Diversifying portfolio & gaining knowledge - advice for a beginner?

bostonerimus

Don't worry about "total diversification", as a beginner it's more important to understand your capacity for risk, choose a suitable equity/fixed income/cash allocation and start investing. VLSxxx is a good start as are many other low cost multi-asset tracker funds. You have plenty of time to add to your portfolio, but for now keep it simple and get going.

bowlhead99

grandst wrote: »

I am not allowed to post any links to the matrix however between 2000 to 2002 a diversified portfolio suffered only a small loss while 100% equity index tracker investor would have lost a huge amount and many would have given up.

Very true. Largest peak-to-trough drawdown of the the FTSE all world index in the last decade was 2007-2009's "credit crunch" when 58.9% was lost from top to bottom (measured in US dollars).

http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue/GAE?issueName=AWORLDS

Granted, in the UK we were not measuring in US dollars, but the US investors were. So, no theoretical reason why a global 100% equities portfolio couldn't do that to GBP investors next time. Also, markets recovered relatively quickly from March 2009 when QE kicked in. Again, not a guarantee that next time it will be a quick rebound instead of long drawn out slump.

Food for thought if you generally think you are a medium to high risk investor but have never actually seen your life savings decline by over 50% on paper. Some will panic once down 33 or 40% , sell up, realise the loss. Ouch.

JustAnotherSaver

Audaxer - yes I was having log in trouble with my account a while ago so had to create a new one. I was able to get the JAS acc working again. The reason behind the switch in account on this thread is because I'm at work on my phone and only know the password to this account as the password to the thread opener account is scrambled and I just copy it from KeePass if I need it so haven't actually memorised that one.

I really should've waited until i'd got home to reply as the switch would only cause confusion.

Apologies.

mollycat

JustAnotherSaver wrote: »

Audaxer - yes I was having log in trouble with my account a while ago so had to create a new one. I was able to get the JAS acc working again. The reason behind the switch in account on this thread is because I'm at work on my phone and only know the password to this account as the password to the thread opener account is scrambled and I just copy it from KeePass if I need it so haven't actually memorised that one.

I really should've waited until i'd got home to reply as the switch would only cause confusion.

Apologies.

Bet Smed/Anthorn wished they'd thought of that excuse!

JustAnotherSaver

Who?

Regardless, I'm not here to convince or prove. I'm only here for information. I'll leave all that silly stuff to others who are interested in that kind of thing.

JustAnotherSaver

bigadaj wrote: »

It does worry me sometimes when people boast about 100% equity exposure, I think more from a cojones type boast than from a rational assessment of their risk tolerance or sensible asset allocation.

Do you think this is a big problem of going DIY? That what people think of themselves (their attitude to risk) can be a world away from their own reality?

Going for the VLS100 myself i am currently happy with my decision. In 10 years time maybe i will be maybe i wont.

Maybe if i'd gone for say VLS60 i'd be wondering if i should've gone higher or lower too. That's the problem when you don't have the answer i suppose.

JustAnotherSaver

AnotherJoe wrote: »

Third, you may have your own ideas about what's going to do better in the very long term and may wish to tilt your portfolio that way. For example, you might think that over the next 30-40 years healthcare or Far East or emerging economies or whatever will do better in general that the average equity and so add some funds that specialise in these areas. It's hard to have trackers that work in specialist areas, I think there's a good argument that active funds are better for these.

So hopefully that answers your question about diversification.

I actually don't have any ideas tbh.

If you was to ask me what i thought would do well and would do badly i'd say in a Scooby Doo voice - iuno based on the fact that iuno anything about it all.

So how do you/people form their ideas then? I suppose they keep their head in the news which is something i don't do.

JustAnotherSaver

justme111 wrote: »

I think it was "smarter investing " that I read a few years ago when I was trying to understand more. I am afraid it was not helpful to me. I think I can relate to what you are trying to achieve. I would not call it "diversifying " but probably " fine tune beyond most crude" or "understand more" so that the steps beyond the first one ( VLS) can be taken. I concluded that this was knowledge that would take me years to acquire and not a book aimed at general public but some serious information on economics and finances which can not be googled in a few minutes. Something like knowing how all asset classes and all types of investments work, how to understand fund's and other vehicle's structures , how to analise financial information of an entity etc. So I accepted my limitations, in a few years of reading these forums understood a bit more about different multiasset funds, continued with my original choice of 5 hsbc tracker funds and dabbled in p2p.

p2p?

Why 5 tracker funds and not 1 or 2?

I can understand what you're saying there but there's a problem with reading on a forum or at least there is for me - eventually (usually at the start for me) you have questions. These get answered and you have more questions & repeat repeat repeat.

Some people stick with you as they understand you're just trying to learn.
Other people seem to think you should only ask x-amount of questions & seem to get upset when you ask beyond this number, which is annoying.

It's like when i was reading how tos when it came to doing some jobs on the car. I THOUGHT i understood it but i wanted to ask questions to make sure i did. Sometimes i did & sometimes i didn't. When asking though y ou would get some people happy to help, go in to detail (bowlhead would be one such person) but then others would give you minimal detail & get narky when you asked further. How dare you not know.

And that can be offputting.

JustAnotherSaver

Audaxer wrote: »

In an earlier thread you asked about options for putting £20k into a low risk fund. You now seem to have changed your risk tolerance dramatically by going for a VLS100. Maybe if you do diversify further you should consider some lower risk options like bonds.

This is the problem when you go searching through peoples previous posts & assuming.

I ask a lot of questions, so don't assume ... ask.

The money i have in the VLS100 fund is for something totally different to the £20k. If you assumed it was for the same thing then that's probably why it didn't make sense to you. I never said they were for the same thing - because they're not. They were in separate threads - because they're separate.

justme111

Well I suppose some people sometimes are in the mood for explaining and others are not. Probably expectation to learn everything you would want to by asking questions is nonrealistic. What can I compare it with May be reading ( not so much news but just baseline information articles and books ). Sorry I do not have an answer , I accepted that I am not going to learn beyond very basics. I sippose you can compare it to one trying to learn a profession or skill or trade by asking questions - may be people get narky about your questions because they see that you trying to achieve unachievable.
Why 5 instead of 1 - different regions (hsbc tracker USA, hsbc tracker europe and so on). P2p- peer to peer.