Portfolio advice

Makkusu

Hi all,

I'm looking for some advice on setting up a portfolio or two. I'd be very grateful for any advice guidance on investment funds as they're relatively new to me.

I am planning for:

S&S ISA
£500 p/m deposit. Increasing to around £1,000 p/m eventually.
15-30 year term left untouched
High growth potential, I understand the risk.

I'm with Hargreaves Lansdown, and have been scouting some of their ready made portfolios. However, I see the Vanguard LifeStrategy funds mentioned a lot on these forums.

My concerns are, 7-8% growth per year from Vanguard funds isn't that attractive, especially when I see top performing funds @ 10%-20% over previous years.

SIPP
£25 p/m deposit. Increasing to around £200 p/m eventually.
30-35 year term.
Good growth potential again, but less management required the better, as I want to forget about this one.
I have a NEST pension also which my employer contributes to.

Would a Vanguard LifeStrategy be a better choice for the SIPP?

Any input is appreciated! Funds I've had an eye on in particular are:

Stewart Investors Asia Pacific Leaders (Class

Old Mutual UK Alpha (Class U1)

Standard Life Inv Global Smaller Companies (S)

Lindsell Train Global Equity (Class D)

Marlborough UK Micro-Cap Growth (Class P)

Legg Mason IF Japan Equity (Class X)

Man GLG Japan CoreAlpha

Vanguard LifeStrategy 80% Equity

Could anyone recommend balancing my own portfolio rather than opting for a Vanguard fund which seems a lot less hassle!

Thanks,
Makkusu

redmalc

You obviously have good faith in Japan and the far east

darkidoe

Makkusu wrote: »

My concerns are, 7-8% growth per year from Vanguard funds isn't that attractive, especially when I see top performing funds @ 10%-20% over previous years.

Interesting. Which top performing funds have you been looking at?

There's always the small print that says past performance is not indicative of future performance, so I will say take it with a pinch of salt.

Makkusu

redmalc wrote: »

You obviously have good faith in Japan and the far east

Despite the current chaos I think Asia will show exponential growth over the next 30 years. I've listed a few because I've been getting a bit carried away with researching them but I'd ensure it's a globally balanced portfolio.

darkidoe wrote: »

Interesting. Which top performing funds have you been looking at?

There's always the small print that says past performance is not indicative of future performance, so I will say take it with a pinch of salt.

There's a good few articles about the internet listing the 2015 top performers. i.e. http://www.iii.co.uk/investing/funds/top-10

I understand past performance is nothing to go by but it goes to show there are such funds out there!

bowlhead99

Makkusu wrote: »

£500 p/m deposit. Increasing to around £1,000 p/m eventually.
15-30 year term left untouched
High growth potential, I understand the risk.

I'm with Hargreaves Lansdown, and have been scouting some of their ready made portfolios. However, I see the Vanguard LifeStrategy funds mentioned a lot on these forums.

My concerns are, 7-8% growth per year from Vanguard funds isn't that attractive, especially when I see top performing funds @ 10%-20% over previous years.

Well, the lifestrategy funds have not been going five years yet, let alone ten, let alone a couple of full economic cycles, so the data on which you are comparing them is not representative of a long term return rate. However, as they closely mirror the main largecap indexes around the world you could look to those for an idea of long term performance.

The ready made portfolios from HL do not target 10-20℅ a year either. You can disregard the performance of "top performing funds" because statistically you will not select the top performing funds. Even if you pick a fund that's in the top ten within its sector last year and next year, it could be bottom ten in other economic circumstances. And the individual sectors will change relative positions - look where emerging markets funds or natural resources funds have sat over the last few years compared to the few before that.

The lifestrategy funds do contain a lot of different companies in a lot of different sectors in a lot of different parts of the world. However, over very long time periods, the largest companies in the world which are targeted by that fund do not necessarily produce the same return as smaller ones. So if you will truly hold for up to 30 years you might like to "break" the target asset allocation of such a fund by adding perhaps a smaller companies fund too. Or if you want to leap into the unknown for more risk and volatility, in search of long term gains, put 25 or 50 of the 500 into a dedicated emerging markets fund so that you have 13% or 18% in emerging markets instead of the 8% that Vanguard think most people would prefer.

SIPP
£25 p/m deposit. Increasing to around £200 p/m eventually.
30-35 year term.
Good growth potential again, but less management required the better, as I want to forget about this one.
I have a NEST pension also which my employer contributes to.

Would a Vanguard LifeStrategy be a better choice for the SIPP?

Could anyone recommend balancing my own portfolio rather than opting for a Vanguard fund which seems a lot less hassle!

With £25 a month you don't need a "self invested personal pension" as you don't have very much money to self invest and so will not be holding a whole cavalcade of different assets or doing any real trading. A generalist fund is fine and you could hold it in a simple stakeholder product. If you increase the contributions then perhaps in five years time when you have £10k in there, think about it again.

Generally if you are holding this fund for 35 years and contributing most of the contributions later rather than sooner, it could happily be in a relatively risky , 100% equities fund, and only change the mix when there's a bigger sum of money to worry about. I couldn't recommend trying to self manage it.

The ISA money is probably more suited to self management as there is more of it at £500 instead of £25 a month, and spending the time on "rebalancing"once a year would be a bit of a learning experience and not feel like a complete waste of your time. But do try to avoid the temptation to chase the recent top performing sectors and hold an unnecessarily complex set of risky funds just because you're "not risk averse"

TheTracker

Makkusu wrote: »

Despite the current chaos I think Asia will show exponential growth over the next 30 years. I've listed a few because I've been getting a bit carried away with researching them but I'd ensure it's a globally balanced portfolio.

Of course by investing in a specific sector or geography you aren't really betting that there will be growth in that area, rather you are betting that there will be more growth than everyone else expects there to be in that area. It's a significant distinction. I mean, I expect Amazon to show exponential growth in the next 10 years, but so does just about everyone else, and that is priced into the market value of Amazon. So it's pretty ballsy of you to declare you know more about how Asia will do in coming years than the collective global investing community. Well done.

Makkusu

@Bowlhead99 thanks for the time taken to respond. Some very helpful advice, I'll take time to digest and re-think.

TheTracker wrote: »

Of course by investing in a specific sector or geography you aren't really betting that there will be growth in that area, rather you are betting that there will be more growth than everyone else expects there to be in that area. It's a significant distinction. I mean, I expect Amazon to show exponential growth in the next 10 years, but so does just about everyone else, and that is priced into the market value of Amazon. So it's pretty ballsy of you to declare you know more about how Asia will do in coming years than the collective global investing community. Well done.

I don't declare to know more than the global investing community. It's just a humble opinion and interest based on my visits to Japan, other Asian countries, articles, opinions from associates... Or perhaps just a wild guess.

I don't think it's too ballsy to invest in Asia to be perfectly honest, as long as the portfolio is globally diverse then why not?