Building a long term investment portfolio

fieldofdreams

Hi All,

Now that I am the wrong side of 30 I have started lately to think more about the future and about building up a decent investment portfolio

My modest mortgage will be cleared early next year, so will have some spare money to invest.

I have a cash isa which I havent been paying into this year as Ive been focusing on overpaying on the mortgage, but will start paying in again next year

I pay £90 a month into a private stakeholder pension, which has been going since I was 28 ( 32 now )

In terms of investments, I have got the ball rolling with the following in a stocks and shares ISA:

Invesco Perpetual High Income Acc ( £75 a month )
JO Hambro UK Equity Income Acc ( £100 a month )
Aberdeen Emerging Markets Acc ( £100 a month )
Neptune European Opportunities Acc ( £100 a month )

I started investing in IP earlier than the others which is why its £25 less

In terms of risk profile, I would class myself as medium

Just wanted to canvas some opinion about other fund sectors that should be included in a balanced, long term investment portfolio

Many Thanks

dunstonh

I pay £90 a month into a private stakeholder pension, which has been going since I was 28 ( 32 now )

£90 is classed as a small premium. So, think about looking at your retirement provision as (based on premium alone and no other facts), it looks weak at the moment. Also, consider personal pensions and not stakeholder (better fund range and/or lower costs at your age).

In terms of risk profile, I would class myself as medium

Yet your funds are spread between medium/high and high.

Just wanted to canvas some opinion about other fund sectors that should be included in a balanced, long term investment portfolio

You have no direct exposure currently to

UK fixed interest
property
N America
Far East
Japan
Specialist

You are also overlapping with two funds.

I,_Brian

Overpaying the mortgage is the better idea at this stage, main point being that interest rates are at record lows and will inevitably have to rise at some point. With that, all unpaid debt will cost far more to pay back. On the cost of a house, that means the extra interest alone can count in the thousands. Hence why it's better to overpay the mortgage now rather than save - you save more money in the longer term.

Wanting to invest is certainly not to be frowned upon - however, the big caution at the moment is the state of the economy, and how the markets react to that. Simply put, to most commentators, it looks as though we're heading into a double-dip recession - ie, the depth of the recession we were supposed to have was stalled by QE and similar economic stimulus measures - but now economic conditions will worsen.

That's probably going to bite on the stock market - when the Fed announced QE Lite yesterday, as it's being called, stocks on the FTSE and Dow Jone went down 2.5% each. Personally I am expecting far more falls to come, and possibly a second crash similar to March last year.

So in other words - good financial practice at present is to pay off debt as much as possible. And also note there is a lot of potential volatility in the stock market which could hamper your investments, even lose significant sums, in the short term. So tread wisely.

Mickygg

This thread is particularly useful for me as it's been on my mind for a while where I need to start thinking more about the future and dip into stocks and shares etc. I only really know about savings and property.

When I see what it involves by responses I realise how much I have to learn in years to come!!

I would add that if you are a HR tax payer I really would use your full ISA entitlement each year for the cash side, as in years to come this will reap rewards when a decent balance is saved up and the taxman can't touch it. Sometimes overpaying your mortgage by as much as possible is not always the best idea, although overpaying to a certain extent is obviously good.

As Brian says above one thing I have learnt about stocks and shares is do as much homework as possible, I know people (unfortunately people close to me) that have lost large amounts.

Zebra

Mickygg wrote: »

As Brian says above one thing I have learnt about stocks and shares is do as much homework as possible

I don't think anybody would disagree with that.

I've said it before and I'm sure I'll say it again - Tim Hale's Smarter Investing is well worth a read.
http://www.amazon.co.uk/gp/product/0273722077

By the way - 32 is NOT the wrong side of 30!

fieldofdreams

Thanks for the feedback, some good stuff to chew on there

Dunstonh - I think your right on the pension, up to now Ive kind of been content with just putting something away, but perhaps now is the time to review it

I take your point with the high risk funds Ive chosen - I have done quite a bit of reading on this and have tried to choose funds that have had a good write up, Ive read mostly rave reviews about the Aberdeen Emerging Markets fund

Brian/Micky - my main focus at the moment is to clear the mortgage. Fully agree that economies are fragile at the moment, however could it be argued that when taking a long term view a drop in the stock market could be seen as a good thing as your getting more units for your money, hence will be in a stronger position when they recover? ( assuming they do that is! )

Thanks

Reaper

I,_Brian wrote: »

the big caution at the moment is the state of the economy... Personally I am expecting far more falls to come, and possibly a second crash similar to March last year.

