100% Passive to 50/50% Active/Passive - costs calc?

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Topic Author
kancell10
Posts: 29
Joined: Thu Jan 09, 2020 3:21 pm

100% Passive to 50/50% Active/Passive - costs calc?

Post by kancell10 »

Hi guys,

I've become a big Vanguard fan over last 5 years, but recently as I've gotten more into investing I've become increasingly tempted to go from 100% VG passive to 50% passive (VG LS 100) and 50% active in investment trusts, such as but not specifically... SMT, Monks, Lindsell Train, Allianz Technology, Smithson etc. I'm sure most of you are shaking your head and saying here we go again... ha! I still don't want to dabble and buy and sell frequently, unless a significant opportunity arises, I prefer to just set up my direct debit and have and hold for a 10 year period when I expect to need the money.

To be honest though, I felt restricted last year when I couldn't, even if I wanted to, quickly nip in and buy SMT (for example) at a low cost as I am 100% in the Vanguard platform. I also feel I am limiting myself, to an extent, of actually have one or two holdings which could have sustained periods of growth in addition to the steadiness that I get from VG. I do find the prices of funds that are highly associated with 'tech' to be ridiculous and am more inclined to value but wouldn't be surprised to see this rotation play out as the economy is re-opened in coming years and we probably enter higher inflationary periods. Therefore I'd like to be in a position to act if growth/tech stocks suffer a reasonable price correction.

Anyway, I'm a data driven person and to settle my mind I was hoping to do a calculation on breaking out my ISA from the Vanguard platform (but leaving my SIPP, wife's ISA and 2 x JISA there, baby steps!) and moving it to Interactive Investor, then entering cost data and performance assumptions which would allow me to compare over different durations. Does anyone have a link to a good investment calculator or a spreadsheet they would be willing to share?

Also, if it sounds like I'm loosing the plot, don't hesitate to speak some common sense. Over 1 year locked away in a little room working and not seeing anyone, plus everyone I do see has zero interest in finance and economics, means I accumulate a lot of thoughts in my head but struggle to find anyone to walk through them with and give me their opinions :D

Thanks,

Kevin
Genghis
Posts: 137
Joined: Fri Jun 26, 2020 6:53 am

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by Genghis »

It sounds like the calculator you want to build is rather bespoke. Have a read up on how to do future value calculations in Excel and then build it yourself. I’d be happy to act as a sounding board.

I build such calculators all the time. For instance, I built one this morning as my employer has a scheme where I can defer my bonus into their expensive active funds but doing so allows me to manipulate my current year taxable income and smooth my income
(I pay tax later). I compared that to paying more tax now and investing in cheaper passive funds.
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galeno
Posts: 2653
Joined: Fri Dec 21, 2007 11:06 am

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by galeno »

Don't do it. But if you must limit your speculation allocation to 5% of port. Charge it to your equity allocation.

Your costs will be commissions, spreads, and taxes.

So. What makes you want to buy a stock? What makes you want to sell it?

Before becoming Bogleheads in 2005 we used an 80/20 port. The 80% equity allocation started the year in 16 selected stocks. We beat the SP500 by a CAGR of 6% over 11 years.

We screened for these 5 things.
1. Exclude banks, financial institutions, RE, and utilities
2. Set a market cap minimum
3. Excellent financials
4. Low PEG
5. Momentum
We would pick the top 16 stocks.

Run the screen ONLY once per year. Only sell a stock if it falls out of the top 50 or 100 in your database. Basically you're trying to limit portfolio turnover.

So that's what we did. Why did we become Bogleheads? Because the bear market of 2000-2002 scared the heck out of us. Believe me it's FAR easier dealing with a multi year bear market with a simple Boglehead port vs one with a concentrated equity allocation.
KISS & STC.
User avatar
Schlabba
Posts: 831
Joined: Sat May 11, 2019 9:14 am

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by Schlabba »

kancell10 wrote: Wed Apr 21, 2021 5:31 am Hi guys,

I've become a big Vanguard fan over last 5 years, but recently as I've gotten more into investing I've become increasingly tempted to go from 100% VG passive to 50% passive (VG LS 100) and 50% active in investment trusts, such as but not specifically... SMT, Monks, Lindsell Train, Allianz Technology, Smithson etc. I'm sure most of you are shaking your head and saying here we go again... ha! I still don't want to dabble and buy and sell frequently, unless a significant opportunity arises, I prefer to just set up my direct debit and have and hold for a 10 year period when I expect to need the money.

