Diversifying portfolio & gaining knowledge - advice for a beginner?
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TheTracker wrote: »grandst is possibly referring to a depiction like this 'carlson quilt'. It is US but gives you an at a glance view of volatility and value of diversification across classes.
http://awealthofcommonsense.com/wp-content/uploads/2017/03/Screen-Shot-2017-03-18-at-8.37.15-PM.png
I'm not sure they were if you check their posting history but that's an interesting plot and different to what you often see, or certainly I've seen.
So it's effectively an argument for rebalancing, the problem is that the majority of the asset classes noted are equity.
It does worry me sometimes when people boast about 100% equity exposure, I think more from a cojones type boast than from a rational assessment of their risk tolerance or sensible asset allocation.
In practice most people have a property, some cash savings and other assets so even heavy equity investment in isas, pension or unwrapped is tempered by other holdings elsewhere.0 -
Yes the 'cojones effect' bothers me too, since 100% equities is a glass ceiling. It's simple to leverage up to 110%, 150%, 200%. Got the cojones for that? No, well maybe you're more of an 80% guy.0
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There are three areas where I think being all in on VLS can be improved, or at least, a debate can be had.
First, it's artificially invested in the U.K., 25% or so, as opposed to the UKs roughly 7% GDP. 25% is an arbitrary percentage, there's no especiall reason for it. You may be comfortable with it or you may feel that in the long term other economies will do better than UK so you should either have the UK GDP % or less. You can address that (if you want to) by adding trackers including Vanguard that are ex-UK or choosing a different Vanguard or other tracker instead of VLS, ones that have UK just as a "natural" % rather than an arbitrary amount.
Second, it misses out on some classes, smaller companies for example and from what I've read, property (though as said there's an argument that you can regard your house as the main investment in property you'd need and more would be too much)
Third, you may have your own ideas about what's going to do better in the very long term and may wish to tilt your portfolio that way. For example, you might think that over the next 30-40 years healthcare or Far East or emerging economies or whatever will do better in general that the average equity and so add some funds that specialise in these areas. It's hard to have trackers that work in specialist areas, I think there's a good argument that active funds are better for these.
So hopefully that answers your question about diversification.0 -
I think it was "smarter investing " that I read a few years ago when I was trying to understand more. I am afraid it was not helpful to me. I think I can relate to what you are trying to achieve. I would not call it "diversifying " but probably " fine tune beyond most crude" or "understand more" so that the steps beyond the first one ( VLS) can be taken. I concluded that this was knowledge that would take me years to acquire and not a book aimed at general public but some serious information on economics and finances which can not be googled in a few minutes. Something like knowing how all asset classes and all types of investments work, how to understand fund's and other vehicle's structures , how to analise financial information of an entity etc. So I accepted my limitations, in a few years of reading these forums understood a bit more about different multiasset funds, continued with my original choice of 5 hsbc tracker funds and dabbled in p2p.The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.0 -
Another Joe , I believe it was exactly what op asked for and very well explained ; thank you.The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers usually to difficult choice between two undesirable options.
Often people seem to use this word mistakenly where "quandary" would fit better.0 -
Some do just stick in a VLS fund and call it a day, and are quite happy with a simple strategy that has made good returns to date.Not_Me_Officer wrote: »I look on here at those with much greater knowledge than I & they don't just stick with one VLS fund & then call it a day.
Again some do and some investors on here are happy to have a lot more than £50k invested in one VLS fund.Likewise i'm sure they don't build their VLS fund to 50k before then investing elsewhere.
The Tim Hale book advocates passive investing over actively managed funds and details options of individual index funds you can buy and how to put together as a portfolio, which would cover some of the areas that VLS doesn't. If you buy the book, just go for the most recent version. I think its well worth £20.Likewise other funds that i can't think of / am not aware of that don't feature in the VLS range at all or much?
In an earlier thread you asked about options for putting £20k into a low risk fund. You now seem to have changed your risk tolerance dramatically by going for a VLS100. Maybe if you do diversify further you should consider some lower risk options like bonds.0 -
I also found the 'DIY Simple Investing' book really useful and I now hold the Vanguard LS 60 fund. This represents around 70% of my portfolio and I regard it as a 'core' holding but around it I have a few 'satelite' holdings.Or can anyone just post up how they came to be comfortable dealing with the steps after just starting up? Basically i'd just like to kick on from here but at the moment i don't have the knowledge to do that.
So the other 30% or so of my ISA includes a few legacy investment trust holdings which have served me well over the years such as City of London (UK income), TR Property Trust and for growth I hold Scottish Mortgage Trust.
Everyone will develop their own style of investing - much will come with experience of how they handle the inevitable bear markets when the strategy of 'long term buy-and-hold' can be severely tested such as 2008/09.
You will probably never build a perfect portfolio but hopefully you will get to a point where you feel comfortable and can relax in the knowledge it is 'good enough'.0 -
barginfinder wrote: »you mentioned it here
But then I never said I didn't mention it did I?
Pink asked why I wanted to get into property, specifically.
I never said that I wanted to. If you see how I referred to it I specifically said I was only using it as an example.
I know there's a whole heap of things you can invest in but I personally only know probably a small percentage of those. I know emerging markets would be one area, technology another, so on & so forth.
The point was just other areas that VLS may not be so focused on or even not focused on at all.0 -
I'm a bit confused - is JustAnotherSaver and Not Me Officer the same person?JustAnotherSaver wrote: »But then I never said I didn't mention it did I?
Pink asked why I wanted to get into property, specifically.
I never said that I wanted to. If you see how I referred to it I specifically said I was only using it as an example.
I know there's a whole heap of things you can invest in but I personally only know probably a small percentage of those. I know emerging markets would be one area, technology another, so on & so forth.
The point was just other areas that VLS may not be so focused on or even not focused on at all.0 -
I am not allowed to post any links to the matrix however between 2000 to 2002 a diversified portfolio suffered only a small loss while 100% equity index tracker investor would have lost a huge amount and many would have given up.0
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