Mainly Passive ETF portfolio

pip895

I have been investing for eight years using mainly actively managed funds. I am transfering a pension into a SIPP in the next few weeks and have decided to take a different approach with the new money. I will use mainly passive ETFs. I made the decision to split the funds over different countries/regions rather than use a global ETF as I wanted the ability to adjust the country weaghtings.

My first draft portfolio is as follows:-

DB X-Trackers MSCI AC Asia Ex Japan Index UCITS ETF 1C GBP 6%
DB X-Trackers S&P 500 UCITS ETF 1C GBP 5%
DB X-Trackers Stoxx Europe 600 UCITS ETF (DR) 1C GBP 8%
ETFS All Commodities GBP 3%
ETFS Physical Gold GBP 5%
iShares £ Corporate Bond 0-5yr UCITS ETF GBP 6%
iShares Core MSCI Japan IMI UCITS ETF Acc GBP 5%
iShares Developed Markets Property Yield UCITS ETF GBP 8%
iShares Global High Yield Corp Bond GBP Hedged GBP 8%
iShares S&P 500 Health Care Sector UCITS ETF GBP 3%
iShares S&P 500 Information Technology Sector UCITS ETF GBP 3%
Lyxor MSCI Emerging MarketsUCITS ETF C GBP 5%
Vanguard FTSE 100 UCITS ETF 5%
Vanguard FTSE 250 UCITS ETF 5%
GAM Star Credit Opportunities GBP Inst 10% (Strategic bond fund - not ETF)
JP Morgan Smaller Cos IT plc 5% (IT - not passive)
Cash 10%

What are your thoughts? Do these seem like sensible choices - I find the notation on etf's a bit confusing - for instance how important is it to pick funds with the "UCITS" rating.

Glen_Clark

Warren Buffet advised his wife to put 90% of her $billions inheritance into the S&P 500, and 10% bonds.
Do you really need that many times more funds than her?

bostonerimus

My thoughts are that you'll be spending a lot of your time rebalancing. Five funds seems complicated to me, I get by with three.

darkidoe

Glen_Clark wrote: »

Warren Buffet advised his wife to put 90% of her $billions inheritance into the S&P 500, and 10% bonds.
Do you really need that many times more funds than her?

I suppose Pip isn't Warren Buffet's wife and hasn't got the billions. :rotfl:

I agree its probably better to keep things simple though.

Malthusian

Glen_Clark wrote: »

Warren Buffet advised his wife to put 90% of her $billions inheritance into the S&P 500, and 10% bonds.

When you have $billions you can afford to invest in a portfolio as crap as that because even if the US stockmarket suffers a Japan-style lost decade, you will still have more money than you can ever spend in your entire lifetime.

Those of us who don't have $billions to live on should not be risking so much on a single country.

As to the OP's question, it looks over-complicated and random to me. If it was left alone it will probably do fine. However, the question is whether the OP will leave it alone, or, for example, sell the healthcare ETF or IT ETF when they go down or up and invest in another random ETF. Over the course of the investment this kind of churning is likely to lose money.

Also, it is likely to be extremely volatile - the 24% in bonds is likely to behave like equities in a crash, being mostly high-yield and "strategic" bonds, which will give the OP further impulse to fiddle with the portfolio.

Why use ETFs and not a cheaper and lower-risk OEIC?

Glen_Clark

Whole point of a fund is to provide diversity. Having that many of them seems like overkill to me. You tend to get more as you sell one to buy another and use up your CGT allowance. But no need to start out with that many.

pip895

Thanks for your replys - OK Slight pruning requiered I think.:)

I am having dificilty getting it down more than this though.

