Portfolio Reassessment - Critique

Stargunner

Of course all at once, unless perhaps it is a portfolio that is not sufficiently conservative because you are fearful of (e.g.) having 5% of your money in Scottish Mortgage at 800p when you saw it at 500p three months ago and know it's something that has a track record of dropping 60-80% from time to time. If the allocations make you nervous, go back to the drawing board - don't just grit your teeth and slowly inch into a portfolio that you are not really going to be happy holding when you eventually get it.

Apart from the 2008 crash I can’t see that SMT has dropped anywhere near your quoted figures in the last 15 years. In fact it is one of the best performing IT’s that you can hold.

AngieP61

bowlhead99 said:

AngieP61 said:

Decision made, we're sticking with the portfolio and the 42% in WP funds. Thanks everyone for your input. Now its just deciding how to get back into the market, slowly by drip feeding or all at once!

Well, it sounds like you have given it some thought, been decisive, and concluded that what you want is to own a portfolio of investments in ISA and pension accounts, including 42% in WP to provide some downside protection along with the 58% of equities funds that are volatile but known to offer good growth potential over long time periods. Good for you. It will probably be fine.

However, if that wasn't the end of the story and you've now had some further discussions and already changed your mind again, concluding that you don't want that portfolio at all, and instead what you would *really* prefer to be holding aside from the five year's of cash in savings and bond ladders cash, is 90% cash and 4% in WP funds and 6% of equities funds...

... but what you will want during July is 80% cash and 8% in WP and 12% equities, and what makes the most sense for middle of summer is 70% cash, 12% WP and 18%... but by September you'll be more comfortable with 60% cash, 16% WP,  24% equities, but as autumn kicks in, it will be better to have 50% in investments (29% equities, 21% WP funds) and 50% in cash, while by Christmas you'll want the ISAs and SIPPs to contain 35% equities, 25% wealth preservation, 40% cash.....

.... then by all means, 'drip feed' your cash back into investments at 10% a month!  And then by Easter next year you'll have it all 100% invested into a portfolio that blends higher volatility equity funds with more conservative wealth preservation funds which is a portfolio that you know today makes sense for your long term needs and with which you would be comfortable.

If you know you want that portfolio by this time next year, and have the money to buy it, and it's more conservative than what you had for the last several years, why not go out and buy it.

If you don't want that portfolio at all, and instead for the coming months you want something more conservative because you get nervous during market volatility (despite knowing that market volatility is an inevitable part of investing), then I would question whether your conclusion of 58% 'aggressive growth' /42% 'cautious mixed asset' is sufficiently conservative, and perhaps you should go back to the drawing board rather than starting a drip feed towards that portfolio.

Because if you are not truly comfortable with holding that portfolio today (which is why you are considering drip feeding towards it rather than simply buying it), then it doesn't sound like it is right for you. Are you saying it's wrong now but it would be right next year and the year after and the year after and the year after?

Drip feeding is a good psychological crutch when investing for the first time, and is sometimes forced upon us because new money we have available to invest only arrives monthly (e.g. through salary or business or investment income). However, if your ISA and SIPP accounts were already fully invested and you are only in cash because you paused to have a think about what you really want, it would make sense to go back to being fully invested, now that you know what you want.

If you buy this portfolio slowly by drip feeding it, because it's a portfolio that you don't want 'in all weathers', how many times per decade are you going to sell it all out to cash and then drip-feed back in? If that sounds like a silly question because it is a portfolio that you'll be fine with in all weathers, then it doesn't make a lot of sense to be thinking as you said in your last post, shall I "get back into the market slowly by drip feeding, or all at once".

Of course all at once, unless perhaps it is a portfolio that is not sufficiently conservative because you are fearful of (e.g.) having 5% of your money in Scottish Mortgage at 800p when you saw it at 500p three months ago and know it's something that has a track record of dropping 60-80% from time to time. If the allocations make you nervous, go back to the drawing board - don't just grit your teeth and slowly inch into a portfolio that you are not really going to be happy holding when you eventually get it.

I must say we deserved that. When we made our decision I had every intention of going all in and still have. It was my husband who mentioned the markets are high and funnily enough he offered the current price of SMT as an example! We have been investing for long enough to know not to try to time the market! We should of known better than to even ask the question. Anyway all sorted now, so good to talk it through on this forum though.  

Linton

Stargunner said:

Of course all at once, unless perhaps it is a portfolio that is not sufficiently conservative because you are fearful of (e.g.) having 5% of your money in Scottish Mortgage at 800p when you saw it at 500p three months ago and know it's something that has a track record of dropping 60-80% from time to time. If the allocations make you nervous, go back to the drawing board - don't just grit your teeth and slowly inch into a portfolio that you are not really going to be happy holding when you eventually get it.

