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Portfolio review ahead of investing an inheritance
In a couple of months I will receive an inheritance and am
starting to plan how to invest it. I would appreciate people’s
thoughts/challenges.
Situation:
- Both early-mid 60s with probably a few more years’ work ahead
- I will have full SP; OH’s will be c.75% of full as she came here from Oz in 2001
- No mortgage or debts
- OH has small NHS DB pension from six years’ service
-
No intention to buy an annuity (anathema to OH).
We will hold c.2 years’ expenses in cash/PBs and invest the
balance. This will increase our investments by c.55% from their current level
and we will hopefully build them a little more before retiring.
Current investments are:
- Fidelity Index World, 22%
- Royal London Short Duration Credit, 17%
- Capital Gearing Trust, 16%
- Stewart Investors Asia Pacific Sustainability, 13%
- Fundsmith Sustainable Equity, 10%
- Liontrust UK Smaller Companies, 6%
- T Rowe Price US Smaller Companies, 4%
- Royal London Short Duration Global Inflation Linked Bond, 4%
- Barings Europe Select, 3%
- BlueStar Israel Technology ETF, 3%
-
Fidelity Index Japan, 2%.
The equity themes are: overweight to small/midcaps; a slight
tilt towards growth; North America kept under 40%; Stewart Investors as a proxy
for emerging markets and although high on India I have faith in the manager. On
bonds, I sold Vanguard Global Bond Index a few months ago and bought the I/L
fund as a hedge against higher than expected inflation; if that does not
materialise I would expect equities to benefit.
I have been dialling down risk over recent years and want to
do that a little more, especially as the coming years are more unpredictable
than the last decade and trying to be too clever would lead to sleepless nights.
For long term holds I still like small/midcaps (although relatively low
volatility, as both Barings and Liontrust historically have been), although I only
hold T Rowe Price to balance the tech-heavy aspect of the US index. As you can
tell from Fundsmith, I like a little quality.
My thoughts for adding funds are:
- maintain equities around 70% of the total
- increase CGT to 20%; if in future I take WP over 20% I would look at other providers (Ruffer, PNL)
- slightly scale back the small/midcaps, esp. US and Europe (if doing this from scratch I might buy European index rather than Barings, but I have made that swap a couple of times and need to stop messing with it)
- possibly reduce Fundsmith a little
- BlueStar ETF was bought just before MIFID II and cannot be increased but I will sit on it
-
I am conscious the 17% RL fund is high, but I
like the low volatility and looking at its record they seem to select good bonds
(generally BBB); however, should I dip back into the ‘vanilla’ Vanguard index
fund? Yes, it’s the eternal (since eternity began six months ago) question of
how to invest non-equity funds.
Thanks in advance for input.
Comments
-
You seem to have reasons for your choices - I have no idea if they have any validity. I would advise less time thinking about investments and more time having drinks with little umbrellas in them. With interest rates rising I would not rule out an annuity and with retirement approaching I'd do a detailed budget before anything else to see where you can save as that's the biggest financial return you can get...maybe use cheaper tequila in those drinks.“So we beat on, boats against the current, borne back ceaselessly into the past.”3
-
I used to drink Glenkinchie, Glenlivet and Talisker. A year or two ago I switched to J&B. No umbrellas. (Edit: the switch from single malts to a blend was a big sacrifice!)0
-
Nicearoominyork said:I used to drink Glenkinchie, Glenlivet and Talisker. A year or two ago I switched to J&B. No umbrellas.
“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
As an alternative to non-equity funds you could look at adding one or two infrastructure ITs, some of which have decent yields with growing income.aroominyork said:In a couple of months I will receive an inheritance and am starting to plan how to invest it. I would appreciate people’s thoughts/challenges.
Situation:
- Both early-mid 60s with probably a few more years’ work ahead
- I will have full SP; OH’s will be c.75% of full as she came here from Oz in 2001
- No mortgage or debts
- OH has small NHS DB pension from six years’ service
- No intention to buy an annuity (anathema to OH).
We will hold c.2 years’ expenses in cash/PBs and invest the balance. This will increase our investments by c.55% from their current level and we will hopefully build them a little more before retiring.
Current investments are:
- Fidelity Index World, 22%
- Royal London Short Duration Credit, 17%
- Capital Gearing Trust, 16%
- Stewart Investors Asia Pacific Sustainability, 13%
- Fundsmith Sustainable Equity, 10%
- Liontrust UK Smaller Companies, 6%
- T Rowe Price US Smaller Companies, 4%
- Royal London Short Duration Global Inflation Linked Bond, 4%
- Barings Europe Select, 3%
- BlueStar Israel Technology ETF, 3%
- Fidelity Index Japan, 2%.
The equity themes are: overweight to small/midcaps; a slight tilt towards growth; North America kept under 40%; Stewart Investors as a proxy for emerging markets and although high on India I have faith in the manager. On bonds, I sold Vanguard Global Bond Index a few months ago and bought the I/L fund as a hedge against higher than expected inflation; if that does not materialise I would expect equities to benefit.
I have been dialling down risk over recent years and want to do that a little more, especially as the coming years are more unpredictable than the last decade and trying to be too clever would lead to sleepless nights. For long term holds I still like small/midcaps (although relatively low volatility, as both Barings and Liontrust historically have been), although I only hold T Rowe Price to balance the tech-heavy aspect of the US index. As you can tell from Fundsmith, I like a little quality.
