How many funds in a portfolio?

Linton

Sally57 wrote: »

Linton, would you mind me asking what is the percentage split between your growth, income and WP portfolios?

Growth: 3/7. Wealth Preservation: 2/7 Income: 2/7. The fractions are of both the investments and the cash, mainly in PBs. The latter forms part of the WP tranche.

Linton

DrSyn wrote: »

This is the classic " How long is a piece of string" questions.

It really depends on a number of things.

1. In my opinion 20 different funds is far to high for the average investor. Such a person should be able to do the job with just one low cost, well diversified global multi asset fund. At the most say 5 funds.

2. Warren Buffet I believe, states in his will, the money left to his wife should be:-
90% in a low cost fund tracking S&P 500 and 10% in US treasure bonds.

3. Lars Kroijer thinks you just need a 2 fund portfolio.
https://www.kroijer.com/

4. Bogleheads think you need a 3 fund portfolio.
https://www.bogleheads.org/blog/the-three-fund-portfolio/
https://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_investment_philosophy
https://financinglife.org/best-books-on-investing/bogleheads-guide-three-fund-portfolio/

5. Here you can take your pick from some off those that are well respected.
https://portfoliocharts.com/portfolios/


You pays your money and takes your pick. You can make investing as simple or as complex as you like.

I always go for the simple. That way you can easily keep track of what the portfolio is doing and monitor the share/bond split to control the risk. Also making sure there is no overlap between funds is easier.

It all depends on your objectives. For example, if you are only investing for the long term with money that at least at the moment is not important for your standard of living then I would agree that 20 funds is far too many. Though avoiding taking advantage of some potential lucrative niches would be an opportunity missed, so I think for a sizeable pot 3 is too low.



However if you are retired, needing well diversified inflation linked income for ongong expenditure, medium term (since the very long term is not so much an issue ) inflation protection, and some reassurance that in the event of a serious crash one wont be left comparatively destitute, then investing becomes rather more complex. A strategy based on believing choosing the xx in VLSxx is the only investment decision one ever needs make would be totally inadequate.

bostonerimus

newbinvestor wrote: »

I hold 20 different funds and wondered if this was normal for the average investor.

The investor with a multi-asset fund like VLSxx owns close to 20 funds.

MaxiRobriguez

aroominyork wrote: »

Tut tut. And there was me thinking you were the best new addition to the forum in recent months. I’ll have to start ignoring you.

For what it's worth I've held the same ten since really starting investing properly and I'm likely to for the forseeable so the valuation/fund numbers should "improve" over time. I've got 30 years to catch up with most of you lot!

bostonerimus

A retirement portfolio with just say VLS60 would not be optimal, but add some cash and a state pension you have a workable solution for many circumstances. Whether you take a chronological buckets approach or have a more total return philosophy it all comes down to asset allocation and balancing risk and return with your circumstances.

For example as I have secured sufficient inflation linked income with a rental, DB pension and state pensions I don’t worry about wealth preservation and have a 70/30 portfolio that will increase its equity percentage as I get older. I keep a year or so cash in the bank just for cash flow and emergencies. The equities are mostly in a domestic and an international equity fund as that’s produced good returns for me in the past. I could up the risk profile, but I’m not convinced of the long term benefits or my ability to manage such a portfolio.

[Deleted User]

bostonerimus wrote: »

The investor with a multi-asset fund like VLSxx owns close to 20 funds.

And pays a fee on both the VLSxx and the underlying funds. Ouch.

ColdIron

That's not how it works, you don't pay the fees of the underlying trackers and the VLS fee

[Deleted User]

ColdIron wrote: »

That's not how it works, you don't pay the fees of the underlying trackers and the VLS fee

It's not clear but you are probably right. I thought if VLS60 holds Vanguard SP500 for example, you would pay the charges of both funds.

stephenadarglas

Vanguard does indeed include a variety of their funds however the costs still doesn't add up to a hill of beans.

talexuser

newbinvestor wrote: »

I thought if VLS60 holds Vanguard SP500 for example, you would pay the charges of both funds.

Maybe you mean a Lifestrategy OCF is a small fraction of a % more than a simple FTSE or S&P tracker? Put them into a trustnet graph and see what the total returns are, I doubt it matters that much.

Adding most of a % OCF in a poor performance "closet tracker" active fund... now that will affect returns over a long time