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longgone

Anyone Like Nutmeg

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The use of the word "portfolio" reminds me too much of the retards on HUTH, trying to major in self importance, but making me want to projectile vomit.

:lol:

add banter to that too :P

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http://www.nutmeg.com/

managed investment portfolio 1k minimum

Why pay someone between 0.3% and 1% of portfolio value annually (on top of the fund fees) to do something that just about anybody should be able to do themselves with a little reading? Those fees are going to wreak havoc over time. Let's run a quick example - a portfolio of £50k, nutmeg expenses of 0.75%, ETF expenses of 0.23%, real after inflation return of 4%, reinvest all returns and a duration of 20 years.

Result. DIY portfolio £90,656. Nutmeg portfolio £104,810. I'll take the £14,154 for a bit of DIY effort.

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Why pay someone between 0.3% and 1% of portfolio value annually (on top of the fund fees) to do something that just about anybody should be able to do themselves with a little reading? Those fees are going to wreak havoc over time. Let's run a quick example - a portfolio of £50k, nutmeg expenses of 0.75%, ETF expenses of 0.23%, real after inflation return of 4%, reinvest all returns and a duration of 20 years.

Result. DIY portfolio £90,656. Nutmeg portfolio £104,810. I'll take the £14,154 for a bit of DIY effort.

I think you have the final numbers back to front...

Doing it yourself "with a little reading" is dangerous advice. Depending on which "little" you read, you could end up going very badly wrong. I'm sure the USA had a lot of "how to make a fortune flipping property" books in 2006.

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The current cash question here 

 

Has sparked my interest in Nutmeg and I stumbled across this old thread. Anyone got any more thoughts on Nutmeg or robo advising as an alternative to holding cash these days? 

Couple of decent reviews:

http://www.thisismoney.co.uk/money/diyinvesting/article-2812199/Are-paying-invest-choose-best-investing-platform.html

http://www.themoneyprinciple.co.uk/nutmeg-a-review-of-our-investments/

All seems pretty positive, if unexciting. Whats the catch...?

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20 hours ago, b_real said:

Whats the catch?

That they're charging you up to 0.95% for something you can learn free from Monevator, or from a £10 book, Smarter Investing.

I suspect they are just capitalising on people who aren't confident enough to DIY. Each to their own, but I'd rather not have that kind of percentage eating away relentlessly every year at my investments...

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Not everyone has time or inclination to learn how to invest, let alone become good at it. DIY is a massive risk IMO. Is the 0.95% still not cheaper than using a portfolio manager? On top of the 0.95% there's an additional 0.19% (average) underlying fund cost, which they reckon is compared to a UK active fund average of 1.43%. 

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13 minutes ago, b_real said:

DIY is a massive risk IMO.

Do you mind explaining your thoughts on why this is so?

[EDIT: Have you tried to learn? I'm not criticising, just trying to understand what in particular you think the added risk comes from with DIY, or if we're talking cross-purposes. My understanding of the most common DIY approach is using broad market index trackers and a bond fund, not individual shares. Is stock-picking your concern?

If people are underconfident or don't have the time, fair enough.]

Edited by Inoperational Bumblebee

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Risk of getting it wrong I guess, and that it's my own fault because I misread a signal or something (although that's part & parcel of the learning process I guess!). I've not really tried to learn, other than just reading comments on here, following links here & there, reading a few blogs etc. No dedicated book buying & associated studying. I'm not exactly short of a brain cell (3 degrees, job in analytics) but finance/investment/money is such a minefield (and a rigged one at that) that it often appears pointless trying to learn anything. 

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Read Lars Kroijer's 'Investing Demystified' and you'll be fine building a DIY portfolio. Alternatively, simply buy one of the Vanguard Life Strategy range. In both cases hold the investments on the cheapest platform you can find.

That's all you need to do. Advisers simply make the simple complicated and their charging guarantees under performance. Avoid them.

Uncle Warren said it best ' when the dumb investor realise how dumb he is, and buys a low-cost index fund, he becomes smarter than the smartest investors'.

Plenty of good websites on passive investing as well.

 

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3 hours ago, b_real said:

Risk of getting it wrong I guess, and that it's my own fault because I misread a signal or something (although that's part & parcel of the learning process I guess!). I've not really tried to learn, other than just reading comments on here, following links here & there, reading a few blogs etc. No dedicated book buying & associated studying. I'm not exactly short of a brain cell (3 degrees, job in analytics) but finance/investment/money is such a minefield (and a rigged one at that) that it often appears pointless trying to learn anything. 

