This fund is in the list of reviewed funds available to members and in some example portfolios. Although it is run by a team two of the most senior members have left since the review was written and recent performance is not impressive. I will be adding some reservations to the fund commentary as a result.
Your own investment tutor!
The content on the Itsnotharry web site expands mainly because my discussions with investors help me to appreciate what they need.
It is clear that people want to understand better what they get for the hefty fees they pay advisers and I have written about that from various angles (see the ‘How to’ and ‘Real World’ articles).
Some people are fairly convinced that they are not getting what they really want and a few would like to learn about running their own portfolios. This is a decision that needs careful thought and probably a longish period of transition for the majority.
A year ago I might have been reluctant to encourage anyone but the most enthusiastic to go down the DIY route. But, to be blunt, I have seen examples of utterly confused and inappropriate advice from the professionals enough times now to realise that it is not just the excessive fees that make many IFAs a poor value proposition, it is also a real lack of expertise.
With this in mind, I am now extending my service offering to include, for a very few people, some personal training and education on a one-to-one basis. This is explained in a new ‘How to’ article. Here is a link.
April commentary published (m)
Pondering about a post Brexit world
Having been pretty nervous and indeed pessimistic about the direction of stock markets for nearly 12 months now, I am beginning to think about what investors ought to do now we are very close to getting a resolution of some sort (ie more certainty about what will happen) on Brexit.
Once any really concrete decisions are made, currency and stock markets will react very fast, so it will pay investors to have at least thought about what options they have for action. I am assuming that most sensible investors will have taken some profits from their portfolios in 2018 or even this Spring and have some cash to invest. Those who do not still need to think about the implications for their asset mix and fund holdings.
Forming a policy for action is in my opinion a process: I don’t have any magic intuition as to what to do! So a starting point is to consider possible scenarios and then assess the way they might, most probably, pan out.
For this post, as a starting point, I am going to over simplify a little and suggest there are two possible situations after a final Brexit plan is settled (or possibly even no Brexit!). One is that the markets are relieved and like the outcome and the other is naturally that they are horrified and there is a ‘flight to safety’.
If the former situation prevails, the pound will likely strengthen and UK shares may come back into favour – the shares in the UK outside of the big global players in the FTSE 100 are oversold (ie cheap) at the moment. That would suggest it would be a good time to buy global stocks as they will be cheaper and my judgement, a rising pound would be short lived as reality sets in. As a result the overseas stocks will benefit from a windfall gain in currency terms later on. Some selected UK funds would look like a good bet too – those most hammered in late 2018, broadly investing in ‘value’ shares.
If the markets sell off and the pound tumbles, then it would be unwise to invest in shares valued in other currencies using a low value pound and there will likely be the afore-mentioned cheap investments to be bought in the UK, but they could be at real bargain prices. This is based on the observation that markets over-react to major changes in the global economy.
As to fixed income holdings (bonds), these are likely to benefit from extra demand if investors are really worried. That would push prices up. However, they are already expensive. It is also hard to know in what direction central banks will move interest rates in either scenario (not at all would be the highest probability in my view), so that is a good reason for not buying into bonds – there is a risk of sharp losses if interest rates rise more than the market has allowed.
In summary, I see opportunities to put cash to work as soon as we have decisions clear enough for markets to re-position. But I would not join any reaction of fear by buying bonds and that means avoiding most cautious managed funds.
New article on portfolio reviews (m)
I have added a detailed article on how a periodic investment portfolio review process ought to operate to the member only tab “Long Reads”. It is not a subject that can be covered succinctly!
Given that adviser clients pay most of their hefty fees to supposedly keep their portfolio in shape, I think investors need to know what ought to be happening. DIY investors will hopefully find the article useful as a checklist of actions. Feedback and comment are welcome as ever.
You want to do what!!?
A steady flow of depressing tales about cases brought to the Financial Ombudsman service (FOS) involving people investing in highly unsuitable assets via Self Invested Pension Plans (SIPPs) makes me fume.
The awards paid out to put consumers back where they should have been are paid by professional indemnity insurers or the financial services compensation scheme, both of which are rising costs for all adviser firms. In other words, the decent firms pay for the folly or plain fraud of others.
One might wonder how advisers seem to tell completely inexperienced investors with not much money that they can safely invest in what seem to be weird and inappropriate assets. Cases recently have involved house building projects and self storage pods! Even investments in gold bullion fall into this category of potential disasters.
Often the assets are outside of the normal regulated investment products and only get caught by regulatory oversight because of the use of the SIPP.
The likely scenario (I have seen this in my working life a few times) is that the client came to the adviser already thinking that they wanted to make a ‘sure-fire’ investment they had read about or a friend had drawn to their attention. The only money they had was in their pension funds and someone suggested (often the promoter of the risky investment) that if they moved their pensions to a SIPP, they could invest.
As most advisers work on percentage fees paid only after they complete an investment (so called contingency fees, which I think ought to be banned), they are motivated to proceed with the transaction. They may well feel protected from future complaints by issuing pages of risk warnings, which of course the client sees as ‘bureaucracy’ and ignores, and adding a little diversification as window dressing. In effect, they say to the client – ‘if you want to do this, who are we to argue? We can make it work, for the right money’.
This is frankly disgraceful and it is a good thing that the FOS will usually assess the suitability of the high risk/illiquid/failed investment relative to the client’s experience and risk profile, irrespective of what any suitability letters or file notes may say. In the worst cases, the adviser is found to have made an extra commission from the promoter of the investment, sometimes at a very high level. To me it odd that such advisers are not immediately banned by the regulator.
What an ethical professional adviser ought to say is that the suggested investment is totally unsuitable for the vast majority of people and should not be touched with the proverbial bargepole! Of course, such good advice may earn them no money and the client may even go somewhere else to get what they want.
A good test of whether or not your adviser is acting in your interest is what is called ‘skin in the game’. Ask the adviser – do you own this investment, or would you buy it in the way you propose that I do?
As an adviser, I usually bought investments in new funds to observe performance before I recommended them – at times I lost money as a result. Good fund managers also own personally many of the shares they have in their portfolios. In simple terms, an adviser should put their money where their mouth is.
And if they think an investment is not something they fancy, they need to talk people out of it, vehemently, or decline to act for them. One problem is that many financial advisers actually have no idea of how to assess the credibility of an investment, having no relevant qualifications or training. Make sure yours does!