My First Investment Portfolio - Your Thoughts

Bazofts_Revenge

Coming back to this thread I would recommend that the original poster runs a fantasy portfolio or Watch list and put some of their possible buys in there and see how their stock selection does whilst they are in the process of building up sufficient funds. Take a fixed lump sum and select one or two stocks or funds per month...

bowlhead99

Smithy101 wrote: »

Also, although you can't see it, unit trust's OEICs have the discount/premium problem too. When you buy units in them they need to go in to the stock market and buy shares which depending on when you invest will be on a premium or discount to the Book value which is equivalent to NAV.

OEICs (or UTs) can have a bid-offer spread and even if they don't, may in practice swing the daily buy/sell price around a little to accommodate the level of subscriptions and redemptions. However, the swing is usually <1%. New units are created or redeemed at a price which is at or around the net asset value of the existing units in the fund, calculated on the current published market price of the underlying shares on the stock market and the cash or other assets held by the fund.

The pricing with OEICs is not at a significant premium or discount to the published price of the underlying listed shares or other assets, as can happen with closed ended funds. In your Scottish Mortgage example, the price to buy or sell a share in the fund in the last five years has moved in a range between a 15% discount to the price of the underlying companies held, to a 5% premium to the price of the underlying companies held.

This adds complexity to the product because it is another 'market sentiment' / 'supply and demand' factor on top of the movements in the share prices of the companies they choose to hold. So if the investment trust holds a portfolio of shares whose prices in the stockmarket move up by 2% over a year, the price you get from selling your shares in the trust might actually be 5% less than you paid for it at the start of the year, giving you a loss, just because people dislike the manager and wish he had instead bought companies that went up in value 10% instead of 2%.

So, additional risk and complexity. Cloud_dog's comment about using gearing/leverage is also pertinent ; 14% of Scottish Mortgage's investment portfolio was financed with borrowed money, as per the last published monthly factsheet (May). This magnifies gains and losses achieved on the underlying portfolio.

I use a number of investment trusts, REITs and closed-ended investment companies within my own portfolios, but acknowledge their complexity and don't promote them at every opportunity unlike Smithy.

dunstonh

It is generally regarded that the equivalent IT to a UT is higher risk. Premium/discounts and gearing being the reasons already mentioned.

Here is a link to an article showing how the average trust beat the average fund in the same sector over the short and long term: http://whichinvestmenttrust.com/investment-trusts-continue-trounce-competition-celebrate-record-year/

Which is completely biased and a very poor comparison. It fails to point out the reasons why an investment universe with a greater number of higher risk funds outperforms those with a greater number of lower risk funds during a growth period which typically favours greater risk being taken.

ITs have their place but suggesting that the OP, who is clearly not knowledgeable on investments (not a criticism as we all need to start somewhere) should use a more experienced investor option is not a good idea.

The OP is making a small contribution and is already overcomplicating it and creating a strange asset mix. Throwing in ITs would just make it worse at this stage.

mark13

Good start, we all need to start somewhere and its good to see you are taking responsibility for your own money. Stick with the the Acc funds. Monitor your investments, I'm sure you'll build them up over time with your monthly top-ups.

cloud_dog

Smithy101 wrote: »

He doesn't have to worry about discounts/premiums and neither do most investors because they iron themselves out in the long run...

Unmmmm, wot bowlhead and dunstonh said

ConnorH

Thanks a ton for all of the responses so far!

I've taken your comments into consideration and conducted even more reading (even ordered my first investment book )..

The initial portfolio was UK-heavy, I realise. Therefore, I've now planned a new portfolio which I am wanting to run past your opinions before I set into motion.
I do envisage almost doubling my capital in the portfolio to the following funds, with the following share percentage:

Woodford Equity Income Acc - 30%
Vanguard LifeStrategy (80%) Acc – 25%
Fidelity Index World Fund Acc – 10%
UK Government Gilts – 15%
American Government Bonds – 10%
Global Property Acc – 10%


In my view, the Woodford fund will expose my portfolio to a breadth of UK companies. The Vanguard fund will diversify by investing in international equities (and 20% bonds). The World Index will follow global growth across all countries. Furthermore, a fund in global property will also help diversify the portfolio and add an edge to my exposure and potential growth. These four funds will encompass 75% of my portfolio, directly related to UK and international equities as well as global property.

On the other hand, I have bolstered the portfolio with UK gilts and American bonds to provide some sort of cushion for future dips in the market / recessions. This 25% weighting of bonds may restrict potential growth, but should supplement the equities in the long term.

I was considering Emerging Markets, for some time, in place of the global property fund - what do you think?

What are your views of this updated portfolio? Like I say, I haven't carried through with it just yet, but it is my plan to do so.

What would you change?

Thanks a lot!

dunstonh

Woodford Equity Income Acc - 30%
Vanguard LifeStrategy (80%) Acc – 25%
Fidelity Index World Fund Acc – 10%
UK Government Gilts – 15%
American Government Bonds – 10%
Global Property Acc – 10%

Why? What knowledge and experience do you have to build a portfolio with that asset allocation that makes you think you are better than the fund house?

Why are you wasting all that time and energy building a portfolio that will need rebalancing and reviewing when your amount is so low?

Furthermore, a fund in global property will also help diversify the portfolio

You do realise that most global property funds are not bricks and mortar but property share. And as such, you would be increasing your risk and not gaining the asset diversification that a bricks and mortar fund brings.

I was considering Emerging Markets, for some time, in place of the global property fund - what do you think?

Ignoring the property share issue above and assuming you mean property asset allocation (which is where the VLS is weak), property is a lower risk asset class. Emerging markets are higher risk. So, you are comparing very different asset classes and changing the risk profile of the investments.

What are your views of this updated portfolio?

Complete waste of time and energy. Creating more work and ending up with no defined structure.

What would you change?

With the amount you have, I would go with a single multi-asset fund.

ChopperST

Without sounding too harsh it still seems a bit all over the place IMHO.

Woodfood is the flavour of the month now but who's to say how he will perform for the next 5,10,15,20 years? You're betting 30% of your wealth he will beat the market consistently. I'd be tempted to dampen that down significantly.

You are overlapping your bond and gilt allocation with the Lifestrategy 80 and the same can be said of the Fidelity index world fund.

Why not just stick with the Lifestrategy and let Vanguard do the hard work for you and have a small holding of Woodford to scratch your itch and a property fund for diversification?

Maelwys

ConnorH wrote: »

What are your views of this updated portfolio? Like I say, I haven't carried through with it just yet, but it is my plan to do so.

What would you change?

Thanks a lot!

Have to echo previous comments - not sure what strategy you're going for here RE the spread other than just "diversification through picking a lot of different funds".

What Equity to Bond ratio are you aiming for? SmallCaps, MediumCaps or LargeCaps? Are you tracking a particular Geographical Region Spread? How are you allowing for currency differences? Hedging? Managed or Passive Funds? Income or Accumulator Units? What platform charges do you incur upon trading?

If this account is going to be used for real savings rather than for fun or as a learning experience, you could do much worse than just working out your risk profile and then sticking to the appropriate Vanguard LS Fund.

collingbone614

ConnorH wrote: »

What would you change?

Total portfolio:

ConnorH wrote: »

Vanguard LifeStrategy 80% Acc

Done.