are up then actually that is not bad on such a short time frame considering last years performance........

However I would question what are the charges your broker is taking on top of the fund management charges and how that would compare if you bought the funds yourself via a Hargreaves Lansdown/II/AJBell or other platform account?

 

If you go  onto the HL pages you can look up the individual funds and see the different fund classes and the cost via HL. I think you don't even need to be signed in to do this. 

 

The next thing to do would be to use the fund charting software in one of those platforms or Trustnet to compare the performance of the funds against a relevant benchmark and some of their peers. EG - look at the UK smaller companies and see how TB Amata compares to others across that period (19th out of 52 on ytd)

https://www.trustnet.com/fund/price-performance/o/ia-unit-trusts?sector=O%3AUKSMALL&assetclass=EQUI&tab=annualisedPerformance&pageSize=50&sortby=AYTD&sortorder=desc

 

My other thought is that is a lot of different funds which may be your brokers way to reduce risk. Unfortunately UK and Europe suffered a lot especially last year. I also note there are no Investment Trusts and no ETFs which should also reduce costs which eat into returns in the long run. 

 

If you are looking for income I would suggest looking at Investment Trusts rather then funds where possible.

https://www.theaic.co.uk/ There are a number of Investment Trusts that have paid a growing level of income for more than 20 years and are not overly "risky". 

 

A good UK forum to pick up views and ideas is https://www.lemonfool.co.uk// which was set up by some Motley Fool contributors when that site stopped their forums.

 

My one observation on Blue Whale is they have done a great job since start but like everything else are they going to be able to continue it. No reason they should do any worse then any other pick however........except i have been looking at them as well which could be a kiss of death 

 

Hope this of some help.

[persimmon]

Re. Fundsmith ,it has done very well over the last few years , but I wouldn`t say it was " low risk ". With interest rates being so low , investors have been forced to take on more risk in the search for yield , so now its quite difficult to find a low risk-high yield option.

 

Check out Vanguard Life strategy 40 or Capital Gearing investment trust .

 

[YorkshireTyke]

Thanks for the replies so far. The broker uses the Ascentric platform, he did tell me the charges but it was all a bit confusing, I believe on the Ascentric website I can see the charges. Hargreaves Landsdown won't let me invest as I don't have a UK address.

 

As I typed the above I thought 3.5% profit was a bit high for 880 GBP, it is in fact half of that, 1.75%.

 

I will check out all your suggestions in the next few days. BTW, I only invested 10k in Fundsmith, I thought it was worth a punt, I wish I had put the whole 60k there !

 

 

[YorkshireTyke]

Well 9 months down the line I did invest in Blue Whale, Lindsell Train and increased in Fundsmith in December last year. All went well of course until Covid. The funds went down but Fundsmith and Blue Whale both rallied and made a decent profit. Lindsell Train caught up a bit so I transferred that holding split between Fundsmith and Blue Whale.

Then beginning of July I asked the FA to sell some Fundsmith and Blue Whale so I could take 9k profit out. He basically said it's not what he's there for and I should find a new FA. Also said Ascentric platform has been sold and the new owners may not want overseas investors. The upshot was I sold all my holdings and dispensed with his 'services'.

 

So now I still have my account with Ascentric which I can use if I appoint a new UK based advisor.

However, I've looked at Fundsmith website and I can buy direct T Class shares Myself as an overseas investor. Charges and tax wise is this a better option than buying through Ascentric ? Has anyone bought direct ?

 

I don't have a UK address so the likes of HL and Bell won't have me as a customer.

[Barnabe]

Have you tried Degiro? You only have a Thai address? 

 

As persimmon said, move your money to one of Vanguard Life Strategy funds, but not all at once... drip it feed it a bit every month.

You can try to diversify with other Vanguard and Fidelity funds but if you’re not knowledgeable don’t bother. I would stay away from other funds unless you’re prepared to spend some time understanding them and the market in general. The Vanguard Life Strategy Moderate Growth (60% stocks, 40% bonds) is a great investment for long term even at your age, and it’s diversified enough.
 

Check out this video by Pension Craft:

 

I highly recommend his videos if you want to learn more about investing in general.

 

The next couple of years might be rough, but if you keep investing every month it should smooth out over the long term.

 

Good luck and try to find a way to make some income on the side.