DB X-Trackers S&P 500 UCITS ETF 1C GBP 15%
DB X-Trackers Stoxx Europe 600 UCITS ETF (DR) 1C GBP 7%
DB X-Trackers MSCI AC Asia Ex Japan Index UCITS ETF 1C GBP 5%
iShares Core MSCI Japan IMI UCITS ETF Acc GBP 5%
iShares Developed Markets Property Yield UCITS ETF GBP 10%
iShares £ Corporate Bond 0-5yr UCITS ETF GBP 15%
iShares Global High Yield Corp Bond GBP Hedged GBP 10%
HSBC MSCI Emerging Markets GBP 6%
Vanguard FTSE 250 UCITS ETF 12%
ETFS Physical Gold GBP 5%
Cash 10%

This portfolio comes in at an FE risk score of 70 and is still 50% equity 50% other. Its performance isn't as good as the previous version but its not bad, it performs (has performed) similarly to VLS 80 but with slightly lower volatility.

I am hoping any fiddling I do will be of the more helpful variety i.e. upping the equity % after a significant correction/crash for instance.
One of the funds I have dropped is Commodities - these have been performing very poorly and are very out of favor, but I cant help feeling they will come back at some point??

capital0ne

pip895 wrote: »

Thanks for your replys - OK Slight pruning requiered I think.:)

I am having dificilty getting it down more than this though.

DB X-Trackers S&P 500 UCITS ETF 1C GBP 15%
DB X-Trackers Stoxx Europe 600 UCITS ETF (DR) 1C GBP 7%
DB X-Trackers MSCI AC Asia Ex Japan Index UCITS ETF 1C GBP 5%
iShares Core MSCI Japan IMI UCITS ETF Acc GBP 5%
iShares Developed Markets Property Yield UCITS ETF GBP 10%
iShares £ Corporate Bond 0-5yr UCITS ETF GBP 15%
iShares Global High Yield Corp Bond GBP Hedged GBP 10%
HSBC MSCI Emerging Markets GBP 6%
Vanguard FTSE 250 UCITS ETF 12%
ETFS Physical Gold GBP 5%
Cash 10%

Repost the above list with your reasoning for selecting each ETF and it's relative pe4rcentage of the whole portfolio.
What sort of size is this £1k, £10K, £100K, £1,000K?
Looking forward to reading your response

pip895

capital0ne wrote: »

Repost the above list with your reasoning for selecting each ETF and it's relative pe4rcentage of the whole portfolio.
What sort of size is this £1k, £10K, £100K, £1,000K?
Looking forward to reading your response

The portfolio is in the mid 100k's

1. S&P 500 - major part of world - 30% of my equity is on the low side (true passive should be close to 50% I think) but its valued pretty high at the moment and I think Trump may come unstuck so I don't want heavy exposure.
2. Europe - Fairly neutral exposure
3. Asia - Probably a bit light but a bit scary
4. Japan - Fairly neutral
5. Best property etf I could find??
6. Short dated Corp Bonds - good and boring to make up the numbers - not as bad as gov bonds/guilts
7. Global high yield - hedged - not to volatile but better return than corp/Gov bonds
8. Emerging market - good growth potential but with high risk
9. FTSE 250 - 24% of my equity - deliberate UK bias - think the pound will probably move up once brexit is behind us. Prefer the 250 to 100 as less volatile and more UK based.
10. Gold - small hedge against meltdown - negative correlation to equities.

Not the most in depth analysis - then if I was really confident of what I was doing I probably woldnt be posting on here!:)

chrisgg

It looks like you're over complicating. I don't see what your portfolio offers that you can't get from VLS or similar. Rebalancing as many ETFs as that will become both time consuming and costly, though I guess the latter point could be mitigated by buying index tracking OEICs instead.

Linton

chrisgg wrote: »

It looks like you're over complicating. I don't see what your portfolio offers that you can't get from VLS or similar. Rebalancing as many ETFs as that will become both time consuming and costly, though I guess the latter point could be mitigated by buying index tracking OEICs instead.

Gold, large % UK smaller companies, large % EM, property, high yield bonds, avoidance of gilts and other very low return/high cost government bonds. That all seems a pretty big difference.