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Reviewing my investments
TobyB_2
Posts: 16 Forumite
This will probably come over as naive - but I'm looking for some advice ...
About a year ago I started a regular monthly investment into some funds, via H-L (not an ISA, already used that). Not noing quite how to play it, as there's a lot of conflicting advice out there, I went for half of it in an all share tracker, and the other half spread equally between 3 highly-rated (Morningstar, BestInvest, H-L, etc) actively-managed UK funds. I did also put in a lump sum into a corporate bond fund in January.
1 year on, they've all performed better than cash ... up 19%. But that's predominantly the all-share which has gained 25% (and the bond up 24%), the actively managed funds are doing less well up 6%-17%.
Should I be thinking that the poorest-performing (and most expensive TER) fund - an absolute return fund - is a poor performer and stop putting any more money in and select something else for further investments? Or should I hang on, because I'm perhaps buying cheaper units now that will perhaps have performed really well at (say) 5 years down the line? If I'm getting out of this fund, should I be selling up and switching to whatever I select as a better option ... or keep what I've got and wait and see, whilst diversifying into an alternative?
Similarly ... the fact that the tracker looks good at the moment, and I could wish I'd just ploughed all the cash into this when I started ... should I be wondering if this will last, and perhaps be thinking of trying to guess when this "peaks" and sell ... as I understand some people do with shares?
As you can see - I'm pretty new and green to this - previously I've really focussed on chasing the best interest rates on savings accounts and using up my ISA allowance ... not sure how I should be thinking, other than understanding I should "review my portfolio regularly" ... and "think long-term" ...
Cheers
T
About a year ago I started a regular monthly investment into some funds, via H-L (not an ISA, already used that). Not noing quite how to play it, as there's a lot of conflicting advice out there, I went for half of it in an all share tracker, and the other half spread equally between 3 highly-rated (Morningstar, BestInvest, H-L, etc) actively-managed UK funds. I did also put in a lump sum into a corporate bond fund in January.
1 year on, they've all performed better than cash ... up 19%. But that's predominantly the all-share which has gained 25% (and the bond up 24%), the actively managed funds are doing less well up 6%-17%.
Should I be thinking that the poorest-performing (and most expensive TER) fund - an absolute return fund - is a poor performer and stop putting any more money in and select something else for further investments? Or should I hang on, because I'm perhaps buying cheaper units now that will perhaps have performed really well at (say) 5 years down the line? If I'm getting out of this fund, should I be selling up and switching to whatever I select as a better option ... or keep what I've got and wait and see, whilst diversifying into an alternative?
Similarly ... the fact that the tracker looks good at the moment, and I could wish I'd just ploughed all the cash into this when I started ... should I be wondering if this will last, and perhaps be thinking of trying to guess when this "peaks" and sell ... as I understand some people do with shares?
As you can see - I'm pretty new and green to this - previously I've really focussed on chasing the best interest rates on savings accounts and using up my ISA allowance ... not sure how I should be thinking, other than understanding I should "review my portfolio regularly" ... and "think long-term" ...
Cheers
T
0
Comments
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Not all investments do well all the time, thats why you have a number of different ones in your portfolio.
Example:
Bond funds will go up when interest rates go down, and vice versa. This is why they have done well.
Trackers will do well when their equivalent index is doing well and has strong growth. The FTSE has done extremely well in the last 6 months, hence the raise.
When these don't do well, other funds will.0 -
When was it a bad performer and when was it good. Just because it doesnt do well in one period doesnt mean it wont do well in another. Personally, I am not a fan of absolute funds. How does the risk of that fund compare to the others? Why did you buy the absolute fund and how does it fit in with your investment strategy?Should I be thinking that the poorest-performing (and most expensive TER) fund - an absolute return fund - is a poor performer
Also, it depends on what you mean by good. The UK All companies sector returned an average of 5.75% over the last 12 months. The L&G index fund was 5.96% just above average. You say this was the best fund you had but it was only just above mid table.