Just to play devils advocate and put forward the other side...

Picking the low point of the market is not a realistic goal and unless you enjoy risk I think it best not to try.

Historically shares are cheap - you only have to look at the P/E ratios. OK they may carry on going down for a while but stocks bought now are so much better value than those that people were only too willing to buy when they cost far more and the stock market was booming.

To somebody wondering whether to put off investing for fear of what the markets will bring I would say don't - invest over a period of time in tranches or with regular monthly premiums rather than one-off lump sums. We may not be at the bottom but we are certainly not at the top.

It's just another opinion no more valid than anyone elses, but I have recently started moving out of savings and into the stock market and plan to gradually continue to do so.

I,_Brian

I,_Brian wrote: »

Overpaying the mortgage is the better idea at this stage, main point being that interest rates are at record lows and will inevitably have to rise at some point. With that, all unpaid debt will cost far more to pay back. On the cost of a house, that means the extra interest alone can count in the thousands. Hence why it's better to overpay the mortgage now rather than save - you save more money in the longer term.

Wanting to invest is certainly not to be frowned upon - however, the big caution at the moment is the state of the economy, and how the markets react to that. Simply put, to most commentators, it looks as though we're heading into a double-dip recession - ie, the depth of the recession we were supposed to have was stalled by QE and similar economic stimulus measures - but now economic conditions will worsen.

That's probably going to bite on the stock market - when the Fed announced QE Lite yesterday, as it's being called, stocks on the FTSE and Dow Jone went down 2.5% each. Personally I am expecting far more falls to come, and possibly a second crash similar to March last year.

So in other words - good financial practice at present is to pay off debt as much as possible. And also note there is a lot of potential volatility in the stock market which could hamper your investments, even lose significant sums, in the short term. So tread wisely.

fieldofdreams wrote: »

Brian/Micky - my main focus at the moment is to clear the mortgage. Fully agree that economies are fragile at the moment, however could it be argued that when taking a long term view a drop in the stock market could be seen as a good thing as your getting more units for your money, hence will be in a stronger position when they recover? ( assuming they do that is! )

No worries - just read this today which might illustrate better the focus on paying debt:
http://www.financemarkets.co.uk/2010/08/13/return-to-2008-mortgage-rates-to-cost-1800-a-year/

According to BoE data, the average rate across three common types of mortgages (standard variable rate, base rate tracker and three-year fixed rate) was 6.3% in 2008 and 4.1% in the first half of 2010.
Reversing the 2.2% fall would therefore result in the typical homeowner paying around £34 per week, or £1,800 a year, extra in mortgage payments.

Would have to be a helluva savings vehicle to match that figure!

Reaper wrote: »

Picking the low point of the market is not a realistic goal and unless you enjoy risk I think it best not to try.

Quite agree - no one knows the bottom of any market, and panic always comes before it. So best to look for panic signals to suggest a bottom coming.

Think we'll be on a slower decline at least for a while, though I expected it to kick in about 8 months ago.

Either way, helluva lot of uncertainty about share prices, and I'm holding cash in my shares ISA until such point as I see an opportunity - ie, general falling back. I really think markets are still being optimistic and factoring in a V-shaped recovery. If that does not materialise - and there seems precious reason to believe in one - I would expect markets to move downwards as a consequence.

However, have learned not to second-guess markets, and act only when the crowds are moving, not before.

I,_Brian

More on stock market uncertainty:
http://www.telegraph.co.uk/finance/markets/7944824/Hindenburg-Omen-foreshadows-imminent-FTSE-crisis-warns-BGCs-David-Buik.html

Reaper

I,_Brian wrote: »

More on stock market uncertainty:
http://www.telegraph.co.uk/finance/markets/7944824/Hindenburg-Omen-foreshadows-imminent-FTSE-crisis-warns-BGCs-David-Buik.html

I think the article mostly shows the experts haven't got a clue. Of the 3 they refer to:

Keith Skeoch - Boom
David Buik - Bust
Anthony Peters - Neither

dunstonh

the problem with using the tag "expert" is that they probably are experts in their fields but they cannot, like anyone else, predict events that do not work by certainty. Just because you may get it wrong does not mean you are not an expert. Just as calling it right doesnt make you an expert either as something else could easily have happened.

The real experts are those that acknowledge that they cant tell but then give a balance of possible scenarios that may occur.