Portfolio sanity check, please

sabretoothtigger

6% Japan is not massively high. How many Japanese products do you use, I find people allocate far too much to USA considering its not a great producer currently
Japan has a positive trade balance with china I believe, if China grows I think Japan is much cheaper investment as a supplier to that economy


http://www.zerohedge.com/article/chinas-trade-balance-country-and-why-fx-action-less-deal-media-will-have-you-believe

gadgetmind

sabretoothtigger wrote: »

6% Japan is not massively high. How many Japanese products do you use, I find people allocate far too much to USA considering its not a great producer

I'm going to reduce Japan a little. I'm now putting together another portfolio using Vanguard Trackers, and have been reading their justification for the split in their LifeStrategy funds, and also some other work regards what enhancement value, growth, yield, and cap size have brought in the past. Watch this space!

And yes, even Vanguard go for a Global fund and then add gobs of UK, more US, more Europe and more Japan. I can see UK as it reduces currency risk, and lots of the UK mega caps have high global exposure, but why increase Europe and Japan?

gadgetmind

OK, here are the Vanguard trackers that both their LifeStrategy funds and (probably!) myself will be using.

UK Equity Index
US Equity
Developed World ex UK (Europe 23%, US 57%, Japan 9%, Pacific 7%, Other 4%)
Japan
Developed Europe ex UK
Pacific ex Japan (Australian 65%, HK 21%, Singapore 13%, NZ 1%)
Emerging Markets (China 17.5%. Korea 14.8%, Brazil 14.6%, Taiwan 10.9% etc)
UK Government Bond
UK Inflation Linked Gilt
UK Investment Grade Bond

The Vanguard 80% equity fund goes for -
UK Equity Index - 28%
US Equity - 5%
Developed Europe ex UK - 8%
Developed World ex UK - 34%
Japan - 1%
Pacific ex Japan - 1%
Emerging Markets - 8%
UK Government Bond - 10%
UK Inflation Linked Gilt - 4%
UK Investment Grade Bond - 6%

Their 60 equity fund boost bonds (dur!) and removes the boosts to US, Japan, and Pacific, and trims EM to 6%

I'm considering
UK Equity Index - 20%
HSBC FTSE 250 - 8%
US Equity - 0%
Developed Europe ex UK - 0%
Developed World ex UK - 35%
Japan - 0%
Pacific ex Japan - 5%
Emerging Markets - 12%
UK Government Bond - 10%
UK Inflation Linked Gilt - 4%
UK Investment Grade Bond - 6%

So, similar to LifeStrategy 80% equity, but with boosts to Pacific and EM rather than US, Europe and Japan (plenty enough exposure via Global). I've also used some FTSE 250 as these mid/small caps have a pleasantly positive Sharpe ratio. I did look at Global Small Cap, but it did really seem to be punching its weight.

I could trim some of this core of trackers to add some spicy funds, but there is abundant evidence that these funds stand more chance of under-performing and dying than actually adding anything.

The lack of property is because it tends to either act like equities (because of underlying REITs) or do the old fire-sale as money bails out. The lack of commodities is because I have plenty of commodity exposure via everything else.

Bestinvest paperwork completed to put in most of my unused carry forward, and to also move my protected rights from Skandia and my SIPP from SIPPCentre/Selestia.

My (soon for the scrapheap!) IFA has *still* not responded to the FOUR emails I have sent regards exit charges from the tangle of SkanSippEstia. I'm not impressed; he's getting over a grand in trail a year and can't even answer a sodding email.

atush

sabretoothtigger wrote: »

6% Japan is not massively high. How many Japanese products do you use, I find people allocate far too much to USA considering its not a great producer currently
Japan has a positive trade balance with china I believe, if China grows I think Japan is much cheaper investment as a supplier to that economy


http://www.zerohedge.com/article/chinas-trade-balance-country-and-why-fx-action-less-deal-media-will-have-you-believe

How many Japanese products do I use? 50 or 75% less than 10-20 years ago maybe?

