Sipp Pension Portfolio - What do you think?

qpop

I've got at least 40 years until retirement, and my Vantage SIPP looks very racy

Fidelity Emerging Europe Middle East & Africa
Onshore Accumulation Units 1,093.26 110.70 1,210.24 1,319.68 -109.44 -8.29
First State Asia Pacific Leaders
Class A Accumulation Units 380.440 328.09 1,248.19 1,277.25 -29.06 -2.28
First State Global Emerging Mkt Leaders
Class A Accumulation 378.078 325.57 1,230.91 1,239.68 -8.77 -0.71

Yes, it's incredibly eastern/emerging market focused, and the risk score would probably be 9. The only things I'm likely to start adding are MFM Slater Growth and JPM Natural resources. I'm currently putting £50pm into EMEA, and £100 is building up pm for me to choose where to invest.

With 40 years to go high risk/high reward should be the way forward, and I can't see enough potential for high medium/long term growth in UK markets, other than companies that are embracing emerging markets.

But then, there might be a south korea/north korea war and my portfolio might plunge 80% - but with 40+ years to go, it's a risk I'm willing to bear.

philrush

Hi Qpop,

Interesting idea, I would say I'm more of a moderate risk taker, but with 40 years to go your strategy could pay off, and certainly in the short term could increase your pension pot, and then you could move to more stable areas.

Phil

qpop

Phil - "Risk tolerance" is one half of the risks that should be taken, "Risk capacity" is the other. On a timescale like yours low risk/low return funds don't really have any place. My tiny SIPP pot is riskier than most because the funds all invest in similar things (This reflects my personal views on the way the world economy is going to go). EMEA is the most "diverse" as it focuses on early emerging markets. For this reason it's also the highest risk (it's lost nigh on 10% since investment some 6 months ago).

Even as a moderate risk taker, you should really consider lifestyling (that is, higher risk - medium risk - lower risk, as you reach your retirement) and look at UK small caps, Perhaps a Euro small cap fund or two if you're feeling brave, emerging markets, and specialist (special sits is good, global basics is good, jpm natural resources is good).

Ark_Welder

Q) Should I wait a couple of months for a double dip or further fall in the markets?

Low risk / low return funds could have a place if you think world economies are going to be high risk / low return for a while. But the important thing is to get started. There might be a dip in a couple of months, but there might not. If there isn't then you might be asking the very same question! Over 40 years there will be recessions, so one at the start should be minimal impact on your contributions.


Q) Does this look like a balanced portfolio for someone as a long term investor?

Don't exclude the US. There are still world class companies there that have global earnings. Similar for Europe, although the initial ride might be a bit bumpier. Emerging markets are still dependent on the western world to some extent so a slow-down in the latter will have an impact on them. EMs are not yet in a position to fully take on the job of 'consumer', but that may occur in the next few decades.


Q) What level of risk does this portfolio suggest, I would say I'm a moderate risk taker ?

Something to read:

http://www.bgtrustonline.com/articles/capital-hill/capital-hill-oninvesting-through-the-decades.aspx



Q) Do you think this portfolio is suitable for someone aiming at average annual gain of (7-10%)

Probably not, but I'm not expecting world growth to be anything special for a number of years (which is undefined!). Some theories suggest that markets should rise (of fall) in the long term by roughly GDP growth plus dividends, and others use GDP plus inflation:

http://www.investorsfriend.com/return_versus_gdp.htm
http://www.financialphysics.net/future.html

Of course, shorter terms largely depend on where we are on the particular curve in respect of a long-term average!


Q) I worked out the average charge of this portfolio is 1.20%, should I aim for lower?

Low is good, but should not be the overriding factor. Only aim for lower fees if you believe that there is a lower-cost funds that will do as good a job or a better one.


Q) I would have thought checking my portfolio once a year would be enough given the length of timeI have to retirement, am I correct?

To start with, but increasing the fewquency as you move closer to your retirement date. There is not harm in monitoring it more frequently - just don't allow it to become an obsession...;)

Q) The tracker funds seem to have done worse in the last 6 months, in times of volatility are trackers a poor choice?

Trackers will always be fully invested, or thereabouts. Actively managed funds have the capacity to move into less volatile assets such as cash. But short-term volatility at the outset will have less relevance in 30/35 years time - after which it might be right to take volatility more into consideration.


If you still have doubts then you could start off by investing in just the one or two funds that you see as core holdings. Then use the next 6 to 12 months to have a read about world economies, etc, after which you can choose the areas into which you would like to diversify.

utigers

From my short experience (14yrs) in S&S PEPS/ISAS etc..... I have read about these 'good things' before, and now its all about EM. A lot of hype is created but the logic of a particular sector to invest in appears good just like EM now. But then something happens, the logic disappears and something 'new' pops up on the horizon and people then follow that trend.

IMO have all bases covered and get a balanced portfolio, invest in areas that are out of favour in the present and hopefully then the future will look bright.