Investing - Chasing the bubbles or a diverse, solid grounding?

mr_fishbulb

Last year when I first started investing, I started reading all kinds of forums, blogs, websites and listening to various podcasts. They had views on peak oil, gold being the only inflation-proof wealth, stagflation, energy and agriculture demand, industrial metals, BRIC countries and their great returns. My attention got pulled in so many directions and I thought everything would be a winner.

I thought I'd take a look at my investments as I'm starting to see the same ideas pop up again. Someone will ask "Where shall I put my savings" and people will chime in "Put it all on gold. it will rocket to $1500-$2000 guaranteed!". Then someone else will say "Oil is the way to go. It's way down at the moment and will hit $200 next week". Then a third person will say "Emerging markets are so hot right now".

It got me thinking "Surely listening to all this isn't the right way to invest?"

I bought gold and silver at the beginning of 2008 and sold them at the beginning of this year making a 12% return. Not bad. But that was only because the value of the pound went down against the dollar - I didn't actually make any money on the metals. What happend to all this flight to the wealth protection gold was supposed to hold?

I also started putting £50/month in the middle of last year into JM Finn Global Opportunities and Invesco Perpetual High Income. JM Finn was a fund mentioned on here (which is why I looked into it). It has dropped a lot, but I'm hoping this will pick up in the future - infrastructure investment will be needed soon. Invesco Perpetual has dropped a little, but I'm sure Woodford can bring the best back around.

Last month I added another £50 monthly investment in the form of M&G Corporate Bonds. Why? Becuase those were the funds of the moment and citywire rated the manager well.

Now I'm thinking maybe put some in an Oil ETF like CRUD later this year as oil should be due a recovery when "green shoots" start to show.

But then I though "What am I doing here? Am I just blindly following fads? Shouldn't I be trying to get myself a good, diversified base for my investments before trying the more exciting investments?"

So, after all this ramblling, if you are still with me, my question is this:

What are this solid, low risk bases I should be covering before trying to do all this stuff? Things which will hopefully be giving consistent but unexciting income (to be reinvested) whilst offering potential for capital growth?

Does that make sense? Or is it just the interal musings of someone who hasn't done much work this morning and is worried about nothing?

Reaper

Normally things like High Income funds and Gilts are considered the dull ones to give a solid foundation, but some people think those are the next bubbles.

Likewise even Blue Chip stocks have had the blues.

You could go for defensive stocks but those will suffer if people think the recession has bottomed out and dump them for the cyclicals.

I honestly can't think of dull, safe havens right now, which is why my protfolio is a little wild!

How about something global that is diversified as much as possible across as many sectors as possible?

purch

It got me thinking "Surely listening to all this isn't the right way to invest?"

You are spot on with that thought.

Using other people opinions and predudices is not a sound way to make an Investment.

How many of these Bloggers and Forum hero's are around to tell you what to do, when following their initial 'advice' has fallen flat on it's face ??

GucciMane

Your right about alot of the sources of information. Usually the author or speaker only has their own interest at heart and it can work in their favour if they can get people to follow them. For example when Soros said the pound was trashed it fell 1.36 against dollar, then next day he came out and said hes minimized his position.

But not discrediting all sources. some are a good read and you just need to pick out the more rational ones. Like i read alot of John Mauldin's stuff and a bit of others like Mike Shedlock, they have a better grasp.

In my opinion this buy and hold stuff is dead. That is why i never have a solid base of investments and always stay active and follow my analysis. But it really depends on the person.

wriggly

It's definitely dangerous to follow the recommendations on this forum without applying your own research.

In the middle of last year, as sharemarkets dropped, we had regular updates from some forum members on how Blackrock Absolute Return had gone up or stayed still while everything else was dropping.

If you were here in August last year, I'd be surprised if you weren't convinced that it was a fantastic fund. Then in 4 months, from October to January, it lost 50%. And you hardly ever hear it mentioned now.

There's some basic advice which you see everywhere.

First select a stocks-bonds percentage, based on your risk profile. 60-40, 50-50 and 40-60 are common suggestions. All these sound conservative to some sharemarket enthusiasts, but can perform almost as well as 100% shares with much less risk.

Second, for alternative assets (real estate, commodities, etc), look at 5-10%, definitely no more than 20%. Take that portion out of your shares portion. So 60-40 might become 50-40-10.

Third, as your investments go up and down over time, keep an eye on these ratios and rebalance about once a year (on your birthday perhaps) to keep them close to your risk profile.

Any advice beyond that is really personal opinion on which shares/funds are likely to perform better, and is probably against the rules of the forum.

purch

Then in 4 months, from October to January, it lost 50%

:eek:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=VNF98&univ=U

barny_100

purch wrote: »

:eek:

http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=VNF98&univ=U

Is it me or does that not show a 50% drop?

wriggly

No, it shows about 28% drop from July to November. My mistake, my statement came from something I saw a few weeks ago.

gopher2

You are right that the Blackrock fund was massively and cleverly hyped and several other fund managers have jumped on the band-wagon with their own "Absolute Return" funds.

Clearly it hasn't matched its stated objectives but the additional problem might be that the upside is far more limited than conventional funds especially after the massive performance fees (20%?) are taken by the managers if it does come good.

wombat42_2

Most Absolute return funds have not done very well. It is particularly difficult of late for those based on equites as volatility is so high. Some absolute return funds are based on bonds. I like L&G Diversified Absolute Return fund as it is "diversified" and is actually 90% cash and 10% a diversified hedge fund.

[Deleted User]

our sipp portfolio has 31 baskets for eggs. All the eggs belong to solid, substantial income generators within many different sectors. Not a single fund among them Equities, pibs and two perfs. We are now fully invested as from last week and we are our own managers and the sipp is doing fine