How many funds should you spread your money over

Imnoexpert_2

The latest Hargreaves Lansdown flier mentions something I touched on in a post a while ago. How many funds should you be invested in? They use the example of £200,000.

I think the asset allocation model is a good one. So I'm trying to cover a range of sectors, and where I have a high proportion of of money in a sector spread that into a number of funds.

So perhaps posters could suggest either how many funds in total for 200K, or even which sectors and how many funds in each, or if very generous with their time the funds themselves.

I am trying to build a 'balanced +' type of portfolio. I'm getting involved, and am tempted to have lots and lots of funds. Should I resist this?

Regards

Lokolo

10-20 funds. With £200k I would do 20 funds.

As for allocation theres a few tools to determine what allocation you should do.

https://www.fidelity.co.uk/investor/guidance-planning/plan-portfolio/myplan-portfolio-quickstart.page?

Theres a small portfolio tool here.

hbakhshi

Lokolo wrote: »

10-20 funds. With £200k I would do 20 funds.

As for allocation theres a few tools to determine what allocation you should do.

Theres a small portfolio tool here.

Excellent tool thanks!

mike88

I have 15 funds concentrating on those with a City Wire AA rating and above. Good League TABLE site here for identifying funds:

http://citywire.co.uk/money/fund-and-fund-manager-performance/home.aspx

I'm not keen on the HL site as Mark Dampier seems to have far too many rated funds which makes choice difficult. He also rates new funds in his Wealth 150 which does not seem a good idea given the lack of any track record.

Linton

Imnoexpert wrote: »

The latest Hargreaves Lansdown flier mentions something I touched on in a post a while ago. How many funds should you be invested in? They use the example of £200,000.

I think the asset allocation model is a good one. So I'm trying to cover a range of sectors, and where I have a high proportion of of money in a sector spread that into a number of funds.

So perhaps posters could suggest either how many funds in total for 200K, or even which sectors and how many funds in each, or if very generous with their time the funds themselves.

I am trying to build a 'balanced +' type of portfolio. I'm getting involved, and am tempted to have lots and lots of funds. Should I resist this?

Regards

I think that it's not a question of how many - the only answer can be as many as are needed for your strategy.

Now, what is your strategy....

First question is what is your portfolio for - income or growth? If you have a need for both decide on x% for growth and 100-x% for income and treat the two as separate portfolios.

So concentrate on one objective......

Lets say income. Where can you get income from? There's income equity funds, gilt funds, corporate bond funds of varying risk and cash. What % do you want in each and what level of risk? Lets look at income equity funds and split those if necessary and possible down to sub objectives with a fund size of say £10K.

So what I am saying is if you do a top down analysis and have no more than 2 funds in any final node of the analysis you will end up with a portfolio that does what you want. Each fund has an objective, you know why you bought it. And since each fund has a purpose within the wider strategy the total number of funds is whatever it needed to be.

Given a single top level objective and a sum of £200K I could envisage a justifiable number of funds being somewhere between 5 and 40.

fimonkey

Interesting thread which I'll be keeping an eye on.

I currently have the L&G all shares UK index tracker, and the L&G emerging markets (EM) tracker. Overall I have £1700 invested in a 2:1 ratio (don't laugh I've just started). I am drip feeding £100pm to the UK tracker and £50pm to the EM tracker and at the moment this is money I can afford to loose, not that I want to loose it of course! I am also saving £160pm to my cash ISA. OVerall this is the total amount I can afford to save (£310 pm) and my strategy is growth.

I'm seeing how it goes to be honest. If there are good profits I will take these and look to re-invest them somewhere else - I may even try my hand at individual shares. That said with the drop in India's economy, the expected Chinese bubble, and the rush of private investors into UK equity I'm, kinda expecting a big dip shortly and wondering whether I should take out some profits and shelter then in cash - but then cash is being eaten away by inflation anyhow!

Swings and roundabouts.

smallfry27

Lokolo wrote: »

Fidelity ... Theres a small portfolio tool here.

I've tried this Fidelity tool a couple of times, and it tells me to keep everything in cash ! In fact I'm aiming at a popular division of using your age to determine % in defensive funds, including cash, rest in equity.

I would just add beware of funds overlapping too much - I found with my previous IFA-chosen portfolio, a lot of the funds had the same popular companies in them, so it wasn't truely diversified. On the other hand, if you intend keeping a lot in one sector, probably is worth spreading over more than one manager.

Morning Star has a good Portfolio Manager tool that lets you set up a 'fantasy' portfolio, and then shows you what % you actually have in various sectors and companies.

mike88

Investor Psychology

Books covering investor psychology suggest that inexperienced investors tend to buy shares, refuse to take profits, only think about selling when they lose money, will not sell at a loss but decide to sell when shares recover; shares never recover so end up with paper loss. (Sorry can't find reference link) This is exactly my experience in the early years of my investment activity which I began around 40 years ago.

Experience has taught me always to take profits. Some might say now would be a good time to take some profits on Emerging Market Funds for example as , arguably, there is a trend to suggest that this sector is becoming somewhat overheated. The market could of course be taking a rest but as an investment philosophy investors should never be afraid to take a profit which was the philosophy of Warren Buffet who tended to get out just before shares peaked. Money could always be sheltered in cash or with funds with a lower risk profile.

Totton

Hi,
Interesting question, I think the answer lies within yourself though. Firstly I would consider how much risk you are willing to put into each fund, is it 5% or 10% or more? Secondly I would consider how much work you personally want and are able to do monitoring fund performance, for example keeping an eye on 1 fund is a lot easier than doing so on 20 funds :-)

For your amount I wouldn't personally have more than 10 funds and optimally just 7 or so. I would put about 70% into one core fund that met my strategic aims, something like an active managed or balanced fund, next I would spread the remainder around half a dozen funds to add spice or income dependant upon my needs. That could be all income funds or as in my case spread around sectors and areas that I believe will do well.

I have found that this strategy works very well for me and a lot better than when I held over 20 funds.

All the best,
Mickey
ps. Holding a large amount in one fund can make the eyes water if the markets are not doing well!

talexuser

I agree with the good advice given above, but am just sad that I can't think of 20 funds that consistenly beat their indexes with managers that earn their TER by skill rather than ocassional year or two of luck