Maximising investment portfolio performance

bowlhead99

badger09 wrote: »

You don't need to be 'somewhat provocative' to elicit a detailed response from bowlhead99:) especially if he can't sleep, is travelling or is bored:p

All of the above last night - and I had to write some of it twice after I lost signal and the phone lost my half-written thesis!

AnotherJoe

Oggers wrote: »

At the risk of sounding like a complete idiot, I would surely want to buy more of a fund that has a better rate of return than a fund that has not? Why would I want to invest in a poorer performing fund?

Because, in the words of the common warning "past results do not predict future performance" and that is statistically and literally true.

Your mechanism would result in poorer, not better performance. Assuming that all the funds rise over time, but with dips and rises, you would end up buying more units at times when they were higher cost, and fewer units, instead of more, at times when they were lower cost.

Look up "pound cost averaging"

Oggers

Chaps

I have digested the comments and would pose the following synopsis for further observations.

My current portfolio appears to be too limiting. Would it therefore be a wise move to diversify into other global markets and also include a wider cross section of industries?

Pursuant to the above, presumably it would be equally wise to attempt to have the invested amounts in each industry/sector roughly similar until such a time as I have established/guessed? which sectors may offer most return for the future?

My varying the amounts in each fund was not meant to be long term. My intention was to capture any short term momentum in a particular sector. It seems I am not executing this correctly though. However, I would like to maintain some degree of flexibility in the amount I invest in each fund. What would be the safest indicators to show that a particular fund may be worth investing more (or less) in? Assume i would shift say 10% of the monthly investment of one fund into another every year.

AnotherJoe

Depends what your goals are, but I would say that SMT seems pretty good and I would now [STRIKE]switch into[/STRIKE] add something more wide ranging, such as a low cost global fund that covers most economies and larger companies.

Especially if your other funds are UK based I'd do that. There's an obvious reason for de-emphasising out of the UK (beginning with "B") but aside that, theres the rest of the world to invest in. If you lived in Portugal would you only buy Portuguese companies?


Talking of larger companies, you said that smaller companies tend to go in line with larger ones / world economy but in good times, smaller companies tend to do disproportionally better. Its much easier for SmallWidget Inc at $2M a year to double turnover than Apple or Microsoft at $Umpteen Squillion a year turnover.

I would stick with healthcare, thats why I'm in it, increasing opportunity for its use as it matures plus demographics.

Finally, I'm not sure that momentum investing works for funds. Maybe for individual companies to a limited extent?

BrockStoker

If I were in your shoes, I would start by gradually selling the funds you least want. Perhaps one fund every month or two. In the mean time I'd identify sectors/funds which you think might have potential, and would help to diversify your portfolio.

Then it's just a matter of following the funds/sectors and waiting for a dip before buying. Don't put all your money in in one go, keep some aside in case there are further dips/opportunities.

Over the course of a year or two, if you keep doing this, you will have invested more of your money when things were relatively cheap, and if you picked the right sectors/funds/geographic regions you should soon start to see some growth.

Market corrections and volatility are your friends. Just remember to sell high/buy low, and keep 5-15% of your portfolio in cash for the buying opportunities. Once you have committed, be patient, and hold your nerve with your new investments once markets fall. Most corrections are over done, but it can be hard to tell if more falls will come, so don't jump in too soon with all your cash.

Good luck.

BananaRepublic

jimjames wrote: »

I've no idea if your investment will allow that but I can't understand your logic. Are you saying you want to switch to buy more of the fund that has gone UP? Surely you'd want to buy more of the one that hasn't?

Certainly the first option, of buying more of a fund after it has gone up, is probably a bad idea. Market volatility is such that if a fund shows an unusual spurt, the chances are that it will not continue in the same vein. There are some who would opt for buying more of the other funds, as you indicate. However, that does rather risk buying into funds that are underperforming due to poor management, so as you suggest, do compare to the index.

You mention that the funds are compared with the FTSE 100 index. That suggests lack of diversification. You really want to diversify over multiple indices, perhaps UK, US and Europe, and maybe some Far East and/or Japan too. Maybe also some emerging markets.

However, you buy each month, and a month is a short timescale and does performance over a month really does not tell you anything much of value, ignoring obvious events such as Brexit, so in your shoes I'd just keep on buying the same amounts of each. You then might want to rebalance every 6-12 months. Personally I just stay in the market, but if a fund is showing poor performance relative to the index, then I consider switching. But I'm not a very 'scientific' investor, assuming there is much in the way of science in this dark art of investment.

Apologies if this has been covered by Bowlhead, but his/her post was rather too long for me to read.

ColdIron

BananaRepublic wrote: »

Apologies if this has been covered by Bowlhead, but his/her post was rather too long for me to read.

Nice cup of tea with some chocolate Hobnobs?

badger09

BananaRepublic wrote: »

Apologies if this has been covered by Bowlhead, but his/her post was rather too long for me to read.

:eek::eek::eek::eek::eek:

mollycat

Short version.

You like sweeties; soor plooms and granny sookers in particular.

Both are 50p per bag.

You have a pound to spend on pocket money day, so you buy a bag of each.

Next pocket money day, soor plooms are priced at £1 per bag and granny sookers are 20p per bag.

Now what do you do?

Buy 1 bag of the soor plooms as they "must be better" because they are more expensive.

Or buy 5 bags of the granny sookers?

I know what I'd do. (Make a dental appointment )

Oggers

.....but as banana republic states, the granny sookers may have gone down - relative to other funds - as they are under-performing, the mix is just wrong, or they have a manager who is unable to make the necessary adjustments. I agree that buying low and selling high is ideal, but then again in some instances, things are relatively cheap for a reason - they are rubbish!