[Rocksteady]

Thanks for link.

Yes. There has been a few back testing studies that have shown that on average lump sum investing comes out best. This assumes you have a lump sum which was what JB has and was asking about.

Regular payment to invest is a good idea if you on a regular salary and the vehicle has low costs such as an ISA or pension with a low cost FTSE tracker or ETF. Just don’t do it based on pound cost averaging.

I looked into this recently as investments and encouraging people to invest is my job.

It's a bit more nuanced than lump sum beats regular investing. Regular investing only slightly underperforms lump sum over the long term and de-risks - i.e. the fluctuation/volatility is lower. So if you might need to take out your investment in an emergency you might want to consider regular investing vs lump sum.
Also, regular investing supports a strong habit of putting money away and building it over time (based on a regular salary), and discourages people from trying to time the markets, or overtrading. So much evidence that people sell when markets fall, which is generally the opposite of what you should be trying to do.

In terms of trackers, I totally agree. What's very convenient now is that many fund managers do multi-asset multi-jurisdictional trackers. So you are tracking indices across geographies, the blend of which is then overseen by the manager based on their strategic assessment of the markets and asset allocation (which is the primary driver of returns vs stock picking). This takes the hassle out of trying to build a portfolio matched to your risk level etc.

[shark]

I looked into this recently as investments and encouraging people to invest is my job.

I wont hold it against you 

Regular investing only slightly underperforms lump sum over the long term and de-risks - i.e. the fluctuation/volatility is lower. So if you might need to take out your investment in an emergency you might want to consider regular investing vs lump sum.

I''ll take your word for it but the interim volatility is irrelevant if you are committed to the long term (ie 10 years+) as JB is with a pension.

Also, regular investing supports a strong habit of putting money away and building it over time (based on a regular salary), and discourages people from trying to time the markets, or overtrading. So much evidence that people sell when markets fall, which is generally the opposite of what you should be trying to do.

Agree and I said as much but not if that means sitting on a lump sum

In terms of trackers, I totally agree. What's very convenient now is that many fund managers do multi-asset multi-jurisdictional trackers. So you are tracking indices across geographies, the blend of which is then overseen by the manager

Actively managed funds that buy trackers are not trackers. They will come at a higher cost (sometimes hidden internal costs as well as fees). Also actively managed funds on average do worse than comparable lost cost trackers such as the ones provided by Vanguard .

I'd always advocate people of average intelligence getting stuck in and taking control of their own finances rather than leaving it to experts.

...based on their strategic assessment of the markets and asset allocation (which is the primary driver of returns vs stock picking). This takes the hassle out of trying to build a portfolio matched to your risk level etc.

Sounds like a sales pitch. In English please

[shark]

Actually facing similar situation with some inheritance money of my daughters which she (with my advice) needs to decide what to do with.

PM if you would like info on how to buy into the Shark Absolute Returns Guaranteed Fund of Funds tm

[Rocksteady]

I looked into this recently as investments and encouraging people to invest is my job.

I wont hold it against you 

Regular investing only slightly underperforms lump sum over the long term and de-risks - i.e. the fluctuation/volatility is lower. So if you might need to take out your investment in an emergency you might want to consider regular investing vs lump sum.

I''ll take your word for it but the interim volatility is irrelevant if you are committed to the long term (ie 10 years+) as JB is with a pension.

Also, regular investing supports a strong habit of putting money away and building it over time (based on a regular salary), and discourages people from trying to time the markets, or overtrading. So much evidence that people sell when markets fall, which is generally the opposite of what you should be trying to do.

Agree and I said as much but not if that means sitting on a lump sum

In terms of trackers, I totally agree. What's very convenient now is that many fund managers do multi-asset multi-jurisdictional trackers. So you are tracking indices across geographies, the blend of which is then overseen by the manager

Actively managed funds that buy trackers are not trackers. They will come at a higher cost (sometimes hidden internal costs as well as fees). Also actively managed funds on average do worse than comparable lost cost trackers such as the ones provided by Vanguard .

I'd always advocate people of average intelligence getting stuck in and taking control of their own finances rather than leaving it to experts.

...based on their strategic assessment of the markets and asset allocation (which is the primary driver of returns vs stock picking). This takes the hassle out of trying to build a portfolio matched to your risk level etc.

Sounds like a sales pitch. In English please

I think you and I are broadly agreeing but in an argumentative way. 

I think people should take control of their investments but having done this myself through self-select investing from a position of relative knowledge I have found it quite a time consuming hassle.
Plugging everything into a FTSE 100 tracker might be low cost but it is also relatively high risk in terms of the concentration into one region. Eg. Brexit risk.

So ideally what you'd look to do is spread your investments around right? Say 20% UK, 30% US, 20% China, 10% Europe, 10% Japan, 10% Emerging Markets.
But how do you know what the best split between geographies is? Or if you want a lower risk fund, how do you pick which duration bonds and which region bonds to choose? Personally I don't have time to research all this or to manage it on an ongoing basis when the markets move.

I previously constructed a portfolio with a mix of cheap trackers and high performing actives (i.e. researching which fund managers consistently beat the index) but found rebalancing it to maintain the right allocation a massive hassle.

