Portfolio analysis

peterg1965

In terms of a 1-10 risk scale (10 being riskiest) what does this portfolio come in at? A few of the smaller funds are missing as they are a tiny % overall, but I have some money in First State India subcontinent, which is doing very well and am thinking of adding a £1000 lump sum to my SIPP in this fund.

It is a snapshot across my SIPP and ISA (95% SIPP).

1 M&G Strategic Corporate Bond Class X 7.2%£ Corporate Bond
2 SVM UK Opportunities Class A 7.0%UK A ll Companies
3 Old Mutual UK Select Mid Cap 6.6%UK All Companies
4 BARINGS Absolute Return Global Bond Class A 6.2% Absolute Return
5 Invesco Perpetual High Income 6.2% UK Equity Income
6 Aberdeen Emerging Markets Class A 5.6% Global Emerging Markets
7 First State Global Emerging Markets Leaders Class A 5.6% Global Emerging Markets
8 First State Asia Pacific Leaders Class A 5.1% Asia Pacific Excluding Japan
9 JPM Natural Resources Class A 5.0% Specialist
10 Scottish Widows Latin American Class A 4.9% Specialist
11 Threadneedle American Smaller Companies Fund (US) Class1 4.8% North American Smaller Companies
12 BlackRock Continental European Class A 4.7% Europe Excluding UK
13 Allianz RCM BRIC Stars Class A 4.7% Specialist
14 Neptune Global Equity Class A 4.7% Global Growth
15 Neptune European Opportunities Class A 4.6% Europe Excluding UK
16 Threadneedle UK Property Class 1 4.5% Property
17 Neptune US Opportunities Class A 4.4% North America
18 Marks & Spencer Group 2.9% [N/A]
19 Kingfisher 1.3% [N/A]
20 Royal Bank of Scotland Group 0.8% [N/A]

Sorry about the formatting

Cautious_Investor_3

Hi

Pure gut feel but looking at the wide range of equities and the level of corporate bond / gilt exposure I'd suggest a 7 - 8 out of 10.

Actually, on reflection probably an 8!

I'm interested to know what other people think.

The Cautious Investor

peterg1965

I have never been entirely sure about corporate/stategic bonds. I am minded to sell and invest elsewhere, or at the very least switch the monthly investment money into something like First State Indian Subcontinent - I have that in my ISA not my SIPP. So does big (ish) exposure to bonds increase the risk level? - I thought it would peg it down a bit.

I am comfortable with a high risk at this stage, but an '8' surprises me somewhat - 10 years to run and this SIPP sits alongside my occupational pension.

LongTermLurker

I calculate about 31% in emerging markets & commodities (which by nature are EM-biased); 12.4% bonds; the rest is fairly broad across UK, Europe, NAM & global.

I'd agree with CI at about 8, but am by no means an expert.

I have some money in First State India subcontinent, which is doing very well and am thinking of adding a £1000 lump sum to my SIPP in this fund.

Personal opinion; you're already pretty heavyweight in EMs. Remember that many of the global, UK and US funds will also have significant EM exposure - tabacco, oil, healthcare and even traditional UK retailers.

Have you used the portfolio analysis tool on Morningstar to see the true split? http://tools.morningstar.co.uk/uk/xray/editholdings.aspx?LanguageId=en-GB

Loughton_Monkey

peterg1965 wrote: »

I have never been entirely sure about corporate/stategic bonds. I am minded to sell and invest elsewhere, or at the very least switch the monthly investment money into something like First State Indian Subcontinent - I have that in my ISA not my SIPP. So does big (ish) exposure to bonds increase the risk level? - I thought it would peg it down a bit.

I am comfortable with a high risk at this stage, but an '8' surprises me somewhat - 10 years to run and this SIPP sits alongside my occupational pension.

Your portfolio is not a million miles away from mine. Except I am early retired, and I am talking primarily about ISA funds.

I'm not sure that a risk level can be measured quite like this (as a single number). What risk do you want to measure? The risk of performing worse than putting it in the Building Society? The risk of losing it all because the fund goes belly-up? The risk of not keeping up with inflation? Or the risk of losing, say up to 25% of value in a year? Each of these would have a different value.

Throw 100% into, say, Neptune India, and we would all agree that the risk is towards the high side! Same if you put it all into First State Asia Pacific. Or JPM New Europe.

Put 33% into each, however, and the risk is reduced somewhat. Each time you spread it (as you have) you are reducing most types of risk, at the expense of losing potentially higher returns.

Even more importantly, I feel, the word "risk" should best be taken in context with your entire savings. If you can measure, say, 90% of your total cash resourses in terms of your SIPP and ISA, invested as you have outlined, then your risk revolves around having the bulk of your resourses in some form of Equities - which can dive dramatically. For you, this is perhaps a major risk.

