Please Review my Current Investment Strategy

Gareth1989

I haven't posted much here at MSE, but have a been a long time reader of the community.

I'm looking for some advice and suggestions on my current investment strategy, where I'm going wrong and what could be better. I expect a lot of suggestions as I am only invested in equities...

Some basic information about me:

• I have a cash reserve equivalent to 6 months salary
• No debit (I spend monthly on a credit card but pay it off in full by direct debit each month)
• 22 years old
• Same job for 2.5 years
• Basic rate tax payer

None of the below investments are held in an ISA - simply a standard share dealing account with Halifax.

Please see below to see my current investments: (hot linking not allowed for me as a new and dangerous user!)

i44.tinypic.com/2hweotc.jpg

As you can tell I like to go for big, solid blue chips, with decent dividends, 'moats' along with a good chance of dividend growth. Ultimately, I would like to be able to build up enough of a portfolio to live off the dividends and retire early. I currently add £250/month to the portfolio but also receive annual bonuses which I invest.

My questions are:

• Considering I'm 22, should I take on more risky equities and chase growth rather than income?
• Do I need to consider foreign shares? I'm happy to invest abroad (Swiss Healthcare, US consumer goods, canadian resources all appeal.
• Do I need to add fixed interest/bond element?
• Should I add in some Investment Trusts? Scottish Mortgage catches my eye particularly and will add some international exposure.

Thanks in advance for any feedback.
Gareth

calypso_rhapsody

Gareth - you may be getting no response because the link doesn't work? i think i typed it correctly but just got to the tinypic home page ...

Sounds as if you have a pretty low risk portfolio from what you say and could perhaps be a little more adventurous especially at your age - but be careful not to get swept along in any bubbles that form from time to time. It might be that if you want to look as some slightly more risky areas then investing in a collective - OEIC or UT - would offer you the best starting point as doing your own research into these areas may be difficult. Likewise foreign shares ... Europe MAY be a good contrarian sector choice at present. Though the large UK coporates earn over 50% (on average) overseas so even a UK only portfolio does give you some overseas exposure. The important thing is to try to diversify so that not all your money is exposed to the same risk.

But whatever you do get it inot tax shelters - get an ISA wrapper and transfer your exisiting holding up to hte limit for this tax year. Then more next tax year (if there is more) and the £250 pm should be into an ISA too.

Do you have a pension? If your employer offers one and will match your contributions then it is a 'no-brainer' that you should join and get free money from your employer as well as the tax rebate into the pension. You say you plan to retire early - at present pension funds can be accessed from age 55 so you will need ISA savings to cover you for any period before that age.

sabretoothtigger

Heres your picture.


My response is one of these two







I was just looking at Halfords as possibly a nice but more risky alternative to Tesco's. In the same way pizza hut or whoever does better when people cant afford restaurants any more?


Type it into HL and see what sector distribution you get, etc

I dont like GSK and AZN but otherwise seems fine. Arent you very close to a FTSE all share (etc.)tracker in your makeup, less is more may apply and unfortunately Im quite close to that realisation myself

You dont have the banks, buy more STAN if thats how you prefer it and of the lot BHP is one of the best stocks there . I see them as far less risky then BP though BP is also good value still I think

No to all your questions, foreign stocks are on the FTSE. Halifax doubled their fees recently so iii is cheaper for the moment

Ark_Welder

Gareth1989 wrote: »

Considering I'm 22, should I take on more risky equities and chase growth rather than income?

If you are re-investing dividends then income vs. growth should be less of an issue. Personally, I find companies that are distributing cash now a lot easier to understand than companies that might do so in the future. Saying that, a company's ability to grow its dividend is more important in the long term than a company that is paying a high dividend now.

Gareth1989 wrote: »

Do I need to consider foreign shares?

Probably best achieved through a fund. If you have eyes on Scottish mortgage than this could be a sensible route to follow: foreign shares can involve currency risk (just like some companies listed on the FTSE100) and witholding tax issues, whereas these will be catered for by a UK fund that invests internationally.

Gareth1989 wrote: »

Do I need to add fixed interest/bond element?

Given your age, I would be inclined to say 'no' because the total returns from equities ought to be higher than those from bonds over a period of 30 years or so - assuming this to be a reasonable timescale for your age. But we might experience the next 10 years with low/no growth from equities, perhaps even a general fall in markets - would you be comfortable with this? If you are saving monthly then falls ought to have less of an overall impact upon long-term returns (note that I do tend to err toward the darkside when it comes to views about the future: if nothing else, it's because the colour-scheme is a lot easier...).


On the whole, I am not big on holding individual shares - just my preference. But when I do I try to avoid holding companies that are in the same sector, or perhaps more specifically, where the underlying business is very similar. I'm thinking particularly of the three water utilities: whilst the next regulatory price review is not due until 2014, all of these companies will be affected. So I would take a view to which one I thought offered the best prospects and go with just that particular one. Ditto for AZN vs GSK, BP vs RDSB, IMT vs BATS, MRW vs TSCO vs SBRY, etc. Although they are in different sectors, I tend to compare SSE against CNA due to similarities in the business. Perhaps where they do differ - and could be a reason for holding both - is with their upstream energy sourcing.

Another concern would be your transaction charges: HSDL is £12 or thereabouts (assuming that this is your brokerage charge), so this is a big upfront cost for each purchase relative to the amount invested. Perhaps saving up 4 month's worth of contributions and then making a single purchase would help to reduce your costs.

With your amounts invested, plus the sector duplication, you might be better off initially by investing into a fund of one sort or another - either an index tracker or a manged fund. This could help to bring down the cost of your initial transactions - although there would be the ongoing annual charges deducted from the fund. Once a comfortable holding had been built up, increasing the holding of individual companies might then be considered.


Scottish Mortgage is managed by Baillie Gifford and their investment trust savings scheme does not charge for purchases (apart from the unavoidable stamp duty), and there are not additional annual charges for the scheme outside an ISA. So saving monthly directly with BG might be a cheaper option than doing so with HSDL - but not possible to do online at the moment, which could be a PITA unless you are happy to do so with a direct debit or by post.

atush

You seem to be in a good position for you age, and the advice above is good.

If you are a taxpayer though, you need to shelter some of this in a tax wrapper such as ISAs. And don't forget to start a pension as well. You could easily set this type of portfolio into a Sipp. but that will depend on your intent for the money short-medium term. Pensions aren't suitable for investments you may need to use before age 55.

gozomark

if they are your current investments, why are there values all exactly a multiple of £ 250 - do you mean this is your intended portfolio ?