[Thailand J]

On 11/6/2019 at 12:55 PM, YorkshireTyke said:

Fidelity Emerging Markets Fund W Acc  (GB00B9SMK778)        

Fidelity Index US Fund P Acc  (GB00BJS8SH10)        

First State Asia Focus Fund Class B (Acc) GBP  (GB00BWNGXJ86)        

Franklin UK Mid Cap Fund W Acc  (GB00B7BXT545)      

           

Invesco Corporate Bond UK Z Acc  (GB00B8N44Z77)        

iShares Corporate Bond Index Fund (UK) D Acc  (GB00B84DSW83)        

L&G UK 100 Index Institutional Acc  (GB00B0CNH502)        

L&G UK Property Feeder I Acc  (GB00BK35F408)     Legg Mason Brandywine Global Fixed Income X Acc  (IE00BSZLQJ44)      Legg Mason IF Japan Equity Fund X Acc  (GB00B8JYLC77)        

Royal London Cash Plus Fund Y Acc  (GB00BMNR1H58)        

Royal London Short Term Money Mrkt Y Acc Inst Hdg  (GB00B8XYYQ86)       European Z Acc (GB00B76V8C37)        

Schroder High Yield Opportunities Z Acc  (GB00B83RDY83)        

Slater Recovery Fund P Acc  (GB00B90KTC71)        

TB Amati UK Smaller Companies B Acc  (GB00B2NG4R39)

 

On 11/6/2019 at 12:55 PM, YorkshireTyke said:

 

4 out of 16 are stocks.

you are 25% stock 75% bond. too conservative.

Me too, will be 60 next year and have no pension that I can count on. I didnt work long enough in US.

Luckily I have a sizable investment , almost all in stocks.

 

Just my opinion: Not only increse your stocks investment, also I would increse the bet in Fidelity Index US Fund. The fund mainly Invest in S&P 500 american mega coorperations. They are money making mechines. 40% of their income is from ex-US so I dont feel the need to buy stocks in other regions. Putting my money in index funds for the long haul had worked very well for me over the last30+ years. I have lost count how many folds my Vanguard account has multiplied.

 

[YorkshireTyke]

THailand J , all of the above that I held chosen by a FA have now been sold. I'm all cash at the moment.

 

I have just applied to buy Fundsmith T class shares which I can do direct from overseas without an FA. I've scanned my application to them on Monday and waiting for a reply as they requested it to be faxed originally. I will chase that up with their online chat today.

 

I know a FA that I met a few years ago and he is looking to register with Ascentric.

 

Thanks Barnabe, I will check out the video later. Although I've a 33 year history of working various roles in Finance analysing companies and shares is a complete mystery to me.

 

I do have a reasonable pension to come in 5 years time but I don't want my capital to erode too much, a 3% investment profit would suffice.

[Barnabe]

I honestly wouldn’t bother too much with it and put almost all if not all of it in one of these Life Strategy funds. I am actually going into that direction, as I used to buy individual stocks but found I couldn’t beat the market, and now only invest long term into index funds, I guess the next step is to trim the number of funds and invest in only one or two generic ones like Life Strategy.
 

I am a bit younger so I’m 100% stock, and while I can’t foresee the future at your age I expect to be at 60 or 80%. The next few years might be rough but eventually it will recover, and the most important thing is to drip feed it every month. Google “dollar cost averaging”, or here’s another video from Pension Craft!

 

 

 

Edited September 2, 2020 by Barnabe

[YorkshireTyke]

Barnabe, Just tried registering with Degiro but I cannot use their services as my residential address is not in one of their designated countries.

[Barnabe]

You can get a UK postal address and register the account with it. If you’re a U.K. citizen I’d say it’s low risk, unless you open an ISA, SIPP or anything that involves tax benefits. There might be tax implications still so it’s something you would have to research.

[Thailand J]

if you have 5 years you can go as high as 80% in stocks with Vanguard Life Strategy Funds.

[Thailand J]

5 hours ago, Barnabe said:

I honestly wouldn’t bother too much with it and put almost all if not all of it in one of these Life Strategy funds. I am actually going into that direction, as I used to buy individual stocks but found I couldn’t beat the market, and now only invest long term into index funds, I guess the next step is to trim the number of funds and invest in only one or two generic ones like Life Strategy.
 

I am a bit younger so I’m 100% stock, and while I can’t foresee the future at your age I expect to be at 60 or 80%. The next few years might be rough but eventually it will recover, and the most important thing is to drip feed it every month. Google “dollar cost averaging”, or here’s another video from Pension Craft!

