First plunge with Investment trusts

takesyourchances

Ryan_Futuristics wrote: »

I think you're right to keep UK Eq Income on the high side - I'm doing the same, and it's being echoed as a robust choice in these market conditions by a fair few commentators - and I've moved extra into Woodford and my other funds mid-week (good buying opportunity)

I'm actually running simulations at the moment of something that might make a considerable difference to returns ... There are two ways to drip-feed ... A regular amount each month, or try and drip feed more when the market's down

And a simple way to do that second is to "buy the difference from the peak" ... So if the FTSE 100 peak is around 6900, then when it's down at 6300, you should buy £600 worth of shares, and when it's up at 6850, you should only top up by £50 ... Still doing it monthly (and you could use any multiplication to scale the amount you're putting in)

Buying Woodford, as opposed to a simple index, it obviously won't correlate quite the same ... So maybe you'd use Woodford's own peak value, or just use the index as a rough guide ... But in tests I've been doing, after a number of market cycles, returns have been much higher

There are potential problems with it (like what you'd do if markets kept rising and you weren't buying in enough, or a huge free fall, and how much you'd want to shovel in, or a long global recession) but it's an interesting concept

I will keep the UK as the core on the high side in this portfolio, I have left my drip feeds for November for Woodford, CTY and Murray IT, I will maybe increase Murray at a later stage and check the premium etc on it for any lumps and in December I might add the drip feed to Newton Asian Income and leave it at that and work away at those.

I understand the concept you are explaining about investing when the markets are low with your drip feeds and buying the difference from the peaks. If it was got right, I could see how that would work.

I am certainly much more limited in knowledge, on dips I have always added in a bit extra lump sums on top of my monthly payments each month, like during the recent dip adding to Woodford and then a few others in my ISA. It is always a good chance to be buying more units is the way I see it.

Also been reading on CAPE from your last post as well, so understand it a bit more.

Eastern Europe certainly is a long term hold I would feel, I am well traveled in Eastern Europe and with property there the cultural ethics in business really are very different and many countries with high levels of corruption. I think it will take a long time for a lot of these ethics to shake off post 1989, many tell me they think it will take the young up and coming generation to change things, but there is potential if a lot of this can be overcome.

I will maybe look at some value holdings for my SIPP maybe in the New Year.

What is your opinion on Asia? I like the fact that they manufacturer a lot within Asia and many every day items are used all over the world in our daily lives and homes from Asia. If the west is doing better and buying, a lot of Asian products will be bought and Asia's own people buying. I view Asia long term which was why I also got some small company focus there in my ISA.

Newton Asian Income looks to be a solid Asian Income fund which I think would suit my Income portfolio as a holding and the dividend culture also in Asian investments.

I have a close friend working as a sales manager in Asia covering a lor of countries and he has said about some great business out there being done. Some day I will have to visit

Thanks again Ryan.

Ryan_Futuristics

takesyourchances wrote: »

I will keep the UK as the core on the high side in this portfolio, I have left my drip feeds for November for Woodford, CTY and Murray IT, I will maybe increase Murray at a later stage and check the premium etc on it for any lumps and in December I might add the drip feed to Newton Asian Income and leave it at that and work away at those.

I understand the concept you are explaining about investing when the markets are low with your drip feeds and buying the difference from the peaks. If it was got right, I could see how that would work.

I am certainly much more limited in knowledge, on dips I have always added in a bit extra lump sums on top of my monthly payments each month, like during the recent dip adding to Woodford and then a few others in my ISA. It is always a good chance to be buying more units is the way I see it.

Also been reading on CAPE from your last post as well, so understand it a bit more.

Eastern Europe certainly is a long term hold I would feel, I am well traveled in Eastern Europe and with property there the cultural ethics in business really are very different and many countries with high levels of corruption. I think it will take a long time for a lot of these ethics to shake off post 1989, many tell me they think it will take the young up and coming generation to change things, but there is potential if a lot of this can be overcome.

I will maybe look at some value holdings for my SIPP maybe in the New Year.

What is your opinion on Asia? I like the fact that they manufacturer a lot within Asia and many every day items are used all over the world in our daily lives and homes from Asia. If the west is doing better and buying, a lot of Asian products will be bought and Asia's own people buying. I view Asia long term which was why I also got some small company focus there in my ISA.

Newton Asian Income looks to be a solid Asian Income fund which I think would suit my Income portfolio as a holding and the dividend culture also in Asian investments.

I have a close friend working as a sales manager in Asia covering a lor of countries and he has said about some great business out there being done. Some day I will have to visit

Thanks again Ryan.