Apart from the 2008 crash I can’t see that SMT has dropped anywhere near your quoted figures in the last 15 years. In fact it is one of the best performing IT’s that you can hold.

The point is that it did drop by 60% or so (from memory) in 2008 and in Jan 2003, only 5-6 years before the 2008 crash SMT dropped back to the level it was at in 1995 after dropping 55% from its height in 2000.  It would not be surprising if it did the same at some point in the future, perhaps several times over the life of the investment.

Making your choice of investments purely on the basis of the period post the 2008 crash is extremely dangerous - it has been one of the most benign times for investors ever.

Stargunner

Linton said:

The point is that it did drop by 60% or so (from memory) in 2008 and in Jan 2003, only 5-6 years before the 2008 crash SMT dropped back to the level it was at in 1995 after dropping 55% from its height in 2000.  It would not be surprising if it did the same at some point in the future, perhaps several times over the life of the investment.

Making your choice of investments purely on the basis of the period post the 2008 crash is extremely dangerous - it has been one of the most benign times for investors ever.

Linton said:

The point is that it did drop by 60% or so (from memory) in 2008 and in Jan 2003, only 5-6 years before the 2008 crash SMT dropped back to the level it was at in 1995 after dropping 55% from its height in 2000.  It would not be surprising if it did the same at some point in the future, perhaps several times over the life of the investment.

Making your choice of investments purely on the basis of the period post the 2008 crash is extremely dangerous - it has been one of the most benign times for investors ever.

Yes it did drop around 60% from May 2008 to Feb 2009, but it was a gradual drop over a 9 month period like most other equity funds at that time. 

The world has changed a lot since 2008 so what is the point in even looking at performance figures of funds over 13 years ago. 

If you select a fund Like SMT you can easily monitor it regularly with technology nowadays. If you feel it is not performing or crashing you can easily sell it.

AnotherJoe

Linton said:

A bit harsh Bowlhead!  But I agree with you.  If the 58/42 portfolio is not appropriate right now it is probably not going to be appropriate in the future.  An investor wshould assume that at some stage there will be shocks to the market of greater severity and construct their portfolio accordingly.  This is particularly important for a retirement portfolio as there is unlikely to be the opportunity for significant extra contributions to the pot.  

I think it was bang on, not harsh at all.

AnotherJoe

Linton said:

Stargunner said:

Of course all at once, unless perhaps it is a portfolio that is not sufficiently conservative because you are fearful of (e.g.) having 5% of your money in Scottish Mortgage at 800p when you saw it at 500p three months ago and know it's something that has a track record of dropping 60-80% from time to time. If the allocations make you nervous, go back to the drawing board - don't just grit your teeth and slowly inch into a portfolio that you are not really going to be happy holding when you eventually get it.

Apart from the 2008 crash I can’t see that SMT has dropped anywhere near your quoted figures in the last 15 years. In fact it is one of the best performing IT’s that you can hold.

The point is that it did drop by 60% or so (from memory) in 2008 and in Jan 2003, only 5-6 years before the 2008 crash SMT dropped back to the level it was at in 1995 after dropping 55% from its height in 2000.  It would not be surprising if it did the same at some point in the future, perhaps several times over the life of the investment.

Making your choice of investments purely on the basis of the period post the 2008 crash is extremely dangerous - it has been one of the most benign times for investors ever.

it dropped from 650 to 450 in March.

Its now 800 which is good as i own some.

FWIW I think a huge amount of that drop and subsequent rise was Tesla which is around 10% of SMT, and it dropped about 60% in that period (and then rose back up to higher)

Which is also good as i own some of that also 

StellaN

bowlhead99 said:

AngieP61 said:

Decision made, we're sticking with the portfolio and the 42% in WP funds. Thanks everyone for your input. Now its just deciding how to get back into the market, slowly by drip feeding or all at once!

Well, it sounds like you have given it some thought, been decisive, and concluded that what you want is to own a portfolio of investments in ISA and pension accounts, including 42% in WP to provide some downside protection along with the 58% of equities funds that are volatile but known to offer good growth potential over long time periods. Good for you. It will probably be fine.

However, if that wasn't the end of the story and you've now had some further discussions and already changed your mind again, concluding that you don't want that portfolio at all, and instead what you would *really* prefer to be holding aside from the five year's of cash in savings and bond ladders cash, is 90% cash and 4% in WP funds and 6% of equities funds...

