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A Thrilling Transfer To My Actively Managed Portfolio

A thrilling transfer to my actively managed portfolio

A cold breeze is passing through and Halloween is right around the corner. Yep, it’s October. So it’s time I do something frighting. Why don’t I deposit an additional 10,000 EUR to my actively managed portfolio?

Active funds aren’t popular in the FIRE community or with anyone looking into investing themselves and who know of ETFs.
There is a reluctance to use these funds and with good reason given their entry and management fees. Even Warren Buffett is dismissive about them.

The fees these funds charge are hefty after all. Exactly how hefty? here are the five funds I have:

  • Robeco QI Emerging Conservative Equities EUR DIS (LU0582532197):
    • Entry fee: 2.00%
    • Running costs: 1.51%
  • Franklin US Opps A acc EUR HDG CA (LU0316494391):
    • Entry fee: 2.00%
    • Running costs: 1.99%
  • Fidelity Pacific Fund EUR CAP (LU0368678339):
    • Entry fee: 2.00%
    • Running costs: 2.02%
  • JPM Europe Equity PLus A acc CAP EUR CAP (LU0289089384):
    • Entry fee: 2.00%
    • Running costs: 2.00%
  • Robeco CAP grwth-property CAP RC 4 (LU0187079180):
    • Entry fee: 2.00%
    • Running costs: 2.00%

So knowing these ridiculous costs why would I even think about adding 10,000 to my original 10,000 EUR account? Why am I not doing the exact opposite?

Smooth sailing with active funds

To be frank, I wish to experience firsthand, using my own money and taking a personal risk, just how these fees impact performance. On top of that, I view this portfolio as another diversification of my wealth. A costlier diversification, I admit, but one regardless.
Finally, I also want to use it as a sort of benchmark, to see how well (or bad) these funds, recommended by my local bank, perform against my own personal investment choices.
In defense of these funds, they don’t perform that bad.

Take Fidelity Pacific fund for example. Using the convenient MorningStar comparison tool, I can generate a simple graph indicating how the fund performed the last 10 years.
An important note here is that the past decade was one of nothing but smooth sailing except for the bump caused by China in 2015 and these last couple of weeks. This resulted in solid and smooth returns for this fund. It’s a similar picture with all but the Robeco growth property fund.

Performance of the Emerging Markets

The actively managed funds are actually performing remarkably well compared to its index and even the passive fund IEMA.

That's it

At the moment of writing, instead of going up, my active funds took a hit and my portfolio is down to ~8%. I’m not really sad or upset about it. Besides the idea of using this portfolio as a benchmark of sort, I saw this recent drop as a good opportunity to invest some extra cash.
While I also have a personal portfolio, I played with the idea to add some additional funds to these active funds one more time for quite some time. Instead of waiting even longer I decided to go for it now.

In the end, time will tell if this was all a waste of time or if the selected funds did provide a good Return On Investment (ROI). After this new deposit in don’t plan to add more in short- and midterm, i.e., the next 2 – 5 years.

My actual deposit will happen in the coming days (at the last November 02, 2018), but I’ll only update the portfolio at the end of the quarter so that the portfolio overview stays aligned. Something I will update, is my milestones page.
Look forward to how these new funds impact the performance.

This Post Has 4 Comments
  1. Hi, nice blog you have.
    I wan’t to comment on your choice to invest in these actively managed funds.

    There are multiple studies that show the impact of recurring fees on your investment performance over the long run.
    It’s statistically unlikely that these will outperform the index on a 50+ year horizon.
    Having found some funds that do outperform on a 10-year horizon is no guarantee for the future.
    There will be even a handful that beat the index in the coming decades, but you will not know upfront.

    Second, you don’t have to own these funds in order to compare your investment performance as a benchmark.
    Just compare them on paper.

    Lastly, these funds are no real diversification to your portfolio, as the are just a subset of all the companies in the index.

    My advice would be to get rid of them and go for low-cost index funds.
    But above all, keep saving and investing.

    Regards

    1. Hey Steven,

      Thanks for your honest comment. I really appreciate it.

      It’s true, it’s very unlikely that they will outperform their index on a larger time frame. I should have added one additional reason I keep the active funds with this smaller bank. I know myself. Sometimes I have difficulty staying away from the market and not “micromanage” my personal portfolio (even though I know I should just do periodic deposits).
      Because of that, I wish to maintain at least one portfolio where I can’t just buy or sell on a whim and potentially screw up. Does that make sense?

      For your second point, you are correct. It’s something I don’t do (enough). I should write out my plans more before making a purchase.

      Regarding your last point, isn’t it a diversification because the actively managed funds have companies I do not currently possess in my personal portfolio?

      Once again, thanks for your comment.
      Please don’t hesitate to share your thoughts and remarks in the future as well 🙂

      Greetings,

      Mr. FightToFIRE

      1. Hi FightToFire,

        I was referring to the fact that you already have index funds with focus on that region:

        ISHARES MSCI KOREA USD ACC
        ISHARES MSCI Emerging Markets ACC
        ISHARES CORE MSCI PACIF X-JP ETF

        I think there will be an overlap with the fidelity pacific fund.

        Regards,
        Steven

        1. Hey Steven,
          Oh! Yes, you are right about that.
          Using MorningStar’s X-ray (didn’t know about this feature till recently btw) I see that I have overlap indeed.
          It’s not that bad though (if M* actually shows ever overlap?). To be precise I have the following overlap between Fidelity Pacific A-Acc-EUR and the ETFs you mention:
          – Alibaba Group Holding Ltd ADR – Fidelity Pacific has 2,67%
          – AIA Group Ltd – Fidelity Pacific has 0,49%

          However, as you can see from the graph above, the actively managed fund does a good job beating the ISHARES MSCI Emerging Markets ACC.
          Though (some) expenses are not included so the actual difference will be smaller. I should maybe see if I can make a decent chart that includes my expenses…

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