Diversifying portfolio & gaining knowledge - advice for a beginner?

Not_Me_Officer

To kick start me off i was recommended a book by John Edwards called DIY Simple Investing. I thought it was a great book because of the way it simplified things. It didn't baffle the newcomer with look how many fancy words i can use type jargon. It kept things nice & simple, easy to understand & from that i had the confidence to at the very least have a go myself (as opposed to paying an IFA which is what i was going to do immediately before the book - who i found was going to use St James' Place which i've read not so great things about).

From that i decided that i wanted to begin with a fund that didn't need a lot of maintenance & was already reasonably diversified. I read a bit about index trackers & story a little short i decided i was going to go with the Vanguard LifeStrategy range. As at 34 i have 30-35 years left in me (hopefully not the latter) i ended up going with the VLS100 to get me going. Only time will tell whether i really do have the stomach for the ride but i'm confident i will.



So the idea while that is in motion is to keep learning. Keep trying to understand because i'm very much a beginner.

I know what i want - i want a well diversified portfolio. VLS100 doesn't cover everything so i've read but at the same time i'm not totally sure what it's weak or non existent in.
Then i'd have to decide whether all additional funds remain as trackers or whether i have anything 'managed' (even though everything i've read seems to say that trackers consistently outperform managed funds over the long haul).
And once that is decided on i'd need to decide on a ratio. How much weight/money do i put in one fund, and another and another & so on.



So the last time i asked for this kind of advice the feedback was good. So once again can anyone recommend a good book to read that deals with that side of investing? Or can anyone just post up how they came to be comfortable dealing with the steps after just starting up? Basically i'd just like to kick on from here but at the moment i don't have the knowledge to do that.

Audaxer

Smarter Investing by Tim Hale is an excellent book.

I really don't think you need to diversify further than your chosen VLS fund, other than possibly add another passive multi asset fund if you wish when you have a significant amount invested in VLS. Options could be HSBC Global Strategy or L&G Multi Index funds. As you are only covered up to £50k for any one fund house under the Financial Services Compensation Scheme, that may be the time to invest in another multi asset fund if you are happy with VLS alone at present.

Not_Me_Officer

Thanks, i'll take a look at that book for sure.

I would've thought that i could surely benefit from adding some additional funds at some point that the VLS range doesn't cover at all or too heavily. Even if it would be just 5% of my portfolio (don't stick on the actual figure of 5% as it was just the first number that came to my mind, i could've just as easily said 1/2/3/4 or 6/7/8/9 %)

I look on here at those with much greater knowledge than I & they don't just stick with one VLS fund & then call it a day. Likewise i'm sure they don't build their VLS fund to 50k before then investing elsewhere.

I keep mentioning property but that's only because i learned last week that it doesn't feature at all/much in the VLS range, so using that as an example, surely it'd be worth having that as some kind of percentage so that if say the VLS range aren't doing so great but property is then you've got something in your portfolio doing well?

Likewise other funds that i can't think of / am not aware of that don't feature in the VLS range at all or much?

Not_Me_Officer

Hmm it seems this Time Hale guy has done more than 1 edition of that book.

I don't suppose you need all of them, especially when one of them seems to be getting on to £20 so which one were you referring to?

chockydavid1983

I imagine an cheap 2nd hand copy of an earlier version will be fine. I read an earlier version and apparently not much has changed in recent editions.

pinkllama

Why do you want to diversify into property? What advantage do you think it’ll give you?
I’d add some bonds before thinking about anything else. VLS100 will at times be very volatile. Property funds can crash 50%+ as well.
VLS100 already has property in it. Drill down into the underlying funds and look at the sector percentages, property companies will be in each of the funds.

Not_Me_Officer

pinkllama wrote: »

Why do you want to diversify into property?

I never said I did. That wasn't the point that I was making.

barginfinder

Not_Me_Officer wrote: »

I keep mentioning property but that's only because i learned last week that it doesn't feature at all/much in the VLS range, so using that as an example, surely it'd be worth having that as some kind of percentage so that if say the VLS range aren't doing so great but property is then you've got something in your portfolio doing well?

you mentioned it here

grandst

Have a look at some asset return matricies for the last 20 years, might make you think twice about going 100% equities.

bigadaj

grandst wrote: »

Have a look at some asset return matricies for the last 20 years, might make you think twice about going 100% equities.

Are you sure?

TheTracker

bigadaj wrote: »

Are you sure?

grandst is possibly referring to a depiction like this 'carlson quilt'. It is US but gives you an at a glance view of volatility and value of diversification across classes.

http://awealthofcommonsense.com/wp-content/uploads/2017/03/Screen-Shot-2017-03-18-at-8.37.15-PM.png