Yeah, the value thing is interesting ... Traditionally, regions with CAPE as low as 6 have never given a negative 10-year return, and more often you're up around 12-15% annual return ... And Eastern Europe is the easiest low CAPE region to buy into at the moment

I think the counterintuitive idea is you're not really betting on a turnaround - just a normalisation ... I see the real mechanism behind CAPE being the flock mentality - where bad news disproportionately lowers valuation, so all you really need is for Russia to shake off a bit of bad press, and it could climb 30-40% without anything significant changing

And the same mechanism is working a little bit the other way for Asia ... People are willing to pay 19x earnings to buy into the Asia Pacific region, while are only willing to pay 6x earnings to buy into Russia ...

So I'd love to increase my Asia allocation (because it's the region I feel best about) but I'm probably holding off until valuations a bit better ... Presumably there'll be another rough patch, where sentiment is lower ... China's got a lot of slow growth news around it at the moment, but it's still not exactly cheap by CAPE (but it's looking cheap on Price/book and Market/GDP, and they may be better measures for the region)

Part of me anticipates a big market draw down at some point in the next year (I'm kind of hoping) - because that would be the opportunity to buy (which we haven't really had in 5 years)

The Asian Income fund has been a star in my portfolio - one of the few funds that's been totally resilient to this market correction - and it's certainly not expensive by valuation

I'd love to visit Tokyo, Singapore, Hong Kong ... I've got friends who spend a lot of time over there - I'm always put off by the flight though ... Doesn't seem healthy spending that long in a plane! I hear China have long-term plans for a high-speed rail link from London to Beijing

takesyourchances

Ryan_Futuristics wrote: »

Yeah, the value thing is interesting ... Traditionally, regions with CAPE as low as 6 have never given a negative 10-year return, and more often you're up around 12-15% annual return ... And Eastern Europe is the easiest low CAPE region to buy into at the moment

I think the counterintuitive idea is you're not really betting on a turnaround - just a normalisation ... I see the real mechanism behind CAPE being the flock mentality - where bad news disproportionately lowers valuation, so all you really need is for Russia to shake off a bit of bad press, and it could climb 30-40% without anything significant changing

And the same mechanism is working a little bit the other way for Asia ... People are willing to pay 19x earnings to buy into the Asia Pacific region, while are only willing to pay 6x earnings to buy into Russia ...

So I'd love to increase my Asia allocation (because it's the region I feel best about) but I'm probably holding off until valuations a bit better ... Presumably there'll be another rough patch, where sentiment is lower ... China's got a lot of slow growth news around it at the moment, but it's still not exactly cheap by CAPE (but it's looking cheap on Price/book and Market/GDP, and they may be better measures for the region)

Part of me anticipates a big market draw down at some point in the next year (I'm kind of hoping) - because that would be the opportunity to buy (which we haven't really had in 5 years)

The Asian Income fund has been a star in my portfolio - one of the few funds that's been totally resilient to this market correction - and it's certainly not expensive by valuation

I'd love to visit Tokyo, Singapore, Hong Kong ... I've got friends who spend a lot of time over there - I'm always put off by the flight though ... Doesn't seem healthy spending that long in a plane! I hear China have long-term plans for a high-speed rail link from London to Beijing

Yes very true on Russia, the bad press and volatile politics would play its part and things could rise there rapid and also fall rapid on moves Russia makes, I know that their currency was devalued an awful lot recently which dried up a lot of potential property buyers from Russia in Eastern Europe which was a big knock on effect and also tourism in Eastern Europe was hit badly with Ukraine from Russian tourists. What Russia does really has an effect all around this whole region.

Neptune Russia I have seen before but not majorly look at it.

Asia I like for long term,, there has been some volatile swings in my smaller company funds, Aberdeen Asian Smaller Companies and Aberdeen Japanese Smaller Companies and I have topped up each time they have dropped. Over the long term I hope to see some reasonable growth in these.

The CAPE valuations on Asia is not something I know to much on, that is interesting 18 times the earnings, that is a lot!

Newton Asian income I think I will add into next month into my Fund and Share account, that would be Woodford, CTY, Murray IT and Newton Asian Income, I think that would be more than enough for me to get on with in that income portfolio and see how it all goes and they would seem to be a good selection to go with.

Yes I would love to visit all those places as well, my friend is based in Bangkok but goes to those regions and cities as part of his job as Bangkok is the base. It is a long way away, it is quite mind blowing to think that a rail link could be made between China and London, I never heard of that and looked it up, very interesting! That would be a serious infrastructure development

Thanks!

takesyourchances

That is City of London IT and Murray International IT now added to my fund and share account to go along with CF Woodford's with my drip feed this month. I am pleased to get these underway now.

Next month's drip feed I will start an allocation to Newton Asian Income and will keep this income portfolio for the foreseeable future simple with these openings.

Woodford and City of London - split
Murray International IT
Newton Asian Income

I also set my fund and share account to reinvest dividends until I decide to take any dividend income.

Thanks!

