Thoughts on my Asset allocation and financial position

krish123

Hi all,
just recently logged back into this forum where I sought after advice on how to start investing back in 2014.  I took the advice (some very good advice looking back at it) and have continued to invest since. 

The main part of my portfolio consists of the following:
VLS80 
ishares bric 50 
ishares global property class d ( will begin investing in this beginning of next month)
My aim is to spread my money across as follows, my portfolio is growing slowly and so now needs more structure.
VLS80 - 40%
ishares BRIC 50 - 25%
ishares global property - 20%
individual shares - 10% ( for income mainly to reinvest back into the above funds) 
I’m now 28 and will be investing for many years to come, full time employed and contribute to company pension (now at 16K)I have also maxed out HTB isa but am not immediately looking to buy a property so this money will stay put for now. I have 6 + months of cash savings additionally.
So, do you think asset allocation and investments are solid? Is my financial position decent for my age? I’m looking for positive criticism or any improvements I can make to my financial future.
Thanks for reading.

Audaxer

At your age, I think I would just put it all in VLS80.   

ishares BRIC 50 looks like a high risk ETF, so a 25% allocation seems high. I don't see the point of investing in individual shares - if you do want income to reinvest, would in not be easier, cheaper and more diversified to have an equity income fund(s)?

krish123

I understand the BRIC 50 is high risk but I am bullish on these emerging markets and believe in the long term they will be key economies in the future, point taken that 25% could be slightly too high though.

good point on the income fund, see when I was a novice I started investing in a few individual companies alongside vls80 etc and have Just kept them to reduce fees etc. What would be a good a good example of diversified income fund? By having this surely there would be a lot of overlap with vls80?

I have one eye on the income the portfolio generates as in the future I will be looking for my portfolio to supplement my income from my job and want that to keep growing over the years.

Audaxer

krish123 said:

good point on the income fund, see when I was a novice I started investing in a few individual companies alongside vls80 etc and have Just kept them to reduce fees etc. What would be a good a good example of diversified income fund? By having this surely there would be a lot of overlap with vls80?

I have one eye on the income the portfolio generates as in the future I will be looking for my portfolio to supplement my income from my job and want that to keep growing over the years.

There are lots of good and well diversified equity income funds or ITs. For example City of London IT is a UK equity income IT and currently yields around 5% and has increased it's dividend every year for the last 54 years. There are a number of other 'IT Dividend Heroes' that have also increased dividends for several decades - details easily found by a search. If you want more diversification there are lots of good global equity income funds and ITs but they generally have lower yields than the UK and Asian equity income funds. I think the only downside of ITs for your purposes is that on many platforms it is more costly to reinvest dividends compared to reinvesting fund dividends.

You could still supplement your income from your job in future from selling some VLS80 units when required, or by converting your VLS80 to an income portfolio at the time you decide you need the income.

MarkCarnage

I understand the BRIC 50 is high risk but I am bullish on these emerging markets and believe in the long term they will be key economies in the future, point taken that 25% could be slightly too high though.

Don't confuse the performance of a country's economy with its listed equity market. The two can be very significantly different. Most of these countries have significant government control over key companies in their countries, often resource based ones. In these cases it's the country's interests which will come first, second, third and the external investor will come last. 

Prism

krish123 said:

good point on the income fund, see when I was a novice I started investing in a few individual companies alongside vls80 etc and have Just kept them to reduce fees etc. What would be a good a good example of diversified income fund? By having this surely there would be a lot of overlap with vls80?

I have one eye on the income the portfolio generates as in the future I will be looking for my portfolio to supplement my income from my job and want that to keep growing over the years.

I would mostly forget about income funds. Just invest and then should you want income just sell what you need. Income fund usually invest in otherwise low performance equities.

grumiofoundation

krish123 said:

Hi all,
just recently logged back into this forum where I sought after advice on how to start investing back in 2014.  I took the advice (some very good advice looking back at it) and have continued to invest since. 

The main part of my portfolio consists of the following:
VLS80 
ishares bric 50 
ishares global property class d ( will begin investing in this beginning of next month)
My aim is to spread my money across as follows, my portfolio is growing slowly and so now needs more structure.
VLS80 - 40%
ishares BRIC 50 - 25%
ishares global property - 20%
individual shares - 10% ( for income mainly to reinvest back into the above funds) 
I’m now 28 and will be investing for many years to come, full time employed and contribute to company pension (now at 16K)I have also maxed out HTB isa but am not immediately looking to buy a property so this money will stay put for now. I have 6 + months of cash savings additionally.
So, do you think asset allocation and investments are solid? Is my financial position decent for my age? I’m looking for positive criticism or any improvements I can make to my financial future.
Thanks for reading.

