Passive V Active Investment Strategies

[PetroDollarWarrior]

Folks,
I'm interested in hearing people's opinions on Passive versus Active portfolio management. I started contracting in 2010 and since then have been saving monthly into my pension - initially set up be an IFA (I've since stopped using said IFA) and last year I switched my pension to St James Place. At the time I didn't give much thought to management fees etc or difference between active or passive strategies. Recently I've been introduced to another firm, by a trusted friend, who specialise in 'passive portfolio management'. I've pitted this company against SJP and both make very persuasive arguments as to why their approach is the best. The case for 'passive management' is; over time (10 -20 yrs) no fund manager can beat their respective benchmark index (lots of independant literature supports this) and high management fees erode portfolio value over the long term. The case for SJP is their approach can beat the market over the long term, higher fees notwithstanding. They don't have in-house managers but bring in external fund managers to manage on their behalf. Their internal investment committee picks the best managers and removes them if they don't perform etc. As I've only been with SJP for a year it's very difficult to make an informed decision on how my portfolio is doing, however I don't want to wait 5 years to find out I've made a mistake.
Has anyone on here been investing with SJP for a long time - how have they performed? Anyone got any strong opinion in favour/against 'passive management'? If I had the time to do all the research etc then I would manage it myself and keep the costs down, but unfortunately like most people, I'm time poor.
Any tit bits of info/advice/personal experience would be much appreciated.

Thanks

[FatLazyContractor]

Any tit bits of info/advice/personal experience would be much appreciated.

Only man boobs here

[Waldorf]

I would be careful of swooping investments around every few years, this will quickly eat into your fund in charges and possibly Capital Gains Tax. CGT may not be an issue but it depends on how you hold the investment and the value we are talking about.

Personally I do not use IFA's or even restricted market operators such as SJP.

Assuming the amounts you are investing are relatively modest I would stick to using an ISA wrapper, set up an account with a stockbrokers like Barclays, and do it all myself.

I would perhaps suggest 50:50 in passive and managed. For Passive funds I would use Vanguard ETF's, perhaps FTSE 250, S&P500 and Europe. For managed I would chose some investment trusts, perhaps Edinburgh, City of London, Mercantile and Lowland, perhaps a fund such as Schroder Oriental if you want some Asian exposure. TR Property will give some decent property coverage.

I would make your choice and just top up each year with your full ISA allowance and of course reinvest the dividends.

Leave, sit back, relax and do not watch the market prices. These are pretty safe investments and will do you good over the years.

[DimPrawn]

Me 'ouse is me pension, 'innit.

Tax free, govt backed with funny money. Boosted by exponential immigration and NIMBY planning laws, Help To Buy and the funny money printing press, along with the "banks to big to fail" mantra.

Luuuuvly Juuuuubly

[lukemg]

Monevator - lots of debate on either side.

Yes - some managers will beat the market over the next 10 years and beat the index trackers even after costs. This is only the same as saying 10,000 chimps throwing darts at a board - some will only hit doubles with every throw. So, its a normal distribution bell curve with outliers at each side.
BUT - 80% + will do worse than the market (AFTER charges included) AND you have no way of knowing which 20% will do this and SJP have no idea either and I don't care what they say. In addition, you can forget just picking the ones who did this for the last 10 years, their darts will almost certainly stop hitting doubles over the next 10. That's before we get into survivor bias (underperforming funds being closed to improve average of the rest) and massive size of successful funds being unable to move the return needle due to size and its a no-brainer.

Select Vanguard Lifestrategy fund that suits your risk tolerance, for me this is 100% shares or 80/20 bonds (I can hold my nerve). Setup automatic payment as much as you are certain you won't need and forget about it as much as you possibly can - job done.

Quick one - Analysis of US market reveals ~9% return, average investor gets ~5% (they pile in when its hot, out when it falls). Best performing group - People who are dead + people who forgot they had the investment i.e. the 2 groups who didn't make ANY decisions.

[greenlake]

Any tit bits of info/advice/personal experience would be much appreciated.

I have an account with an independent asset management firm that provides both discretionary and advisory investment services. I use them to buy stuff to which I have very limited or no access as an individual retail investor. Examples would include instruments traded on foreign exchanges, investments available only to institutional investors, access to restricted IPOs, bulk pricing for precious metals, currency hedging at minimal spreads, etc.

For run of the mill stuff, I do it myself.

[fragglerock]

These guys are very invested (ha) in passive, low cost funds. And mostly Vanguard things. US focused but interesting

https://www.bogleheads.org/

Monevator also has some great advice.
Our updated table will help you find the right online broker

I am associated with neither.