Re-balancing our Portfolio

yorkie07

A couple of years ago my wife and I decided we'd had enough of the low interest cash ISA's we were invested in and instead started to transfer our cashIisa's into S&S Isa's. We use our full Isa allowance each year so now have around £200K between us in our ISA portfolio's.

We now feel we need to have more balance to our portfolio so would like to look at re-balancing our portfolio going forward so any views on the holdings below would be really appreciated.

Fundsmith - 35%
Witan - 12.5%
Bankers - 12.5%
SMT - 10%

Henderson Euro Focus Trust - 5%
Fidelity Asian Values - 5%
Newton Global Emerging Markets - 5%

Henderson Smaller Companies IT - 5%
Baillie Gifford Shin Nippon - 5%
TR European Growth - 5%

We decided primarily we wanted to invest in Global Funds/IT's. Fundsmith was our first big transfer and that is the reason it currently has the largest holding and it has done well. We have not got a separate UK holding as we felt that this was covered by Witan, Bankers and Fundsmith who have quite large allocations to the UK so in the end we just invested in a UK smaller companies IT. We did also look at F&C Global Smaller Companies but eventually went with three separate regional smaller companies. Overall the ISA portfolio is a growth portfolio therefore that's why it is currently 100% equities but this could change over time.

Although we have read and researched quite a lot over the past year we are still really inexperienced and are aware that the portfolio requires more balance/re-balancing so your comments on this would be very useful to us. Thank you.

BLB53

With 100% equities you will have done well in recent years but I would now be looking to protect against the downside and protect some of those gains.

A good all-in-one option would be Vanguard Lifestrategy 40 for example and possibly something like Capital Gearing IT which aims to preserve capital or Personal Assets.

Here's an article on CGT from the DIY Investor site which may be of interest http://diyinvestoruk.blogspot.co.uk/2017/05/capital-gearing-trust-new-purchase.html

Linton

In my view your current portfolio is highly adventurous and is a massive step from cash ISAs. It could lose 50% in a crash like 2008/2009. If this is just a small part of your total accessible wealth the risk may be acceptable, otherwise perhaps otherwise.

To be brutally honest I wouldnt look to rebalance, rather to start again looking top down at the overall portfolio. Perhaps start off considering a single global fund and then working out where you might like extra emphasis.

What is your timescale? When might you want to use some of the money? What other investments/savings do you have? How old are you? The answers will change the type of portfolio that is most suitable for your circumstances.

For £200K to invest it may be worth talking to an IFA at least to set up an initial portfolio.

enthusiasticsaver

I would also say your portfolio is very risky as all equities but as you say it is for growth so if you are prepared for heavy losses should there be a downturn that is your call. We have invested slightly more than you and are inexperienced too so have elected to hold around 60% in a VLS60 so 40% bonds and split the remainder between 2 active income funds which also have a mix of bonds/equities and diversified globally and sector. We are in the early years of retirement at age 57/58 though and may need to access some to bridge the income gap until state pensions/all occupational pensions kick in.

yorkie07

Linton wrote: »

In my view your current portfolio is highly adventurous and is a massive step from cash ISAs. It could lose 50% in a crash like 2008/2009. If this is just a small part of your total accessible wealth the risk may be acceptable, otherwise perhaps otherwise.

To be brutally honest I wouldnt look to rebalance, rather to start again looking top down at the overall portfolio. Perhaps start off considering a single global fund and then working out where you might like extra emphasis.

What is your timescale? When might you want to use some of the money? What other investments/savings do you have? How old are you? The answers will change the type of portfolio that is most suitable for your circumstances.

For £200K to invest it may be worth talking to an IFA at least to set up an initial portfolio.

Thanks for your response. The Isa portfolio is currently still for growth, we have approx £300K in our pension funds and in excess of £100K in cash accounts and no outstanding mortgage on 2 properties and no debt. Therefore, we are willing to hold a more risky Isa portfolio. I am 59 (retired) and the wife is 56 (still working).

Rather than re-balance you suggest we hold just one global fund rather than 4 and leave the rest of the portfolio as is?

bigadaj

enthusiasticsaver wrote: »

I would also say your portfolio is very risky as all equities but as you say it is for growth so if you are prepared for heavy losses should there be a downturn that is your call. We have invested slightly more than you and are inexperienced too so have elected to hold around 60% in a VLS60 so 40% bonds and split the remainder between 2 active income funds which also have a mix of bonds/equities and diversified globally and sector. We are in the early years of retirement at age 57/58 though and may need to access some to bridge the income gap until state pensions/all occupational pensions kick in.

I wouldn't have said it's really the all equities element that is particularly risky, it's the nature of those equities. Very focused and conviction driven funds in volatile areas, this could lose a huge percentage in any downturn.

Linton

yorkie07 wrote: »

Thanks for your response. The Isa portfolio is currently still for growth, we have approx £300K in our pension funds and in excess of £100K in cash accounts and no outstanding mortgage on 2 properties and no debt. Therefore, we are willing to hold a more risky Isa portfolio. I am 59 (retired) and the wife is 56 (still working).

Rather than re-balance you suggest we hold just one global fund rather than 4 and leave the rest as is?

I wouldnt propose holding one fund because I dont know of any one fund that would necessarily be appropriate for your needs nor what allocation would satisfy you in terms of risk acceptance. I would suggest that it would be helpful for you to know why you are choosing a different allocation than would be provided by say a global tracker. So think top down rather than accumulate a set of funds which seemed to be a good idea at the time. Portfolios are often structured with a single core fund and a range of smaller holdings to modify the allocation though this isnt the only way of doing things.

MPN

I have to agree with others it is a very adventurous and a highly focused conviction driven portfolio.

You could lessen the risk slightly by reducing your global equity exposure to just 2 funds either Fundsmith or SMT and either Witan or Bankers? Its very much a personal preference but I would favour Fundsmith and either Witan or Bankers mainly because if there is a crash I believe SMT will suffer the largest loss from these global funds.

The other elements of your portfolio are all 5% holdings so if you're happy with them keep them.

StellaN

It is a high risk portfolio but if you feel sure you can accept a 50/60% loss in a crash then that's your decision. Even if you don't want to tinker too much with the portfolio, as MPN suggested you could reduce the global funds from 4 to 2. From my own experience, I too used to hold various global funds and now I'm down to just 2 funds which I'm happy with.

yorkie07

Thank you all for your comments and I will take on board your thoughts about too many global funds. I agree I should reduce this to two global funds instead of four. I will do some further research on the various holdings etc, however, at the moment I am leaning towards Fundsmith with either Witan or Bankers.

MPN

yorkie07 wrote: »

Thank you all for your comments and I will take on board your thoughts about too many global funds. I agree I should reduce this to two global funds instead of four. I will do some further research on the various holdings etc, however, at the moment I am leaning towards Fundsmith with either Witan or Bankers.

As well as reducing the number of global funds, is there really any need for the additional regional funds - Henderson Euro Focus Trust, Fidelity Asian Values and Newton Global Emerging Markets? Surely, these area's are already covered in your choice of global funds. For instance, Bankers regional breakdown is UK - 27.5%, US - 26.5%, Europe - 16.6%, Asia Pacific - 15.8%, Japan - 10.8% and Emerging Markets - 2.8% - a very broad exposure?

The smaller companies can be very risky but can also be very rewarding so I'd keep them in preference to the funds mentioned above.