Critique My Fund Portfolio

Coeus

Hi all. Thanks for taking the time to read this.

I have recently transfered my S&S ISA from Halifax to Hargreaves Lansdown (https://forums.moneysavingexpert.com/discussion/3043752) and have been convinced of the worth in selecting funds individually rather than investing into a multi-manager portfolio (https://forums.moneysavingexpert.com/discussion/3044404).

Special thanks to dunstonh on the above threads and Imnoexpert for raising a thread on risk management (https://forums.moneysavingexpert.com/discussion/3042498).

I would appreciate any insights into my proposed portfolio of funds in Hargreaves Lansdown (waiting for funds still to clear Halifax). Initial investment will be ~£7,000 with a monthly SO of the 11/12 ISA allowance (= £5,340 / 12m = £445 p/m).

Please note a minimum investment per fund of £50 is in effect which limits the number of funds I can invest in (with nil tax consequences) to 8 (= £445 / £50 = 8.9 thus 8 funds p/m maximum).

There will be a separate % investment for (i) the initial investment and (ii) the subsequent investments:

INITIAL INVESTMENT (DRIP FED BI-MONTHLY OVER 3 MONTHS)

FUND NAME

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SECTOR - % OF PORTFOLIO - TER

CF Amati UK Smaller Companies (Accumulation)

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UK Smaller Companies - 10.0% - 1.62%
AXA Framlington Global Technology (Accumulation)

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Technology and Telecoms - 10.0% - 1.58%
Chelverton UK Equity Income (Accumulation)

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UK Equity Income - 10.0% - 0.02%
Newton Real Return (Class A) (Income)

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Absolute Return - 40.0% - 1.62%
Prudential Growth Accumulation (Active Managed)

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Active Managed - 30.0% - 1.71%

SUBSEQUENT INVESTMENT (MONTHLY)

FUND NAME

---

SECTOR - % OF PORTFOLIO - TER

CF Amati UK Smaller Companies (Accumulation)

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UK Smaller Companies - 20.0% - 1.62%
AXA Framlington Global Technology (Accumulation)

---

Technology and Telecoms - 15.0% - 1.58%
First State Global Resources (Accumulation)

---

Specialist - 15.0% - 1.59%
Chelverton UK Equity Income (Accumulation)

---

UK Equity Income - 15.0% - 0.02%
Prudential Growth Accumulation (Active Managed)

---

Active Managed - 5.0% - 1.71%
HL MM Special Situations Fund

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Special Situations - 10.0% - 2.11%
Aberdeen Emerging Markets (Accumulation)

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Global Emerging Markets - 15.0% - 1.88%
Newton Real Return (Class A) (Income)

---

Absolute Return - 5.0% - 1.62%

sabretoothtigger

AXA Framlington Global Technology (Accumulation)

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Technology and Telecoms - 15% - 1.58%
JPM US Smaller Companies (Accumulation]

These are both american pretty much.
I realise USA are massive but really its 300m people and they could be yesterdays news, if you want growth pick another country since uk is already tied to usa you have given them too much influence most likely.

I like tech, I'd keep it to just that

mark13

Looks OK to me, though I'd reduce it to 4 or 5 funds , I'd drop the Global Tech fund, just because specialist Technology funds don't appeal to me and I would include and India fund.

masonic

You know it's quite possible to maintain more than 8 funds through regular savings. To do so, you can either periodically transfer part of one fund into another you are not regularly contributing to, or you can change some of the funds you invest in, say, every 6 months. If you feel you need more than 8 funds, then there's no need to impose that limit on yourself.

You haven't mentioned the usual factors - timeframe, what are you trying to achieve, attitude to risk etc...

This seems to be a very adventurous portfolio. You've got almost 50% invested in small companies, and most of your exposure to larger companies will come from emerging markets and other higher risk areas - is that intentional?

mike88

As a general comment I would use your lump sum to invest in 2 core holdings probably from the Equity Income sector. Dividends will rise this year and two good equity income funds could prove to be useful core holdings. I wouldn't waste my lump sum on Emerging Markets and the Far East where markets are arguably overheated and could at best stagnate. Many will disagree.

When you invest monthly you can afford to be more risky and your mix certainly is that. Investing monthly into Emerging markets, Technology and the Far East is a good strategy in the long term. But I'm unsure why you have selected an Equity and Bond Income fund. The outlook for bonds is not that great and there is little point investing monthly into bonds.

Your one UK fund is in the UK Small Cap sector. That means you may be eliminating the possibility for your UK Fund Manager to invest in UK large caps. There are times when small cap shares stagnate and in such times the manager of your small cap funds may not have the flexibility to invest large.

Large caps may seem stodgy to some but some of these companies are expanding into Emerging Maskets and should benefit from the increasing wealth of individuals in these countries as consumerism grows. Why not opt for a more general fund in the UK All Companies sector where the manager has the flexibility to invest in large and small caps.

Coeus

Thanks for the input!