What other funds you have. You just say actively managed but we dont know where they are? Are the asia, europe, china etc? The average managed European fund achieved 7.61% over the last 12 months. Doesnt make it any better or worse as a fund but it beat your best fund in another sector. Basically, how you are you investing at the moment? Equity Income, Asset allocation, sector allocation, recovery position, defensive, balanced, random hit and hope
There reason you get lots of opinion is that it is all about opinions. No-one knows the future. Different strategies come out best at different times. Different risk profiles will be better at different times. There are things to avoid (like fashion investing....in absolute funds for example ), but not much is really wrong. I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Actively managed fund managers take a view about where they think things are going.
The manager of Invesco Perpetual Income fund has taken the view that the economy is not recovering and that there will be a drop in share prices or a high risk of one and has remained quite defensive. He's also been avoiding cyclical stocks that are some of the major components of the FTSE index (mining and oil). So far this year those have done well so his fund has done less well than a FTSE tracker.
Absolute return funds could have done well for much of the last year compared to a FTSE tracker but since March they will have done less well.
Now, part of your job is to decide what the economy will do and to adjust your holdings based on that view. So in my case:
1. I switched most of the money I had in Invesco Perpetual Income into a financial fund earlier this year.
2. Earlier this year I gradually switched most of the money that I had in absolute return funds into long-only equity funds, much in Asia-Pacific, Latin America, BRIC, hard commodities and financials. A major increase in risk level.
3. I switched much of the part of the money still in absolute return to a less cautions absolute return fund. This part is a portion of my property deposit money so it has an uncommonly high, for me, cautious component. But it's still high risk given the timescale.
4. Around 75% of my pension investing is in long-only developed market trackers, mostly non-UK, and I've left it there. The other 25% I switched to high risk as part of item 2.
5. I've greatly reduced my cash holdings.
All of that could backfire if the markets drop a lot because it's a switch from low risk to higher risk. But so far it's been good for me. And part of my job is to decide when to go to a more cautious view.
In your case you have a mixture and different parts will be good at different times. That reduces your overall risk level. You can still choose to adjust the mix if you like, provided you accept the risk of getting it wrong. Looking at the markets today, now is a fairly good time to be having absolute return funds money if you're concerned that the markets could drop. The one I'm now mostly using put in placed a 50% hedge on the markets before the start of this month in case the speculated drop as people returned from holiday happened. That cost it returns because it didn't happen, so it didn't do as well as a FTSE tracker did - the protection wasn't free.
Nobody who considers their risk tolerance to be anything less than high to speculative should do what I did. It's not appropriate for most people.0 -
Very interesting thread.
I was going to post something similar so it must be on a lot of peoples minds.
My situation is very similar.
Im sitting on a 10 percent profit on my overall investmenst and am up 25 perecent plus since the bottom of the market.
What do I do now I ask myself?
My gut feeling is the market is going to fall/crash slump within the next few months perhaps november/december (6 months before the election)
My portfolio is badly needing rebalanced but Im reluctant to meddle with something that is making so much daily gains.
I am a cautious investor but my porfolio consisting of about 13 funds are acting like a volitile share currently in a bull trend.
I have two funds which overlap other funds I have namely so they are surplus to requirements but they are performing extremely well over the short term namely
Invesco perp mthly inc plus
and
Artemis global growth.
If I sell both it will effectively return my 10 percent profit to cash in my portfolio and leave me with my specified asset allocation.
I am now overweight in Europe namely
Neptune european opps which I plan to reduce .
All in if I sell both of the first two funds and reduce my European fund and buy some more corporate bonds then it will rebalance my portfolio and realise a 10 percent profit which I could hold in cash awaiting the forecasted market correction and at this point I would buy back in small amounts equally to rebalance.
Is this perhaps a solution to the OP and what do viewers think of this strategy?0 -
Last two answers giving me some ideas - thanks.
I'm getting the idea that I could sit tight and see what happens, but both switching to an alternative fund I think might do better, or cashing in the profit and saving or reinvesting it elsewhere could also be a reasonable strategy.
