Critique My Fund Portfolio

xx_Law_Grad_xx

If anyone could critique my fund choices it would be much appreciated.

I had an old thread but it is now not so relevant as my opinion on the economic outlook in 2011 is different.

I have chosen funds which I believe will perform well if inflation rises.

I have selected a number of emerging market funds which one day will invest in but not for the time being as the funds have been falling for several months now.

About me: -

• 23 years old.
• Full time employment.
• No financial commitments.
• Long term investment - 15-20 years
• Open to above average risks.
• Drip feed monthly into an ISA. Initially £30 per fund then increase/decrease for certain funds to further balance portfolio.

Bonds

• Standard Life Investments Global Index Linked Bond - Incase inflation rises.

UK

• Artemis Income - For large cap equity income.
• M&G Recovery - For large cap growth.
• Marlborough Special Situations - I believe UK smaller companies will do well with increased lending from banks.

Europe Excluding UK

• Neptune European Opportunities - Exposure to large cap companies.

North America

• Threadneedle American - For exposure to large cap European companies.

Global

• Newton Global Higher Income - For global large cap growth.

Emerging Markets

• First State Greater China Growth - Will invest in eventually.
• First State Indian Subcontinent - Will invest in eventually.
• Neptune Russia & Greater Russia - Bullish on Russia.
• First State Latin America - Less exposure to Brazil than other funds.
• Investec Africa & Middle East - Believe there are opportunities in ME especially whilst unrest.
• Baring ASEAN Frontiers - For exposure to frontier markets.

Specialist

• Baring Global Agriculture - Sarasin Agrisar is not appealing to me. Aware of high TER.
• JPM Natural Resources - Accidently missed off but now added to list.

Thanks.

jimjames

Looks like a reasonable mix of funds - you don't say what the proportions are between them.

I'd also ask about your statement that you're not investing in emerging markets because they are falling. Generally you'd be wanting to buy when the price is low rather than high so falling prices are good if you are a net buyer and especially if you are investing monthly.

Newbie2saving

Lots of investors see a drop in a fund sector as a good opportunity to invest (not advocating chasing after a lost game), what is your strategy here? Do you seem EM's rising in the future?

peterg1965

Interesting choice, you have a lot in Emerging Markets exposure and I have quite a few of the same funds in my portfolio. I think that UK small caps and possibly US small caps are worth a punt as we are easing towards some form of recovery, likewise some Euro funds are worth a look. Maybe some commodity based funds - JPM Nat Resources for example are worth investing in.

Linton

It looks well thought through - I particularly like the way you have a reason for each investment.

Some details...

A key area I feel you have missed but shouldnt is commodities. This should give some diversification from the high cap equity. This is a pointer to something else - for a long term investment I think you can afford some higher risk/higher return from more small caps.

Another niche area you could have is technology. Yet another is property which should provide diversification from high cap equity.

I am not sure why you need the Higher Income fund. It seems to focus on the high cap companies which you may well see in your geographic high cap funds.

xx_Law_Grad_xx

jimjames wrote: »

Looks like a reasonable mix of funds - you don't say what the proportions are between them.

I'd also ask about your statement that you're not investing in emerging markets because they are falling. Generally you'd be wanting to buy when the price is low rather than high so falling prices are good if you are a net buyer and especially if you are investing monthly.

I would initially be looking to invest in equal amounts for each fund. But will look to adjust eventually to further balance the portfolio. I was thinking initially £30 per fund.

With the emerging markets I do not want to invest too soon if they will carry on falling for a long while. I am going to hold off investing with China until I can make a decision on whether in my opinion the property bubble will burst or if it can be averted as at the moment I am undecided. With regards to India from what I have read in various articles is overvalued at the moment.

Newbie2saving wrote: »

Lots of investors see a drop in a fund sector as a good opportunity to invest (not advocating chasing after a lost game), what is your strategy here? Do you seem EM's rising in the future?

With the Investec Africa and Middle East fund I see the massive drop as an ideal opportunity to invest.

China, as mentioned above, I am uncertain and will hold off investing until I can make a better decision. If the property bubble there were to burst then the drop will be massive. Just trying to time my entry point with this one.

India, from the various articles I have read, the general consensus has been to hold off as the shares are overvalued.

I believe that Russia and Latin America will rise in the future. I am also bullish on oil and gas which the Russia fund gives me exposure to.

peterg1965 wrote: »

Interesting choice, you have a lot in Emerging Markets exposure and I have quite a few of the same funds in my portfolio. I think that UK small caps and possibly US small caps are worth a punt as we are easing towards some form of recovery, likewise some Euro funds are worth a look. Maybe some commodity based funds - JPM Nat Resources for example are worth investing in.

Do you have any suggestions for a US Small Caps fund? I have been debating Schroder US Mid Cap for a while now but have yet to pay much attention to small caps.

