Terry Smith explains..........

[Dod101]

I know that with ATS I was given reduced charges for a Corporate Bond OEIC once the ATS nominee holding had breeched the minimum holding to attract the reduced charges. I expect the same will happen with Fundsmith. I assume that if you hold the £20000 in their ISA youwill be given the T Class but if you hold it on a platform, most likely you will get the I Class, and thus the lower charges.

So it is a no brainer assuming the platform does not levy specific charges of its own, to hold them on a 'pooled' platform.

Dod

[OZYU]

It says on the Fundsmith Fact Sheet that the minimum investment for the 'I' Class is £5 million. I can't quite manage that so it seems that it will be the T Class for me. If that is the case it presumably means that to access the 'I' Class that most will have to piggy back on a platform.

Dod

Hi Dod,

You are an ATS client IIRC, my wife holds the I class on the ATS platform (no charges for the pleasure of hoding funds else she would not hold funds at all, unlike so many other platforms which charge horrendous amounts 'ad valorem' for the pleasure, although it does cost them a bean more if you hold £1 or £1m, less in fact, daylight robbery imho), in her Growth non-ISA portfolio. She mostly holds ITs, but does hold a few 'special' funds, and Terry's is most certainly one of those in our opinion.

No need for £5m, the platform nominee probably holds way over that to give you access to the I class.

Ozyu

[Dod101]

Thanks OZYU. That is what I surmised.

Dod

[BrummieDave]

With the Halifax Platform, you can, or certainly did used to be able to, reduce the £12.50 transaction fee to £2.50 in one of two ways.

Firstly by waiting for their 'Cheap Trading Days' which occur every two months or so and last for two hours. Here Halifax offer trades at £2.50 reduced from £12.50. Can't remember if it's OEICs as well as Shares (inc ITs) but think it is.

Secondly by setting up an Investment Plan (menu option on right hand side in Dealing) and either making a regular investment over, say, two months or rather incredulously in one go. Both only get charged £2.50, or certainly used to. You could even set up a monthly Investment Plan for, say, £10k per month, only put £10k in your account, and it would cancel the plan after one month having charged you £2.50 and not £12.50.

Things may have changed, but if minimising costs to that extent is important to you, go have a dig around.

[Itsallaguess]

It says on the Fundsmith Fact Sheet that the minimum investment for the 'I' Class is £5 million.

I can't quite manage that so it seems that it will be the T Class for me. If that is the case it presumably means that to access the 'I' Class that most will have to piggy back on a platform.

That will be for direct investments. I think the platforms will each negotiate their own deal on Fundsmith. I'll have to check what I have on my II ISA/SIPP account.

Edited to say - I have "I" class holdings of Fundsmith in my II account.

And having just checked on my Halifax Sharedealing Account, I can also confirm that they sell FUQUIT's, which is the Fundsmith I-class Accumulation one I'm after.

Thanks again for everyone's input - much appreciated.

Cheers,

Itsallaguess

[RececaDron]

Just to clarify this investment "game" for a newbie, the best advice to get good returns is:

- wait for a fund to have 7+ years of massive out-performance against all its benchmarks
- and (as a result) have HUGE assets under management because it's so popular

...and then you buy it?


So past performance is the key, as is safety in numbers and doing what everyone has already been doing for years?


???

[Itsallaguess]

Just to clarify this investment "game" for a newbie, the best advice to get good returns is:

- wait for a fund to have 7+ years of massive out-performance against all its benchmarks
- and (as a result) have HUGE assets under management because it's so popular

...and then you buy it?

So past performance is the key, as is safety in numbers and doing what everyone has already been doing for years?

???

I can only speak personally - but as I'm already relatively heavily exposed to largely UK-market (although often with a more global-reach in wider company-specific terms..), high-yield investments, I'm looking to allocate some funds to more growth-oriented investments, in markets that I'm currently not exposed to, and in a way that removes some self-management risk (ie. someone else other than me is allocating individual investments whilst maintaining a good spread of diversification within the fund).

Fundsmith and the Vanguard 80% LifeStrategy both look to tick all of the above boxes, and so I'm looking to dip a toe into them.

I should be clear that the capital going into these new areas (for me..) is largely sat in cash that is being eroded by inflation as each day passes.

Whilst there may clearly be some additional equity-risk with the two funds mentioned, these will be long-term investments that I acknowledge may show some short-to-medium-term turbulence. Much like the rest of my investments then.....

Cheers,

Itsallaguess

[Dod101]

Just to clarify this investment "game" for a newbie, the best advice to get good returns is:

- wait for a fund to have 7+ years of massive out-performance against all its benchmarks
- and (as a result) have HUGE assets under management because it's so popular

...and then you buy it?


So past performance is the key, as is safety in numbers and doing what everyone has already been doing for years?

Your cynicism may for all I know be justified but how good is your crystal ball?. In any case things can just as well go wrong by buying new funds, just look at some of Woodfords, and Terry Smith talks a lot more sense than Woodford ever did. In any case whilst time tends to erode the advantage with things like Berkshire Hathaway, I do not think it necessarily does with the likes of Fundsmith as he explains in the AGM video. Berkshire needs to keep finding ever bigger investments to spend its cash mountain; that does not apply to Fundsmith.

Dod

[Aminatidi]

Interesting thread.

I do wonder when my toilet breaks if I should call a plumber with a proven track record of doing good work, or go out and try to learn to be a plumber in the hopes that I'll do a better job of it myself after watching a couple of YouTube videos?

[RececaDron]

I think I understand the problem now...

A newbie mistake would be putting store in all the studies showing that low-cost index funds outperform higher cost actively managed funds over the long term, ie. the sort of thing Buffet proposes people do and has instructed the trustees of his fortune to do on his wife's behalf.

