Critique My S&S ISA Selection

MrMalkin

jabbahut40 wrote: »

http://www.hl.co.uk/funds/master-portfolios

Thoughts?

As a general rule of thumb, if HL are promoting something then you should be very dubious, chances are they stand to make more out of it than you will.

However, aside from the active/tracker question mentioned above (which has already been done to death in other threads so I'll spare you here) those portfolios look quite reasonable in terms of their asset allocation and suitability for the risk profiles, with the exception of the long-term ones which appear to be 100% equities.

I personally use a similarly defined mix of asset classes (about 25% bonds and 75% equities from various markets) but I prefer to go with trackers. So, you could use the HL portfolios as templates, and just alter the funds within to meet your needs.

jamesd

jabbahut40 wrote: »

Holding Portfolio %
First State Asia Pacific Leaders Acc 18.8
JPM Natural Resources A Acc 18.7
Neptune European Opportunities Acc 10.4
Schroder US Mid Cap Acc 9.7
Gartmore China Opportunities Fund 9.2
Marlborough Special Situations Fund Acc 8.5
Aberdeen Emerging Markets Acc 7.6
M&G Global Basics Fund A Acc 5.1
Neptune Global Equity Fund Acc 5.1
Jupiter Financial Opportunities Fund 3.7
Invesco Perpetual High Income Acc 2.7
First State Greater China Growth Fund 0.4

Those look reasonable and I'm using many of them myself.

JPM Natural Resources has had a recent manager change, so don't assume that its excellent performance will continue. It may, but manager changes are a high risk time that often causes a drop in performance.

The manager of the Neptune European Opportunities fund currently takes a cautious view. Do you or are you buying it to try to exploit a possible European recovery in the short term? If the latter, this may currently be the wrong fund to be using. A European smaller companies fund might be a better choice for that.

I'd perhaps swap the percentages of Aberdeen Emerging Markets and First State Asia Pacific Leaders because the former is more flexible but this will increase the risk level a bit.

First State Asia Pacific Leaders is nice in down times but in up times the Fidelity SE Asia fund grows better. Some balance or swapping between the two can be interesting.

BLB53 wrote: »

Most of your returns will be going to the fund managers rather than you! I would seriously consider some cheaper investment options.

You've been misled by all the talk of charges and are forgetting that returns matter far more and hugely affect the cut that a fund manager ends up getting. The higher the fund returns, the less the manager cut ends up being. For the funds under discussion here your claim is foolish because the returns are so high. If we were discussing bond funds you'd have a better point though the fund manager still wouldn't get most of the money or anything close to it.

jabbahut40

MrMalkin wrote: »

I personally use a similarly defined mix of asset classes (about 25% bonds and 75% equities from various markets) but I prefer to go with trackers. So, you could use the HL portfolios as templates, and just alter the funds within to meet your needs.

gadgetmind wrote: »

Trackers, yes, FTSE trackers, not so much. Maybe you want to add some home bias, but you probably want some EM and small cap bias - I know I do!

Thanks Gadgetmind & MrMalkin. Given that all my funds are held in ISA wrappers with Fidelity (FundsNetwork) and that fact that they appear only to offer 5 different trackers (most of which are FTSE based) is buying a tracker (outside an ISA wrapper) with another online platform my most realitic option? If so what online platform would you recommend?

Jabba

Linton

jabbahut40 wrote: »

Thanks Gadgetmind. Given that all my funds are held in ISA wrappers with Fidelity (FundsNetwork) and that fact that they appear only to offer 5 different trackers (most of which are FTSE based) is buying a tracker (outside an ISA wrapper) with another online platform my most realitic option? If so what online platform would you recommend?

Jabba

Fidelity offer a lot more trackers. - try putting "index" into the search, trackers are very rarely called "trackers".

jabbahut40

Linton wrote: »

Fidelity offer a lot more trackers. - try putting "index" into the search, trackers are very rarely called "trackers".

Thanks Linton. Just tried this and found 61 more funds!

