I sincerely doubt anyone can be sure on that one!Is Colm trying to help Joe & Josephine make an investment decision? I'm not so sure.
I know. I wasn't intending to do a 4% constant withdrawal. I was intending to do a 4% withdrawal of the value at the beginning of the relevant 5 or 10 year period (as in replicate something Joe & Josephine might actually need!) This would impact the figures but I suspect not to any material degree in this sample!If you are making a constant percentage withdrawal the sequence of returns does affect your cash flow, which of course matters, but it makes no difference to the final fund value.
My first thoughts on looking at the original table were "What index had that return for 2020?" filled by "Maybe it's a typo"The only reason the Managed fund outperformed the Index tracker was the huge difference in performance in 2020 (14.72% Vs 3.87%), a difference so large that I would ask to double check that original information).
If you are investing in an ARF and drawing down money, the sequence of returns does indeed matter. If I get a chance later, I'll model, say a 4% annual withdrawal. However, I wouldn't expect much of a difference in the key takeaway here.
Possibly, but that isn’t really the point (i.e. comparing other approaches, e.g. being 100% in cash with Colm’s approach). It’s really about the time cost, the increased risk, and the ‘proof of the pudding’ in terms of the real world outcome. Colm is wasting his time and setting a bad example for others because stock-picking in your own ARF in a concentrated manner is madness. He’d be better off lying on a beach with his ARF 100% invested in Zurich’s International Equity fund at 0.5%.Well Colm was actually beating both the other funds right up until 2024 (albiet with more risk).
My point is that Colm overall approach is correct, but for the average investor you can optimize it to be even better.
Paraphrasing, but I think Gordons point is that Colm is a "Fool" for even trying to pick himself. But the reality is that Colm is far better off than the vast majority of ARF investors.
Colm is in the right forest and Gordon is saying he's stupidly picked the wrong trees. But most everyone else is not even in the forest.
I don't doubt your conclusions but do you mind sketching the methodology you used. @Gordon Gekko need not bother to read any technical stuff.@Johnny apples
I promised to try to get back to you. Over the 10 years, the impact of a fixed withdrawal of 4% of the starting sum is to increase marginally the previously stated underperformance of Colm's fund. (The increase is marginal not the underperformance - the cumulative revised under-performance over the 10 years is over 25%).
Over the 5 years, the relative impact is more significant increasing the cumulative underperformance in those 5 years from just over 26% to just under 29% (or circa 0.45% of an additional under-performance on an annualised basis).
I hope that helps with your query.
Can't quite remember why I chose a High Dividend fund. I suppose it is down to my three rules for choosing investments: Tax, Tax and you guessed it. High Dividend shares should stand at a small discount because in general they are subject to higher taxation and so that should be a free lunch in an ARF. Seems to have cost me about 10% in 2024
I haven't thought it through to any great extent and was just wondering why I went for High Dividend. In general dividends are treated more unfavourably than capital gains for tax purposes. But in a ARF wrapper there is no difference so if there is a discount because of general taxation it is a "free" discount in the ARF. For example, if I were to DIY my ARF I would fill it with high yield stocks like Phoenix with double digit yields. I certainly did not develop this hunch to the detail of how US shares would be impacted. Or maybe I was just persuaded by the term "High".Can you explain why you think this should be the lunch on the house please? I would have thought that High Dividend funds within pensions were generally tax inefficient especially for US shares.
This is oversimplisitic and ignores the regulatory landscape. Qualifying Fund Managers aren’t two men and a dog doing ‘basic bookkeeping and payroll’.Another reason for publishing is to expose the price gouging in this market. My ARF provider does an excellent job. Nevertheless, I think they grossly overcharge for what is essentially basic bookkeeping and payroll.
Have to admit that I misread that first time...and, worst case, will blow-up your ARF.
So I was wondering were you trolling me. It turns out you were. I thought you were better than that.I thought that I read/heard somewhere that the concept that income and growth from pension funds is tax free needs to be qualified somewhat.
