Ok then - How do I choose a S&S ISA!

carnet

Jupiter Emerging European - OK, but now too big for me
Neptune European Opps - OK, but fear it will soon get too big
JPMorgan Natural Resources - OK, but getting big
INVESCO PERPETUAL Latin American - OK, but prefer other LA offering
UBS UK Smaller Companies - Better UK small cap funds around
Scottish Widows Latin American - why more than one LA fund ?
Old Mutual UK Select Mid Cap Inc-AB fine manager but too big + MC's now ?
M & G Global Basics Income – GF fine manager but enormous fund size
M & G Global Basics Growth - why both classes (see above) ?
Threadneedle Latin America - another LA fund ?
Marlborough H H Special Situations – another UK SC fund ?
JPMorgan New Europe Fund-OK,Managed out of Moscow by a Russian national
New Star Global Financials- OK, if you think financials prospects are sound !?
New Star Global Financials - ?
Old Mutual UK Select Mid Cap Acc - why both classes (see above) ?
Close Finsbury Far East - OK but better FE funds around
Aberdeen Emerging Markets - better GEM funds around


The only other points I would make ;

No US exposure (which I actually agree with ATM) and no Japan exposure (which might be a wrong move given the present conditions). No UK Eq Inc (which historically outperform Growth funds) ?

Also, bear in mind that a fund is only as good as its manager – and the average manager’s tenure is only about 3.5 years. When looking at past performance you could well be looking at a previous (or a number of previous) managers efforts. The present/future manager(s) could be a lot worse or better. To draw meaningful conclusions from performance statistics you really have to overlay it with a fairly sound knowledge of who was actually responsible for the performance at any given time.

Of course, just my personal opinion, as always.

Judwin

OK Since stphnstevey has been brave enough to explain his strategry, I'll explain mine. I already have a £4000 mini SS Isa from the previous tax year. This is split equally between the following two funds.

£2000 in Invesco Perpetual Monthly Income Plus Accumulation
£2000 in Schroder European Alpha Plus Fund

The Monthly Income Plus is low risk, and the Schroder is medium.

For this tax year I wanted to put all £7000 into a Maxi SS Isa, in medium and high risk funds, with the aim to achieve at least 12% growth (double the Cash ISA rate), ideally more like 20%.

1) Primary concern was sector spread. I went to trustnet and wrote down the 10 best performing sectors over the past 1 and 3 years.

2) I then inspected each sectors constituents in turn, and picked one or two funds from those in the top 4 or 5 in each sector.

3) I compared the funds I picked in this way to see if they appeares in the H-L Wealth 150 list.

4) I noted how long each fund manager had been at his/her post. Any that were less than 3 years were discarded.

5) I had now whittled my choice down to 10 funds. I was opening an H-L Maxi Isa with £7000 in april, so had to whittle these 10 down to just 7, at £1000 a piece. I watched all the funds between January and April, and finally settled on (in increasing Trustnet risk rating)

£1000 in Invesco Perpetual High Income Income Units
£1000 in Standard Life UK Smaller Companies Retail Acc Units
£1000 in Henderson European Smaller Companies Acc Units
£1000 in Neptune European Opportunities Fund A Acc
£1000 in First State Greater China Growth Accumulation units
£1000 in Invesco Perpetual Latin American Accumulation Units
£1000 in Neptune Russia & Greater Russia Fund A

The first 4 are medium risk, the last 3 are high risk. Im a bit heavy in Europe when taken together with the other 2 funds I already hold, but I'm fairly euro-optomistic. Nothing in USA or Japan which I'm OK with. Nothing in India either, which will need addressing next year. So far I'm up 4.2% in a month. Russia is the only fund down (-3.5%), but the Latin American is up 12.6% in a month. The rest are up between 3% and 6%. Yes I know a month is no where near long enough to get excited about performance.

I'm intending to rebalance everything yearly - i.e. next April - although the surge in the Latin american fund has got me wondering if I should rebalance it sooner to crystalise some of the profit into a lower risk or different sector fund incase it goes pear shaped.

