Balance my S+S ISA

foofi22

Hi

I opened a S&S ISA a few years ago and have been adding to it monthly since. I am now going to increase the monthly payment to £200 but I realise that my portfolio is not particularly balanced, and that as I am going to put more in I should be more sensible!

My current holdings are:

BlackRock Global Bond A Acc 13%
Henderson China Opp Acc 25%
Henderson Global Tech A 3%
Invesco Perp High Income Acc 25%
M&G Intl Sovereign Bond Acc 12%
Old Mutual UK Mid Cap Acc 22%

So I am quite exposed to UK and China and have a lot in bonds.
I only have £5k invested in total so an IFA won’t be interested.
My thinking on regional allocation

UK 10%
UK smaller 5%
Europe 10%
Europe Smaller 5%
USA 10%
USA smaller 5%
Latin America 10%
China 10%
Japan 5%
Asia (ex China) 15%
Australasia 5%
Bonds 10% (I must admit I don't really understand bonds)
TOTAL 100%

I can contribute a minimum of £20 each month to a fund which makes getting these ratios more difficult so I will invest £20 every other month in some cases (i.e. quasi £10 a month). Here is what I have lined up so far:

Aberdeen Emerging Markets £20
Henderson China Opps £15
BlackRock Emerging Markets £20
Invesco Perp Latin America £10
Fidelity South East Asia £15
Aberdeen European Sm Cos £20
Threadneedle Pan European £10
Invesco Perp European Opps £10
Artemis UK Special Situations £10
Old Mutual UK Mid Cap £10
Threadneedle American Sel £10
Allianz RCM US Equity £10
Schroder US Smaller Companies £10
Invesco Perp Japan £10
BlackRock Global Bond A Acc £10
M&G Intl Sovereign Bond Acc £10

Which brings me close to my intended allocation above (according to my spreadsheet anyway!)

Any opinions on these choices or allocation such as 'don't do that!', 'how about this fund instead..' etc would be greatly appreciated as I'm really trying to sort myself out here! (I'm 27, and don't need the money for next year etc)

jimjames

"don't do that!"

Personally I would not split out to so many funds at such small amounts. As the UK market is your home market it is one that you have no risk of currency changes affecting return so I have a higher percentage in this. Remember that the UK market isn't based on the UK economy as around 70% of the return on UK stocks comes from overseas.

I would pick 1 or 2 funds to invest in each month and then switch to others after 12 months. Over a period of time you will then build a more balanced portfolio.

Jegersmart

probably too many holdings for such a relatively small pot. You could look at some of the funds that do some diversification for you:

M&G Global Dividend
Invesco Global Smaller Cos
Aberdeen Emerging Markets
GLG Global Corporate Bonds / Old Mutual Strategic Bonds

then add more specialist if you want:
Marlborough Special Situations
Blackrock US Opps
Threadneedle Pan European
Blackrock European Dynamic
FS India and Subcontinent
Inv Perp Latam

It is a difficult choice I guess but I would try not to be invested in more funds than have you £k's invested (at most).

imho, dyor.

Jegersmart

forgot to mention that it is not necessarily a good thing to be invested in *everything*. In the same way that putting 35 chips down on a roulette table .....better to do some research and decide where to put your money and in what (with some balance thrown in in case you get it wrong:))

dunstonh

Until you get to around 20k you cant really portfolio plan as you dont have enough. Also, the impact of that level of diversification doesnt tend to matter as much on that size of fund.

When I was a smaller investor, I used to build up £1k per fund. As it got larger, I went £2k per fund until I had a large enough amount to portfolio plan. As it stands you currently hold more funds than I do on a much larger valuation. So, I reckon you are going over the top a bit.

foofi22

Thanks all for the replies, I'm glad you all agree with each other. I haven't actually invested across all those funds (thankfully), it was only a plan so all I have lost is a bit of time.

