First time Stocks&Shares ISA and fund allocation question

Osoneko

I have finally decided to put money into a Stocks and Shares ISA this tax year instead of a Cash ISA. The intention is to leave the investment untouched for the next 5 years, if not longer. I intend to invest into the following funds. 
Blue Whale Growth Acc - 30%
Lindsell Train Global Equities - 30%
Fidelity Total Bond Fund - 30%
Fidelity ZERO International Index Fund - 10%
Is this enough diversification or am I trying to cover too much here? 

Another_Saver

You only need one global equity index fund and hey presto, you have maximum ultimate diversification.
Whether or not your two active funds (blue whale and lindsell train) are a good buy is something only time will tell. What I do know is that blue whale seem to have a lot of cash to spend on marketing. Lindsell Train is fine - cheap, decent not too bullshitty manager, good businesses.
The bond fund will likely do worse than cash over the next decade or so, especially if you take fund and platform charges into account.

grumiofoundation

Another_Saver said:

You only need one global equity index fund and hey presto, you have maximum ultimate diversification.

You have good diversification ('maximum ultimate' diversification is practically impossible to achieve as this would surely involve owning every company?) within equities not within assest classes (e.g. property, gold, bonds of various types)

Another_Saver

grumiofoundation said:

Another_Saver said:

You only need one global equity index fund and hey presto, you have maximum ultimate diversification.

You have good diversification ('maximum ultimate' diversification is practically impossible to achieve as this would surely involve owning every company?) within equities not within assest classes (e.g. property, gold, bonds of various types)

Just a bit of hyperbole, the L&G index fund owns almost every public company, so it's maximum diversification within the investable universe.
Buying other assets is asset allocation, diversification would be buying a diversified portfolio of commodities, bonds and property within those asset classes.

Osoneko

Another_Saver said:

You only need one global equity index fund and hey presto, you have maximum ultimate diversification.
Whether or not your two active funds (blue whale and lindsell train) are a good buy is something only time will tell. What I do know is that blue whale seem to have a lot of cash to spend on marketing. Lindsell Train is fine - cheap, decent not too bullshitty manager, good businesses.
The bond fund will likely do worse than cash over the next decade or so, especially if you take fund and platform charges into account.

Thank you. In various advisory sites, beginner investors are often advised to have some bond allocation in their investments. My initial plan actually did not include the bond fund until I read those. Would it be highly risky to be investing 100% in equities?

Osoneko

Another_Saver said:

grumiofoundation said:

Another_Saver said:

You only need one global equity index fund and hey presto, you have maximum ultimate diversification.

You have good diversification ('maximum ultimate' diversification is practically impossible to achieve as this would surely involve owning every company?) within equities not within assest classes (e.g. property, gold, bonds of various types)

Just a bit of hyperbole, the L&G index fund owns almost every public company, so it's maximum diversification within the investable universe.
Buying other assets is asset allocation, diversification would be buying a diversified portfolio of commodities, bonds and property within those asset classes.

Completely newbie in investing here - sorry for not clarifying! When I was thinking of diversification, I was thinking of equities - region and sector diversification. As mentioned in the previous post, the decision to allocate some of that ISA to a bond fund was because I read too many sites. 

dunstonh

In various advisory sites, beginner investors are often advised to have some bond allocation in their investments.

It is highly unlikely an advisory site would advise asset allocations without getting sufficient information to give out advice.  Do not interpret information and opinion as advice.

Knowledge and behaviour is certainly something to take into account when deciding asset allocation.   However, attitude to risk and capacity for loss are also other things.

Would it be highly risky to be investing 100% in equities?

Depends on your behaviour, knowledge, attitude to risk and capacity for loss.  It also depends on the type of equities.

MaxiRobriguez

Bonds have typically been seen as a "safer" investment which comes with lower annual gains but acts as a protection on your portfolio in the event of a *stock* market crash. More bonds = less volatility, (in both directions).

However that assumes bonds don't crash in tandem. Historically the correlation is negative, but if we end up in a high inflation / high interest rate world in the next few years, then there's every chance that bonds could start to sell off rapidly like stocks.

Personally I'm not keen on bonds given ultra low interest rates at the moment. Upside potential is small, downsize potential is large. I'd rather hedge stocks with gold whilst the opportunity cost is low. 

dunstonh

Personally I'm not keen on bonds given ultra low interest rates at the moment. Upside potential is small, downsize potential is large. I'd rather hedge stocks with gold whilst the opportunity cost is low. 

This view is reflected in a number of the fluid asset allocation models where cash and gilts are being used for risk reduction on corp bonds are sitting at zero allocations except for the higher risk end of the scale where some may offer upside but with risk comparable to equities.

Albermarle

You should not look at your S&S Isa portfolio in isolation .
For example 100% equities in a £40K  S&S ISA , would be less risky overall if you separately had £100K in a cash savings account .
Also depending on the type of pension you have this could also be already invested in a certain % of equities , bonds etc .