I'm intending to fo the same thing next year and add another £7200 in April, using the same sector cherry picking scheme to add another 4 or 5 different funds in sectors I don't currently hold - Global Growth, Global Emerging, etc - and use the remainder to rebalance/strengthen.

If any fund I hold after a year hasn't outperformed it's sector average, then it's going to get sold, and another one bought. I want all my funds to be 1st quartile for the period I hold them, and preferably in the top 4 or 5 of the sector (don't we all :-) ).

Anyway, that was my selection scheme. I'm fully expecting to get shot to pieces now. Tin hat on :-)

Cheers,
Judwin

dunstonh

The first 4 are medium risk, the last 3 are high risk.

The first one is medium. The next three are high and the final three are speculative.

3) I compared the funds I picked in this way to see if they appeares in the H-L Wealth 150 list.

That has a poor reputation and dont eliminate funds just because they dont appear on that.

StevieJ

Judwin wrote: »

4) I noted how long each fund manager had been at his/her post. Any that were less than 3 years were discarded.

If Carnets observation is correct 'and the average managers tenure is three and a half years' you could soon be looking at a few new managers.

Judwin

dunstonh wrote: »

The first one is medium. The next three are high and the final three are speculative.

Ok. I was going on a low-medium-high 3 point scale for the sake of clarity. Sounds like you are suggesting using a low - medium - high - sepeculative 4 point scale?

I actually used the Trustnet risk ratings in a spreadsheet when chosing. Two in the 40's, 2 in the 50's, and one each in the 70's, 80's and 90's, giving an average of about 63. Next year I'll probably aim lower for my new choces, bringing the combined average down nearer 55-60.

dunstonh wrote: »

That has a poor reputation and dont eliminate funds just because they dont appear on that.

Yes - 3 of the 7 aren't in the Wealth 150. It wasn't a yes/no factor, just something added to the decision making mix. I was more interested in avoiding things that had recently been evicted from the 150.

Plus points were scored if in a top 10 sector, top quartile in it's sector, and in the Wealth 150.

StevieJ wrote: »

If Carnets observation is correct 'and the average managers tenure is three and a half years' you could soon be looking at a few new managers.

True - and a couple of the funds haven't been running 3 years yet either. A new/change of manager in the comming year would probably provoke me into immediate action.

Cheers,
Judwin

dunstonh

Ok. I was going on a low-medium-high 3 point scale for the sake of clarity. Sounds like you are suggesting using a low - medium - high - sepeculative 4 point scale?

I was using a general 5 scale. However, 5 let alone 3 is not enough. I used to work on a 1-5 scale for general risk but fitting 10 risk categories for funds into that but I am in the process of moving to a wider scale of 1 to 6 but with three sub levels within each category. i.e. risk 4 would now be split 4.1, 4.2, 4.3. This allows fine tuning between different funds in the same sector.

1.0 = cash. 6.1 is where the riskiest unit trust funds stop. (2= low, 3 = low/medium, 4 = medium, 5 = medium/high and 6 = high)

4.3 - Invesco Perpetual High Income Income Units
5.1 - Standard Life UK Smaller Companies Retail Acc Units
5.1 - Henderson European Smaller Companies Acc Units
5.2 - Neptune European Opportunities Fund A Acc
6.1 - First State Greater China Growth Accumulation units
6.1 - Invesco Perpetual Latin American Accumulation Units
6.1 - Neptune Russia & Greater Russia Fund A

Remember that no risk system is perfect and often information is subject to opinion but that should give you a general idea.

Differences can actually see funds in the same sector in totally different risk levels. i.e.: First State Global Emerging Market Leaders Fund is rated as 5.2 but Jupiter Emerging European Opportunities Fund is 6.1. Both in the same sector but with different approaches and different levels of volatility expected.

pjala

Why is Latin America such high risk?

