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Porfolio check

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How does this look for a long term SIPP portfolio? I've had this for a year now and it's about 2.41% up over that time which doesn't seem a great return. Every month I pay in £450 net, which is split by the percentage in column three. This keeps the allocations fairly steady through the year.
Fund Name										Percentage	Ideal Percentage
Baring Europe Select								4.46%		4.00%
Blackrock Corporate Bond Tracker						5.17%		5.00%
Cash											2.36%		0.00%
CF Woodford income								10.43%		12.00%
Fidelity Index Emerging Markets						9.79%		10.00%
Legal & General All Stocks Index-Linked Gilt Index		5.14%		5.00%
Legal & General European Index					9.71%		10.00%
Legal & General Global Inflation Lnk Bond Indx		5.11%		5.00%
Legal & General Japan Index						4.93%		5.00%
Legal & General UK Index							4.78%		5.00%
Legal & General UK Property Trust PAIF				4.89%		5.00%
Legal & General UK Smaller Companies			5.00%		5.00%
Legal & General US Index							24.07%		25.00%
Threadneedle Smaller Companies					4.16%		4.00%

Any advice about maximising returns or about my allocation?

Thanks!

Comments

  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    Zippeh wrote: »
    How does this look for a long term SIPP portfolio? I've had this for a year now and it's about 2.41% up over that time which doesn't seem a great return. Every month I pay in £450 net

    Why doesn't it seem a great return? Is it terrible, bad, so-so, quite good, or very-good-but-not-great? I guess you need to define for yourself what you mean by 'great' and how many years out of every ten you should expect to get it. Probably no more than one or two, given markets can be up, down or sideways in a given year.

    Once you've decided what would qualify as a great return, you need to consider the performances of the major global indexes (most of which you have in your portfolio) over the last 12 months; are you being realistic if you think a typical high-equities pension fund should have delivered that great return between May2015 and May 2016?

    You don't mention how much you started off with. If it was £0 a year ago, then adding £450pm to get to a current value of £5-£6k now means that your money was deployed on average for only about half the year. So returning 2.4% on the total contributions in a little over half a year is getting on for 4.5%+ annualised. Even if your 2.4% is a full year's return on a large sum, a typical equities-heavy, mixed asset portfolio would not have delivered very much if bought exactly one year ago today. For example, the Vanguard Lifestrategy 80% fund, which is 80% equities to your 85%, has delivered 0% from 17//5/15-17/5/16.

    If most of your money is from the drip-feeding, your outperformance against the flat return of the broad markets would be explained mostly by the fact that in Sept/Oct and Jan/Feb your monthly contributions were buying in at relative cheap prices while markets were at low points. So as markets have returned to their start point of where they were late May 2015, you have picked up some gains.

    Overall though it was not exactly a bumper year for equities so you shouldn't be expecting massive returns. The markets can move positively, negatively, or indifferently, in a given year or two (or three or five or ten).
    Any advice about maximising returns or about my allocation?
    We don't know your goals. Maximising returns usually means maximising the risks taken and betting on particular sectors hoping that they will capture the themes that drive the best returns. Which is difficult to pull off and having a bright idea doesn't mean it is the right idea. So most people diversify and invest broadly, focussing their money mostly into equities if they want high long term returns at the expense of short term volatility.

    Most of your investing is via indexes. So, most of your returns should by definition be middle-of-the-road. You can't "maximise" the returns from (e.g.) your holdings in Europe ex-UK by investing a little bit of money in every company based on its size; this will get you the average (market capital weighted) return. To get the maximum return you have to put all your money in the company that performs the best. You can pay management fees to try to find that, or you can aim to minimise management fees and accept what the market gives you by default.

    Thanks for the terribly formatted table. As your target allocations are all convenient round numbers I assume you haven't got an actuary or IFA to construct something targeted at a particular level of risk or volatility - it's just you having a go yourself at the allocations you want, trying to get a bit of everything with the largest allocation to US because it's big and smaller amounts in the UK because it's smaller?

    I didn't know Threadneedle did a general global small companies fund although they do a Europe one and an American one; perhaps the one you have is a second American fund rather than a Europe one (just a guess, as you already have two Europe ones)?

    If so, what's wrong with smaller European companies or smaller Japanese companies? For that matter, if Japan is the second largest stock market in the world, perhaps you could justify >5%? And if you are going for global coverage it's pretty common to include the rest of developed Asia-Pacific ex-Japan (e.g. Hong Kong, Singapore, Australia) even though it's the smallest region in a developed world index. And I guess you went for the US index instead of a broader North American index on cost grounds (i.e. Canada is only 5% of the size of the US and there are more US-focussed passive funds to choose from)?

