Agenda Module 1 - Risk, Volatility & Timescale Module 2 - Asset - - PowerPoint PPT Presentation

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Oct 07, 2022 318 likes •649 views

Agenda Module 1 - Risk, Volatility & Timescale Module 2 - Asset Allocation Module 3 - Identifying the Building Blocks Module 4 - Reviewing a portfolio This Module Active vs Passive investing Off the shelf solutions Trackers and ETFs and

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Agenda

Module 1 - Risk, Volatility & Timescale Module 2 - Asset Allocation Module 3 - Identifying the Building Blocks Module 4 - Reviewing a portfolio

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This Module…

Active vs Passive investing Off the shelf solutions Trackers and ETFs and how to choose them Core & Satellite investing Choosing the active components

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Active vs Passive investing

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Active Investing

Where a fund manager seeks to add value in excess

f the market returns by choosing what to buy and

sell at any given time

Definition

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Passive Investing

Avoiding the risk of choosing the wrong manager by instead choosing a market in which to invest, and then tracking it by buying the whole market in the right weights

Definition

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Active vs Passive Investing

Active Investing Passive Investing

Pros Cons Pros Cons

Beat the market (sometimes) Often don’t beat the market Removes risk of choosing wrong manager Tracking error and costs mean you will always underperform market Diversify views on the market Those views might be wrong Relatively low-cost At the mercy of markets

n the way down

Wide choice Relatively expensive Wide choice Perhaps a bit dull?!

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Smart Passive/Beta Investing

Using index tracking, but constructing the trackers differently than the usual market-weighted approach, for example with equal-weighting or book value.

Definition

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Active vs Passive Investing The last word?

“A low-cost index fund is the most sensible equity investment for the great majority of investors.”

Warren Buffett

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Off the shelf portfolio options

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Off the shelf options Sectors

Mixed Investment 0-35% Mixed Investment 20-60% Mixed Investment 40-85% Flexible Investment

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All Sectors

Capital Protection

Growth Income

Specialist Fixed Income Mixed Asset Equity Mixed Asset Equity

UK Gilts UK Indexed Linked Gilts Sterling Corporate Bond Sterling Strategic Bond Sterling High Yield Bond Global Bonds Global Emerging Market Bonds UK Equity Income Global Equity Income UK Equity & Bond Income UK All Companies UK Smaller Companies Japan Japanese Smaller Companies Asia Pacifjc Inc Japan Asia Pacifjc Exc Japan China/Greater China North America North American Smaller Cos Europe Excluding UK Europe Including UK European Smaller Cos Global Global Emerging Markets Mixed Investment 0-35% Shares Mixed Investment 20-60% Shares Mixed Investment 40-85% Shares Flexible Investment Personal Pensions Property Specialist Targeted Absolute Return Technology & Telecommunications Money Market Short Term Money Market Protected

Tiese four groups determine what the underlying funds are intending to achieve Tiese sub-groups indicate the primary asset class the underlying fund invests in

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Off the shelf options Should you use them?

Yes!

as a core holding
if you’re disinterested / short of time
opt for passive versions if possible

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Off the shelf options Major players

7IM AAP Portfolios
Architas
Fidelity
Vanguard
Jupiter Merlin
Premier AM

Passive Active Others are available!

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Core & Satellite Investing

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Core & Satellite Investing How it works

Core

Satellite Satellite

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Core & Satellite Investing How it works

Multi-asset

Indiv Sector Indiv Sector

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Core & Satellite Investing How it works

Passive

Active Active

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Passive, multi-asset core, 80-90% of portfolio Sector satellites, also passive, 10-20% of portfolio Active managed satellites for fun, maybe

Core & Satellite Investing My recommendation

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How to research Off the shelf portfolio options

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How to research Trackers and ETFs

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Trackers and ETFs The difference

More like a share
Trades constantly
Wide scope
Beware synthetics
OEIC structure
Trades once a day

ETFs Trackers Watch for trading costs on platforms

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Core & Satellite Investing How it works

Multi-asset

Indiv Sector Indiv Sector

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Stick with tracker funds Choose by sector

My recommendation Trackers and ETFs

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Trackers and ETFs Major players

dbx Trackers
Lyxor
iShares
ETF Securities
Vanguard
BlackRock
Legal & General
HSBC

ETFs Trackers Others are available!

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How to research Active funds

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Only a small, satellite part of your portfolio Treat them as ‘bets’ - the term is up to you Again, choose by sector - Asset Allocation first!

My recommendation Active Funds

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Core & Satellite Investing How it works

Passive

Active Active

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Final thoughts Filling up your asset allocation

5% 5% 15% 25% 37% 13% UK Equities Overseas Equities Bonds HY Bonds Property Commodities Cash

Overseas Equity

Most = developed regions

US
Europe
Japan

Not much emerging markets unless adventurous

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Final thoughts Filling up your asset allocation

5% 5% 15% 25% 37% 13% UK Equities Overseas Equities Bonds HY Bonds Property Commodities Cash

Bonds & HY Bonds

Most = UK Little bit of developed markets

US
Europe
Japan

Include Gilts

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How many funds? One per asset class or sub-class is plenty Too many funds takes the fun out of it - makes work For larger asset classes, and larger investments, maybe more

Final thoughts Filling up your asset allocation

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