Specifically, Dividend Withholding Tax (DWT) applies in certain countries. In some of these countries, it is possible for the pension fund to reclaim the withheld tax but in other countries (like the US), there's an amount of the retained tax which cannot be reclaimed. That's why I was wondering about tax-saving element of your strategy. (Others may be more qualified than I to comment on the merits of high dividend strategy more generally). If you hadn't been so nasty to Gordon there, he'd probably take the time to explain the implications of DWT within pensions in more detail!
@AJAM is right, of course. All the evidence shows that someone my age (now 75) would be strongly advised by @Louisval, @Gordon Gekko and their like to invest a significant proportion of my ARF in bonds and cash, given particularly that the ARF is now my sole source of regular income other than the contributory OAP: I don't have any other pension entitlement.A few pieces of Context, Colm's performance is far superior to the vast, vast majority of ARF investors who would be mostly invested in "Lifestyle" or balanced funds which would include a high proportion of Cash or Bonds.
What "previously stated underperformance" was @Louisval referring to? I would very much appreciate if he/she could do the honourable thing and withdraw that and similar false statements, but I fear I'll be left waiting. The same applies to @Gordon Gekko who has supported every claim of my underperformance as well as adding their own completely false claims. For instance, @Gordon Gekko's final comment in the last thread was priceless:the previously stated underperformance of Colm's fund. (The increase is marginal not the underperformance - the cumulative revised under-performance over the 10 years is over 25%).
Whoever said pensions were boring, huh?The earlier thread on my ARF investment strategy was closed last evening
I'm thinking particularly about @Gordon Gekko and @Louisval. Both almost certainly knew that nearly all of what they were wrote about my approach was completely untrue. I can't allow those false claims to stay on the record.
Hi @Johnny apples
I had a look at the last 5 and 10 years.
Over the last 5 years, the Global Index tracker has returned c. 80% versus Colm's 42.5%
And over the last 10 years, the tracker was up 193% versus Colm's 139%
Sure, there may be some adviser fees. I know @GSheehy charges 0.25% p.a. for his execution only service.
In summary, we have an experienced finance man seriously lagging a reasonable benchmark in his equity allocation. I struggle to see how Colm's posts help Joe & Josephine Arfer in any practical way whatsoever! Can some of the posters who enjoy Colm's post explain how they believe Joe & Josephine benefit from these posts? I genuinely can't see it myself.
Hi @Johnny apples,
If you were investing a lump sum, the sequence of returns doesn't matter an iota.
If you are investing in an ARF and drawing down money, the sequence of returns does indeed matter. If I get a chance later, I'll model, say a 4% annual withdrawal. However, I wouldn't expect much of a difference in the key takeaway here.
I forgot to mention earlier that the returns from the Managed International Fund are better again than the index fund but I didn't include it as there are certainly managed funds that underperformed the tracker fund also.
Isn't that Gordon's key point?
And the difference is even bigger over different timescales (say, over the more normal period chosen for comparative purposes of 5 or 10 years)
I sincerely doubt anyone can be sure on that one!
I know. I wasn't intending to do a 4% constant withdrawal. I was intending to do a 4% withdrawal of the value at the beginning of the relevant 5 or 10 year period (as in replicate something Joe & Josephine might actually need!) This would impact the figures but I suspect not to any material degree in this sample!
@GSheehy - thanks for the clarification!
@Johnny apples
I promised to try to get back to you. Over the 10 years, the impact of a fixed withdrawal of 4% of the starting sum is to increase marginally the previously stated underperformance of Colm's fund. (The increase is marginal not the underperformance - the cumulative revised under-performance over the 10 years is over 25%).
Over the 5 years, the relative impact is more significant increasing the cumulative underperformance in those 5 years from just over 26% to just under 29% (or circa 0.45% of an additional under-performance on an annualised basis).
I hope that helps with your query.
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