Catch the next wave or diversify?

BarleyGB

Im risk adverse and have an extremely unbalanced portfolio and not syre what to do, diversify or maybe pile into the next opportunity

Current portfolio looks like this (and last 2 years approx. performance)

40% UK Smaller companies (5 funds) +45%
35% Bank stocks (4 stocks) + 15% plus dividends
10% Other stocks (5 stocks, 5 sectors) + 10% plus dividends
5% Biotech (1 fund) + 40%
5% Global Emerging Market (2 funds) + 8%
5% UK mid cap (2 funds) + 20%

Started investing in 2010, have been lucky and rode the some of the banking revival and got into UK smaller companies at the right time, also Axa Framlington Biotech.

In the last 9 months ive seen my portfolio start to stagnate, particularlygiven im heavy on banks and UK smaller companies which had served me well.

Im hoping to catch another wave of growth but not sure where to turn, alternatively I could just diversify further and look to consolidate my gains.

I guess the key area im looking at is halving my exposure to UK smaller companies (decided to hold the banking stock for the potential long term gains?).

Earlier this year I made the mistake (and a very small one) of a small amount into a Japan fund at its peak, sold after losing 15% and now see its recovered even stronger.

Would appreciate any thoughts or suggestions, this summer saw strengthening South American funds, more recently its being Asia, India, Japan again and now seeingstrength in China? Is UK due anotherrise, could this be the next wave?

Or maybe I should just diversify for a more even mix and not worry about the 3-6 month rises and falls, guess im looking for the next massive growth like Ienjoyed with UK smaller companies?

jimjames

BarleyGB wrote: »

Im risk adverse and have an extremely unbalances portfolioand keen to diversify but looking to pile into the next opportunity

Earlier this year I made the mistake (and a very small one) of a small amount intoa Japan fund at its peak, sold after losing 15% and now see its recovered evenstronger.

These two statements and your portfolio split really do not add up at all.

Selling out at the first drop is not a sensible strategy at all. You've been very lucky so far but your portfolio and your stated aims are at polar opposites so you need to either review your attitude to risk or amend your portfolio but the two are certainly not compatible at the moment.

edinburgher

Risk averse?

Your 'portfolio' appears to be a random grab bag of risky choices. 80% in smaller companies/banks/biotech would scare the crap out of me.

BarleyGB

My over-riding aim is to maximise growth, but manage risk. I know im not doing that at the moment.

Understand the contradiction in my suggestion about diversifying vs chasing growth, I guess im interested in the latter.

Think I mentioned the diversification as I suspect thats what a lot of people will suggest, i.e. rebalancing portfolio, 5% Woodford Fund, 5% USA etc?

Think its been more luck than judgement that ive been successful so far and appreciate I should hold steady at the first drop, ive held fast so far with the volatility in the remainder of my portfolio, would describe the Japan fund exploration as a punt that I wasnt really comfortable but experimented trying to catch the rising Japan wave.

BarleyGB

edinburgher wrote: »

Risk averse?

Your 'portfolio' appears to be a random grab bag of risky choices. 80% in smaller companies/banks/biotech would scare the crap out of me.

Not so much a random grab bag, more that I kept buying what was giving me growth.

My banking Investments started with Lloyds at 30p (Barclays havnt done so well of late), RBS at 190p, recently TSB

My intial tranche into UK smaller Co is 100% growth, 45% 2 year average is the compounding effect of further tranches over the last 12-18 months

Similarly ive been adding to Biotech watching it rise, shows as one of the highest performers on the 5 year history

edinburgher

All this talk of waves is making me seasick

Your approach sounds like momentum investing, which is what the majority of investors end up doing and is often doomed to failure.

It might be worth going back to the fundamentals of your portfolio and coming up with a more solid plan than 'whatever's worked for the last 5 years'.

I'm not criticising your choices per se (too risky for me), just suggesting that you choose them for more fundamental reasons than 'it's worked so far'.

pip895

If you do want to continue with momentum investing you could take a look at www.saltydoginvestor.com which uses a rather safer more balanced version!


Otherwise I would at least diversify as a matter of some urgency.

Thrugelmir

BarleyGB wrote: »

Im hoping to catch another wave of growth but not sure where to turn, alternatively I could just diversify further and look to consolidate my gains.

You've benefited from an era of unprecedented central bank support. Where sticking a pin into a list would have more than likely generated a return. As many assets prices have risen on the back of the helicopter drops of money rather underlying improvement in profitability. As banking stocks go. I would further a field than the ones you list.

SomeUser

If you're risk averse, then go for a diversified portfolio. This is what I would do for myself based on what you've said in this post, but I'm not saying this is the "right" or "only" way, it's to give you a perspective.

I'd start from scratch - design your ideal consolidated portfolio, ignoring current investments, which will be used for 80-90% of your investments as a minimum. Then work out if there are any ways you can integrate your existing portfolio into what you want and formulate a transition plan to move from your existing investments to new ones.


To try and catch a wave (although it's a risky business) then take a max 10-20% of your portfolio and use that to take a punt.

gadgetmind

BarleyGB wrote: »

Im risk adverse and have an extremely unbalanced portfolio and not syre what to do

Perhaps your best approach would be to align your portfolio with your attitude to risk? I'm an adventurous investor but your portfolio gives me the heebie jeebies.!

Without any bonds or property, and lots of trendy/risky/volatile holdings, you're in for the rollercoaster of your life, and perhaps fairly soon.

I think when the s hits the f you'll go to pieces, hold far too long, and then sell at the bottom for a huge loss. Maybe I'm wrong. Only you know.

Maybe buy a copy of Smarter Investing by Tim Hale, read the key messages, get a grasp of asset allocation, and then chill.

BarleyGB

Thanks for all the advice, im thinking the almost start from scratch option maybe the best, have a proper think about my aims and decide on a plan. I shall get the Tim Hale book as have often read recommendations.

Have already begun the diversification a little, im in the final stages of acquiring a BTL which in investment terms represents 50% in value terms (when compared to the portfolio above), therefore 33% of my overall invested position. I also have a 6 month cash buffer.

Concerning future punts (at 10-20%), anyone have a feeling which investment types, geographic zones offer most potential?