When what newbies should be doing is to sort a list of actively managed funds by past performance and fund size (popularity) and then buy the ones at the top, ie. the sort of thing plenty of financial advisers and private investors do, not to mention the authors of investment articles in the newspapers who must know a thing or two.

Listening to the wrong people - easily done. Tricky this investment game.

[hiriskpaul]

I think I understand the problem now...

A newbie mistake would be putting store in all the studies showing that low-cost index funds outperform higher cost actively managed funds over the long term, ie. the sort of thing Buffet proposes people do and has instructed the trustees of his fortune to do on his wife's behalf.

When what newbies should be doing is to sort a list of actively managed funds by past performance and fund size (popularity) and then buy the ones at the top, ie. the sort of thing plenty of financial advisers and private investors do, not to mention the authors of investment articles in the newspapers who must know a thing or two.

Listening to the wrong people - easily done. Tricky this investment game.

You have forgotten another important thing that newbies should do - churn their portfolio every year or so when the top performers they have bought into fail to live up to expectations.

[GeoffF100]

I do wonder when my toilet breaks if I should call a plumber with a proven track record of doing good work, or go out and try to learn to be a plumber in the hopes that I'll do a better job of it myself after watching a couple of YouTube videos?

A plumber with a proven track record of doing good work is likely to do better than a plumber with a proven track record of doing bad work. The same is not true for fund managers. Fund managers with a proven track record for delivering good returns do not do better than fund managers with a proven track record for delivering bad returns. There have been many careful studies of this. They have all come to the same conclusion. When risk has been taken into account, the funds (and fund managers) that did well in the past have no more chance of doing well in the future than those who did badly.

[OhNoNotimAgain]

Interesting thread.

I do wonder when my toilet breaks if I should call a plumber with a proven track record of doing good work, or go out and try to learn to be a plumber in the hopes that I'll do a better job of it myself after watching a couple of YouTube videos?

A plumber has a skill in indentifying the problem and then applying his knowledge to fix it.

A fund manager is trying to indentify an undervalued share before everyone else does. In reality there are so many fund managers trying to do that:

a) there is massive overcapacity
b) any opportunity is rapidly exploited and eliminated.

[JamesMuenchen]

A fund manager is trying to indentify an undervalued share before everyone else does. In reality there are so many fund managers trying to do that:

a) there is massive overcapacity
b) any opportunity is rapidly exploited and eliminated.

Not sure that's true, especially given Fundsmith's "do nothing" approach

According to this article http://basehitinvesting.com/what-is-your-edge/ the average gap between the 52week high and low price of the top 10 companies in the SAP500 was nearly 50%, so even mega-caps are subject to short-term mispricings.

The author goes on to say:
So much focus is on the short-term, and so much focus is on trying to uncover information before the market. This creates an advantage for investors who choose to focus on a different potential advantage, and that is namely time-horizon advantage.

So my answer to “what is your edge” with XYZ large cap stock is not some hidden piece of information, but it’s simply my willingness to view the business through a different lens than the majority of investors. And I think this is a real edge. I think it’s also a sustainable edge, and one that is likely to increase as investment timeframes continue to get shorter and shorter (the average investor held a stock for 14 years in 1965, and by the end of the 1990’s, this was down to 30 months. It is now likely under a year).

So I think this hyper-focus on generating short-term results, analyzing quarterly data, and emphasizing “catalysts” all help to increase the edge for those who are willing to buy good companies with no clear reason for why the value exists or when the market will correct the value.

[Alaric]

A fund manager is trying to indentify an undervalued share before everyone else does.

How about trying to identify overvalued shares? Short them if that's in the investment mandate, otherwise avoid them. Carillion being a case in point when the final collapse showed that there was no value remaining for shareholders.

[GeoffF100]

A fund manager is trying to indentify an undervalued share before everyone else does.

How about trying to identify overvalued shares? Short them if that's in the investment mandate, otherwise avoid them. Carillion being a case in point when the final collapse showed that there was no value remaining for shareholders.

They are all trying to do that as well.

[GeoffF100]

It occurs to me that what we may be witnessing here is a bubble phenomenon. Smith has been lucky enough to have a good "track record", and spins a good yarn. He attracts more investors. He buys more of the same stocks, pushing the prices up. His "track record" looks even better. He attracts more investors... Eventually, the bubble comes to an end when the prices of the stocks he is buying become so ridiculous that people start selling the stock faster than he can buy it, and then the whole process goes into reverse.

[Dod101]

It is always essential to keep our feet on the ground and Geoff makes some good points. But do we really think that Fundsmith has the buying power to influence prices like that? He is investing in some pretty big companies, world renown at that.

My main concern is his charges which are very high. In fact if he were running an IT he would be highly criticised especially given the size of the fund he is running. Given say a direct comparison with the likes of Scottish Mortgage they are ridiculous. SM has an ongoing management fee of 0.44%, about half of Fundsmith and I am not sure that the 0.9% for its cheapest charge is equivalent to an ITs ongoing management charges.

I have always said that it is the net result that counts and I guess that is so but it makes Fundsmith's charges look like very easy money once the fund is established anyway.

Dod

[OLTB]

I can also confirm that they sell FUQUIT's,

FUQUIT is similar to what Mrs OLTB sometimes shouts at me.

Cheers, OLTB.

[Alaric]

The guy has been doing the exact same thing all the way back for several decades

He wrote a book back in the 1990s exposing the accounting tricks Companies are able to use to window dress their accounts. If he's buying into Companies or rejecting them based on gaining a truer and fairer view than taking the published results at face value, that's a distinct method which should work as long as accounts can be works of near fiction as regards profitability and asset values.