ISA Fund 'high risk' portfolio choices part 2 - please reply/comment

bobsy31

Hi

I posted recently on this topic, responses from which were very useful. Following additional research and thoughts. I wanted to give a defined list of invesments I have chosen. For the benefit of others here is an extract from my previous thread

I have spent the last few weeks researching funds/investments; reading hundreds of pages of posts here on mse, morningstar, trustnet,bestinvest etc.
I have opened a h-l stocks and shares account and my plan is to invest £50 per month over a number of funds. I plan to do this for at least 15 years+, passively looking at their performance a handful of times a year
I am fully aware that my following choices are pretty high risk - I am very comfortable with the potential highs and lows this brings, even to the extent of losing most of it (though I obviously hope this won't happpen). I am going to 'leave' these for a very long time, As time goes on and I get older I will be looking to picking 'less risky investments'.

Investment Choices:

First State Global Resources - £50pm
Baring Asean Frontiers - £50pm
M&G Global Basics - £50pm
First State Greater China - £50pm
First State Indian Subcontinent - £50pm
First State Latin America - £50pm
Neptune Russia and Greater Russia - £50pm
Axa Framlington Global Tech- £50pm
Blackrock European Dynamic- £50pm
Standard Life UK Smaller Co's- £50pm
Invesco Perpetual High income- £50pm
Fidelity South East Asia- £50pm
Schroder us mid cap- £50pm- £50pm
L&G Health & Pharma- £50pm

Any advice/alternative choices/overlap observations are gratefully received!

Many thanks

Ilya_Ilyich

You sure went for high risk, didn't you!

All I can say is I hope you're really in this for the (very) long haul; you have a portfolio that has a lot of potential for growth but will experience a ton of volatility & is vulnerable to GBP movements. You do say you're happy with the risk you're taking so I assume your savings/investments elsewhere are solid; as long as you're treating this as something of a "speculative" investment and won't need to withdraw funds from it in the next 10-15 years you should be reasonably safe - your fund choice is well diversified (amongst your chosen markets anyway).

bobsy31

Hi Ilya

Thanks for the reply.
Thsi is definitely along term thing ie 15-20 years and am expecting a (very) bumpy ride along the way!
One or two of the funds may implode however hope the diveristy means i have somewhat 'minimised' the risk to a degree.

I cannot see all (even most) those geographies/markets disappearing out of site, in fact I see the East/Asia/south America as having more success long term and catching up to the 'west'.

In my late 40's 50's i'll start 'playing safe' with my investments!

edinburgher

One or two of the funds may implode however hope the diveristy means i have somewhat 'minimised' the risk to a degree.

In this case, you haven't so much minimised the risk as spread it over more risky choices. I think for most people, minimising the risk means including a few less exciting picks to balance things out.

In my late 40's 50's i'll start 'playing safe' with my investments!

As you're going for almost exclusively adventurous picks, you should probably have a very definite plan (i.e. years and percentages) for reducing your exposure to equities and into more stable investments.

Best of luck

JonnyBravo

edinburgher wrote: »

In this case, you haven't so much minimised the risk as spread it over more risky choices. I think for most people, minimising the risk means including a few less exciting picks to balance things out.

It has however, reduced the risk of "losing it all".
Each individual fund would still have a relatively low (% chance out of 100) of going bust or encountering majority losses, but if you put it all in one you are clearly in an all or nothing situation. He is less likely to be in that situation now but of course that comes at a price. The price here of course is that he is more likely to lose something as he is now exposed to more "encounters" with the high risk.

edinburgher

It has however, reduced the risk of "losing it all".
Each individual fund would still have a relatively low (% chance out of 100) of going bust or encountering majority losses, but if you put it all in one you are clearly in an all or nothing situation. He is less likely to be in that situation now but of course that comes at a price. The price here of course is that he is more likely to lose something as he is now exposed to more "encounters" with the high risk.

Well said. He's reduced his risk of totalling his money, but not his total risk

bobsy31

Thanks for the replies so far.

Duly noted on the 'not reducing total risk' comments - this indeed will be a rollercoaster ride however I feel I have picked good funds and across some very interesting areas with long term prospects.

I am thinking of 'merging' some of the funds and getting one fund that would cover them - any input on this would be really useful

thanks

Totton

Re: merging some of the funds. There is a good podcast on the Motley Fool site where a manager of the Hexham Emerging Markets range is interviewed. The very convincing lady explains why Hexham does not advise single country funds but prefers Global EM funds which can adjust country specific ratings as they go along.

The podcast you want is 'Where to Invest in Russia' which features the comments I mention.

With regard to the fund choices, you may want to take a look at the TER's and review performance against similar Investment Trusts. Over the long-term you have in mind, the extra costs could make a huge difference to your capital but if the manager is the best then stick with the OEIC.

You could have gone for a risky portfolio rather than safe one you have chosen :-) Seriously though, The IP Income fund seems a strange choice, the % it makes of the portfolio seems hardly worth its purpose of income, why not switch it for the new Artemis energy fund or perhaps First State Global Listed Infrastructure?

Personally your portfolio is far too risky for me, I'd not be able to sleep at night but in 10 years you may well be able to retire!

Good luck,
Mickey

jimjames

Yes its a high risk set of funds but equally you are not investing a huge lump sum up front and are drip feeding in. If there are any drops then you will be buying more units so as a long term strategy it seems like a reasonable plan as long as you are fully aware of the likely volatility (which it appears you are)

bobsy31

Thanks for the replies - an interesting shout on the new artemis energy fund that will definitely be going onto the ever expanding list!

Can someone please explain TER's to a relative newbie like myself and the impact on my chosen funds and my timescale of investment (15-20+ years). I have lookd at the and they all seem to be between 1.5 and 2

Thanks

Rollinghome

The TER is the Total Expenses Ratio, an odd term because it isn't the total expenses and it isn't a ratio. It's the AMC, annual management charge, plus some other costs like auditing fees but doesn't include the fund's trading costs - the cost of buying and selling the shares it holds.

"Alan Miller, a former fund manager at New Star, recently estimated that these costs would add a further 1 per cent a year to the average TER on a unit trust or Oeic in the UK all companies sector, based on the average portfolio turnover rate of 57 per cent." http://www.moneyobserver.com/issue/features/time-call-fund-groups-account. Nor does the TER take into account any front end or exit charges.

The compounded effect of charges over the years can be very surprising and the main reason why most unit trust funds underperform their related indices. The problem of high charges for small-time investors can be the loss of the compensatory "risk premium" - so that they end up with the risk but with very little of the premium.

"Fund management fees eat away an average of 43 per cent of investors' returns over a ten-year period, according to an investigation by Money Observer into the true cost of investing." http://www.moneyobserver.com/news/10-09-30/hefty-charges-slash-investor-gains-almost-half