How to grow £230K

Aminatidi

I'm considering upping my direct equity exposure.

Portfolio below which is around £230K.

£50K cash and NS&I linkers and approx £2K/month new money going in from salary.

Feels a bit tame which perhaps made sense this year with so much uncertainty.

Very tempted to stick a big chunk of it in Fundsmith or Baillie Gifford Managed but I can see justification for almost any option I consider.

Where might you look if you were sitting on this and the intention was to grow it for 10+ years without going crazy but you weren't a fan of losing money?

As ever I may just do nothing which seems to be working quite well right now but with all that spare time and Christmas in Tier 4 it's a good time to consider options.

Stock name % Weight Sector
1 Capital Gearing Trust Plc Ord GBP0.25 40.6% [N/A]
2 Personal Assets Trust PLC Ord GBP12.50 39.9% [N/A]
3 Baillie Gifford US Growth Trust plc Ord GBP0.01 8.4% [N/A]
4 Scottish Mortgage Investment Trust Plc Ord GBP0.05 6.6% [N/A]
5 Ruffer Investment Company Red Ptg Pref Shs GBP0.0001 4.4% [N/A]

tomla

Not sure I 100% follow you, but if you are willing to take more risk than simply holding cash then start with reading "rich dad poor dad." And "smarter investing" . Then you can decide how much risk you are happy to take.

Thrugelmir

Aminatidi said:

Very tempted to stick a big chunk of it in Fundsmith or Baillie Gifford Managed but I can see justification for almost any option I consider.

Every investment has a potential downside. Consider the options in a rounded emotionally detached manner.  

Considerable number of sectors/regions where you have no exposure currently.  

thegentleway

Aminatidi said:

Where might you look if you were sitting on this and the intention was to grow it for 10+ years without going crazy but you weren't a fan of losing money?

I'd look at global equity index trackers, preferably with active ethical screening.

Prism

Did you learn anything more about yourself during last years Feb/March crash? Were you feeling any temptations to buy or sell?

Aminatidi

Prism said:

Did you learn anything more about yourself during last years Feb/March crash? Were you feeling any temptations to buy or sell?

Good question.

At the time I was !!!!!! bricks.

I sold a couple of things and booked the profits expecting it to get worse.

I think I dropped around 15%

The interesting question is looking back with hindsight because it was the first experience I've had of that sort of event.

Would I do the same next time?

I certainly hope not.

One of the things I'm debating is whether I prefer taking a higher risk with a smaller allocation (essentially the 15% in SMT and Baillie Gifford US Growth) or having a higher allocation to what I think would be seen as a lower volatility option at least if history is anything to go by.

The crazy thing is that if I'd had the portfolio above going into 2020 I'd have ended the year 22% up which is mad for something that I think looks so pedestrian.

itwasntme001

You answered your own question it seems - you don't seem to have a high risk tolerance so your portfolio seems to be fine as it is.  I would continue buying into wealth preservation funds and take market corrections to buy into 100% equity funds.

You may want to pick and stick to a global equity fund such as Vanguard all cap instead of paying into (much) more risky funds like SMT.

The biggest risk for you is changing your allocation dramatically so that it increases risk and you panic sell again when the next crash happens.

Prism

Aminatidi said:

Prism said:

Did you learn anything more about yourself during last years Feb/March crash? Were you feeling any temptations to buy or sell?

Good question.

At the time I was !!!!!! bricks.

I sold a couple of things and booked the profits expecting it to get worse.

I think I dropped around 15%

The interesting question is looking back with hindsight because it was the first experience I've had of that sort of event.

Would I do the same next time?

I certainly hope not.

One of the things I'm debating is whether I prefer taking a higher risk with a smaller allocation (essentially the 15% in SMT and Baillie Gifford US Growth) or having a higher allocation to what I think would be seen as a lower volatility option at least if history is anything to go by.

The crazy thing is that if I'd had the portfolio above going into 2020 I'd have ended the year 22% up which is mad for something that I think looks so pedestrian.

These times are good test I think. There was another towards the end of 2018 (Trump/China tussle)  which was almost as bad from my perspective. I know that I am rubbish at judging these things as they happen so I sold out of Scottish Mortgage and Legg Mason Japan at a relatively benign time last in 2019. However this year I calmly watched Smithson drop by over 40% in three weeks and all I could think of was why I had no spare funds to buy more - so I made a mistake by selling the previous funds I guess. I always work under the assumption that I won't see a crash for what it is and will never manage to sell a volatile fund on time - so simply invest in stuff that you think you can watch crash hard and then do nothing about it. Some people are much better at reacting quickly.

Partly in answer to your first question I believe that Personal Assets Trust holds plenty of high quality stocks in its equities allocation so maybe Fundsmith is not really needed here. I might be tempted to stick with SMT, as long as you think you can accept a large drop from time to time.

Aminatidi

Part of my reasoning for the heavy weighting to Capital Gearing Trust and Personal Assets Trust is that they're multi-asset and the fund managers are heavily invested themselves so I'm essentially outsourcing their judgement on what to do and when and what to use spare cash for.

Agreed on Personal Assets Trust in that I almost see it as a Fundsmith + Index Linked + Cash fund.

I'd be interested in views on concentration v diversification as the whole point of the "small" allocation to SMT and USA was essentially to try to "rocket fuel" returns whilst accepting it's 15% in concentrated (ish) higher volatility funds.

Then again who the hell expected SMT and USA to do what they did in March and from March onwards?

That's where the self-inflicted dilemma is in that if there's any sign of this years returns being like last years would have been if I'd had that allocation all year then I'm content with where I'm positioned now.

If that makes any kind of sense

itwasntme001

What would a 50% fall in both SMT and USA do to your state of mind?  Would you be tempted to sell out?  If yes, dial the risk down to a level where a 50% fall would keep you invested.

Or if the reasons you bought the funds don't meet your objectives and risk tolerance going forward then cut back some or all.

I am looking to reduce my SMT holding and invest the proceeds into CGT.  It has become too much of a weighting for my portfolio.

itwasntme001

In my view (and I could easily be wrong) I think CGT and PNL will outperform equities and even the best performing funds of today.