Portfolio Review

mobro123

Hi Guys,

I know there have been a lot of posts asking for reviews of portfolios so hope you don't mind another.

Background: 25 yr old male, Salary £36.5k, trying to save for retirement AND deposit. I have a good work place pension (total contributions are around 18% of salary). I have been investing for around 3 years (started to take a more active role in the last year and looking at researching own funds etc). I am happy making the investment decisions myself and am currently reading Intelligent Investor but by no means an expert.

I have around 11k in a globally targeted return fund and around 6k between corporate bonds, global, US and Pacific equity (I have been against moving this as I used to work for the provider and got all fees and ongoing charges wavered).

I have around 8.5k with Hargreaves which I am in the process of moving to Charles Stanley (mostly because of the fees). The Hargreaves fund was Woodfords Equity income.

Below are the funds I am considering moving the 8.5k into - I plan to invest £800 a month split between these funds. I see this pot as my future retirement nest egg, hence the passive tracker funds (trying to keep TER down) and diversification. I am open to emerging markets and Japan as I can leave the investments for 30+ years. The 17k I have with the other provider has been growing steadily and is up 2k in just under 3 years with very little volatility. I also have a small cash ISA which I am topping up £200 a month.
Fund Price/PE Price/book Div yield Weighting TER Risk

BlackRock UK Equity Tracker D Fund Acc 15.4 1.85 3.28 20 0.06% 5
BlackRock Gbl Prop Equity Tracker 22.1 1.44 2.17 10 0.22% 5
CF Woodford Equity Income C Fund Acc 14.2 2.69 3.2 20 0.75% 5
Legal & General US Index I Trust Acc 19.5 2.7 1.4 20 0.10% 5
Fidelity Index Japan W Fund Acc 14 1.3 1.66 10 0.12% 6
Fidelity Index Emerging Markets W Fund 12 1.4 1.79 10 0.23% 6
Vanguard Global Small-Cap Index Fund 18.3 1.8 1.8 10 0.38% 6

Please excuse the poor formatting.

I am trying to save £1000 a month - £12000 a year - 30 years is £360,000 + what I already have (call it 25k so £385k). I have seen the graphs showing the potential of cumulative growth and ideally want to turn this into a million by 55 (30 years time).

So questions:
1. Do you think this is achievable with my current spread of funds/ risk and annual savings
2. Any recommendations on equivalent funds which I should consider
3. General comments about types of fund and anything else to consider
4. What would you do with the 17k deposit fund that I will need in the next 5 years - I was considering riskier investments or adding this to the 8.5k in Charles Stanley - I know the markets go up and down but realistically if the funds went down, I would just wait until they go up before I take out the required deposit.

Thanks in advance,

Mobro123

Malthusian

A rather large bias to the UK at 40%. 100% equities so you will need to be confident that you can cope with falls in value of 40% or more. But I see little potential for disaster as long as you are happy to ride out the crashes.

Based on your contributions you need growth of around 5% per annum to reach 1 million in 30 years time. So it's not unrealistic, if you ignore the fact that £1 million won't be worth £1 million in 30 years' time. Growth of 5% per annum above inflation is possible but optimistic in many eyes. It's not unrealistic, just rather arbitrary.

If £17,000 is enough for your deposit then why not buy now instead of at some point within five years? If it's isn't enough, then you need to be saving more, or reprioritising the house vs retirement funds.

Cash-Cows

I would raise a slight eyebrow in that it's all equities. Even if I was a very adventurous investor I would probably stick something in bonds even it was to just say I'm covering as many asset classes as possible.

AnotherJoe

At your age I think its fine to have 100% equities.
Why have you got an income fund? Doesn't seem to match your needs. (even if its the acc version it will still have a bias to lower growth stocks)
Personally I wouldn't track the UK stock market I'd have more in the global tracker.

mobro123

Thanks for the reply.

I have since added the black rockrock global properties security index fund to the portfolio. I think I will reduce the Uk tracker to 10% and have the properties fund as 10%, I haven't experienced a crash or significant loss as of yet and I am aware the bear market wont last forever. I think (hope!) I can handle the volatility - with dollar cost averaging I will simply buy more shares during the dips.

The 17k is'nt enough for a deposit but I am also saving £200 a month into a cash ISA which will also be used for the deposit. I agree I might have to scale back the retirement pot but with interest rates what they are at the moment I am willing to risk the stock market short time (3-5 years). Risky I know but I think the diversification is reasonable - I could possibly look into a bond fund, any advice on which sector/ fund to consider?

Thanks

mobro123

I have good diversification of bonds in the 17k with the previous provider (Corporate Bonds, Distribution Bonds, Monthly Income Plus bonds, Global Opportunities Bonds). Although I am not adding to these funds and would have to pay additional fees for monthly contributions.

mobro123

I like Woodford and his fund - up over 30% in under 3 years. Plus his long track record and defensive approach that seems to do well in market downturns. He is cheaper than the Fundsmith fund which I have also looked at. I also like the diversification into pharmaceuticals. Could you explain why you wouldn't track the UK index and would favour the global tracker?

Thanks

Fatbritabroad

mobro123 wrote: »

I like Woodford and his fund - up over 30% in under 3 years. Plus his long track record and defensive approach that seems to do well in market downturns. He is cheaper than the Fundsmith fund which I have also looked at. I also like the diversification into pharmaceuticals. Could you explain why you wouldn't track the UK index and would favour the global tracker?

Thanks

More diversified

cashbackproblems

L+G have an international index tracker

AnotherJoe

mobro123 wrote: »

I like Woodford and his fund - up over 30% in under 3 years. Plus his long track record and defensive approach that seems to do well in market downturns. He is cheaper than the Fundsmith fund which I have also looked at. I also like the diversification into pharmaceuticals. Could you explain why you wouldn't track the UK index and would favour the global tracker?

Thanks

Brexit.
If the UK economy does well then that means the global economy is doing well also, so global equities will do well, probably slightly dampened by a higher pound but a high pound will depress some U.K. shares, so its a wash most likely.
OTOH if Brexit is a bust, it's double whammy pound falls U.K. shares (mostly) fall global shares rise due to falling pound.
It's also inherently higher risk, one country (to an extent) rather than the global economy.

30% on Woodfords fund isn't especially impressive over 3 years as a metric (fair point about defensive approach though) because most of my funds are up 30% past year. Inherent growth and drop in Pound.

How do you determine that Fundsmith is "more expensive" than Woodford ? They are wholly different funds with different areas sector and geography wise, but in any case what makes a fund "expensive" ? Did you mean the management fee? (And Fundsmith is surely up much more than 30% in 3 years)

If you like pharma, why not just buy a pharma or healthcare fund? FWIW I have BIOG and WWH there are many others.

mobro123

Fatbritabroad wrote: »

More diversified

But if you look at a global tracker its heavily weighted to the top 3/4 economies, US, UK and Europe, Japan. If I have a US tracker an UK tracker and a Japan tracker isn't this already diversified? If you look at the top 10 holdings you have global companies such as HSBC, BP, Shell which make up a large proportion of the fund. These companies are not limited to just the UK.