Retirement Portfolio?

Cat333999

I'm moving into retirement in a year and am trying to put together a portfolio that can balance income/growth and not be too exposed to the predicted downturn... It is a £1m-ish example just for round figures, but it is the % split that is most relevant........... I know ETF trackers will be cheaper but I'm hoping actively managed funds may perform better in a downturn.... in theory!!!!


Just wondering what your collective knowledgeable thoughts are on this type of mix - thanks for any thoughts



Vanguard Target Retirement 2020 - £250k
ORB - Selection of bonds 0-6 years 4% yield-ish - £100k
Fundsmith Equity Class I - Income £50k
City Of London Investment Trust £50k
RIT Capital Partners plc £50k
Baillie Gifford Long Term Global Growth 50k
Jupiter UK Smaller Companies Income 50k
Standard Life Inv Global Smaller Companies Income 50k
Stonehage Fleming Global Best Ideas Equity 50k
Lindsell Train Global Equity Class D - Income (GBP) 50k
Troy Trojan Income £50k
Legal & General Global Healthcare & Pharmaceutical 50k
Royal London Sterling Extra Yield Bond £50k
LF Miton UK Multi Cap Income 50k
First State Global Listed Infrastructure £50k
Marlborough UK Micro-Cap Income 50k

dunstonh

Just wondering what your collective knowledgeable thoughts are on this type of mix - thanks for any thoughts

Seems to lack any investment structure and looks more like a fashion investing list. Just a bunch of punts without any structure. I cant recognise any particular investment strategy or model style with that list.

Cant see any benefit to using Vanguard Target retirement fund when you are willing to use single sector funds (that fund is also more expensive than VLS and the risk reduction is of a style that is unlikely to suit the average investor as it starts higher risk than the average UK investor and ends up lower risk than the average uk investor. its a very niche fund)

Also seems quite high risk for someone looking at a short investment period. Do you have the knowledge and understanding and capacity for loss for such a spread?

Cat333999

Thanks for the feedback, appreciated. I'm already invested in many of the funds which have performed very well and are all highly rated. There is a mix of international and UK, also different sectors and fund managers which I was hoping would balance risk. ORB & Vanguard 2020, plus RIT would be new additions & more conservative instead of low performing Aviva generic funds.


But I'm happy to learn and am open to all angles and ideas, hence the post.

tacpot12

I think this portfolio is a good retirement portfolio to draw down a pension from; the bond element of the Vanguard Retirement Fund, plus the individual Bonds should provide some protection from a downturn, but I think you also need some cash held in reserve, in case the bond values also tank during a downturn. I don't think the 'active' management will help with avoiding losses in a downturn, but providing you have enough cash/bonds you don't really need to avoid the downturn, just ride it out. Of course you could also try to beat the market via timing, but you are more likely to react incorrectly to a minor blip than to spot a major downturn coming!

If you want to reduce the effect of a downturn on your capital value, you really need funds/trusts that are focused on capital preservation (e.g. Personal Assets Investment Trust). I'm not taking that approach with my retirement portfolio as I think you give up to much in terms of lost growth in the long term; I'll relying on cash/bonds/property and other income to see me through any downturn.

The portfolio is somewhat overweight in Smaller Companies/Small Caps, when perhaps it doesn't need to be. Also, the portfolio does not obviously have any Commercial Property holdings, to diversify the income stream. Unless you have commercial property income outside of this portfolio, you might want to consider a Commercial Property Fund/Trust. I have F&C Commercial Property (FCPT) and iShares UK Property EFT (IUKP) in my retirement portfolio.

Edited having see dunstonh's post - I should point out that dunstonh is a professional and I am an amateur.

OldMusicGuy

Like dunstonh said, why? It looks pretty random. That kind of portfolio looks like the thing an IFA should put together.

As a cautious DIY investor just 6 months into retirement, I have a portfolio of 3 multi asset passive funds for a large portfolio that seems fairly resilient to downside (based on its performance through this year's correction).

I did have an actively managed fund focused on income generation but I found it too volatile for my liking, but YMMV.

kidmugsy

If you want some protection in a downturn you could consider investment trusts that hold portfolios designed with that in mind. Two obvious ones are Personal Assets Trust and Ruffer Investment Company. Each publishes regular reports/reviews on their websites explaining how they see the financial world and describing their investment policies. They are almost always good reading.

