Inheritance money - how many investment trusts to hold.

Bigbobby

I have inherited £10,000 from my gran who passed away earlier this year.  I'm 34 and I have no debts, have an emergency fund and I am overall in a good financial position.  I have done some research and I feel investment trusts are a good option and have come to the conclusion that investment trust tend to outperform OEICs.  I could overpay my mortgage but there is the potential for better returns by investing.  I know there is no magic number but I am unsure on the number of investment trusts I should invest in.  I know it is important to spread risk across different sectors but not to the extent that i dilute too much and there is potential crossover.  I have read that for smaller investors 1 global fund such as Scottish Mortgage or Alliance Investment Trust would be sufficient (albeit I have noticed SM is heavily concentrated in North America and on technology!).  Others say 10 investment trusts is a good rule of thumb to spread out across different regions and sectors - Jupiter European Opportunities, BMO global smaller companies, TR property investment, Finsbury Growth and income etc.  I know a lot of investment trusts have a lot of holdings themselves, some in their 100s.  I am patient and i am willing to invest for at least 5 years which is recommended.

[Deleted User]

I hold a number of ITs. Monks, Mid Wynd, Martin Currie being the core and Edinburgh Worldwide, Smithson and Fidelity China Special being the satellites. I did a lot of research when I decided these - each does something different.
For 10k I would just choose one whose Investment strategy you understand and agree with and let the manager choose the regions and sectors. Be careful of the buy/sell spreads though.

tacpot12

Yes, for £10K, I would think that a single broad (Global?) fund would be sufficient. I hold a number of ITs in my retirement portfolio, one reason being that they they pay dividends (and I need income), and they can hold reserves that allow them to maintain the level of dividends they pay at times when the dividends they are receiving have reduced (e.g. during a global pandemic). This advantage doesn't seem to be something that you needs, and as I don't agree that ITs offer better performance that OEICs, I'm not sure you are right to rule out OEICs from your selection. There are some very good global equity funds that are OEICs. 

Linton

You mention SMT as a major holding.  Very high performers can fall very fast.  Between May and November `2008 SMT dropped by about 60% and did not recover until 2 years later.  How would you have felt if you were investing then and lost £6000 of your inheritance?

If you want a bit of excitement, fine.  But if you are serious about investing I would suggest you take up tacpot12's advice and go for something rather more boring..

ColdIron

Going all in on Scottish Mortgage would be what Sir Humphrey would call 'courageous'

With £10,000 there is no point in trying to construct a bespoke portfolio so 1 investment should be sufficient for now. By limiting yourself to ITs you are dismissing index funds which in reality are probably your best bet. Simple, cheap, great diversification, fire and forget. In your position I would choose a multi asset fund (comprised of trackers) or perhaps a global index tracker

If I had to choose a single IT maybe Bankers? Cheap (for an active fund), diverse and balanced, no gearing and low discount/premium. But we don't know much about your circumstances, objectives etc. I like ITs but for these sums I'd still suggest a fund/OEIC

csgohan4

HMWO cheap , nothing spectacular but you know you will end up with more than you put in over the years, however is an ETF

Another_Saver

Bigbobby said:

I have inherited £10,000 from my gran who passed away earlier this year.  I'm 34 and I have no debts, have an emergency fund and I am overall in a good financial position.  I have done some research and I feel investment trusts are a good option and have come to the conclusion that investment trust tend to outperform OEICs.
There is no evidence, or reason for this.
  I could overpay my mortgage but there is the potential for better returns by investing.  I know there is no magic number but I am unsure on the number of investment trusts I should invest in.  I know it is important to spread risk across different sectors but not to the extent that i dilute too much and there is potential crossover.  I have read that for smaller investors 1 global fund such as Scottish Mortgage or Alliance Investment Trust would be sufficient (albeit I have noticed SM is heavily concentrated in North America and on technology!).  Others say 10 investment trusts is a good rule of thumb to spread out across different regions and sectors - Jupiter European Opportunities, BMO global smaller companies, TR property investment, Finsbury Growth and income etc.  I know a lot of investment trusts have a lot of holdings themselves, some in their 100s.  I am patient and i am willing to invest for at least 5 years which is recommended.

Why not just one global index fund? Do you feel you understand these particular ITs well enough to have sound reason to depart from using index funds?

Bigbobby

Thanks for the feedback everyone.  It looks as if I was fixating on ITs too much so I will open my mind up to trackers.  If I do go for a global should I invest in developed countries only such as through the Vanguard FTSE Global All Cap index.  Or alongside this should i also have another index such as Vanguard Emerging Markets Stock Index?  With 2 separate indexes I am investing in both developed and developing countries.  If I do invest in two what percentage should i invest in each?

george4064

Bigbobby said:

Thanks for the feedback everyone.  It looks as if I was fixating on ITs too much so I will open my mind up to trackers.  If I do go for a global should I invest in developed countries only such as through the Vanguard FTSE Global All Cap index.  Or alongside this should i also have another index such as Vanguard Emerging Markets Stock Index?  With 2 separate indexes I am investing in both developed and developing countries.  If I do invest in two what percentage should i invest in each?

The Vanguard FTSE Global All Cap Fund has 11.1% in emerging markets, so no need to have a separate meeting markets fund unless you particularly want to add further exposure to EM?

kazwookie

Pay the £10k off your mortgage.

dunstonh

and have come to the conclusion that investment trust tend to outperform OEICs.

ITs are frequently higher risk than their closest equivalent OEIC.   This can lead to higher performance when going up but worse performance when going down.  Since unbundling took place from 2013, the differences on a comparable risk level are not what they once were.  ITs can go to a higher risk level than is possible with OEICs.

 Others say 10 investment trusts is a good rule of thumb to spread out across different regions and sectors 

When you have £100k plus then yes.   When you have £10k then no.