Portfolio advice

brotherbarry

Hi All

I was hoping for some portfolio advice, it essentially boils down to passive vs active. Apologies for the long post below, but was hoping to give you all the information you need to give me advice.

While I agree with the cost arguments for passive investment, some of my active funds have performed well making me a little reluctant to sell them.

In terms of information on myself; I am 29 years old, recently married, no kids currently and a homeowner. I am looking to invest to retire in my early 50s. I currently invest £660 a month across a number of funds, but know I need to increase this amount to achieve my goals.

I currently have ~13.5k invested across the below funds.
- Artermis Strategic Bond 12% of portfolio vs 15% target
- Fundsmith Equity 11% of portfolio vs 15% target
- iShares Japan Equity Index 8% of portfolio vs 10% target
- Jupiter India 6% vs 6% target (I am considering removing this fund, as I believe the allocation is too high and I can achieve an appropriate allocation through other active funds or trackers)
- L&G US Index 11% vs 12.5% target
- Lindsell Train UK Index 5% vs 5% target
- Woodford Equity Income 4% vs 3% target (considering removing this as the fund has essentially been an expensive tracker since inception)
- Rathbone Global Opportunities 18% vs 15% target (considering to remove, over the last 10 years performance has tracked the market – I find the high fees are unjustified)
- River & Mercentile UK Equity Smaller Companies 10% vs 6% target
- Stewart Investors Asia Pacific Leaders 14% vs 12.5% target

Last year I noticed by asset allocation was all over the place with some funds being over 20% of my portfolio! I defined some arbitrary targets to introduce a bit more diversification. I am moving towards these by investing my monthly amount equally in those funds below the target allocations.

I’ve estimated I’m paying 1.1% charges annually (platform fee + OCF), and have been considering to reduce my fees and invest in trackers reduce the annual fees (either Vanguard LifeStrategy 80 or a combination of All World Equity and Bond trackers to achieve my target equity and bond allocations)

Now my key questions is, would changing to a passive investment portfolio help me achieve this goal quicker through the reduced costs? Or would this put me at risk, as I would be losing a number of funds which have had great success in outperforming the market (e.g. Fundsmith Equity and Lindsell Train UK)?

I am also considering introducing physical gold into my portfolio via Bullion Vault (as I am from an Indian background, gifting gold is part of the culture and I am hoping to reduce the burden of this later in life through $ cost averaging).

Any help you guys can give me would be highly appreciated!!

A_T

Seems unnecessarily complicated but as long as your platform does not charge trading fees for funds it probably won't matter. You could just buy a global index tracker like Vanguard FTSE Global All Cap Index fund but it's pretty boring if you like investing as a bit of a hobby.

geeovana

brotherbarry wrote: »

Now my key questions is, would changing to a passive investment portfolio help me achieve this goal quicker through the reduced costs? Or would this put me at risk, as I would be losing a number of funds which have had great success in outperforming the market (e.g. Fundsmith Equity and Lindsell Train UK)?

What strategy did you use to choose the above concoction of funds as your investing portfolio? How do you know the above funds will outperform the general market in the coming years?


For a modest portfolio of your size a single tracker fund would almost certainly be the preferred solution.


To retire in your early 50's looks ambitious given your current monthly investment. However this clearly depends on your desired retirement income, personal circumstances etc. so I will refrain from judgemnt until/if further information is provided.

brotherbarry

geeovana wrote: »

What strategy did you use to choose the above concoction of funds as your investing portfolio? How do you know the above funds will outperform the general market in the coming years?


For a modest portfolio of your size a single tracker fund would almost certainly be the preferred solution.


To retire in your early 50's looks ambitious given your current monthly investment. However this clearly depends on your desired retirement income, personal circumstances etc. so I will refrain from judgemnt until/if further information is provided.

The current portfolio was chosen by what was "in fashion" as certain points in time, while trying to make achieve some sort of diversification. Not the best methodology...


I agree, the idea of one fund is probably much easier... Keeping track of allocations is becoming a bit of a pain, and would be simpler and less hassle to reduce this to just one...


Would it be advisable to have this all in a world equity fund like Vanguard FTSE Global All Cap Index or keep in LifeStrategy 80 to reduce volatility?


In terms of the monthly investment amount, I will be increasing this gradually over the coming months. Currently my wife is unemployed, but once she has found a job, my contribution to the mortgage and house bills will fall allowing me to increase my monthly investment. We will also look to for a buy-to-let in the next 3-5 years to supplement the amount invested in funds.

Iain_For

brotherbarry wrote: »

..


Would it be advisable to have this all in a world equity fund like Vanguard FTSE Global All Cap Index or keep in LifeStrategy 80 to reduce volatility?

