Am I balanced or Unstable?

theGrinch

I put significant trust in peer review, so I would be grateful for any feedback, comments or suggestions on my portfolio. I am sure it would help others too.

I would like to retire in 15-20 years time. I am looking for a relatively balanced portfolio with capital growth. but without being reckless! I am currently phasing money into investments on a monthly basis.

Profile: single and a homeowner (with tracker mortgage (23 years on term). My investments are approx £75k less than my mortgage. Self employed. No pension provision, but I have the following investments.

(Approx Figures)

30% CASH of which 20% are in fixed bonds (3.5% gross) of 1 to 2 years and 10% in instant access accounts (2.5%).

10% GOLD

40% FUNDS split as follows:
10% in a FTSE 100 tracker
5% in a FTSE 250 tracker
4% in Invesco Pepertual Income
4% in M&G Recovery Fund
4% in Jupiter Corporate Bond Fund
3% in M&G Optimal Income
3% Fidelity Special Situations Fund
3% in Marlborough ETF
2% in JO Hambro US Opportunities
2% in M&G American
1.5% in L&G tracker
1.5% in L&G Growth Fund


8% holding spilt equally in BHP, Glaxo, Tesco, Restaurant Group, Randgold Resources, Royal Dutch Shell, HSBC, Kazakhmys
0.5% in each of Educational Development (EDD) and Advanced Medical (AMS).

0.3% in Zopa


I have 8-9% of funds unallocated, currently held in cash. I was thinking about a little exposure to emerging markets, China and India or even upping US exposure. Also a fund that follows Director's Dealings would be useful. Any ideas?

Would you say that my investments roughly balanced? Any possible weaknesses? I have a few natural resources stocks. Would it be sensible to cash in and take out a natural resources tracker?

Nothing wrapped in a SIPP

ps I have used full ISA allowance for 2008/09

Thank you in advance.

StuartGMC

I don't feel able to comment on your balance but if you dial your data into Trustnet's portfolio tool, it should give you a good indication via the range of pie-chart analyses it undertakes when it scans the complete holdings to help you see if you are overweight in any specific sectors etc. I would leave out your cash holdings to assess your equity holdings more readily.

You note you've used your ISA for last year, was this Cash ISA or S&S ISA (or both)?

Is £7.5k sufficient for an emergency fund as you are self-employed (assuming this is what the instant access funds represent)?

Anyway, after the forum reworking, hope this reply bumps your original item posted beforehand.

timarr

Analysing this would take a lot of time which isn't available but a couple of things come to mind.

Firstly for wide coverage I think you should have some emerging economy exposure. BRIC definitely, personally I'd prefer China and Brazil, but you pays your money and takes your choice. I'd also look for even more emerging markets, although with a lower level of exposure. As ever I'd do this through trackers or ETF's.

I understand the gold, but you're taking a short-term risk on an investment that doesn't pay a dividend. As I've written elsewhere I think gold should be viewed as insurance against the really bad things that can happen. It should be held physically rather than through an investment vehicle.

Without looking at the contents of your funds (agree with Stuart GMS's comment) I can't really make any detailed comments but generally I'd be looking for significant ex-UK exposure. I'm guessing that's OK, but keep an eye on it. The stocks look pretty good although I don't have any view on Restaurant Group or AMS. Maybe you need to check your funds aren't holding significant proportions of these stocks?

Natural resources are impossible to call short term, IMO. However BHP, Shell and Kaz look undervalued on a twenty year view.

Overall I'd always recommend a tracker over individual stocks but that looks a decent portfolio. A couple of things you almost certainly know - (1) get everything in an ISA you can and (2) if you're a higher rate taxpayer think about using a SIPP to maximise your capital through the government's generosity. Personally I'm reluctant to tie my money up in a pension but as retirement approaches it becomes a more interesting proposition.

Finally, you're probably overwight in cash and equivalents for your age - a correct decision in the current markets. Obviously at some point that'd be wrong but I haven't a clue when that'd be. Dependent on personal circumstances, normally.

One point that's worth factoring in is that the last time the markets got caned like this it took 20 years for PE ratios (and share prices) to return to "normal". Don't say it'll happen this time but it's worth factoring in to the equation.

Good luck.

timarr

theGrinch

thanks stuart and timarr. very helpful comments and I will certainly consider carefully your comments and observations.

I was thinking about a SIPP, but tbh I need to read around it more - pros and cons - before deciding. I didnt want to rush into something to beat deadline.