Long time ago I have decided stock picking is not for me. For example I bought APPL at 699 per share before the 1 to 7 split, which was about 99/share. At one point many experts were saying the best days with APPL were over. I got cold feet and sold all my APPL at 193. APPL was 505/sh at all time high.

With Index funds I  know the US market will always recover and move higher. No problem staying in the game when the market was down.

 

I keep things simple in all my 4 investment accounts: My fidelity account only has 2 funds, total stock market and large caps. My Schwab account has the same, plus Amzn. My IB account is invested in Nasdaq high risk stocks: AMzn, QQQ and VGT.  My Vanguard account has VOO VTI VGT and 10% BRK/A 10% MSFT.

 

[Barnabe]

6 hours ago, Thailand J said:

Long time ago I have decided stock picking is not for me. For example I bought APPL at 699 per share before the 1 to 7 split, which was about 99/share. At one point many experts were saying the best days with APPL were over. I got cold feet and sold all my APPL at 193. APPL was 505/sh at all time high.

With Index funds I  know the US market will always recover and move higher. No problem staying in the game when the market was down.

 

I keep things simple in all my 4 investment accounts: My fidelity account only has 2 funds, total stock market and large caps. My Schwab account has the same, plus Amzn. My IB account is invested in Nasdaq high risk stocks: AMzn, QQQ and VGT.  My Vanguard account has VOO VTI VGT and 10% BRK/A 10% MSFT.

 

I did it for 3 years, from around 2016 to 2019. I averaged around 15% a year but still got beat by the market.

 

It was a lot of fun, I learned a lot and really enjoyed keep up to date with financial news, following my hunches, etc. For example I made a lot of money after Brexit as I knew the UK would vote out.

But in the end, it was not worth the time I was putting into it, so I gave up and put everything into index funds. Now I just spend a fixed amount per month in these funds - about 6 or 7 Fidelity Indexes as that is my broker - and make some small risky side bets on the Russian index, gold, silver, bitcoin, etc. Minimal effort, and don't need to keep track of daily news, which is a huge time saver.

 

I think I will follow my own advice from an earlier post and eventually move all those indexes into a Life Strategy 80/100 or Fidelity equivalent.

 

Another point worth mentioning for @YorkshireTyke - now that we have decades of data, it is very clear that over 90% of the actively managed funds can't beat the market. The reason for their underperformance is usually the fees (although some are mismanaged).

Bottom line, put everything into index funds that have fees under 0.20% or less, unless you're making specific bets like I am (Russia, gold, etc).

 

Once again I'll refer to PensionCraft and his excellent videos to further explain this topic:

 

 

 

 

 

 

[Thailand J]

Here is S&P Indices vs Active scorecard.

80-90% of active funds underperformed.

 

Active fund managers with fancy college credentials, research teams plus outside consultants cant beat the market why should I think I could?

Investing in index funds is like signing up for a class. You dont have to do any homework sit back relax and your grade is better then 80-90% of your smart hardworking classmates. It's a good deal.

 

 

 

 

Edited September 3, 2020 by Thailand J

[YorkshireTyke]

I like the idea of the Life Strategy Funds, the same as I like Fundsmith and also to a slightly lesser extent, Blue Whale, let the experts do the choosing and sit back and do nothing.

 

I am not limited to 5 years investing, it is just a point that I have no other income until I start claiming my pension in 5 years. I won't suddenly sell all my investments in 5 years when my pension kicks in.

 

I would be happy to put an equal amount in the Conservative and Moderate funds.

 

But as I have to use a platform, currently Ascentric, then I have to pay fees. I can't invest directly into Ascentric, I have to use an FA and pay their fees even if I don't take their investment advice and instruct him to buy the Life Strategy Funds.

Ascentric fees are 2% per single lump sum initial charge plus 0.75% ongoing advisor charges. So if the funds rise 3% in the first year I will make zero in that year. Any opinions ?

[Barnabe]

16 minutes ago, YorkshireTyke said:

I like the idea of the Life Strategy Funds, the same as I like Fundsmith and also to a slightly lesser extent, Blue Whale, let the experts do the choosing and sit back and do nothing.

 

I am not limited to 5 years investing, it is just a point that I have no other income until I start claiming my pension in 5 years. I won't suddenly sell all my investments in 5 years when my pension kicks in.

