So what's part of a Portfolio?

darkvader

Hi,

Most threads and posters on here mention balancing overall percentages carefully in your 'portfolio'. My question is on what encompasses this portfolio. For example, this is what the missus and I have

1. Few savings accounts
2. A property on mortgage
3. Company pensions for each of us
4. S&S ISA for myself
5. Cash ISA for the missus
6. Opening the III Portfolio Builder in the new year
7. Also opening a SIPP for each of us
8. Emergency Cash roughly 3 months my salary
9. Physical Gold
10. Some equity investments in the market thanks to my parents but not in the FTSE

Needless to say, pensions, SIPPs and SS ISA will all be in funds and trackers and the portfolio again in companies so they all are market investments

Would you count all the above as part of my portfolio and when adjusting should I factor in all the above? Or should pension, SIPP and emergency cash be left out of this as they are either not in my control, mandatory or/and for emergencies/immediate needs like holidays, purchases etc - and hence not part of my investment strategy per say. But then, isn't pensions and SIPPs what contribute a huge amount to my final plan of 'financial freedom'??

Your insights will help me direct my efforts in a better manner. All a little confusing to me (especially on a Saturday evening sipping Scotch )

Thanks
DV

westy22

I follow the taxman's lead on this - if he would want a bite of something because he considers it part of my capital then its part of my portfolio. I include everything you list above as part of my portfolio as it would be included in any IHT calculation. I then split the % down into sectors such as Equity / Fixed Interest / Property / Cash etc. With the house it is only the equity element that is included, i.e. I deduct the outstanding mortgage from the likely value.

Linton

All of these can be considered parts of your portfolio.

You can then see your wealth at the portfolio level rather than a random collection of individual items. For example what % of your total wealth is in cash, equities, or bonds. Is that overall % appropriate?

darkvader

Linton wrote: »

For example what % of your total wealth is in cash, equities, or bonds. Is that overall % appropriate?

No, not at all really and that's why it worries me. Property alone makes up 90% of my portfolio now (that's including mortgage assuming I own 100% of the place) so its not really ideal to include everything. It will be many years before my cash/equity component comes anywhere close to the property value but thats true for everyone right? If someone in their 30s purchases property for say £150k, then property will automatically make a major portion of the portfolio.
I guess I need to only count that part of the portfolio that's mine and as and when the mortgage gets paid off, the property %age grows in lines with this

DV

westy22

If you are a homeowner then property will always be a major part of your assets. There are a hell of a lot of people out there for whom home equity is 100% of their assets!

JoeCrystal

Maybe one thing to bear in mind concerning portfolio is how easy it is to liquidate them. Selling Bonds, Funds and Shares are much easier than selling Property. Frankly, if I was home owner, I would leave it out.

Cheers

Joe

calypso_rhapsody

Personally i don't regard my own home as part of my portfolio as i need somewhere to live but i do regard investment properties as part of my portfolio and would regard everything you list as being so - except perhaps the company pension as you have no real control (whereas by contrast you do with a SIPP).

darkvader

Yes very true - property meant for living is best kept outside of the portfolio and so also company pensions that we dont have control on. I guess we do need to keep an eye on it because that pension will be a significant factor while planning for retirement so must not be neglected.

Thanks for the replies, I guess I should only count my savings/regular accounts, emergency funds, any investments in equities/funds, my cash and S&S ISAs, commodities like gold and finally, keeping an eye on company pension, our SIPPs. Now for the next step of working the percentages out and get the balance right!

DV

gadgetmind

darkvader wrote: »

Would you count all the above as part of my portfolio and when adjusting should I factor in all the above?

I never consider the value of our house as selling it would be a last resort. OK, we'll probably down-size and/or clear off somewhere warmer at some point, but we want this to be an option rather than a necessity.

Balancing between vehicles such as SIPPs and ISA is tricky due to restrictions on payments in/out, so you really need a good diverse asset mix within each of these pots.

As for cash, get it index linked where possible, and ideally on a combination of instant access and notice/term accounts as you won't need it all at once. NS&I certs are *brilliant* for this, which is why they sell out *very* quickly.

I don't count the cash we hold as an asset for portfolio balancing for the same reasons as above: we can't freely flow it in and out of SIPPs and ISAs, so these need to hold their own safer/uncorrelated assets.

jon3001

darkvader wrote: »

No, not at all really and that's why it worries me. Property alone makes up 90% of my portfolio now (that's including mortgage assuming I own 100% of the place) so its not really ideal to include everything. It will be many years before my cash/equity component comes anywhere close to the property value but thats true for everyone right? If someone in their 30s purchases property for say £150k, then property will automatically make a major portion of the portfolio.
I guess I need to only count that part of the portfolio that's mine and as and when the mortgage gets paid off, the property %age grows in lines with this

DV

I think you could say that the equity is part of their portfolio, not the value of the property (unless you owned all the equity of course). So the 30-yo who just bought a £150K place with 10% down would have £15K property equity. That may or may not be a large part of their portfolio.

That said, I would only include it in your portfolio if you planned to downsize or do equity release upon retirement. E.g. if you decided to move to a place that was 25% cheaper you could include 25% of the equity in your portfolio.

darkvader

Will do Jon3001,

Now that I think of it more, the property we have taken is not 'residential' in our sense of the word and we may sell it in a few years time. As it is on a loan, and we are saving up to buy a place for ourselves next year, I should and will include only that percentage that we own outright as it clearly is going to help us in our future plans

DV