Depends on your appetite for risk - there's a useful questionnaire on Vanguard's US site that might help you judge that:

https://personal.vanguard.com/us/FundsInvQuestionnaire

You can also look at the impact of costs here:

https://www.vanguard.co.uk/adviser/adv/tools/costsimulation#

bostonerimus

This is so similar to many of the portfolios that get posted. It's depressing that the fund industry seems to have done such a good marketing job to so many naive investors.

For me the portfolio has too many funds, their fees are too high and they are too "niche". I would buy a global equity index and a global bond index...or just a good multi-asset fund.

brotherbarry

Thanks all for the advice.

I'm leaning towards switching to Vanguard LifeStrategy 80.

In the future, I will consider setting my own asset allocations through holding separate global equity and bond funds, but will need to take a bit more time understanding what an appropriate asset allocation would be for myself. Also, would be good to reduce the exposure to UK Equities that is present in LifeStrategy.

In the short term, I'd be better off ditching the current haphazhard portfolio, reducing my fees paid!

Iain_For

brotherbarry wrote: »

Thanks all for the advice.

I'm leaning towards switching to Vanguard LifeStrategy 80.

In the future, I will consider setting my own asset allocations through holding separate global equity and bond funds, but will need to take a bit more time understanding what an appropriate asset allocation would be for myself. Also, would be good to reduce the exposure to UK Equities that is present in LifeStrategy.

In the short term, I'd be better off ditching the current haphazhard portfolio, reducing my fees paid!

Bear in mind that the VLS series uses the Vanguard FTSE U.K. All Share Index Unit Trust for its UK allocation, 25% of which comprises global corporations HSBC, Shell, BP, Glaxo and AstraZeneca, the reason the FTSE 100 goes up when the £ falls! However, holding a VLS fund as your core and then adding other areas or styles of investing you feel meet your goals is not a bad plan. I recently added Vanguard's Global Small-Cap Index Fund to my core VLS 60 holding, as small caps are under-represented (depending on your point of view) in the constituent funds of the VLS range, together with some Global Bond Index Fund to keep my overall equity allocation at 60%.

rathernot

Maybe combine a good passive(ish) multi-asset with some pure equities such as Fundsmith or Lindsell Train Global Equity or UK Equity.

geeovana

brotherbarry wrote: »

The current portfolio was chosen by what was "in fashion" as certain points in time, while trying to make achieve some sort of diversification. Not the best methodology...


I agree, the idea of one fund is probably much easier... Keeping track of allocations is becoming a bit of a pain, and would be simpler and less hassle to reduce this to just one...


Would it be advisable to have this all in a world equity fund like Vanguard FTSE Global All Cap Index or keep in LifeStrategy 80 to reduce volatility?


In terms of the monthly investment amount, I will be increasing this gradually over the coming months. Currently my wife is unemployed, but once she has found a job, my contribution to the mortgage and house bills will fall allowing me to increase my monthly investment. We will also look to for a buy-to-let in the next 3-5 years to supplement the amount invested in funds.

You should really take some time to understand the differences between each fund before you start investing into them.

The FTSE Global ALL Cap Index is an ETF that aims to replicate the global market through purchasing shares in several thousand companies. This fund is what I invest in personally, as aside from the issues regarding 'free float' it matches the performance of the global market well.

The VLS 80 is a fund of trackers that goes some way towards tracking the global market performance. I say 'some way' as it is heavily biased towards the UK. Up at around 20% I believe compared to the reality of around 6%. It has 80% in equities and 20% bonds. If you feel the UK economy will outperform the market in the coming years then you may well like to choose the VLS fund. If, like many of us, you have absolutely no idea which economy will do best, then the Vanguard All cap fund is a good option.

You would have to add some percentage of bonds to your portfolio should you choose the All-cap fund as you progress towards retirement.

IanManc

geeovana wrote: »

You should really take some time to understand the differences between each fund before you start investing into them.

The FTSE Global ALL Cap Index is an ETF that aims to replicate the global market through purchasing shares in several thousand companies. This fund is what I invest in personally, as aside from the issues regarding 'free float' it matches the performance of the global market well.

The VLS 80 is a fund of trackers that goes some way towards tracking the global market performance. I say 'some way' as it is heavily biased towards the UK. Up at around 20% I believe compared to the reality of around 6%. It has 80% in equities and 20% bonds. If you feel the UK economy will outperform the market in the coming years then you may well like to choose the VLS fund. If, like many of us, you have absolutely no idea which economy will do best, then the Vanguard All cap fund is a good option.

You would have to add some percentage of bonds to your portfolio should you choose the All-cap fund as you progress towards retirement.

The Vanguard Global All Cap Index Fund that I invest in is an OEIC, not an ETF.