Ryan_Futuristics

Good to hear! Hope they work out well

I know consensus around here tends more towards the low cost semi-passive funds (like Vanguard Lifestrategy), but at very least you can say those are all top-rated funds with outstanding track records (or managers)

So if we're wrong, a lot of other people (and just about every major investment resource) will be too! But as we're hearing a lot at the moment - it's hard to go 'wrong' with equity income (unless you're buying in the US, where dividend stocks have probably been pushed way too far into overvaluation)

It may still be that the best buying opportunities at the moment are Eastern Europe, Europe, Brazil and Russia ... There's at least good Brazil exposure in Murray, and a fair bit of Europe in Woodford

But also a great deal more uncertainly if you wanted to invest more directly in any of those regions ... I've got a third of my portfolio in value regions ... Russia demonstrates the dilemma (not just ethical) in trying to work out whether exceptionally cheap is an exceptional opportunity or a black hole to throw money into

C_Mababejive

Why do some ITs seems to trade on a continuous discount..eg EFM and is this an opportunity or a steer clear message?

Ryan_Futuristics

I'd call it a relative opportunity

The Far East is quite well covered with ITs, and EFM's fees aren't the cheapest, so it's going to struggle to trade at a premium, even if performance is good

There's some research that over very long periods, they do tend to hover back towards a 0% premium/discount - I suppose like with most companies, good runs can't be expected to go on indefinitely, bad runs become buying opportunities, and the market is good at eventually finding an asset's fair value ...

It certainly can be either - but then the premium/discount is only one relatively small marker of valuation

Buying Murray International at an 8% premium might still be cheaper than buying a trust with a higher US allocation at a discount, when those US shares are likely to be trading at a much higher overvaluation anyway

takesyourchances

Ryan_Futuristics wrote: »

Good to hear! Hope they work out well

I know consensus around here tends more towards the low cost semi-passive funds (like Vanguard Lifestrategy), but at very least you can say those are all top-rated funds with outstanding track records (or managers)

So if we're wrong, a lot of other people (and just about every major investment resource) will be too! But as we're hearing a lot at the moment - it's hard to go 'wrong' with equity income (unless you're buying in the US, where dividend stocks have probably been pushed way too far into overvaluation)

It may still be that the best buying opportunities at the moment are Eastern Europe, Europe, Brazil and Russia ... There's at least good Brazil exposure in Murray, and a fair bit of Europe in Woodford

But also a great deal more uncertainly if you wanted to invest more directly in any of those regions ... I've got a third of my portfolio in value regions ... Russia demonstrates the dilemma (not just ethical) in trying to work out whether exceptionally cheap is an exceptional opportunity or a black hole to throw money into

Thanks! Look forward to seeing how these workout in this portfolio I have the passive set up as well with Vanguard LS when I started, so be interesting to see how this goes for the income portfolio

Murray does cover Brazil and Europe in Woodfords. I will see maybe next year about some value holdings in my SIPP for the long term, a European fund might be an idea for me in my SIPP.

The Russian currency is being hit hard at the moment, I see that Russia is making more trade ties now with Asia (China) for gas with the sanctions against them from the west. As far as investing goes with Russia, maybe it will pay off in the long term with the value, it is a bit unpredictable how the political situation will go. I don't really feel I know enough to hold a specific Russian holding. Would you think if Russia is making trade deals etc with Asian countries, China for example with the gas this is good for Asian holdings in these areas?

With the income based holdings in this portfolio I have my drip feeds are set and I will work away with these holdings.

Thanks!

Ryan_Futuristics

Yeah, Russia is either the best buying opportunity in decades, or it's just a toilet to flush money down - the currency problems make them extra cheap to pick up, and in the past, when any emerging country's dividend has been higher than its CAPE ratio, it's gone on to produce 70% returns shortly afterwards

But the risks of increasing tensions and even Russia seizing foreign assets just stop short of it being a no-brainer (I'm investing through JP Morgan New Europe, with 45% exposure to Russia ... so presumably the ability to rotate out to some extent if the risk/return situation gets too much worse ... But I'm far from certain about it as an investment)

I read that China are looking to produce more of their own energy eventually, which could spell trouble for Brazil and Russia (as major suppliers) ... It's a funny one though, because investing in the cheap and untouchable companies and regions does tend to work out so much better in the long-run - but the better the opportunity, the worse the news and prospects need to be, so it's definitely (at most) something to do with a small, compartmentalised part of a portfolio

Asia's the region I feel best about - but it's just not particularly cheap (just the right side of fair value)

I'm looking for an opportunity to increase my allocation to Newton Asian Income (may just go back to drip feeding into it)

Daniel54

Ryan_Futuristics wrote: »

Asia's the region I feel best about - but it's just not particularly cheap (just the right side of fair value)
)

I don't use CAPE,but am firmly of the opinion that Asia ( not just China) is going to be the area for economic growth over the next decade or so.

It is also an area particularly ill suited to index tracking and I would always look to invest in a managed fund for informed exposure to the region