... but what you will want during July is 80% cash and 8% in WP and 12% equities, and what makes the most sense for middle of summer is 70% cash, 12% WP and 18%... but by September you'll be more comfortable with 60% cash, 16% WP,  24% equities, but as autumn kicks in, it will be better to have 50% in investments (29% equities, 21% WP funds) and 50% in cash, while by Christmas you'll want the ISAs and SIPPs to contain 35% equities, 25% wealth preservation, 40% cash.....

.... then by all means, 'drip feed' your cash back into investments at 10% a month!  And then by Easter next year you'll have it all 100% invested into a portfolio that blends higher volatility equity funds with more conservative wealth preservation funds which is a portfolio that you know today makes sense for your long term needs and with which you would be comfortable.

If you know you want that portfolio by this time next year, and have the money to buy it, and it's more conservative than what you had for the last several years, why not go out and buy it.

If you don't want that portfolio at all, and instead for the coming months you want something more conservative because you get nervous during market volatility (despite knowing that market volatility is an inevitable part of investing), then I would question whether your conclusion of 58% 'aggressive growth' /42% 'cautious mixed asset' is sufficiently conservative, and perhaps you should go back to the drawing board rather than starting a drip feed towards that portfolio.

Because if you are not truly comfortable with holding that portfolio today (which is why you are considering drip feeding towards it rather than simply buying it), then it doesn't sound like it is right for you. Are you saying it's wrong now but it would be right next year and the year after and the year after and the year after?

Drip feeding is a good psychological crutch when investing for the first time, and is sometimes forced upon us because new money we have available to invest only arrives monthly (e.g. through salary or business or investment income). However, if your ISA and SIPP accounts were already fully invested and you are only in cash because you paused to have a think about what you really want, it would make sense to go back to being fully invested, now that you know what you want.

If you buy this portfolio slowly by drip feeding it, because it's a portfolio that you don't want 'in all weathers', how many times per decade are you going to sell it all out to cash and then drip-feed back in? If that sounds like a silly question because it is a portfolio that you'll be fine with in all weathers, then it doesn't make a lot of sense to be thinking as you said in your last post, shall I "get back into the market slowly by drip feeding, or all at once".

Of course all at once, unless perhaps it is a portfolio that is not sufficiently conservative because you are fearful of (e.g.) having 5% of your money in Scottish Mortgage at 800p when you saw it at 500p three months ago and know it's something that has a track record of dropping 60-80% from time to time. If the allocations make you nervous, go back to the drawing board - don't just grit your teeth and slowly inch into a portfolio that you are not really going to be happy holding when you eventually get it.

Usually I would totally agree with you on this point especially as I have always been an 'invest and hold' type of person and always invested sums from day 1 rather than drip feed. However, these are very different times and circumstances and in my opinion the markets are quite extreme in certain sectors with some of the OP's holdings priced at the very top share value SMT, PCT etc. Therefore, I personally see no reason not to invest the total amount straight away mainly because there should be some dips in the next 6 months or so but who knows the price may go up even further. Just my opinion and personal preference but if it was my money I would hold some back in cash rather than invest the entire £650K in one go.     

MarkCarnage

As an observation, the 'bar bell' approach above (with most of these funds) will have worked pretty well in the last few months, although if I'm reading it correctly it was liquidated to cash in February. In my own definition of risk (permanent loss or significant diminution of capital), this portfolio isn't that high risk - it's likely to be pretty volatile at times, but provided there are no involuntary milestones along the way where funds need to be realised it's fine in my book. You can always sell from the WP element of it.
If you do want to dial things down a bit, rebalance it towards WP over time as suggested above. 

MarkCarnage

FWIW I think a huge amount of that drop and subsequent rise was Tesla which is around 10% of SMT, and it dropped about 60% in that period (and then rose back up to higher)

Tesla is the second largest holding at about 8.5%. A year ago it was less than half that. The managers haven't bought any more shares, although I do know that there was a fairly lengthy and intense debate within Baillie Gifford about the stock a year or so ago. 

The nature of the fund is such that there will be concentration of holdings, and quite a 'tail' of small, often unlisted stocks. Some of these will die a death, but one or even more may be the next Amazon, Illumina, Netflix etc. 

AnotherJoe

MarkCarnage said:

FWIW I think a huge amount of that drop and subsequent rise was Tesla which is around 10% of SMT, and it dropped about 60% in that period (and then rose back up to higher)

Tesla is the second largest holding at about 8.5%. A year ago it was less than half that. The managers haven't bought any more shares, although I do know that there was a fairly lengthy and intense debate within Baillie Gifford about the stock a year or so ago.

As of end of May, eg just 3 weeks ago, Tesla was the largest holding at 11.1%.

Since then Tesla has risen nearly 25% so unless they've sold some, its probably more like 12% now.