Other possibilities might include RIT and Capital Gearing Trust but I believe the former has been trading at a non-trivial premium recently, which would put me off. The first two trade in their own shares with the intention of keeping their discount/premium at close to zero.

I've never kept an eye on CGT but this recent report seemed pretty clear-eyed to me.
http://www.capitalgearingtrust.com/~/media/Files/C/CGT/quarterly/CGT%20Quarterly%20Report%20-%20Jun%202018.pdf

EDIT: I see you hold RIT. At the current premium I might sell it.

bostonerimus

Far too many funds IMHO.

Cat333999

These funds (Orb/Vanguard/RIT excepted) have all performed very well for me, but moving into actual retirement and taking an income in a year's time is a reality and the downturn is a nagging worry. I thought it was pretty well balanced (UK/World/Bonds/Investment styles, etc) but the consensus seems to be it's not balanced, agree it's overweight small cap but what else is wrong?



I appreciate the advice on low cost tracking funds, but can't see any tracker holding up in a downturn... or am I wrong?



Cheers all, appreciate the advice - keep them coming...



What about your own suggested portfolios for a £1m fund investment........

dunstonh

I'm already invested in many of the funds which have performed very well and are all highly rated.

We are coming off nearly a decade of high growth. Given the high risk nature of many of those funds you would expect them to do well in growth periods. You also expec them to suffer more in negative periods. Which sort of conflicts with your downside protection objective.

There is a mix of international and UK, also different sectors and fund managers which I was hoping would balance risk.

Diversification can and does reduce risk when done properly. However, poor diversification can [STRIKE]negative [/STRIKE] negate that.

plus RIT would be new additions & more conservative instead of low performing Aviva generic funds.

Aviva funds are aimed at the mass market dont-know-what-they-are-doing types. They will never go bad but never excel. They are not designed for the specialist investor as they are not catering for that type of person.

You have funds in there which have very high loss potential. That is fine when you have a structured portfolio weighted to match a risk profile. Yours is more £50k in a bunch of funds that have a recent good track record and I suspect you have invested above your risk profile.

What about your own suggested portfolios for a £1m fund investment........

What sort of volatility level are you looking at? (as we cant tell from your posts or the funds you have).

investing is about opinion. 100 people looking will have 100 different views. However, before you start picking investments, you need to have an investment strategy and risk profile and consider your capacity for loss.

They key thing is structure and method.

For example, when looking to fill a sector, I ensure the fund meets the criteria. One of the secondary checks made after Primary filter shortlisting is that it has at least 85% of its assets in that sector. You will be surprised how many single sector funds can actually have large amounts outside of their sector. If your model is based having x% in a sector then its important that you get as close to that as possible.

Cat333999

What sort of volatility level are you looking at? (as we cant tell from your posts or the funds you have).

investing is about opinion. 100 people looking will have 100 different views. However, before you start picking investments, you need to have an investment strategy and risk profile and consider your capacity for loss.

They key thing is structure and method.

For example, when looking to fill a sector, I ensure the fund meets the criteria. One of the secondary checks made after Primary filter shortlisting is that it has at least 85% of its assets in that sector. You will be surprised how many single sector funds can actually have large amounts outside of their sector. If your model is based having x% in a sector then its important that you get as close to that as possible.

As the pension pot is already built and I have ISA's and cash elsewhere, I'm looking to achieve a 4%+-ish return and can accept some volatility as I should not need to sell beyond drawing an income. I wanted to consolidate my various pensions into one platform and invest in a mix of what I believe are top rated fund managers and funds with good track records and covering UK and World equities, balanced by Target Retirement funds and Orb. But safer funds that would generate 4%-ish would be fine......

Cat333999

kidmugsy wrote: »

If you want some protection in a downturn you could consider investment trusts that hold portfolios designed with that in mind. Two obvious ones are Personal Assets Trust and Ruffer Investment Company. Each publishes regular reports/reviews on their websites explaining how they see the financial world and describing their investment policies. They are almost always good reading.

Other possibilities might include RIT and Capital Gearing Trust but I believe the former has been trading at a non-trivial premium recently, which would put me off. The first two trade in their own shares with the intention of keeping their discount/premium at close to zero.

I've never kept an eye on CGT but this recent report seemed pretty clear-eyed to me.

EDIT: I see you hold RIT. At the current premium I might sell it.

Thanks for these I'll take a look