ISA is S&S.

once again, thank you for taking the time to comment.

Reaper

My first thoughts are that you are over-concentrated on the UK. Although I haven't checked where all those funds invest on first glance only 4% of the funds are invested abroad and all of that is in the USA, whose economy is pretty similar to the UK.

Personally I'm not that keen on the UK. While I fully approve of all the spending the government is doing it has to be realised there is going to be a "morning after" which must mean high taxes that hinder future growth. The same goes for the US.

I'm not very keen on Europe either but that still leaves a lot of other countries. As previously suggested I think Emerging Markets should be in your portfolio - both Asia and South America because although those areas have suffered they did not do all the crazy stuff we did and I hope they will come out of recession without the lingering hangover. The strengthing of the IMF at the recent G20 also means it is now less likely they will go bankrupt, which was previously a concern.

It's a changing world and what looks good today may not look so good tomorrow so don't invest then forget about it. I don't like Europe partly because their governments have dragged their heals acting in the downturn, but when recovery starts they ought to recover cleanly and I would want to quickly switch over.

I'm not so keen on gold, I would stick to 5% but that's just personal preference. If you expect high inflation soon then leave it as it is.

You ought to be in a SIPP. Hargreaves Landsdown looks the best.

I'm not aware of a fund that follows directors dealings. However a useful tool for helping choose between funds (after you have chosen a sector) is Best Invest's fund manager ratings.

As previously said you are overweight in cash but as I don't believe the press saying we have reached bottom that's not such a bad thing in the short term. One option would be to overpay your mortgage while interest rates are low. Though if you believe they will stay low there is no need.

Disclaimer: All the above is stuffed full of personal opinion and I accept no liability if it all goes pear shaped! Only act on the bits you think make sense.

theGrinch

emerging markets was certainly on my consideration list. asia most notably, but I will investigate south america on your helpful comments.

my US holding is based on they got us into this mess and hopefully, that's where recovery will start first. I was actually thinking of going in stronger there.

also under consideration is some kind of gilt fund...maybe index linked. My view is inflation will be ok for 12-months, but there will be strong pressures on inflation by end of 2010 and into 2011 and beyond.

Reaper

theGrinch wrote: »

also under consideration is some kind of gilt fund...maybe index linked. My view is inflation will be ok for 12-months, but there will be strong pressures on inflation by end of 2010 and into 2011 and beyond.

I'd stay well clear of all gilts with the possible exception of index linked. With yields low I feel they are over-priced and will fall in value as inflation hits, interest rates rise and the government stops using QE money to purchase them.

GucciMane

Your portfolio looks like one that you will put in the market and will require little maintenance. It might be suitable for you which is good. If you are confident then i feel you should be more hands on. It will allow you to time the market and make decisions on what trends you believe in. Also its hard to say if your portfolio is balanced or not because things change all the time. For example if gilts paid well i would've told you to allocate some there, or if ftse was too overly-optimistic i would have told you to short instead.

From my understanding it looks like a buy and hold. What i'd do is just have one etf for each sector, e.g instead of 4 uk funds i would probably hold 1 ftse 100. and also i would time the market e.g go long when markets pessimistic.

Regarding your choices, you should only put that much into gold if your going to stay active with it. Just dont expect it to always go up. For example gold is just as percieved as anything else. If it is really because of economic scarcity in comparison to cash then why is rhodium, which is much much rarer down 90% for the year?

Also dont over commit yourself to your inflation prediction, we've seen how being irrational has caught so many people out over the past year. so if it doesn't come into fruitation, make sure you can cover yourself or you may get stuck.

theGrinch

thanks for the feedback. it seems there is a consenus that Im underweight in BRIC exposure. China and Brazil maybe where I look first.

I will look at some funds that can give me some exposure here as I have unallocated cash. I might even consider reducing my UK exposure by 5 to 10% and putting it in BRIC.

I am quite keen on resource stocks on a long term view. I may increase to 5-10% here.

I will look into a SIPP. I understand there are tax breaks to having one, however, what are the major disadvantages? Are there time restrictions?

DiggerUK

@ theGrinch,
I note you are only 10% in gold. As you are looking at a long time frame I would recommend you go to 20%.

I'm a higher %, about 2/3, you may not feel comfortable at that level.

I know that "paper gold" can be put in a SIPPS, don't know how your set up works, I'm not a fan of equities.

GucciMane

You serious 2/3? That is quire a risk. We are not in an inflationary environment, it is deflationary. So make sure you can hedge.