At the moment I'm now looking at:
Aberdeen Emerging Markets 25%
Invesco Perp Pacific 15% (not quite sure about including this one)
Threadneedle Pan European 20%
BlackRock Global Bond 10%
M&G Intl Sovereign Bond 10%
First State Emerging Markets 20%

Can someone explain 'bond funds' to me? I'm thinking how do they generate 'decent' returns when they are fixed interest? (I've obviously missed something)

Jegersmart

foofi22 wrote: »

Can someone explain 'bond funds' to me? I'm thinking how do they generate 'decent' returns when they are fixed interest? (I've obviously missed something)

It is best to google this as there are many different types of bonds around. Most bonds have a "coupon rate" which is the rate at which the loan is effectively given on issuance - and the price of a bond is usually something round like 100 at issuance. Most bonds are a security so these can be traded just like stocks. What happens in general is that if there is no demand for the bond, the "price" goes down but the yield (coupon rate) goes up which is why you hear in the news "the yield demanded on Greek 3 year bonds has risen to xx% " - in effect because people are selling out of their bond holding in that scenario. The reverse is also true - recently yields on US Treasuries have gone very low because money has been flowing in and the "price" has gone up so the yield (or coupon) has gone down. This is because the coupon is fixed so the instrument has to adjust to the correct level to reflect the coupon to maturity (whatever the maturity period is). So taking and offloading positions in these bonds at the right time can make gains in excess of the coupon rate as my past holdings have demonstrated to me.

I don't and haven't traded bonds directly so this is my rambling (and perhaps not so good) explanation of the basics...

HTH

J

p.s. Invesco Perp Pacific has quite a large exposure to Japan which would be the most important factor to consider against these other two. Another to consider instead of the Inv Perp Pacific could be Fidelity South East Asia with its slightly larger exposure to China, S.Korea, Taiwan etc.....

Good luck!

Ark_Welder

foofi22 wrote: »

Thanks all for the replies, I'm glad you all agree with each other. I haven't actually invested across all those funds (thankfully), it was only a plan so all I have lost is a bit of time.

At the moment I'm now looking at:
Aberdeen Emerging Markets 25%
Invesco Perp Pacific 15% (not quite sure about including this one)
Threadneedle Pan European 20%
BlackRock Global Bond 10%
M&G Intl Sovereign Bond 10%
First State Emerging Markets 20%

Can someone explain 'bond funds' to me? I'm thinking how do they generate 'decent' returns when they are fixed interest? (I've obviously missed something)

Something that I knocked up about bonds (on a good day!) that might also go towards some information, or perhaps start at the top of that thread to get th full gist of things: http://forums.moneysavingexpert.com/showpost.php?p=45222660&postcount=3

A question that I suggest you should ask yourself is your reason for holding M&G Intl Sovereign Bond in addition to BlackRock: the latter does hold sovereigns as well as corporates. Not saying that it's necessarily wrong to do so, just something for you to confirm to yourself. I'll also make the observation that you have no exposure to US equities (whilst you do have exposure to the US government!!).

foofi22

I think I will go for these allocations, I think it gives me good exposure to all emerging markets (not just China) and smaller companies, along with more established UK/Euro/US big players. Any comments? My risk profile is high as I am still young and even though I don't want to lose money I wouldn't be in dire straits should that happen.

Threadneedle Pan European 20%
Aberdeen Emerging Market 20%
First State Emerging Markets 15%
Threadneedle American 15%
Invesco Perp Global Smaller Cos 20%
BlackRock Global Bond 10%

I plan on investing £200 per month using interactive investor (and dividing my existing £5k between these funds).

Is there anything I need to be aware of when selling funds using Interactive Investor? Say if I have contributed £800 to a fund with a paper value of £1000, would I receive £1000 after selling the units or is it (more likely) £1000 minus X%? (I've never sold before as you can tell!)

Jegersmart

I hold several of these funds myself, some solid choices in my view - although it is all about the allocation according to your wants and needs of course. The markets are struggling a lot at the moment and a lot of people are getting out of equities which may be a good time to start to buy in especially as your monthly constributions will be "phasing" the buying over a period of time. Good luck, let us know how you get on.

J