How does this look for a balanced agressive portfolio?

peterg1965

I have not yet committed to these funds but how does this rate (look) as a medium-high risk 'balanced' portfolio looking for long term (10-15 yrs) growth:

Gartmore China Opportunities - Accumulation Units £1000 (high risk i assume?)
Schroder UK Mid 250 - Income Units £1000
New Star Select Opportunities - Accumulation Units £1000
Jupiter Income - Income Units £1000
Fidelity Global Special Situations - Accumulation Units £1000
Fidelity South East Asia - Accumulation Units £1000
Jupiter UK Growth - Income Units £1000

What is the difference between an accumulation units and income units?

EdInvestor

Hi peterg

Haven't got time to investigate all these funds,sorry.But if you're looking for something mainly medium risk but with a "punt" attached, then the JPM Natural Resources fund has performed the latter function very adequately for many years.

http://business.scotsman.com/finance.cfm?id=1137862007

I would suggest UK big cap stocks will do better than mid cap , as the latter are looking quite overpriced having had a very good run.

Income funds pay out the dividends to your account, usually quarterly. Accumulation funds reinvest the dividends.

"Growth" shares do not normally pay dividends, or only very small ones ( they claim that reinvesting their profits in the company will generate better returns).

"Income" shares pay out part of their returns to shareholders in the form of dividends ( which you can then use to buy more shares if you like, thus producing additional long term growth.)

History shows that the shares that pay the dividends give better returns over the long term.

peterg1965

Thanks Ed, I already have £4200 in JPM Natural Resources in my Scot Eq PPP. I transferred to that fund in Jan and it has done very well

Thanks for the explanation of accumulation and Income. Does a spread of UK/Euro/US/Spec Sits/Far East/Resources Funds constitute a reasonable spread of risk?

EdInvestor

What type of UK funds and what percentage splits in each type of fund do you have in mind? I would say that is quite a high risk spread at the moment.

jamesd

Gartmore China is speculative rather than high risk and the set as a whole appears to be between high and speculative.

Latin America? Europe and/or Emerging Europe? There's a fair amount of comment suggesting that Russia is one of the least over-valued emerging markets. You might take a look at European smaller companies funds as well - some grew by around 40% last year and might continue to do so.

Fidelity Global Special Situations is ranked 89th in six month performance in the global growth group. I assume that it's focus is value rather than growth investing so that may explain why and it could turn out to be a decent defensive global growth stock if it is value invested.

I might swap the UK mid size for European smaller companies or 50:50 smaller and large; change China to global emerging markets and change SE Asia to European emerging markets. Assuming that Asia-Pacific is more over-valued than Europe. This would take away a lot of your Asia-Pacific concentration of risk but still leave you in high growth areas. Also shifts some of your UK concentration to Europe so you could do better in bad UK years.

EdInvestor might take a look at Warren Buffet's Berkshire Hathaway. I think it's paid a dividend once, in one of the early years. Fair point if you stick to comparing UK equity income to UK all share though.

peterg1965

James VMT for your comments. I continue to reserach funds via CityWire (when its up!), Trustnet and H-L site. None give a definitive risk category for individual funds which I find a little frustrating, although I am aware that the likes of BRIC funds and SE Asia, emerging markets are considered to be more high risk, or speculative as you put it. I am really after a reasonble mix of risk and sectors to achieve good growth over 13-15 years, with an eye on my 55 birthday as achieving semi retirement, no mortgage, plenty of saving/investment option at that point. I am willing to accept medium-high risk at this stage with a tendency to reduce risk later on.

My current PPP has a spread of European (10%) UK equities (35% - Split equally between UK MID 250 and Invesco Perp Income) Specilaist (primarily JPM Nat Resources) 25% Emerg Mkts (10%) Pacific (no Japan) 20%
I am comfortable with that - is this about right do you think? I may just continue to invest in my PPP in those funds bolstering the European/UK funds, but I do fancy a punt on China, hence the Gartmore China Opp. I am also starting to invest in S&S ISAs so may well go for the China Mkt in that. I will take on board your comments about UK and Europe funds. Ed seems to think that the mid sized UK company funds may well run out of steam so the bigger companies are best, but how about smaller company funds?

jamesd

peterg1965, Here's a Watson Wyatt allocation for risk level 9:

sector/amount		%	4000	7000	11000	14000	18000
UK Fixed Interest	6	240	420	660	840	1080 
UK Equity		42	1680	2940	4620	5880	7560 
North American		13	520	910	1430	1820	2340 
European		13	520	910	1430	1820	2340 
Japanese		8	320	560	880	1120	1440 
Far East Ex Japan	5	200	350	550	700	900  
Emerging Market	Equity	5	200	350	550	700	900  
Global Specialist	8	320	560	880	1120	1440 

I work closer to one with a 35% UK cap that has UK fixed interest at 10%, UK Equity, US and Europe at 18%, Japan at 11, Far east excluding Japan and emerging market at 7% each and global specialist at 11%. I don't follow it exactly but I do track how far I deviate from it since the deviations I use increase the risk level. I'm not sufficiently keen on the UK long term prospects to want 48% of my money invested in the country.

Have a look at the trustnet sector descriptions to get some informed view of how the various sectors look. Trustnet's customise link gives you the option of reporting their riskgrade. ft.com also provides some risk measures. Look at the trustnet ratios at the upper right of the description of each fund and follow the question mark to learn what they mean.

peterg1965

James, once again thank you. What is Risk Level 9? Is that medium, high or low on the scale? Is that a recognised method of determining risk/sector spread? If so where is it explained fully? It does seem to overexpose UK markets like you say and I am a little surprised by the lack of exposure to the specialist/Far East market - but then again 25% of the total fund in higher risk areas does sound OK.

EdInvestor

peterg1965 wrote: »

My current PPP has a spread of European (10%) UK equities (35% - Split equally between UK MID 250 and Invesco Perp Income) Specilaist (primarily JPM Nat Resources) 25% Emerg Mkts (10%) Pacific (no Japan) 20%
I am comfortable with that - is this about right do you think?

Well it's high risk.

45% mainstream (UK and Euro,assuming a big cap fund)

55% high risk/spec (resources, emerging markets and Pacific)

More suitable allocation for a younger person IMHO.I'd have thought someone over 40 ought to have 60% in big/mid cap mainstream primarily UK, equities.

25% is a lot for JPM (but if you look across the entire investible assets in and outside the pension, it may not be.)

There would seem to be scope for a UK small companies fund - this is high risk, but being local, has no currency risk.

It would be quite useful if peterg provided a full list of all his various assets and investments.Doing it wrapper by wrapper without knowing what elese there is could easily cause a big error.

So how much (what percentage) in

cash or fixed interest (bonds)
property (residential)
property (commercial, funds)
equities (local and foreign)
commodities

?

dunstonh

Watson Wyatt risk grades are 1-10. 9 is very high risk.

jamesd

Risk level 9 is 9 out of 10 for fund based investments. It's not really explained anywhere in public that I know of. It's very high or speculative.

Within the sectors you can adjust risk levels. Smaller companies are higher risk than larger. Funds covering one country are higher risk than funds covering several or many.