JPM Natural Resources had been on my list for a while. Not sure why it is not there. But thank you for reminding me.

Linton wrote: »

It looks well thought through - I particularly like the way you have a reason for each investment.

Some details...

A key area I feel you have missed but shouldnt is commodities. This should give some diversification from the high cap equity. This is a pointer to something else - for a long term investment I think you can afford some higher risk/higher return from more small caps.

Another niche area you could have is technology. Yet another is property which should provide diversification from high cap equity.

I am not sure why you need the Higher Income fund. It seems to focus on the high cap companies which you may well see in your geographic high cap funds.

Thank you I thought it might help people in seeing why I have gone about choosing the funds.

I will definitely be looking to add a US Small Caps fund now aswell.

Do you foresee technology funds still performing well? As I was worried I have missed the boat on them. With the massive valuations placed on facebook and other social networking sites I am concerned that this could quickly lead to a second bubble.

I have always lumped property funds in with Japan funds. Do you have any recommendations for property funds as it is an area I have neglected to devote much research to. From what I have read they have performed abysmally over the last few years.

I will remove the Global Higher Income fund as there will be massive overlap with the other EM funds.

bendix

I'm a big fan of technology at the moment.

Companies around the world are awash with cash as a result of being cautious during the financial crisis. Their balance sheets are very very strong. Usually when this happens, we see a spate of M&A activity, but companies are risk averse at the moment and M&A is much more cautious - only the very best deals are happening.

So what are companies going to do with this cash? My guess is spend it on their own infrastructure development, and that means large IT projects.

I bought GLF Technology Equity a few months ago, and have been very happy with it to date.

The technology bubble of the 90s was due to investors buying stocks from companies with no business model or revenues. Completely different these days, and GLG in particular is comprised 10% Apple, 9% ARM and a whole host of others including Cisco, Infosys etc.

bendix

xx_Law_Grad_xx wrote: »

I have always lumped property funds in with Japan funds. Do you have any recommendations for property funds as it is an area I have neglected to devote much research to. From what I have read they have performed abysmally over the last few years.

.

Huh? What an odd statement. Why?

Both property funds and Japanese share funds have performed poorly in recent years. Which, of course, is a good reason to buy them.

To be candid, given you're putting in only £30 a month into these and presumably have a long investment horizon, where is the risk?

Less thinking, more doing, and more quickly would be my advice.

xx_Law_Grad_xx

bendix wrote: »

I'm a big fan of technology at the moment.

Companies around the world are awash with cash as a result of being cautious during the financial crisis. Their balance sheets are very very strong. Usually when this happens, we see a spate of M&A activity, but companies are risk averse at the moment and M&A is much more cautious - only the very best deals are happening.

So what are companies going to do with this cash? My guess is spend it on their own infrastructure development, and that means large IT projects.

I bought GLF Technology Equity a few months ago, and have been very happy with it to date.

The technology bubble of the 90s was due to investors buying stocks from companies with no business model or revenues. Completely different these days, and GLG in particular is comprised 10% Apple, 9% ARM and a whole host of others including Cisco, Infosys etc.

Ahh. Thank you for the info. I have seen the Axa Framlington Tech fund mentioned alot recently but will definately have a look at the GLF one.

bendix wrote: »

Huh? What an odd statement. Why?

Both property funds and Japanese share funds have performed poorly in recent years. Which, of course, is a good reason to buy them.

To be candid, given you're putting in only £30 a month into these and presumably have a long investment horizon, where is the risk?

Less thinking, more doing, and more quickly would be my advice.

Perhaps I was quick to pass over property funds. Would you recommend a global one? Or UK only?

Japanese funds are offputting as their economy has been stagnant for ages now and their ageing population is a big problem. I will look at a large cap income funds.

Yes, it is a small, almost trivial amount of money. But I am looking to increase my monthly contributions to ensure I use up my ISA allowance. So would be around £60 ish per fund.

Agree completely, can over analyse things and never get anything done. I will be setting up the monthly trade plan tonight.

purch

Your Fixed Interest choice isn't Fixed Interest.

I am a big believer that Japan has turned the corner, and will be a good place to invest, especially small caps and REIT's. I don't think the Japanese market is one where a tracker, or fund manager who is just a follower of the Index works particularly well.

Technology is also one to look at. IT's such as Polar Cap and RCM have performed well recently, and I think will continue to do so.

Commodities is an area worth looking at. There is still a huge supply Inelasticity, and pure commodity funds, or funds concentrating on commodity producing nations should benefit. Again I would avoid an Index style fund or ETF to play this area.

bendix

GLG Technology Equity Fund, not GLF. My typo, sorry.

I wasnt meaning to deride your monthly contribution. It is important to start somewhere. My point is that with low monthly payments you don't really need to worry too much about risking a fall of a few percent - it won't kill you.

The important thing is just to get started and to get into the discipline.