    One reason for not including every area one can possibly imagine, is probably that you don't want to increase the number of funds to 15+ because it's a hassle to manage and impractical when putting in only £450 a month net (as it is, a 5% slice is under £30pm gross of the tax reclaim inside the pension). But extending that logic, if you only have a £5k pension adding £5k a year, you could stick it all in a simple multi-asset fund or two - rather than building something complicated yourself from scratch.
  • Zippeh
    Zippeh Posts: 108 Forumite
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    Why doesn't it seem a great return? Is it terrible, bad, so-so, quite good, or very-good-but-not-great? I guess you need to define for yourself what you mean by 'great' and how many years out of every ten you should expect to get it. Probably no more than one or two, given markets can be up, down or sideways in a given year.
    I guess it's that you see some funds having grown XX% in the same time frame, and it's always that feeling of missing out on the *big* gains. But like you say, as I'm index tracking a large number of things, my gains (and hopefully losses) should prove to be more "steady as she goes".
    You don't mention how much you started off with.
    I started out last year with about £12,000, and my contributions have increased steadily. Basically if I get a pay rise then I increase my monthly contribution by half of the pay increase.
    We don't know your goals.
    My goal is to develop a healthy pension fund so that I can retire relatively comfortably. On top of this I have 10 years of paying into a Local Authority pension scheme, and I have a 50% share in a rental property. So this will form the bulk of whatever I have to retire with. I'm currently 35, married and have a toddler daughter.
    Thanks for the terribly formatted table.
    No problem.
    As your target allocations are all convenient round numbers I assume you haven't got an actuary or IFA to construct something targeted at a particular level of risk or volatility - it's just you having a go yourself at the allocations you want, trying to get a bit of everything with the largest allocation to US because it's big and smaller amounts in the UK because it's smaller?
    Correct. I've tried to look at the individual funds selected to match some of my risk profile as I determined it to be from knowledge gained through my own research. Can't remember what it was that I read, but the general indications seemed to be to allocate based on stock market size so yes, more US as it's bigger, less UK as it's smaller.
    I didn't know Threadneedle did a general global small companies fund although they do a Europe one and an American one; perhaps the one you have is a second American fund rather than a Europe one (just a guess, as you already have two Europe ones)?
    Yes it is the American one that I have. Sorry should have included the full title.
    If so, what's wrong with smaller European companies or smaller Japanese companies? For that matter, if Japan is the second largest stock market in the world, perhaps you could justify >5%?
    I wouldn't say there's anything wrong, but as you say further down, due to the amount I pay in every month, I had to stop somewhere.
  • dunstonh
    dunstonh Posts: 116,684 Forumite
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    I guess it's that you see some funds having grown XX% in the same time frame

    And do those funds have a similar asset breakdown to your holdings?
    Do they have the same risk profile?

    When those funds go down and yours go up, will you feel the same way?
    it's always that feeling of missing out on the *big* gains.

    It shouldn't be as that isnt how investing works. I suspect you need to do a bit more reading up on investing and understanding how it works and why things happen as they do.

    Plus, you are using index trackers. So, mid table (or just below) consistency is what you have chosen.
    should prove to be more "steady as she goes".

    The volatility is not impacted by the choice of tracker over managed.
    but the general indications seemed to be to allocate based on stock market size so yes, more US as it's bigger, less UK as it's smaller.

    That is one strategy. Whether it is the right one, time will only tell. It is a management decision which increases the risk a bit. It may have been better for you to select a global equity tracker if you wanted to do that. Plus, you are missing Far East exc Japan.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    An alternative approach would be to hold a core fund with smaller satellites to cover areas not included within the core. You currently have thirteen funds, can't see what split there is on your table but that's a lot of funds for around £15000.

    You've got a mixture of passive and active funds, some people would prefer either approach in its entirety but many would consider passive better in some areas and active in others.

    You could replace the majority of the funds with a single multi asset fund, the main ones discussed here are vanguard lifestartegy, black rock consensus or legal and general multi index. Theshe will cover developed equity and bond markets, and property for multi index, so adding smaller funds for emerging markets, property, smaller companies or possibly commodities, tech etc would be a valid approach.

    In terms of returns then a year is far to short an time period to assess whether you are doing better or worse than other options. You can set up your portfolio, either on your platform or trustnet or Morningstar and compare it to a range of measures, including different risk rated funds, market index, inflation etc to give some idea.
  • grey_gym_sock
    grey_gym_sock Posts: 4,508 Forumite
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    bowlhead99 wrote: »
    As your target allocations are all convenient round numbers I assume you haven't got an actuary or IFA to construct something targeted at a particular level of risk or volatility

    well, it is a bit spurious to determine that the optimal portfolio has an allocation of 13.79% to X, 9.21% to Y, and so on. you can only reach that conclusion by using the historical figures for volatilities and correlations, but volatilities and correlations change all the time. so you can just as well round the allocations off to simpler numbers - i like using multiples of 2.5%, but that's just because i've always liked the 2.5-times table :)
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    I wouldn't myself be happy with an open-ended fund as a way of investing in property: I'd look at a closed-ended fund instead. I might do the same for smaller companies. In other words, I'd be looking at Investment Trusts (aka Investment Companies).

    http://www.theaic.co.uk
    Free the dunston one next time too.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    well, it is a bit spurious to determine that the optimal portfolio has an allocation of 13.79% to X, 9.21% to Y, and so on. you can only reach that conclusion by using the historical figures for volatilities and correlations, but volatilities and correlations change all the time. so you can just as well round the allocations off to simpler numbers - i like using multiples of 2.5%, but that's just because i've always liked the 2.5-times table :)

    Spurious accuracy adds to the gaiety of nations. Where would we be without the opportunity to snort with derision at some chump's recommendation to invest 13.79% here and 9.21% there? And said chumps get paid for this malarkey, so who is really the chump?
    Free the dunston one next time too.
  • bigfreddiel
    bigfreddiel Posts: 4,263 Forumite
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    Perhaps learning how to spell portfolio may be a good start! fj
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