Rebalancing portfolio

LHW99

bostonerimus said:

LHW99 said:

Aged said:

bostonerimus said:

masonic said:

Aged said:

There were 10 holdings. Woodford accounted for 1/10th of the portfolio. 4 x equity funds accounted for 40% - all UK. Fixed Interest 20%. UK Property 10%. Cash 10%. Mixed Investments 20%. This is just one step - I'm trying to get some more equity income rolling in, and to get away from being too heavily reliant on UK equity income. 

So from 40% equities, all UK to 10% global, 30% UK. That's a step in the right direction, but the proportion of companies listed in overseas markets paying a high dividend is considerably more limited, so it may make more sense to go global with a more general fund.

I think it should be closer to 10% UK and 30% Global Equity...probably even less of a UK weighting. I'd take this opportunity to reduce the number of holdings. Is it really necessary to have 3 or 4 x UK equity funds?

I did think about reducing the number of holdings, but on reflection I decided to stick with it. It keeps the size of each holding at a good size ie not too small, but not so big that I might worry about fund houses collapsing etc! I guess it suits my cautious nature. It would make things much simpler with fewer funds though, so I will definitely think seriously about that going forwards.

Plenty of people feel that your UK allocation should be small, as the UK is a fairly small part of the global financial markets. Then again, there is an argument that the UK has been undervalued for years, and may be on the point of improving. They are both opinions and it depends on what you feel most comfortable with. Our household portfolio tends to hover around 20% UK, because that suits what we aim for.

I think bostonerimus is USA based, and the US is a very large part of the global markets and most trackers have 50%+ in the US. Which is fine, unless you believe the US is about to catch a cold (or you don't want too much of your portfolio in the Facebook, Apple Tesla etc companies).

My advice to reduce the UK equity allocation and increase the international equity allocation has nothing to do with my location, I think many people would advise against such a heavy domestic overweighting.

Not intended to be a criticism of your opinion bostonerimus, although as said, investing has to be about what makes you feel comfortable, and aligns with your own opinion / philosophy.

As I understand it though, in the US a majority of perople would have a high proportion of their investments in the US market, possibly more than even the US global weight would suggest. Similarly a majority of UK investors are likely invest a higher proportion locally in the UK, perhaps because it doesn't occur to them to do otherwise, perhaps because that makes them feel they have more understanding of the companies.

Decisions are not always logical, but as long as they are good enough that should work out OK.

Linton

Deleted_User said:

Aged said:

I take on board that UK is 'small' compared with the bigger global picture, but at the same time my conscience dictates that as a UK citizen I should be investing in my own country. 

Does that still hold if investing "in the UK" turns out to mostly mean investing in some transnational corporations, which show no loyalty to any country, but happen to have their HQ in the UK?

There are some FTSE100 companies that dont even have their main HQ in the UK.  For example:
Fresnillo: Mexico,  BHP: Australia, Thungela: South Africa, Just Eat: Netherlands, DCC and CRH: Ireland

Some of these have very little connection to the UK at all.  Fresnillo PLC has 15 employees.  BHP employs about 50 people in the whole of Europe.

Prism

To really invest in the UK you either need to be pretty selective with companies or move down the size scale. The FTSE 250 gets around 50% of revenue from the UK and 50% is global. 

bostonerimus

LHW99 said:

bostonerimus said:

LHW99 said:

Aged said:

bostonerimus said:

masonic said:

Aged said:

There were 10 holdings. Woodford accounted for 1/10th of the portfolio. 4 x equity funds accounted for 40% - all UK. Fixed Interest 20%. UK Property 10%. Cash 10%. Mixed Investments 20%. This is just one step - I'm trying to get some more equity income rolling in, and to get away from being too heavily reliant on UK equity income. 

So from 40% equities, all UK to 10% global, 30% UK. That's a step in the right direction, but the proportion of companies listed in overseas markets paying a high dividend is considerably more limited, so it may make more sense to go global with a more general fund.

I think it should be closer to 10% UK and 30% Global Equity...probably even less of a UK weighting. I'd take this opportunity to reduce the number of holdings. Is it really necessary to have 3 or 4 x UK equity funds?

I did think about reducing the number of holdings, but on reflection I decided to stick with it. It keeps the size of each holding at a good size ie not too small, but not so big that I might worry about fund houses collapsing etc! I guess it suits my cautious nature. It would make things much simpler with fewer funds though, so I will definitely think seriously about that going forwards.

Plenty of people feel that your UK allocation should be small, as the UK is a fairly small part of the global financial markets. Then again, there is an argument that the UK has been undervalued for years, and may be on the point of improving. They are both opinions and it depends on what you feel most comfortable with. Our household portfolio tends to hover around 20% UK, because that suits what we aim for.