 

I would be happy to put an equal amount in the Conservative and Moderate funds.

 

But as I have to use a platform, currently Ascentric, then I have to pay fees. I can't invest directly into Ascentric, I have to use an FA and pay their fees even if I don't take their investment advice and instruct him to buy the Life Strategy Funds.

Ascentric fees are 2% per single lump sum initial charge plus 0.75% ongoing advisor charges. So if the funds rise 3% in the first year I will make zero in that year. Any opinions ?

 

Most funds, including Life Strategy, come in two versions: Accummulator (Acc) and Income (Inc). The difference is the way they handle dividends from companies. Acc reinvests those dividends by buying more shares, while Inc pays directly to an account of your choosing.

Acc is recomended if you're thinking long term, but your case is clear cut for Inc.

 

As for the fees, it's a rip-off. You can always take my advice of getting a UK postal mail address and registering with Fidelity or HL. If you would like more details message me, as I have personal experience with this.

The best alternative is to use a trusted family member (or a friend you trust your life with) address in the UK.

 

While I don't know anything about Ascent but I firmly believe that what applies to active fund managers also applies to financial advisors. The hard reality is that both jobs are becoming redundant, and really good people in them already realised it and moved on to other careers / positions. Index funds and robo-advisors like Nutmeg are replacing them very quickly.

 

The problem here is that stocks are at all time highs, dividends are at all time lows and bonds at historic lows, so this is a really tough situation for you. You might seem some years of negative gains eating into your pot unless you take some risky gambles, like investing in a gold fund.

[YorkshireTyke]

Barnabe, I've Googled how to obtain a UK postal address, they usually offer a free onward post in the UK with a charge for forwarding overseas. However, to open a bank account or trading account like HL etc, they need proof of residence which usually means a utility bill or a bank statement from that address. How do you get around that ?

[bouph12]

I opened an account with AJBell two years ago.  I have lived in Thailand for 10 years and they were made aware of this from the start. Some additional documents had to be scanned and verified, but they were happy to accept me as an overseas customer.

  I was transferring a SIPP, but I did ask if I could also open an investment account and was told that I could. I know that they have a range of in-house funds with various degrees of risk from cautious to adventurous.

   I ended up opening an investment account with Internaxx (now Swissquote) to avoid an eggs-in-one-basket scenario, but I am happy with AJBell's  service and the low cost to operate the account - to the extent that I have had JSIPPS for my grandsons opened with them as well. 

[YorkshireTyke]

5 minutes ago, bouph12 said:

I opened an account with AJBell two years ago.  I have lived in Thailand for 10 years and they were made aware of this from the start. Some additional documents had to be scanned and verified, but they were happy to accept me as an overseas customer.

 

I emailed AJ Bell with my situation and they replied on 18/6 'Unfortunately you won't be able to open an account with us. We only accept applications for trading accounts from UK residents for tax reasons.'

[Barnabe]

5 hours ago, YorkshireTyke said:

Barnabe, I've Googled how to obtain a UK postal address, they usually offer a free onward post in the UK with a charge for forwarding overseas. However, to open a bank account or trading account like HL etc, they need proof of residence which usually means a utility bill or a bank statement from that address. How do you get around that ?

 

Yes you are right, and I forgot about that... I actually moved my existing account to one of those UK postal addresses, so didn't need to do that. I think you're a bit stuck - either you use a trusted family member's address or keep digging to try to find a broker that accepts a Thai address.

 

If you're stuck in Thailand, there are some options like the ones from SCB Asset Management. However picking one of these requires much more knowlege, so I'd stay away from them: https://www.scbam.com/en/fund/morningstar

[Thailand J]

Schwab International and Interactive Brokers accounts can be opened with a Thai address. Vanguard Life Strategy is basically  a list of 'lazy portfolios" each consist of a handful of index funds with varying  stocks to bond ratio.If it is not available via Schwab or IB you can buy a few stocks and bond index funds and balance quarterly yourself.

[Barnabe]

2 hours ago, Thailand J said:

Schwab International and Interactive Brokers accounts can be opened with a Thai address. Vanguard Life Strategy is basically  a list of 'lazy portfolios" each consist of a handful of index funds with varying  stocks to bond ratio.If it is not available via Schwab or IB you can buy a few stocks and bond index funds and balance quarterly yourself.