Looking at comparison graphs on H-L it's interesting to see that the shapes of the graphs in the last year or two for the 2 actively-managed UK Equity funds are very similar, and very similar to the UK all shares tracker ... only the latter is rising now with a steeper gradient than either of the other 2 ... hence the bigger gains. Jamesd's comment about the defensive nature of Invesco Perpetual manager explains ... this may not rise as fast, but perhaps won't fall so fast should that occur. The absolute return fund has a completely different shape to the others - clearly not going to make spectacular rises, or falls though (on past performance!).
So - predominantly in UK equities at the moment - though do have some in european funds also - maybe rather than switching out of any of these, I could stop putting any more into one the funds I've invested in so far and put the monthly drip into another sector to spread the number of baskets my eggs are in ...0 -
Fatheroftwo, that's interesting. Artemis Global Growth was the first unit trust I purchased. I sold it earlier this year because I was unhappy with its performance. The value of the investments I purchased instead is now 7% higher than they would be if I had stuck with it, though with greater risk level.
TobyB, take a look at CF Octopus Partner Fund to see an absolute return fund that has done spectacularly well over the last year. Blackrock UK Absolute Alpha has a much lower volatility target and it shows in the results. Don't expect the Octopus fund to repeat that record, though it might.
There's also an argument that the defensive stocks that are significant in Invesco Perpetual Income have lagged the market rises and might be due to catch up, possibly outperforming over the next quarter or two. Or not.
For your UK approach, you might take a view on how the Pound will do. There seems to be a fairly wide view that it is currently over-valued and will drop. That would lead to a boost in performance for non-UK holdings that aren't hedged against the currency risk. The rise of the Pound has been a drag on the performance of many of my holdings over the last few months, though it helped for the last quarter of last year.
At various times I've considered purchasing covered warrants to hedge my currency risk and stock market risk. Haven't done so, though.0 -
3. I switched much of the part of the money still in absolute return to a less cautions absolute return fund. This part is a portion of my property deposit money so it has an uncommonly high, for me, cautious component. But it's still high risk given the timescale.
Did you go for the Octopus Absolute Return fund by any chance? It seems to be a doing well 0 -
Actively managed fund managers take a view about where they think things are going.
The manager of Invesco Perpetual Income fund has taken the view that the economy is not recovering and that there will be a drop in share prices or a high risk of one and has remained quite defensive. He's also been avoiding cyclical stocks that are some of the major components of the FTSE index (mining and oil). So far this year those have done well so his fund has done less well than a FTSE tracker.
Ive got that one, its gained about 9% in the last 5 months it looks like. If thats solid growth then thats great, really its hard to judge the quality of these things short term
It only take a 7% annual gain to double your money in ten years. I'm fine with that if the manager thinks its best
I cashed in a ftse tracker to invest in Schroder Global Emerging Market Fund and that has risen 19% over the same time period.
Thats good but Im expecting it to fall back at some point, long term I expect market growth so it would be bad practise to cash it in imo.
Its normal for a growing market to keep reseting itself, so long as its still going up Im not going to dance around and try preempt it
The difference to a bad fund would be the direction I believe it will take, hence why I switched from ftse even though it was still gaining0 -
Fatheroftwo, that's interesting. Artemis Global Growth was the first unit trust I purchased. I sold it earlier this year because I was unhappy with its performance. The value of the investments I purchased instead is now 7% higher than they would be if I had stuck with it, though with greater risk level.
TobyB, take a look at CF Octopus Partner Fund to see an absolute return fund that has done spectacularly well over the last year. Blackrock UK Absolute Alpha has a much lower volatility target and it shows in the results. Don't expect the Octopus fund to repeat that record, though it might.
There's also an argument that the defensive stocks that are significant in Invesco Perpetual Income have lagged the market rises and might be due to catch up, possibly outperforming over the next quarter or two. Or not.