I think bostonerimus is USA based, and the US is a very large part of the global markets and most trackers have 50%+ in the US. Which is fine, unless you believe the US is about to catch a cold (or you don't want too much of your portfolio in the Facebook, Apple Tesla etc companies).

My advice to reduce the UK equity allocation and increase the international equity allocation has nothing to do with my location, I think many people would advise against such a heavy domestic overweighting.

Not intended to be a criticism of your opinion bostonerimus, although as said, investing has to be about what makes you feel comfortable, and aligns with your own opinion / philosophy.

As I understand it though, in the US a majority of perople would have a high proportion of their investments in the US market, possibly more than even the US global weight would suggest. Similarly a majority of UK investors are likely invest a higher proportion locally in the UK, perhaps because it doesn't occur to them to do otherwise, perhaps because that makes them feel they have more understanding of the companies.

Decisions are not always logical, but as long as they are good enough that should work out OK.

It wasn't taken as a criticism, I just think it was an inaccurate comment as I advised the OP to simply move away from a massive domestic overweighting. I did not recommend the components in the non-UK allocation, but a significant US component would be sensible given the size of the US market.

Prism

Deleted_User said:

Perhaps I should mention that I have about 35% of my equities in UK equities - which I suspect many posters here would consider too high. If there's no perfect answer, but an acceptable range for a UK weighting, then IMHO 35% is perhaps around the top of the range. (The bottom of the range might be 4%, based on the market capitalizations of UK vs global stock markets.)

I am currently 33% UK in my SIPP which I am pretty happy about, although last year it was more like 25%.

Eco_Miser

Aged said:

I take on board that UK is 'small' compared with the bigger global picture, but at the same time my conscience dictates that as a UK citizen I should be investing in my own country. 

An alternative view would be to earn income for the UK by investing overseas. Which the nation has been doing for the past 400+ years.

howard3844

Most of the earnings in the FTSE 100 is global. Also the US 500 is 25% concentrated in top 5 - 10 companies.  

Aged

masonic said:

Aged said:

masonic said:

Aged said:

masonic said:

Aged said:

There were 10 holdings. Woodford accounted for 1/10th of the portfolio. 4 x equity funds accounted for 40% - all UK. Fixed Interest 20%. UK Property 10%. Cash 10%. Mixed Investments 20%. This is just one step - I'm trying to get some more equity income rolling in, and to get away from being too heavily reliant on UK equity income. 

So from 40% equities, all UK to 10% global, 30% UK. That's a step in the right direction, but the proportion of companies listed in overseas markets paying a high dividend is considerably more limited, so it may make more sense to go global with a more general fund.

Can you explain what you mean by 'more general' please? 

Equity income funds focus on companies paying a high dividend. That means you're missing out on a fairly wide cross-section of global companies.

OK so something where the objective is something like 'income and capital growth' rather than income only (or growth only).

Yes, or a fund that seeks to track the performance of a suitable index.

... or, another strategy could be to have an income fund AND a growth fund?

masonic

Aged said:

masonic said:

Aged said:

masonic said:

Aged said:

masonic said:

Aged said:

There were 10 holdings. Woodford accounted for 1/10th of the portfolio. 4 x equity funds accounted for 40% - all UK. Fixed Interest 20%. UK Property 10%. Cash 10%. Mixed Investments 20%. This is just one step - I'm trying to get some more equity income rolling in, and to get away from being too heavily reliant on UK equity income. 

So from 40% equities, all UK to 10% global, 30% UK. That's a step in the right direction, but the proportion of companies listed in overseas markets paying a high dividend is considerably more limited, so it may make more sense to go global with a more general fund.

Can you explain what you mean by 'more general' please? 

Equity income funds focus on companies paying a high dividend. That means you're missing out on a fairly wide cross-section of global companies.

OK so something where the objective is something like 'income and capital growth' rather than income only (or growth only).

Yes, or a fund that seeks to track the performance of a suitable index.

... or, another strategy could be to have an income fund AND a growth fund?

Yes, that could work too. The objective would be to avoid unintentionally excluding a large subset of companies just because they don't meet the rigid criteria of one type of fund.

Aged

Deleted_User said:

Aged said:

I take on board that UK is 'small' compared with the bigger global picture, but at the same time my conscience dictates that as a UK citizen I should be investing in my own country. 

Does that still hold if investing "in the UK" turns out to mostly mean investing in some transnational corporations, which show no loyalty to any country, but happen to have their HQ in the UK?

I guess if you wanted to take it that far, you'd be talking about investing in individual companies.