I owned a Honda, now a Hyundai. I owned other japanese things but now own korean, and even US/european items.

sabretoothtigger

UK Government Bond - 10%

10% makes me wince
UK borrows at 2% rates for 10 years, that isnt good value and I wouldnt want to own something I know cant pay me back even my original money long term
Yes you would be better off switching that to Japanese equity though I cant blame anyone for completely avoiding the Nikkei on the grounds of poor transparency/corruption. Japan is supposedly the cheapest index in the world, cheaper then brazil china or whatever market though they have inflation and Japan could easily see both inflation and so surprising growth I think


USA doesnt deserve 0% either as it has many great companies and resources but the difficulty would be to find those that will do increasingly well even while the country as the whole may go backwards as it must in order to stop a consumer based economy.
BHP is classed australian but is in USA natural gas, thats the kind of company you want to have regardless of its country label they are international and some of these type will be labelled USA but will do well in the world.

Pacific ex Japan - 5%

BHP is a large part of a pacific tracker. 5% is too low, it should be in the core of a portfolio

IBM Intel are a couple that could still do well though Im waiting for them to crash into great doubts, basically they are international not reliant on USA anymore then the rest of the world is

JamesU

Post a little misleading, developed "Europe" line 4 post#34 (typo) is surely developed World ex UK, so about 17% US based on a possible 35% dev World ex UK index weighting.

JamesU

Ark_Welder

gadgetmind wrote: »

I could trim some of this core of trackers to add some spicy funds, but there is abundant evidence that these funds stand more chance of under-performing and dying than actually adding anything.

The lack of property is because it tends to either act like equities (because of underlying REITs) or do the old fire-sale as money bails out. The lack of commodities is because I have plenty of commodity exposure via everything else.

Spicy might be private equity, property and infrastructure, so it doesn't necessarily have to mean a convential fund, e.g. smaller companies, etc. Perhaps a consideration for future contributions rather than an initial allocation.

But if you do still have an interest in property/REITs then would it fit into your HYP? Choices then would be whether to use the tracker/ETF, or an IT or REIT such as Land Securities, etc. There are also a few that offer exposure to mainland european industrial. Ditto the HYP with regards to HICL too.

gadgetmind

JamesU wrote: »

Post a little misleading, developed "Europe" line 4 post#34 (typo) is surely developed World ex UK, so about 17% US based on a possible 35% dev World ex UK index weighting.

Yup, cut and paste error when bringing stuff across from Excel, now fixed. Thanks.

gadgetmind

Ark_Welder wrote: »

Perhaps a consideration for future contributions rather than an initial allocation.

Ongoing contribs will be into my group pension, and I'm still exploring pulling a subset of this out. Sadly, I'll be at bleeding edge of what HMG currently allow, so no sneaky top-ups with any spare readies will be possible.

But if you do still have an interest in property/REITs then would it fit into your HYP? Choices then would be whether to use the tracker/ETF, or an IT or REIT such as Land Securities, etc. There are also a few that offer exposure to mainland european industrial. Ditto the HYP with regards to HICL too.

I have considered it, but my wife holds our HYP unwrapped and REITs are tricky beasts when held thus. However, I will be moving ISAs away from Skandia (and maybe HL too!) so thanks for the input.

gadgetmind

sabretoothtigger wrote: »

BHP is a large part of a pacific tracker. 5% is too low, it should be in the core of a portfolio

I guess it depends on whether you consider it wise to over-weight Pacific/BLT given that I'm holding a core of UK/Global equities, and have a Pacific boost, and hold some BLT directly in my HYP?

I could add a "Diggers and general" fund too, if you like.

USA doesnt deserve 0% either

That 0% is deceptive. I'll be holding a weighted chunk of the US via global, but by setting US to 0% I'm not over-weighting compared to other territories.