For your UK approach, you might take a view on how the Pound will do. There seems to be a fairly wide view that it is currently over-valued and will drop. That would lead to a boost in performance for non-UK holdings that aren't hedged against the currency risk. The rise of the Pound has been a drag on the performance of many of my holdings over the last few months, though it helped for the last quarter of last year.
At various times I've considered purchasing covered warrants to hedge my currency risk and stock market risk. Haven't done so, though.
Re artemis Growth.
I had it up until october last year and after the crash sold out on all my riskier Funds and into safer funds such as Invesco Perp High Inc.
I bought back into it a few months ago as I decided to go back into riskier funds as the market were stabilising.
Ive gained 12.5 percent since reinvesting However compared to some similar funds it isnt that great.
I had a look at the morningstar rating and its rated as 2 star but has a superior grading from them.
I got a leaflet in from HL and the are pushing the insynergey odey global growth run by Crispin Odey.
This guy is top notch but his funds are difficult to access due to the initial sum required but they have brought out this new fund which runs alongside his institutional fund and I decide to review my global growth selection which is
Artemis global growth
M&G global basics
M&g global leaders
and
Neptune global equity
As I say I have a bit of overlap so decided to consolidate into
M&G global basics (mid/smalll caps)
Neptune global equity
and
insynergy odey global (only due to the manager and past history) this is against my usual policy as it has no history but Im basing my decision on the manager profile.
I then started looking at what I posted earlier re going partly cash (taking profits)
I dont really want to be sitting on cash and would prefer some exposure but in a safe fund that might take advantage of any falls to hedge my position.Then I thought of absolute funds.I spent hours last night researching absolute funds and saw the octopus fund you indicated but it looks a bit of a fluke performance probably based on investing on banking stocks and is probably very high risk which I dont want.
Im looking for consistency and an element of controlled risk in absolute funds so filtered these funds
Gartmore UK absolute
Gartmore Euro absolute
CF ODEY Absolute (very very good fund but is a 5K initial fee and is probably the best)
Threadneadle taget return.
Im not sure if there are intrinsic differences between these funds and would appreciate comments ?
I would appreciate anyones input who has a bit of knowledge on absolute funds and noticed the trustnet site filters into equity/mixed/fixed interst also what is the difference in equity/mixed/fixed interest ?
Is there any other funds worth considering?0 -
Here is invesco, seems like a ftse 100 tracker to me but I presume he likes each of these companies and would rebalance weighting regularly
http://www.citywire.co.uk/adviser/fund-and-fund-manager-performance/-/unit-trusts/uk-equity-income-and-growth/fund-factsheet.aspx?FundID=9311&CitywireClassSchemeID=1&CitywireClassID=2279Top 10 Holdings Correct at Jul-2009
AstraZeneca 8.59%
GlaxoSmithKline PLC 8.32%
BG Group plc 5.84%
Vodafone Group Plc 5.64%
British American Tobacco PLC 5.22%
Reynolds American Inc 5.20%
Tesco PLC 4.54%
National Grid Plc 4.26%
Imperial Tobacco Group PLC 4.01%
BT Group PLC 3.99%
Problem is most people do the same thing hence the rise and falls. I figure a fall in commodity and emerging markets could happen again if its realised 'it aint over yet' but I plan to move into them more if thats the caseI bought back into it a few months ago as I decided to go back into riskier funds as the market were stabilising.
With the absolute funds Im not sure I see the point unless you need that money soon, just have more faith in what you invest and realise a price tag doesnt represent value
equity pay no income sometimeswhat is the difference in equity/mixed/fixed interest ?
fixed interest always pays income even if the capital value falls
mixed is both,
the invesco one would be mixed I guess as none of those companies have to pay out a nice dividend but they ( & alot of ftse100 ) have a history of doing so
Most people should go for growth with income reinvested.
State all your funds and I'll say where I think you are underweight imo. I generally think the majority of funds should be eastern looking/serving and most people lump their money with the uk growth prospects unfortunately0
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