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investment portfolio diversification

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Hi All,

Just dipping my toes into long term investments, previously i have only saved via Banks.
I have invested a little money into a MSCI global tracker - SWDA - although it covers various markets and companies, its still heavily US biased, can anyone give me tips on how to approach diversification? and how to manage it? now that i have some funds in SWDA.
is it bad to choose other funds ie Fundsmith / Lindsell Train / Tray Trojan? all of which seem to have consistent performance accummulated?
should i be choosing funds such as VLS 60 which has a bigger share of bonds?
or should i just stock to investing more into a global index tracker other than spending time to get that extra edge as i'm a newbie to all of this.
could some people share how they have balanced their portfolio with equities?
Thanks 
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  • Alistair31
    Alistair31 Posts: 980 Forumite
    Seventh Anniversary 500 Posts Name Dropper
    edited 11 April 2020 at 7:16PM
  • Alexland
    Alexland Posts: 10,183 Forumite
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    First decision is do you just want to hold only equities or do you also want to hold the other asset types such as bonds, property, gold, etc to reduce the volatility and derisk your exposure to the possibility that equities crash (further..) or have a sustained period of poor performance? If so decide which asset types to hold in which proportions.

    Then for your equities are you happy with the developed world large+mid cap weighted exposure you are getting from SWDA (or cheaper alternatives such as LCWL) or do you want to include small cap and emerging markets? If so would you rather have a single fund/ETF solution or a small number of holdings accepting it may increase your trade fees.

    In terms of active equity funds my view is you can do without them.
  • actually, it's a different question, this is about diversification and how to go about it, as i'm new to this and you dont have anything to contribute, back out rather than quote my previous posts, it's quite obvious i didn't get the answer to what i wanted - Thanks
  • Audaxer
    Audaxer Posts: 3,547 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    edited 11 April 2020 at 7:42PM
    Hi All,

    Just dipping my toes into long term investments, previously i have only saved via Banks.
    I have invested a little money into a MSCI global tracker - SWDA - although it covers various markets and companies, its still heavily US biased, can anyone give me tips on how to approach diversification? and how to manage it? now that i have some funds in SWDA.
    is it bad to choose other funds ie Fundsmith / Lindsell Train / Tray Trojan? all of which seem to have consistent performance accummulated?
    should i be choosing funds such as VLS 60 which has a bigger share of bonds?
    or should i just stock to investing more into a global index tracker other than spending time to get that extra edge as i'm a newbie to all of this.
    could some people share how they have balanced their portfolio with equities?
    Thanks 
    A global tracker is fine if you want to go 100% equities. As you say you are dipping your toes in long term investments, I would think a medium risk multi asset fund, like VLS60 or HSBC Global Strategy Balanced, would maybe be more suitable and give you a medium risk, low cost, globally diversified portfolio. I don't think you need to add one or two of the popular active funds you mention to get an easily managed and well diversified global portfolio.
  • Alexland said:
    First decision is do you just want to hold only equities or do you also want to hold the other asset types such as bonds, property, gold, etc to reduce the volatility and derisk your exposure to the possibility that equities crash (further..) or have a sustained period of poor performance? If so decide which asset types to hold in which proportions.

    Then for your equities are you happy with the developed world large+mid cap weighted exposure you are getting from SWDA (or cheaper alternatives such as LCWL) or do you want to include small cap and emerging markets? If so would you rather have a single fund/ETF solution or a small number of holdings accepting it may increase your trade fees.

    In terms of active equity funds my view is you can do without them.
    Thanks for the above, so to your first point, this is where i'm struggling, been viewing videos and also reading this forum that diversification is key and such we need to have different types of assets, so how do you guys choose different assets? is it the case that you buy ETFs / Funds for bond/property or ETC for gold etc, i'm not sure how you diversify the assets, as such query on VLS60/80 which does hold Bonds/Equitys - so am i better off ditching SWDA for a fund like VLS?
    I havent had a period of bad performance as i only bought into SWDA last week for a small value.

    with regards to equities, i guess i want my investment to succeed, i have 20+ years before i need the cash, unless something drastic happens and thus i have been thinking about emerging markets - especially China.

