Thoughts for the next tax year

dilan911

Hi all

I am a bit of a noob when it comes to investing, i am 20 (21 in June) and i am looking to invest in at least 5 x £1000 funds in the next tax year (April 2013 - April 2014). I have a HL Vantage S&S ISA, and have three funds in it currently:

HL Multi-manager Income & Growth Trust Acc Units (£500)
Standard Life Inv Global Smaller Companies Acc Units (£1000)
Standard Life UK Smaller Companies Retail Acc Units (£1000)

I do not have a particular investment strategy but do not know anything about asia so have avoided asia related funds. I already have 2 'smaller companies' funds but do not mind having 3/4 more. Is this considered too risky?

these are the some of the funds that i intend on investing in next year:

M&G Optimal Income Class X (income)
Jupiter Strategic Bond (income)
JPM UK Smaller Companies (income)
AXA Framlington Blue Chip Equity Income Fund (income)
Troy Trojan (Class I) (income)
Investec UK Smaller companies (income)
HL Multi Manager Strategic Bond (income)

what are people thoughts on these funds? I made an excel spreadsheet with the start date, start price, current price and it shows the percentage change each year since the start which has helped see how the funds have been performing on average, as on the HL website, it shows the past 5 years performance and if there was a drop it puts me off, but if i know that it has consistently done well year on year since the start date it shows to me it still has potential. (not sure if this is the right way to think about it)

Also if i put some money into the vantage isa before the new tax year, when i get the new ISA allowance, am i allowed to use it to buy funds even though technically it is from the previous year (i know it sounds silly). Appreciate any help, thanks.

Regards

Dilan

Eponym

You already invest in one UK smaller companies fund but want to invest in 2 more?

CLAPTON

dilan911 wrote: »

Also if i put some money into the vantage isa before the new tax year, when i get the new ISA allowance, am i allowed to use it to buy funds even though technically it is from the previous year (i know it sounds silly). Appreciate any help, thanks.

Regards

Dilan

yes

you can add cash to your S&S ISA this tax year and then use the money to buy investments next tax year leaving you the full 2013-14 ISA allowance

dilan911

Eponym wrote: »

You already invest in one UK smaller companies fund but want to invest in 2 more?

It may seem silly but they have different holdings etc so its not like having two of the same, i was looking at it as having a greater coverage of the UK smaller companies. Also the investec smaller companies has averaged 77.04% since the start (according to my spreadsheet) and on HL the graph indicates almost 100% increase in the past five years, so it is still going strong. Though i do see what you mean and you do make a better argument lol. I will probably go for the other funds in the meantime and give the smaller companies a proper thought!

Thanks Clapton for the help.

marathonic

Don't look at a list of funds and randomly pick some.

Instead, make a list of sectors such as:

• UK
• US
• Europe (excl UK)
• Australia
• Far East
• Japan
• Emerging Markets

I'd consider the above to be in order of least risky to most risky (although you may feel different).

As well as the above geographic sectors, you'll have small, medium and large cap within each.

Then you have further divisions into:

• Health
• Infrastructure
• Biotech
• Technology
• etc.

Study up the sectors first and pick a percentage you'd like to invest in each. You'll probably start in 3-4 and expand as more money becomes available to invest.

When you've selected your percentages, make a list of the funds in each that you'd like to invest in and select the ones you'd like to invest in. There should be no real reason to invest in more than one fund in any particular sector.

A sample selection for some people may be:

UK Large Cap: 20%
UK Small Cap: 15%
Europe: 15%
US Large Cap: 15%
US Small Cap: 5%
Emerging Markets: 10%
Health: 10%
Technology: 10%

If my end goal was the above, I'd study up the ones where I'd like to be most heavily invested in first. With the above end goal in mind, it might be 2-3 years before you even invest in US Small Cap, Emerging Markets, Health or Technology.

marathonic

By the way, the above strategy lends itself well to periodic re-balancing.

As an example, if the US outperforms the market significantly, you could see the percentages change so that your 20% investment in the US makes up 25% of your portfolio overall.

In this situation, you can sell some of your US funds and buy some of the others to bring the percentages back to the original amount.

The advantage of this is that there's a good chance that you'll be buying low and selling high. Different sectors come into favour at different times.

By doing the above in 2000, you'd have sold a lot of your technology stocks near the peak and replaced them with funds that were out of favour at that time but, likely, came back into favour since.

Eponym

I'm very much a novice investor too, but I'd suggest 2 bond funds would be excessive at your age.

My own very small portfolio is M & G Global Basics (big companies providing everyday items and with a presence in emerging markets), Aberdeen Emerging Markets, Henderson European Special Situations (solid companies with high barriers to entry, chosen to try to profit from the European upswing) and Invesco Perpetual Global Smaller Companies (I believe smaller companies will do well as the economy recovers and I didn't want to buy multiple smaller companies funds for different regions as I only invest £50 pm. Plus this has some Japanese exposure which I don't have really in my other funds.)

I am 26 so not too much older than you.