Sabretoothtigger. Given that both CF Amati UK Smaller Companies (Accumulation) - UK Smaller Companies and JPM US Smaller Companies (Accumulation) - North Am Smaller Companies are essentially the same I will drop JPM US Smaller Companies (Accumulation) - North Am Smaller Companies as this is a higher risk one (to eliminate some risk as noted by masonic).

Mark13. Exposure to India is not covered in the Schroder Asian Alpha Plus (Accumulation) - Asia Pacific exc. Japan. Honestly I have not given much focus to India though I am unsure why I have largely ignored it. Do you have any specific funds in mind mark13? I use Hargreaves Lansdown to filter through funds - no sector dedicated specifically to India so this could be why.

Masonic. Thanks for the notes on the funds through regular savings. This is something I will definately keep in mind for when my fund sum builds up but for the first 6m or so I will familiarise myself with Hargreaves Lansdown and track progress of 8 funds only - get these right and then expand I have a preference for smaller companies mainly due to them serving me well in the past however 50% is excessive I agree. As such mentioned above I will drop JPM US Smaller Companies (Accumulation) - North Am Smaller Companies bringing investment in smaller companies to 30%.

Mike88 (sorry you posted as I updated ) Honestly I like the idea of investing in an 8 fund set - seems manageable and is meant to expose me financial (and experience wise) to a wider fund market. Masonic suggests an India specific fund - where do you stand on this? I have dropped the % in Emerging Markets to 5% and % in Asia Pacific exc. Japan to 7.5% to manage risk. As for the Insight Monthly Income (Accumulation) - UK Eq & Bd Inc this was included as a risk control on my behalf. I already had a substitute lined up in UK Equity income. This has been updated in my original post - please tell me what you think.

I will look into all the suggestions in further detail but will continue to modify posts as quickly as I can to focus my research. I have updated the holdings in my original post per the discussion and will continue to do so as appropriate. Thank you very much for your input! Keep it coming

Coeus

Hi all. Early update this morning.

Decided to drop an eight fund (15% of portfolio) and distribute it the remaining seven funds.

As such exposure to smaller companies remains @ 30.0% of portfolio, with 20.0% being Asia Pacific exc. Japan and Global Emerging markets.

Please let me know what you think - have I missed any opportune markets?

Thanks,
Coeus.

mike88

An India fund is a great idea for monthly investment; large middle class and huge potential for economy to expand. There will of course be potential for exposure to India in your Emerging Market fund.

When you invest monthly stock falls can be very advantageous as you buy more for your money. Not so great if you have invested a lump sum and your holdings are exposed to extreme volatility especially in the current climate when many professionals feel that emerging markets are overvalued. As I said I like the idea of a two tranche strategy - lump sum and monthly investment but as you are a long term investor then I guess you are able to ride the troughs.

Just a thought but are you likely to want access to your money in the forseeable future. If so my personal strategy would be very different.

One further point for educational purposes only. You say your exposure to smaller companies is 30% of your portfolio. My point which I should have explained more clearly is that your small company exposure is nearer to 85% than 30%. Technically, many of the companies in Emerging markets, Tech and Far East funds are small to mid size. Again for monthly investment - no problem. My concern is preserving your lump sum.

I appreciate that I'm probably perceived as being excessively cautious but this results from an adult lifetime of investing in stock markets - and property but that is a different story.

mark13

Some India funds :
Fidelity India Focus
First State Indian Subcontinent
Jupiter India
Neptune India

I have Fidelity India Focus fund.
India funds are on a downturn at the moment having been performing well, so now could be a good time to start drip feeding into the funds 9 my opinion) .
FF - India Focus A GBP


Performance History31/01/2011Growth of 1,000 (GBP) Advanced Graph

Coeus

Mike88. Thanks for the word out caution - suits my signature 'Hope For The Best, Plan For The Worst'. I've been thinking on your points of initial portfolio investment. I would still like to invest sums in each fund to start with however I think I may have an different % investment for the inital balances from the monthly investment in favour of the less risky funds. That said once the funds have been transfered to Hargreaves Lansdown in the form of cash I can drip feed this in at whatever rate I choose as technically it it still invested in a S&S ISA even if in cash. Would you suggest combining these two strategies?


I would likely want to withdraw funds within the next 3-5 years for a FTB deposit. I have ran the Halifax fund (luckily) straight after the 2008 crash (performed reasonably to date) so the move to Hargreaves Lansdown as a continuence of this investment over the long term. I consistently match the investment in my S&S ISA with equal investment in a Cash ISA in addition to monthly fixed savers and a fixed property investment to spread risk further. Would you still advise a different approach given these details?


Mark13. Thanks for the funds I will have a look into each individual - considering a 5% allocation into a India-specific fund. Will let you know what I pick - if you could provide an opinion that would be brilliant!

B_Blank

I dont know what I am talking about so ignore this possibly...

But I thought when inflation is potentially going to run high then you should focus on bigger companies and more income funds that you would do otherwise.

Your high exposure to small companies seems like a disaster waiting to happen surely??????????????

Again, I dont have a clue this is just what I think with not alot of experience!

Good luck!