So now I plug regular investments through a fund where the split between geographies is actively managed, but the implementation of investments is all through passive trackers. Basically a hybrid. Yes it's 0.60% annual fees vs Vanguard multi-asset tracker at 0.20%. But in choppy or downwards trending markets active funds often outperform passives which just track the markets down. I'm backing this approach to outperform the index by more than 0.40%.

Since last year funds have to disclose their transaction costs so there aren't hidden extras any more. Active funds that trade a lot can bump up the cost but funds like the one I'm in aren't adding more than 0.10% a year in transactions.

I guess what I'm saying is, yes, trackers are great and cheap and in my view much better to get involved in investing than sit on the sidelines while the spending power of your cash is eroded by inflation. But it's worth thinking about a blend of different trackers or getting some active elements involved, even at a higher cost, to diversify your portfolio and spread your risk and chances of return.

[Rocksteady]

So you are tracking indices across geographies, the blend of which is then overseen by the manager based on their strategic assessment of the markets and asset allocation (which is the primary driver of returns vs stock picking).

The assertion in bold is very questionable. I have seen catastrophically stupid asset allocation decisions made by allegedly smart people. Many London-based managers, for example, had a huge bias against the US throughout the 1990s, which was disastrous for returns. In the early 2000's there were similar excessive biases toward emerging markets, especially the "BRICS", which ended badly.

I feel that your examples demonstrate my assertion - that poor asset allocation drives poor returns?
If you're saying that there is lots of evidence that passives beat active management then I agree. But as I understand it there is also evidence that in some markets, specifically choppy or falling markets, active management tends to work better.
See e.g. this 2018 article
https://www.morganstanley.com/access/active-vs-passive-investing

Of course it could be that I am believing the industry's self-justification.

I just think it's worth questioning the mantra that passive is always best, just as it is worth questioning if your active fund manager is actually beating the index.

[shark]

I think people should take control of their investments but having done this myself through self-select investing from a position of relative knowledge I have found it quite a time consuming hassle.
Plugging everything into a FTSE 100 tracker might be low cost but it is also relatively high risk in terms of the concentration into one region. Eg. Brexit risk.

So ideally what you'd look to do is spread your investments around right? Say 20% UK, 30% US, 20% China, 10% Europe, 10% Japan, 10% Emerging Markets.
But how do you know what the best split between geographies is?

A couple of points.
- I dont think investing needs to be as complicated as you are making it
- FTSE100 is largely composed of multi national organisations some of which even trade in dollars (Miners, Oil companies)
- Saying "best split" implies you have to make a decision. Why do you feel compelled to be so geographically diversified - particularly with such exactitude? I can understand the merits of business sector diversification but not specific geographical diversification.

IMO an investment should stand or fall on its own criteria whether its a buy to let or some complicated financial instrument. I personally prefer to pick UK listed stocks largely on traditional value metrics. If something is compelling I'll bet the farm on it. Those that take an active interest in investing tend to gravitate to an investing style or specialism that they find works for them.

[Rocksteady]

So ideally what you'd look to do is spread your investments around right? Say 20% UK, 30% US, 20% China, 10% Europe, 10% Japan, 10% Emerging Markets.
But how do you know what the best split between geographies is?

A couple of points.
- I dont think investing needs to be as complicated as you are making it
- FTSE100 is largely composed of multi national organisations some of which even trade in dollars (Miners, Oil companies)
- Saying "best split" implies you have to make a decision. Why do you feel compelled to be so geographically diversified - particularly with such exactitude? I can understand the merits of business sector diversification but not specific geographical diversification.

IMO an investment should stand or fall on its own criteria whether its a buy to let or some complicated financial instrument. I personally prefer to pick UK listed stocks largely on traditional value metrics. If something is compelling I'll bet the farm on it. Those that take an active interest in investing tend to gravitate to an investing style or specialism that they find works for them.

My ideas re: diversification come from observing advice given by portfolio and wealth managers. Generally they'll say that UK-based clients are very UK-centric i.e. own property in the UK and if they invest have UK-centric investments. Despite UK companies earning abroad they are still generally vulnerable to UK market downturns. When the whole FTSE drops it's usually geopolitical and there isn't always a differential between companies with and without earnings abroad.
Optimal geographic split is based on the theory of market cycles and different areas being at their peak performance at different periods in time. Obviously you don't have to be totally precise but it is worth rebalancing as if one market does well on a sustained basis then it's probably time to move into one that has done badly for a while as you are likely getting to the inflection point. Personally I think it's an interesting theory and don't mind paying c.0.3% a year for someone to spend their working life trying to work this out and run a fund on this basis.

Value investing is obviously a tried and tested method, but personally I struggle to find the time to research companies sufficiently to find the bargains. Also now because of work I have to get pre-authorisation to trade which takes the fun out of it and potentially causes timing issues on picking up something at a good price.

In the future if I don't have to worry about pre-authorisation and if I have a bit more to play around with I'd like to track a few stocks over time and try swing trading. Earning on the downs by short-selling as well as on the ups is appealing. This book is sort of a bible on it:
https://www.amazon.co.uk/Come-Into-My-Trading-Room/dp/0471225347