    I'm with HL and thus every ETF purchase will cost me £11.95 and so i was then querying whether active funds are a better option as there is no dealing charges which is why i was looking at Fundsmith - seems to have a pretty good balance of top companies globally 

    or go for both? would it be pointless investing into SWDA + Fundsmith + Lindsell Train and the likes because there is overlap

    Ultimately - continue to invest more in my SWDA ETF + invest into more funds,
    or ditch SWDA and invest into single diversified funds
    or pick various multiple funds - personal diversification (need more resources)

  • Alistair31
    Alistair31 Posts: 980 Forumite
    Seventh Anniversary 500 Posts Name Dropper
    edited 11 April 2020 at 8:38PM
    actually, it's a different question, this is about diversification and how to go about it, as i'm new to this and you dont have anything to contribute, back out rather than quote my previous posts, it's quite obvious i didn't get the answer to what i wanted - Thanks
    FWIW then, I think you are significantly diversified already In terms of equities - and are now at risk of trying to fix something that isn’t broke. 

    Surely you considered (and discounted) diversification across different asset classes before deciding on 100% equities? Or perhaps not...

    Also, although I don’t use HL myself, I understand you can set up a regular investment and pay £1.50 per deal rather than £11.95. 
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Precisely why some people employ IFA's. There's not a model portfolio that gets rolled out for everyone to follow. Suggest you start with mainstream products initially. Then broaden your horizons once you've spent time researching the topic. There's a wealth of online and hard copy material to read that will make you better informed. In addition find some free webinars held by investment managers etc. Which are extremely informative and topical at any given point of time. 
  • actually, it's a different question, this is about diversification and how to go about it, as i'm new to this and you dont have anything to contribute, back out rather than quote my previous posts, it's quite obvious i didn't get the answer to what i wanted - Thanks
    FWIW then, I think you are significantly diversified already In terms of equities - and are now at risk of trying to fix something that isn’t broke. 

    Surely you considered (and discounted) diversification across different asset classes before deciding on 100% equities? Or perhaps not...

    Also, although I don’t use HL myself, I understand you can set up a regular investment and pay £1.50 per deal rather than £11.95. 
    I havent discounted anything, but i just wanted to get some money invested, hence now revisiting my options as i still have money in my account to invest further - so wondered how people on this forum diversified their funds and what would they do in my shoes?
    ie if i were to invest some more into active funds like Fundsmith am i restrciting my diversification? initially i was only going to invest in a ftse100 tracker but decided to go for a MSCI world tracker.
    reading up that the US economy is going to be propped up, should i just go invest more in US market with a S&P500 tracker.
    if SWDA isnt fully diverse, should i buy into a Vanguard 60 or 80 as well? which does cover bonds etc
  • Alistair31
    Alistair31 Posts: 980 Forumite
    Seventh Anniversary 500 Posts Name Dropper
    edited 11 April 2020 at 10:57PM
    So if I understand it right you are at present 100% equities in what many would consider a decent, low cost, diversified ETF.

    You are now doing some more reading that you should probably have done before investing anything and are now considering the following options; 

    1) staying 100% equities but adding some funds that you think will give you some edge, LT, Fundsmith etc, without truly understanding what this involves 
    2) Getting out of 100% equities and instead going to VLS with only 60% in equities (a drastic change)
    3) staying 100% equities but overweighting in US stocks by investing in an S&P500 tracker because the economy is being propped up  (despite in your original post saying you think you are heavily US biased already?) (also the US is not alone in being “propped up”)

    My recommendation, decide whether you really want bonds, if the answer is yes then pull the plug on SWDA, buy the appropriate VLS fund (depending on what percentage of bonds you want) and do nothing more. 
    If the answer is no, continue with SWDA and do nothing more. 

    The best thing I was given when starting out was a link to monevator, so here you are;
    https://monevator.com/highlights/
    Use your time in lockdown to read, read and read some more. 
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