another request for advice

rob77_2

Hi all,

If you guys aren't too bored of giving advice to novices such as myself could you check my current plan. I have a cautious nature to risk. I am thinking of investing equal amounts in the following funds.

New Star or Norwich Union Property
Invesco Perpetual Income
Invesco Perpetual Distribution
HL Ultimate Managed

Is this enough diversification?

Once I have my initial solid foundations I then plan to set up a monthly direct debit into some 'riskier' funds.

Any advice on my plan or the correct asset allocation for my cautious first steps into the investing world will be greatly appreciated.

Thanks.

dunstonh

Depends on how much you are investing. If you are investing £4000, then its fine. Any more than that, then you need a bit more sector allocation (HL Ultimate Managed may offer more but I am too knackered to find it on the HL website right now. The name suggests fund of funds which would give diversification).

Debt_Free_Chick

Yes - HL Ultimate Managed is a fund of funds. I agree there's diversification in the form of different managers. My only other observation is that, overall, the investments are almost wholly UK (apart from 40% of the HL FoF, which is ex-UK).

Also, I think there are likely to be some duplicated holdings in the two Invesco Perpetual funds.

Further diversification could be achieved using the planned monthly contributions.

Debt_Free_Chick

Diversification means a number of different things. You can diversify into different asset classes e.g. equities, fixed interest (gilts/bonds), cash, property.

You can diversify by using different geographical sectors e.g. UK, US, Japan, Pacific Rim (ex-Japan), Emerging Markets ...

You can diversify by sectors e.g. Utilities, Manufacturing, Technology, Financial Services .....

I'm not sure if this is available to non-Fidelity customers, but have a go and see if you can use their portfolio planner. You can specify your goals, your attitude to risk and the funds you are interested in ... and it will analyse it for you. Just more research for you to consider.

HTH

Debt_Free_Chick

Just to add that diversification is a risk management tool. You don't have to diversify, if you are prepared to accept the risk of not doing so. For example, I want my S&S ISA to grow as much as possible, so I've opted for pure equity funds - I have no fixed interest (gilts/bonds), property or cash. That just happens to suit my circumstances and I am happy with the level of risk involved with pure equity investment funds. I have, however, diversified, by geographical region.

I also have historical cash ISAs (but not putting any new money in there!) and a non-ISA UK Corporate Bond holding (to try and get a return better than cash!).

In my opinion, the first thing for you to do is to fully understand your attitude to risk - it's not simply about the risk of investing in equities .. there are numerous other risks!

HTH

rob77_2

Brilliant, thanks for the advice. I seem to be getting a bit bogged down with the vast number of funds available. I'll definitely give fidelities portfoli tool a try. I've also found one on the Morningstar website whcih seems pretty good.