IMHO you don't want to read signals but instead read Time Hale's Smarter Investing and do try and learn.  I was exactly where you were in 2007 and this is what I did with it:

161016-7.png

Some highlights:

  • I don't believe you can afford not to DIY invest.
  • if you focus on ways to save money (either increase earnings and/or decrease spending) it takes pressure off needing to knock it out of the park investment wise.
  • set an investment portfolio that is diversified from both a country / asset perspective that meets your risk tolerance. Tim Hale will teach you how to do that or you can find it freely on the web.  It's not as difficult as it sounds.
  • never buy, sell or do anything you don't understand or you'll end up in that minefield you mention.  There are plenty of asset classes that are easy to understand and your background suggests to me that you have the intelligence to do it.  Also if it looks to good to be true it probably is.
  • don't try and time the market or become a trader.  Time in the market and matching the market is more than adequate if you do some of the other things I mention as well.
  • focus on reducing expenses.  You seem quite relaxed about giving away 1.14% per annum.  I'd challenge you on that with a real world example.  Since 2007 after inflation, expenses and taxes I've managed an investment return of 4.2%.  My expenses are now down to 0.25%.  You need to ask yourself if you are prepared to give away 25% (or more) of your investment return in expenses.  I know I'm not.
  • focus on reducing taxes for the same reason as expenses.  Use ISA's and Pension's to help with this.
  • Other non-quantitative things - start, be determined, never become a victim and remember the power of AND (it's many things that make the difference not just one) 

Good luck and please do your own research.

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Great post! I love that graph. I think my starting point is a bit lower than yours but lots there for me to think about. The Tim Hale book looks like a great starting point, lots of good reviews on it. 

 

Will check out the Vanguard strategy too.

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23 minutes ago, b_real said:

Great post! I love that graph. I think my starting point is a bit lower than yours but lots there for me to think about. The Tim Hale book looks like a great starting point, lots of good reviews on it. 

 

Will check out the Vanguard strategy too.

I started DIY investing quite late (age 35) and because I'd been working for quite a few years by then did have some capital built up.  The amount of capital or starting age doesn't really matter though.  What matters is just starting and letting the maths do its thing IMHO.  If you start with a bit less it simply takes a little longer.

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Tim Hale's book is fine but he over complicates and comes across as a bit of an eejit in my opinion.

Also, as I recall, he doesn't asset allocate by world stock market weightings and in doing so invites the average investor to make judgements which they are probably not qualified to make (eg. how much should I put in the USA market?).

Lar's Kroijer's recipe is simpler and more intuitive - x1 equity ETF and x 1 gilt etf in percentages to suit your risk preference. Just aim for something like 60/40 equity/bonds, reinvest dividends and forget.

or Life Strategy - very similar but ready made as it were.

wish I could afford one's blog is an excellent primer too. 

William Bernstein too if you get interested but altogether more geeky.

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14 minutes ago, Wudolf said:

...

Lar's Kroijer's recipe is simpler and more intuitive - x1 equity ETF and x 1 gilt etf in percentages to suit your risk preference. Just aim for something like 60/40 equity/bonds, reinvest dividends and forget.

...

I haven't read Kroijer's book.  I'm guessing the Equity ETF is something like the FTSE All World ETF from Vanguard (ticker: VWRL) but what's the gilt/bond ETF he recommends?

By doing that you also lose out on property and gold however I personally am not heavily exposed here at 10% and 5% respectively so maybe not such a big deal...

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Yes, VWRL. Could use SWDA just as easily.

I use iShares UK gilt 0 to 5 years but I think he leaves it open. There are others but I think minimising duration is important on the 'risk free' side. I also add Corporate Bonds 0 to 5 which Kroijer offers up as an option if one wants a bit more than the basic global equity/bond portfolio. 

Property - yes this does get missed. I think the assumption is that there is enough exposure to property through normal trading businesses and ones home, if one owns one, and REITS don't offer additional diversification benefit. Others think differently I know.

Gold - gets missed too. No present value though, so one is relying on the bigger fool theory for ones exit!

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2 minutes ago, Wudolf said:

Yes, VWRL. Could use SWDA just as easily.