:T

Just had a quick look and notice that none of these trackers seem to be on the Fidelity Select List. Is is down to poorer performance of trackers or lower charges (meaning the Fidelity make less money). Don't want to reraise the whole charging debate. Just interested in peoples view on why?

Jabba

jamesd

The Fidelity Select List is intended to be funds that have a chance of outperforming. So it's effectively impossible for any trackers to be on that list.

jabbahut40

jamesd wrote: »

The Fidelity Select List is intended to be funds that have a chance of outperforming. So it's effectively impossible for any trackers to be on that list.

Thanks Jamesd. I thought this was the case...which leads me to another novice question.

Why do people keep talking and recommending trackers on this forum? Is this just down to fund mgt charges or do trackers offer something else to portfolio diversity not covered by OEICS?

Totton

jabbahut40 wrote: »

...
Out of interest how long had you held these funds before you switched? I have found that switching within less than 5 years of holding often leads to bad timings or decisions. Would be interested in your views and those of others?

Jabba

Hi Jabba,
Bit of a mixed bag really but most of the OEICS were held for between 3 & 6 years although on one occasion I held Jupiter Financial for probably 6 months before taking the large profit and buying back in at a later date. I'm not sure that there is a minimum timeframe to hold and avoid bad decisions. I am inclined to take a view and adjust accordingly. For example, I bought into Caledonia on a 23% discount, if that discount narrowed then I would be looking to re-consider it against the likes of Scottish Mortgage. I would also be inclined to sell any satellite holding that no longer became attractive, for example I hold Scottish Smaller Co's (SST) which is a great fund but if Asia suddenly became too dangerous then I'd consider selling no matter how long I had held.

Regards,
Mickey

Totton

jabbahut40 wrote: »

Thanks Jamesd. I thought this was the case...which leads me to another novice question.

Why do people keep talking and recommending trackers on this forum? Is this just down to fund mgt charges or do trackers offer something else to portfolio diversity not covered by OEICS?

Tracker or index funds are a great option if you want to build a core holding to underpin your portfolio. They are very good for the investor who doesn't like to take an active position or who just doesn't have the time to do so. It is said that an index fund is especially good for markets such as the US where it is rare for a fund manager to consistently beat the index, indeed most fund of funds choose the same US smaller co's fund for the reason there is not much alternative if you want an active manager, however that fund is not available to retail clients so you're out of luck :-)

If I didn't enjoy the research so much then I would most likely go for 65% index funds and 35% active, as it is I have a core portfolio of 65% actives (if you can call Personal Assets active!) and I mix that with 35% satellite actives which I am quite happy to sell within as short or long as time as the holding is relevant.

Why do I choose 65% as the core, well I've read quite a bit of stuff and get the idea that around that % is optimal. It might not be but it is something that I am comfortable with, a core holding is generally safe from interference by me unless there is a manager change or some other major change.

I do use index funds in the form of ETF's from time to time although they haven't returned as much as active funds for me. I am currently of the opinion that index funds are easily beaten if you have the nous or luck to choose decent managers of active funds. If you don't feel that is the case then stick to index funds but even then you still need to do some research to keep abreast of how much weighting you should be giving to regions and sectors.

HTH,
Mickey

MrMalkin

jabbahut40 wrote: »

Why do people keep talking and recommending trackers on this forum? Is this just down to fund mgt charges or do trackers offer something else to portfolio diversity not covered by OEICS?

It's mostly down to the charges. There is persuasive evidence that paying a fund manager's higher charges does not give you a good chance of beating an index, so you might as well go for a much cheaper tracker and concentrate on keeping your costs down. It's still hotly debated though here and elsewhere, but my position is that on a website dedicated to saving money the default suggestion should be to go for a portfolio of cheaper trackers.

Indexing works best with an asset allocation strategy, regular investments, and periodic rebalancing, but those concepts can equally be applied to managed funds if that's what you choose to put your money in.

One book you'll see recommended a lot is Smarter Investing by Tim Hale. He's an indexing advocate but there's plenty of stuff in there about building and managing portfolios that you can apply to just about any set of funds.