You could say the economic political situation in LA is much more volatile than in North America or Europe, but I would dispute at least some of the risk on that. I would not say it is not riskier, as the developing economy is obviously less capitalised that in Europe or North America, but we may be overestimating the risk.

Now the risk is much less than it was 5 years ago, the LA countries are actually going through a period of stabilisation under left wing governments. It certainly appears to be the case that stability is enhanced under left wing governments more than under right wing governments - which LA previously had.

But the point is, that Latin America is still tarnished with the brush of instability from those times, when guerillas and death squads roamed the countryside. Emerald energy is an example of a mining company that suffered , in fact it was a penny share as a result. There were obvious deposits in the ground but the political situation made it almost impossible to make any money out of them. Now the company is worth around 1.60 per share, maybe 100 times more than it was at its worst.

So I guess what I am saying is that I believe we in the west sometimes underestimate the capabilities of other countries to pull themselves together and make something out of the raw materials that countries possess. Hence we sell those countries short. I think LA is an example of this, hence underestimated and possibly we exaggerate the instability.

Just my thoughts.

jamesd

pjala, consider the comparative records of left-wing and right-wing latin American governments when it comes to nationalising the property of investors in their countries. That's a significant political risk to capital even if the government itself is stable.

StevieJ

pjala wrote: »

Why is Latin America such high risk?

You could say the economic political situation in LA is much more volatile than in North America or Europe, but I would dispute at least some of the risk on that. I would not say it is not riskier, as the developing economy is obviously less capitalised that in Europe or North America, but we may be overestimating the risk.

Now the risk is much less than it was 5 years ago, the LA countries are actually going through a period of stabilisation under left wing governments. It certainly appears to be the case that stability is enhanced under left wing governments more than under right wing governments - which LA previously had.

But the point is, that Latin America is still tarnished with the brush of instability from those times, when guerillas and death squads roamed the countryside. Emerald energy is an example of a mining company that suffered , in fact it was a penny share as a result. There were obvious deposits in the ground but the political situation made it almost impossible to make any money out of them. Now the company is worth around 1.60 per share, maybe 100 times more than it was at its worst.

So I guess what I am saying is that I believe we in the west sometimes underestimate the capabilities of other countries to pull themselves together and make something out of the raw materials that countries possess. Hence we sell those countries short. I think LA is an example of this, hence underestimated and possibly we exaggerate the instability.

Just my thoughts.

Ask EXXON about Venezuala.

StevieJ

dunstonh wrote: »

I was using a general 5 scale. However, 5 let alone 3 is not enough. I used to work on a 1-5 scale for general risk but fitting 10 risk categories for funds into that but I am in the process of moving to a wider scale of 1 to 6 but with three sub levels within each category. i.e. risk 4 would now be split 4.1, 4.2, 4.3. This allows fine tuning between different funds in the same sector.

1.0 = cash. 6.1 is where the riskiest unit trust funds stop. (2= low, 3 = low/medium, 4 = medium, 5 = medium/high and 6 = high)

4.3 - Invesco Perpetual High Income Income Units
5.1 - Standard Life UK Smaller Companies Retail Acc Units
5.1 - Henderson European Smaller Companies Acc Units
5.2 - Neptune European Opportunities Fund A Acc
6.1 - First State Greater China Growth Accumulation units
6.1 - Invesco Perpetual Latin American Accumulation Units
6.1 - Neptune Russia & Greater Russia Fund A

Remember that no risk system is perfect and often information is subject to opinion but that should give you a general idea.

Differences can actually see funds in the same sector in totally different risk levels. i.e.: First State Global Emerging Market Leaders Fund is rated as 5.2 but Jupiter Emerging European Opportunities Fund is 6.1. Both in the same sector but with different approaches and different levels of volatility expected.

With regard to risk, if you only had a choice of the funds above, would it be less risky to use just the Invescu Perp fund 4.3 or to spread the funds between them all (ignoring cash for now) i.e. does diversifying your portfolio reduce risk even if you are diversifying inti riskier areas?