 

Thanks for the brokers - I guess that solves @YorkshireTyke's problem.

 

As for the manual rebalancing, that won't be necessary. Both of them appear to have Life Strategy.

[YorkshireTyke]

Thanks guys for going the extra mile for a complete stranger and novice.

 

I've started the process with Schwab, I need to print off an agreement and scan it so I will do after the weekend when PO opens again for my printing.

[Thailand J]

With a non-US address, my Schwab account  cannot trade US mutual funds, only ETFs and stocks. Vanguard Life Strategy Funds are mutual funds.

 

Vanguard mutual funds and ETFs : https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns

 

This is what you get in the 60% stock Vanguard LS Growth Fund:

 

 

You can build your own lazy portforlio, for example to mimic  the  Vanguard Life Funds, buy 4 ETF's : VTI, BND, VXUS and BNDX. There are many like kind funds from other companies. For US broad market stocks, I have VTI and SCHB. There may be asset allocation ETFs from other companies that you can buy with Schwab.

There is no one size fits all portfolio. Build your own by your risk tolerance. It can be nerve racking when the market is down. At this time the markets are at all time high, please be careful when and  how you buy in. Most people prefer dollar-cost averaging over a period of time . Good luck.

 

Edited September 5, 2020 by Thailand J

[Thailand J]

Interesting reading : https://www.marketwatch.com/story/this-50-year-old-vanguard-mutual-fund-is-holding-its-own-against-younger-rivals-2020-09-04?mod=home-page

 

Vanguard Wellesly Income, a balance fund with just 35% in stocks has a 9.7% annualized 50-yr return.

[Barnabe]

4 hours ago, Thailand J said:

Interesting reading : https://www.marketwatch.com/story/this-50-year-old-vanguard-mutual-fund-is-holding-its-own-against-younger-rivals-2020-09-04?mod=home-page

 

Vanguard Wellesly Income, a balance fund with just 35% in stocks has a 9.7% annualized 50-yr return.

 

But the same article says:

 

Quote

Over this same period, the entire U.S. stock market, as measured by the Wilshire 5000 Total Return Index, produced an 11.0% annualized return.

 

The problem I see nowadays is that bonds are at unprecedented lows and can't really go much lower, as 0% or negative debt is not really sustainable. Stocks are at an all time high, and I do expect them to come down, but let's not forget all time highs are to be broken, and they will eventually will, even if it takes 5, 10 or 15 years.

 

I'm not going to claim I am a financial expert, I'm not going to advise anyone to go 100% stocks, so I'll stick to what everyone else says when recommending between 60/40 and 80/20 stock / bonds split when someone asks me for advice.

 

But for myself, I will keep at 100% stocks for as long as bond yields are at 0% or near it, with a bit of gold and silver as a hedge.

 

I do dollar cost averaging because I believe that makes the most sense, and makes me feel safer. Surprisingly, some studies have found that dollar cost averaging might not outperform lump sum investing by that much... check this out:

 

 

 

I believe the bottom line when it comes to simple investing is to:

1) invest in index / passive funds where the cost is below 0.5% (preferably < 0.25%)

2) keep invested and NEVER sell, ESPECIALLY if the market starts falling

3) keep topping it up, even if not monthly (3, 6 or 12 monthly will do)

 

Edited September 7, 2020 by Barnabe

[Thailand J]

On 9/7/2020 at 11:22 AM, Barnabe said:

I'm not going to claim I am a financial expert, I'm not going to advise anyone to go 100% stocks, so I'll stick to what everyone else says when recommending between 60/40 and 80/20 stock / bonds split when someone asks me for advice.

 

But for myself, I will keep at 100% stocks for as long as bond yields are at 0% or near it, with a bit of gold and silver as a hedge.

same here, 0% bond. This is my Vanguard account, my cash reserve is running low after I use it to buy into tech stocks in April. It was "sales of a lifetime" I could not resist.

 

Edited September 9, 2020 by Thailand J

[Barnabe]

4 hours ago, Thailand J said:

same here, 0% bond. This is my Vanguard account, my cash reserve is running low after I use it to buy into tech stocks in April. It was "sales of a lifetime" I could not resist.

 

Well I bet you have made a massive profit since then... I kept buying in the indexes as per my dollar averaging strategy, but poured all my extra money in gold and silver. Also sitting on a nice fat profit, which I expect to increase.