I use iShares UK gilt 0 to 5 years but I think he leaves it open. There are others but I think minimising duration is important on the 'risk free' side. I also add Corporate Bonds 0 to 5 which Kroijer offers up as an option if one wants a bit more than the basic global equity/bond portfolio. 

Property - yes this does get missed. I think the assumption is that there is enough exposure to property through normal trading businesses and ones home, if one owns one, and REITS don't offer additional diversification benefit. Others think differently I know.

Gold - gets missed too. No present value though, so one is relying on the bigger fool theory for ones exit!

Thanks. So he's advocating UK exposure for bonds but global exposure for equities.  Can you remember his rationale for this?

For bonds I'm now using:

  • INXG (UK, inflation linked gilts) which has an average maturity of 24.4 years.  Now yielding only 1.2% while RPI runs at 1.8% and RPI will likely increase if the £ continues to rise.  So a negative yield that is just going to get more negative unless price falls.  Can't see much upside, unless I'm wrong on inflation and we enter a long period of deflation, but then I don't trade so just hold on until a rebalance band is hit.
  • ISXF (circa 50% UK, corporates ex financials) which has an average maturity of 13.9 years. Still yielding about 3.5%.

Re property.  I won't consider my home (when I buy one) as part of my investment portfolio as once I'm in it the value or price of it won't matter as I need somewhere to live.

Re gold.  I hold it simply because its correlation is different to other asset classes so looking for maybe a little free lunch via one asset class zigging while the other is zagging.

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I think the view with international bonds is that if they are high quality, ie investment grade, you get precious little reward but take on currency risk. And the latter can easily exceed the former. If one wants to park money where one will always be able to get at it (presumably to meet a known cost) I think it has to be in one's home currency and as short as possible. Bernstein's position is that one takes risk in the equity side and nowhere else (and anything above short gilts is risk) and if one wants to up the ante, so to speak, you just buy more VWRL (or whatever).  

Agree - INXG looks like a one way bet to me and duration is 20 plus years I think. It has to very vulnerable to changes in inflationary expectations (obviously!) but I also think there may be some regulatory risk if the rules regarding defined benefit pensions change and the funds become less dependent on index linked bonds.

ISFX - I haven't looked at it before but must be similar to the one I use, only longer dated bonds. 

I like your website by the way. I think I have been a very occasional poster as Ruby. If you haven't read Bernstein I would recommend him as I know from your site you are highly numerate. He has a few books and a site called Efficient Frontier. He's a bit dry!

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15 minutes ago, Wudolf said:

...

I like your website by the way. I think I have been a very occasional poster as Ruby. If you haven't read Bernstein I would recommend him as I know from your site you are highly numerate. He has a few books and a site called Efficient Frontier. He's a bit dry!

Thanks for the hat tip.

Re Bernstein.  There are probably 5 books that I've read on investing and personal finance that really made a difference for me.  One of those was Bernstein's The Intelligent Asset Allocator.  Have you read that one?  Which would be your recommendation?

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20 hours ago, Wudolf said:

In both cases hold the investments on the cheapest platform you can find.

Would you mind elaborating on this a bit for a beginner like me? One thing thats alway confused me about investing is... where do you actually do it? When you say cheapest platform here, can you recommend any? 

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1 hour ago, b_real said:

Would you mind elaborating on this a bit for a beginner like me? One thing thats alway confused me about investing is... where do you actually do it? When you say cheapest platform here, can you recommend any? 

A platform is simply an online broker through whom you buy your investments. Hargreaves Lansdown and AJ Bell are two of the better known ones but there are quite a few.

Costs are important - the cost of the fund/ETF and the cost of the platform or broker itself.

a) If one is starting off I should open an ISA. This will have a monthly cost of a few pounds but your investment is then sheltered from income and capital gains tax.

B) The broker will then levy a charge for holding the fund/ETF on your behalf and administering the receipt of dividends etc. The platform or broker charges for ETF's are usually minimal or even free. The costs for holding an open ended fund (or unit trust as it used to be known) varies a lot and you need to be careful. HL charge 0.45%, for example but AJ Bell is about half that I think.

c) Then there is the cost of the ETF or fund itself. A FTSE 100 index fund might cost 0.07%. The Vanguard All World ETF costs 0.25% but is much better diversified.

Your costs overall annually are a+b+c

Monevator has a comparison tool which is quite useful.

This ignores dealing costs which maybe £10 or so if you are buying an ETF. Open ended funds are usually commission free.

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