You say you aren’t looking to buy “immediately” - have you looked at lifetime ISA? If you aren’t planning on buying in the next 24 months by this time (3 tax years) you would have been able to contribute 3 x 4000, generating a 3k bonus (same as HTB max). Obviously any longer to buy and LISA bonus then outstrips HTB. 

Other advantage of LISA is can buy a 450k property outside London whereas HTB limited to 250k outside London (450k in London). Drawback of LISA is withdrawal penalty so if you did end up buying and using HTB for greater bonus would not be able to get money back without paying a penalty - although you could in this case switch to S and S LISA and use for retirement.


https://www.moneysavingexpert.com/savings/lifetime-isas/

bd10

Hi krish -- do you really want to hold the property tracker from ishares? I had a look at the portfolio, all REITS. First one Japanese. No data on occupancy rate on the web site. Either the site needs updating or the writing is on the wall so to speak. In my eyes, the commercial real estate market is dead for the next decade, worse than post-2008.

krish123

grumiofoundation said:

krish123 said:

Hi all,
just recently logged back into this forum where I sought after advice on how to start investing back in 2014.  I took the advice (some very good advice looking back at it) and have continued to invest since. 

The main part of my portfolio consists of the following:
VLS80 
ishares bric 50 
ishares global property class d ( will begin investing in this beginning of next month)
My aim is to spread my money across as follows, my portfolio is growing slowly and so now needs more structure.
VLS80 - 40%
ishares BRIC 50 - 25%
ishares global property - 20%
individual shares - 10% ( for income mainly to reinvest back into the above funds) 
I’m now 28 and will be investing for many years to come, full time employed and contribute to company pension (now at 16K)I have also maxed out HTB isa but am not immediately looking to buy a property so this money will stay put for now. I have 6 + months of cash savings additionally.
So, do you think asset allocation and investments are solid? Is my financial position decent for my age? I’m looking for positive criticism or any improvements I can make to my financial future.
Thanks for reading.

You say you aren’t looking to buy “immediately” - have you looked at lifetime ISA? If you aren’t planning on buying in the next 24 months by this time (3 tax years) you would have been able to contribute 3 x 4000, generating a 3k bonus (same as HTB max). Obviously any longer to buy and LISA bonus then outstrips HTB. 

Other advantage of LISA is can buy a 450k property outside London whereas HTB limited to 250k outside London (450k in London). Drawback of LISA is withdrawal penalty so if you did end up buying and using HTB for greater bonus would not be able to get money back without paying a penalty - although you could in this case switch to S and S LISA and use for retirement.


https://www.moneysavingexpert.com/savings/lifetime-isas/

I have had a look into the LISA however, i would like to continue to build on my portfolio with my spare money and have the HTB ISA on the side where i can withdraw the money at any time should i need it.

krish123

bd10 said:

Hi krish -- do you really want to hold the property tracker from ishares? I had a look at the portfolio, all REITS. First one Japanese. No data on occupancy rate on the web site. Either the site needs updating or the writing is on the wall so to speak. In my eyes, the commercial real estate market is dead for the next decade, worse than post-2008.

I have been trying to plug the gaps of what is missing in VLS80 and property is one of them. Not all of the REITS in this fund are commercial, one for example supplies care homes and support for elderly people, another is digital storage. Overall i still see people needing to rent. Why do you think real estate is dead? I also dont think many companies will be working from home permanently, companies want control of employees and hence will have them in the office.

lescarp88

AFAIK, Vanguard Lifestrategy funds do include a small allocation to REITs (I think some FTSE250 property stocks). Holding ishares global property in addition to VLS is overweighting property shares (which may not negatively correlate to equities) rather than access to direct property.

I went through a similar process of "what does VLS not include?". Ah, I'll add some of this or that, but then realised that lots of my intended IT purchases were already in the FTSE100/250 already and included in VLS.

IMO, one VLS fund could form your core (and could be a suitable investment for your whole pot). Then, think about whethet you truly need any diversifiers to a VLS fund as optional extras, e.g. gold, private equity, direct property, direct infrastructure, an all-weather/wealth preservation fund.

Regarding your ishares BRIC 50, perhaps consider a smaller % satellite allocation to these emerging markets.

Likewise, the City of London IT (CTY) mentioned above is concentrated to UK stocks, while not diversifying from what you already hold in VLS. CTY would be more suitable for a retiree in the decummulation phase, but you're looking to accumulate.