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Scottish Mortgage Trust

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Scottish Mortgage Trust has performed so well since the downturn that it is now 25% of my portfolio.  Should I be considereing rebalancing?  Other main holdings are Stewart Investors Asia Pacific Leaders 12.5% (held for ten years), Lindsell Train 12% (held for a couple of years)  and Liontrust Russia 7% (held for over five years)
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  • bowlhead99bowlhead99 Forumite
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    From your numbers it's not really possible to see what investment strategy you are following, if any.

    But as you mention that it is due to performance in recent months that SMT has become such a large part of your portfolio, that implies you didn't set out to have a quarter of your money in that one fund.  So, it stands to reason that you should assess how much of your portfolio you'd like it to be, and rebalance as appropriate; 25% seems quite ballsy. 

    Despite doing well in the most recent downturn, it is still a concentrated 100% equity fund with a mixture of public and private holdings and could lose 50% of its value in a relatively short space of time (which is something that it's done before), while you'll have noted that it's currently 70% higher than it was a year ago. So  if you reduced it to a more modest level, that would be quite understandable. 
  • dunstonhdunstonh Forumite
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    SMT is very high risk and volatile.   Then again, looking at the rest of your portfolio you are pretty much off the conventional risk scale when it comes to risk.  So, maybe that isnt a problem.

    This financial crisis was unusual as many higher-risk assets didn't actually drop much or recovered very quickly.    So, don't consider this a typical fall and recovery.   If you dont mind 50-60% losses in a 12 month period and you can afford it then go with it.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • sg1000sg1000 Forumite
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    Thanks to you both, bowlhead and dunston.  I read all you comments across multiple topics and hope to learn.  The strategy is basic...try to come out of this with a profit over the next ten years that beats profits from bank deposits.  The rest of the portfolio is made up of various funds averaging 2 - 4% of the portfolio.  I won't list them to avoid undue criticism :-).
    Thanks for the input, I'll run with it (SMT) for the time being.

  • bowlhead99bowlhead99 Forumite
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    If most of the portfolio is made up of things with up to 4% weighting with a few outliers for Lindsell Train, Stewart APAC and Russia, it does seem strange to keep something that is 25%, as it's five to ten times the average size of all the other holdings.  Still, it is not necessarily 'wrong' (i.e. it doesn't make your overall portfolio 'more likely than not' to fail). But if the goal is simply to beat a bank account you are going about it in quite an extreme way.
  • edited 13 July at 7:04PM
    sg1000sg1000 Forumite
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    edited 13 July at 7:04PM
    When I first started thninking about "investing" around 2006 - 2008 banks were offering around 5% a year B)

  • Sebo027Sebo027 Forumite
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    It is also quite heavily invested in the technologies which have seen a massive boom as a result of the work from home and quarantine measures that have been implemented due to COVID-19. It is literally off the chart in terms of performance at the moment but I do wonder how long that will last as those measures are relaxed. 


  • edited 14 July at 8:52AM
    AnotherJoeAnotherJoe Forumite
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    edited 14 July at 8:52AM
    I'm not a fan of rebalancing, i tend to run my winners, but I will trim down an investment if it gets large enough, % wise that it seems out of kilter.  I wouldnt have anywhere near as much money had I trimmed my Apple shares down for example, but now they are 25% my portfolio and I'm going to start spending them down. If you don't  need the money though, I'd let it run. Ok it might drop by half, but then it might double also and I think that's very likely medium term.  
    Also, much (Nearly all?) of SMTs recent rise is down to Tesla, and I'd expect SMT to be trimming their Tesla % back just on grounds of prudence  (I still expect Tesla to rise and I bet they do also) and thus sort of doing the rebalancing for you. 
    And from what you've described your portfolio isn't really one That fits a rebalancing strategy anyway as the %  are arbitrary. It's just a question of prudence. If you do trim it back perhaps look to put it in some of your best performing  Smaller % investments to avoid getting more and more incidental investments that don't really help you grow. 
  • pafpcgpafpcg Forumite
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    The seemingly relentless rise in SMT's share price brings a major headache for me.

    Way back in 1993, my partner & I bought £5000-worth of SMT shares in an unwrapped account and we left them unregarded until several years ago I realised that there'd be a substantial capital gains tax bill if we sold them.  So I mapped a schedule to dispose of tranches of the SMT shares over multiple years to keep within the annual CGT tax-free allowance; half of them have gone now.  Perversely, I welcomed any market-wide drops in share prices because it meant that I could unload a greater number of SMT shares in the next tranche! 

    But now my heart sinks almost every time I look at my FT watchlist to see the rises in the SMT share price - are they growing faster than we can sell them?  Certainly the day when we can finally divest ourselves of the last few shares of that nearly thirty-year-old investment seems to be getting further and further away...

  • where_are_wewhere_are_we Forumite
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    Have both of you utilised your maximum ISA allowance each year. If not then you might not have your "enviable problem".  We will be reducing our overlarge SMT holding.
  • pafpcgpafpcg Forumite
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    Have both of you utilised your maximum ISA allowance each year. If not then you might not have your "enviable problem". 
    We're recalling a series of investments back in 1993!  I forget what the annual limits were for "PEPs" back then, but they were fully utilised around that time.  What we didn't do, was to gradually move the "unwrapped" investments into PEPs and ISAs over the following years - that was our rookie mistake.  (And we've made plenty more since!)

    PS:  Are you suggesting that CGT can be avoided if an unwrapped investment is sold & immediately repurchased within an ISA?  My understanding is that the gain on the sale of the unwrapped investment is liable for CGT without regard to any repurchase in an ISA.  Am I wrong?  If so, please tell me!
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