To be honest though, I felt restricted last year when I couldn't, even if I wanted to, quickly nip in and buy SMT (for example) at a low cost as I am 100% in the Vanguard platform. I also feel I am limiting myself, to an extent, of actually have one or two holdings which could have sustained periods of growth in addition to the steadiness that I get from VG. I do find the prices of funds that are highly associated with 'tech' to be ridiculous and am more inclined to value but wouldn't be surprised to see this rotation play out as the economy is re-opened in coming years and we probably enter higher inflationary periods. Therefore I'd like to be in a position to act if growth/tech stocks suffer a reasonable price correction.

Anyway, I'm a data driven person and to settle my mind I was hoping to do a calculation on breaking out my ISA from the Vanguard platform (but leaving my SIPP, wife's ISA and 2 x JISA there, baby steps!) and moving it to Interactive Investor, then entering cost data and performance assumptions which would allow me to compare over different durations. Does anyone have a link to a good investment calculator or a spreadsheet they would be willing to share?

Also, if it sounds like I'm loosing the plot, don't hesitate to speak some common sense. Over 1 year locked away in a little room working and not seeing anyone, plus everyone I do see has zero interest in finance and economics, means I accumulate a lot of thoughts in my head but struggle to find anyone to walk through them with and give me their opinions :D

Thanks,

Kevin
If you haven't read it (or if you did but you need a reminder), read "The little book of common sense investing" by John Bogle. I found it so convincing I am never going to put money in active funds.
Topic Author
kancell10
Posts: 29
Joined: Thu Jan 09, 2020 3:21 pm

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by kancell10 »

I've never actually read it but I also say a book from Lars Kroijer which I could access for free on Kindle Unlimited, so will read that.

I still would like to keep it simple, not stock picking or anything at all like the complexity of the system you were running. More like 60% in VG 100, 20% in a value orientated large cap investment trust, then 10% each in two growth orientated but low cost-ish investment trusts like SMT (OCF 0.69) and Allianz Tech (i don't think anyone could argue with their +10 year performances).

I need to read more and sleep on it for a few weeks before I decide though. Appreciate the thoughts and feedback to give me a balanced view and maybe drag me back to my original position of being 100% passive!
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Scott S
Posts: 1937
Joined: Mon Nov 24, 2008 2:28 am
Location: building my position

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by Scott S »

kancell10 wrote: Wed Apr 21, 2021 3:46 pmAllianz Tech (i don't think anyone could argue with their +10 year performances).
We can argue about their next 10 year performance, though. :wink:
"Old value investors never die, they just get their fix from rebalancing." -- vineviz
Topic Author
kancell10
Posts: 29
Joined: Thu Jan 09, 2020 3:21 pm

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by kancell10 »

Absolutely we could, no doubt about that! It does give you a sense of confidence though when an investment trust has been operational since 1909 and the management firm have consistently demonstrated strong performance, low fees and an exciting vision for the future.... But of course that could change tomorrow

Another alternative I guess would be to leave the status quo with Vanguard but open a GIA for small amounts of purely speculation money in the event that I am in the fortunate position to exceed my ISA allowance
Topic Author
kancell10
Posts: 29
Joined: Thu Jan 09, 2020 3:21 pm

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by kancell10 »

Ok, I've slept on it and had a good think this morning, plus read first couple of chapters of Lars Kroijer book to refresh my mind why I am happy being passive!

I've decided to keep all our SIPP, 2 x S&S ISA, 2 x JISA in Vanguard, in a mix of LS 100 and VG FTSE Global All Cap and set a clear monthly savings target which should allow me to fill up my ISA allowance and meet target amount for my SIPP.

If, and only if, I am lucky enough to have any overspill (and in reality it would likely only be about 5% of overall annual savings) I'm going to open a General Investment Account and speculate this little amount monthly into Scottish Mortgage Trust. I like this local company (Baillie Gifford), i like their historical performance, i like their vision of the future, as an engineer i like the types of tech they invest in (elec cars, space travel, software services) and to be quite frank i'd like this little flutter and interest it would give me.

Thanks for dragging me back from the dark side :D
Topic Author
kancell10
Posts: 29
Joined: Thu Jan 09, 2020 3:21 pm

Re: 100% Passive to 50/50% Active/Passive - costs calc?

Post by kancell10 »

p.s. i found some great calculators:

https://monevator.com/financial-calculators-and-tools/
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