If, on the other hand, the vast majority of your funds are in 'safe' pension funds, Cash ISA's, Fixed Term Deposits, and 2.75% savings accounts, then the small proportion in Equities should not be considered too much of a risk.

There is another 'risk', which I define as taking too passive a view. Picking a basket of funds, and then 'going to sleep' is a risk. Moving it all around daily, with fund switches, is equally a big risk. But in the middle, somewhere, is a safer route that says follow the big trends.

Currently, there is no doubt in my mind that India, Far East, Emerging Markets are going to outperform 'The West'. Europe and America are bankrupt, and losing money (balance of payments) to the others. Resources and commodities look set for continued scarcety value. But things could change, and don't be afraid to liquidate from time to time, when things look set for a slump, and re-enter the market at lower prices.

I'm not saying that us 'ordinary investors' are any better than fund managers, but fund managers have 'terms of reference' and if that means investing in smaller US companies, then that's what they do. If shares in US smaller companies decline by 30%, then expect the fund to drop similarly. Don't expect fund managers to liquidate, invest in fixed interest, and buy back at much lower prices (except in some of the more 'absolute' types of fund).

Us investors have no such constraints. So pencil in a thorough review every 6 months or so, and keep abreast of major market trends (e.g. the 'PIGS') and make sure you are not exposed to them.

peterg1965

Great post Loughton Monkey, and I agree with your sentiment regarding risk and attitudes to it.

I am really just getting started with my SIPP, having opened it back in March. I have not yet really changed many funds yet, I have slowly increased my monthly net contributions to £1000/month and overall have been pleased with my fund selection, I have about £61K to play with at the moment. It has been a bit of a roller coaster but is up about 9% in that time. I agree with your apprasal of emerging markets outperforming the west, hence I biased my funds in favour of EMs and specialist. My overall aim is to reach at least £400K in exactly 10 years, if I maintain my current level of contributions (£15000 gross/year) that requires a 9.2% rate of growth. I need to be a little adventurous in that time I think, particularly in the early years.

By the way, what is the 'PIGS'?

sunil1234

peterg1965 wrote: »

Great post Loughton Monkey, and I agree with your sentiment regarding risk and attitudes to it.

I am really just getting started with my SIPP, having opened it back in March. I have not yet really changed many funds yet, I have slowly increased my monthly net contributions to £1000/month and overall have been pleased with my fund selection, I have about £61K to play with at the moment. It has been a bit of a roller coaster but is up about 9% in that time. I agree with your apprasal of emerging markets outperforming the west, hence I biased my funds in favour of EMs and specialist. My overall aim is to reach at least £400K in exactly 10 years, if I maintain my current level of contributions (£15000 gross/year) that requires a 9.2% rate of growth. I need to be a little adventurous in that time I think, particularly in the early years.

By the way, what is the 'PIGS'?

great post Loughton monkey, makes a lot of sense and i learnt something:beer:

Pig – While not an official term, being called a pig in the stock market is not a good thing. It usually means that you have no clue what you are doing, and just blindly make and execute trades.

Loughton_Monkey

peterg1965 wrote: »

By the way, what is the 'PIGS'?

Portugal, Ireland, Greece, Spain. All troubled zones at the moment!

yelf

I'd say at least an 8. opp, brics, and direct holdings. nice

Loughton_Monkey

Now I have defined "Pigs" (thought everyone knew of it), forgive me for an amusing anecdote.

I worked/lived in Korea for 4 years. Very strange country, but overall good. But expats have an expression "OINK" which means "Only in Korea". To cut a long story short, that country throws so many unbelievable things at you, the expression is used frequently.

Well over a period of a month, I watched from my office a new restaurant being renovated over the road. My Interpreter and secretary (lovely Korean girls) kept me abreast with developments too, as we were always on the lookout for new places to lunch. It had a picture of a pig on the boards, and my girls told me it was probably a pork restaurant.

One day, the three of us had spent the morning on the most frustrating and unbelievable visit to Customs. On the drive back, I insisted we went to the brand new "Oink" for lunch. It just seemed appropriate. We could unwind after the incredible morning's hassle.

Arriving at the table, my girls read the menu. The waitress came up, and (via my Interpreter) I said I would have pork.

The waitress's answer?

"We don't do pork".

I swear by almighty God that this is true [Plus the Tantalus Pasta Restaurant doesn't serve Pasta]!

LongTermLurker

Loughton_Monkey wrote: »

Portugal, Ireland, Greece, Spain. All troubled zones at the moment!

Must admit I hadn't heard of it, but assumed it was a list of countries, ala BRICs, from the context...