Balancing Savings v Investments

dunstonh

Where the minimum lump sum investment is usually £500 and monthly investments £50 I have found it difficult to work out how to obtain the spread you rightly suggest. It will work where a very large amount is to be invested but even a simple suggestion like '5% in Europe' seems unobtainable where the overall investment is modest.

Perhaps with your provider. I use providers that have a minimum of £10 per fund when it the amounts cant get above the minimum per fund of some.

baldbloke_2

cheerfulcat wrote:

Hi baldbloke,

It is more important than people seem to realise to define your goals before you put together your portfolio. If preserving capital in real terms is really all you want to do then one of the big global investment trusts would provide a good vehicle, with the added attraction of providing an entire portfolio in one share ( several of them invest across a spread of asset classes including property and bonds ). If you want market-beating returns you need to be more adventurous and look at things like special situations and smaller companies funds, or do the research and hold a portfolio of shares directly.

BTW, don't be seduced by the idea that holding cash is safe, because it isn't. At current rates cash is only just beating headline inflation after tax, and if you consider that real inflation is considerably higher than headline, cash in the bank is currently losing buying power. The index-linked "bonds" aren't much better. I think that at 80% your proposed cash holding is way too high.

Thanks. I shall do a 'search' for 'big global investment trusts'!

I accept your points and it is because I realized I was being overly-cautious that I was interested to see how my 80% to 20% balance sounded. It felt rather feeble even to me.

I have a couple of fixed-rate yearly bonds totalling £30k that mature in the new year and my initial instinct was to reinvest them. I am now thinking very seriously of making periodic lump sum investments to complement the monthly payments I continue to make to a couple of trackers and a property fund. I find all of the suggestions very helpful - and they do get me looking up fund comparison sites for more info.

cheerfulcat

Hi, baldbloke,

Have a look here for global investment trusts. There's a good lot of information on that site about ITs in general. Trustnet also has plenty of information.

EdInvestor

... tracker funds are one of the least adventrous investments out there (over the longer term) - some banks have charges as low as 0.3%/year for these or look at exchange traded funds(ETF's) which are very similar.Income funds or non trackers would be higher risk, as you are then relying on someone's judgement to beat the market - something a lot of fund managers are very bad at doing in the long term.

I also disagree that trackers are unadventurous, they are considerably higher risk than equity income funds, as is very obvious when you compare the performance of the two over the last 6 years including the period of the market crash.

Re risk and percentages, I think with a new investor one also needs to take into account the "baffle factor". It is actually quite difficult to understand what is going on with funds, (I find shares much easier!) and if a portfolio contains 10 or so, the likelihood is the investor won't even try.

If the choice is limited to a few then there's some chance the investor scan actually learn something. So IMHO, 4 would be fine to start with - I would spread across one Equity Income, one Special Sits, one Property.

And just to keep you awake Baldloke perhaps you'd like to choose something a little more zippy for the last 5k?

eg a UK Small Companies fund or a Commodities fund?

Always pick from the top ten funds in the relevant category on Citywire.I personally prefer funds with a consistent long track record and a long serving manager.

dunstonh

Always pick from the top ten funds in the relevant category on Citywire.I personally prefer funds with a consistent long track record and a long serving manager.

I would disagree with this to a point. That only shows past performance over the given period. A lower volatile fund in the same sector may not make the top 10 in that period but could be more suitable over the long term for a investor with lower risk. If you change the periods from 1, 3, 5 and 10 years you will get a different top 10 each time. So which do you pick? If you can spot a consistent entry in those, then that could well be the one to look at.

There was some stats posted a while back. I cant recall the figures but it was something like only 10 of the funds in top 100 from 5 years ago are in the top 100 today.

You shouldnt rely on past performance as a guide to what is the best fund.

And just to keep you awake Baldloke perhaps you'd like to choose something a little more zippy for the last 5k?

Or perhaps five x £1000 funds to spread the load. Maybe a natural resources fund, european real estate fund or a european finanancial opportunities fund.... 5 totally different areas.

This article just appeared on citywire. About asset allocation and rebalancing, amongst other things. http://nma.citywire.co.uk/News/NewsArticle.aspx?VersionID=85268&re=390&ea=94300

baldbloke_2

So many possible choices and apparently past performance may not be a useful guide ... I can only say thank you - why do I make it sound so difficult when it's as easy as you say???!!!

Mind you the Citywire article was interesting - but unhelpfully brief.

It's all a bit like the time when your Primary School teacher looked at your attempts at arithmetic and said to you 'now you can work this out for yourself, I'm not going to do it for you.'

Excuse me I'm off to the funny farm.

dunstonh

why do I make it sound so difficult when it's as easy as you say???!!!

Its not difficult when you have been doing it so long. It also helps when you have software that works out the asset allocation appropriate to the risk profile of the individual provided watson wyatt and updated quarterly. Plus have fund filters based on alpha, beta, sharpe, TER, consistency, sub-sectors and performance.

Whilst you dont need to go into that sort of detail to invest the more research you do the better. Having the research tools and data available and being able to understand it helps too. You dont need to go into any detail and could just close your eyes and point to a fund and hope for the best.

You just need to be comfortable with what you do.

EdInvestor

If you change the periods from 1, 3, 5 and 10 years you will get a different top 10 each time.

Ah, but that's not so.

If you can spot a consistent entry in those, then that could well be the one to look at.

Indeed so,that is exactly what I mean.:)

Something like only 10 of the funds in top 100 from 5 years ago are in the top 100 today.

Quite so. There are thousands of funds out there but only a very few with a long term ( 10 years) consistent track record of excellence have survived the full term.

These are the ones you want.You can ignore the rest.

Now does it look easier?

baldbloke_2

EdInvestor wrote:

There are thousands of funds out there but only a very few with a long term ( 10 years) consistent track record of excellence have survived the full term.

These are the ones you want.You can ignore the rest.

Now does it look easier?

I'm thinking of having a 'light bulb' moment. Almost there.