My thoughts for adding funds are:
- maintain equities around 70% of the total
- increase CGT to 20%; if in future I take WP over 20% I would look at other providers (Ruffer, PNL)
- slightly scale back the small/midcaps, esp. US and Europe (if doing this from scratch I might buy European index rather than Barings, but I have made that swap a couple of times and need to stop messing with it)
- possibly reduce Fundsmith a little
- BlueStar ETF was bought just before MIFID II and cannot be increased but I will sit on it
- I am conscious the 17% RL fund is high, but I like the low volatility and looking at its record they seem to select good bonds (generally BBB); however, should I dip back into the ‘vanilla’ Vanguard index fund? Yes, it’s the eternal (since eternity began six months ago) question of how to invest non-equity funds.
Thanks in advance for input.
However I was also thinking reading your post, if you weren't getting the inheritance would you be happy to keep your portfolio as it is? If so, why not just invest the inheritance into the same funds, keeping the same weightings.1 -
I don't feel qualified enough to critique your selections - and you have good reasons. I would question thay amount of active stuff though and how those fees eat into your returns. The trex calculator shows this nicely.
Israel Technology, thats a new ETF to me, curious as to your reasons for something that niche? I have my fair share of thematic ETFS myself for all kinds of reasons. Also small holdings thankfully, as most have done pants!2 -
It would probably be worth thinking about a transition from the RL funds to something more conventional, although now is perhaps not the time to make the change. On the equities side, there is not much to be gained from tinkering with holdings that make up just a few percent, or making small adjustments to your 10% Fundsmith holding. Overall, the geographic spread looks pretty balanced, with only a notable underweight in UK large caps (not a criticism), although I don't know what might be lurking in the Fundsmith fund.
1 -
Audaxer said:
As an alternative to non-equity funds you could look at adding one or two infrastructure ITs, some of which have decent yields with growing income.aroominyork said:In a couple of months I will receive an inheritance and am starting to plan how to invest it. I would appreciate people’s thoughts/challenges.
Situation:
- Both early-mid 60s with probably a few more years’ work ahead
- I will have full SP; OH’s will be c.75% of full as she came here from Oz in 2001
- No mortgage or debts
- OH has small NHS DB pension from six years’ service
- No intention to buy an annuity (anathema to OH).
We will hold c.2 years’ expenses in cash/PBs and invest the balance. This will increase our investments by c.55% from their current level and we will hopefully build them a little more before retiring.
Current investments are:
- Fidelity Index World, 22%
- Royal London Short Duration Credit, 17%
- Capital Gearing Trust, 16%
- Stewart Investors Asia Pacific Sustainability, 13%
- Fundsmith Sustainable Equity, 10%
- Liontrust UK Smaller Companies, 6%
- T Rowe Price US Smaller Companies, 4%
- Royal London Short Duration Global Inflation Linked Bond, 4%
- Barings Europe Select, 3%
- BlueStar Israel Technology ETF, 3%
- Fidelity Index Japan, 2%.
The equity themes are: overweight to small/midcaps; a slight tilt towards growth; North America kept under 40%; Stewart Investors as a proxy for emerging markets and although high on India I have faith in the manager. On bonds, I sold Vanguard Global Bond Index a few months ago and bought the I/L fund as a hedge against higher than expected inflation; if that does not materialise I would expect equities to benefit.
I have been dialling down risk over recent years and want to do that a little more, especially as the coming years are more unpredictable than the last decade and trying to be too clever would lead to sleepless nights. For long term holds I still like small/midcaps (although relatively low volatility, as both Barings and Liontrust historically have been), although I only hold T Rowe Price to balance the tech-heavy aspect of the US index. As you can tell from Fundsmith, I like a little quality.
My thoughts for adding funds are:
- maintain equities around 70% of the total
- increase CGT to 20%; if in future I take WP over 20% I would look at other providers (Ruffer, PNL)
- slightly scale back the small/midcaps, esp. US and Europe (if doing this from scratch I might buy European index rather than Barings, but I have made that swap a couple of times and need to stop messing with it)
- possibly reduce Fundsmith a little
- BlueStar ETF was bought just before MIFID II and cannot be increased but I will sit on it
- I am conscious the 17% RL fund is high, but I like the low volatility and looking at its record they seem to select good bonds (generally BBB); however, should I dip back into the ‘vanilla’ Vanguard index fund? Yes, it’s the eternal (since eternity began six months ago) question of how to invest non-equity funds.
Thanks in advance for input.
Yes, I wonder about that but it's not a sector I understand well enough. Some people (who know more than me) say it's just one sector of the equity market so I have exposure to it through my index funds. The way infrastructure is sometimes talked up leaves me feeling that it sounds too good/reliable to be true so it probably is.Audaxer said:
However I was also thinking reading your post, if you weren't getting the inheritance would you be happy to keep your portfolio as it is? If so, why not just invest the inheritance into the same funds, keeping the same weightings.aroominyork said:In a couple of months I will receive an inheritance and am starting to plan how to invest it. I would appreciate people’s thoughts/challenges.
Situation:
- Both early-mid 60s with probably a few more years’ work ahead
- I will have full SP; OH’s will be c.75% of full as she came here from Oz in 2001
- No mortgage or debts
- OH has small NHS DB pension from six years’ service
- No intention to buy an annuity (anathema to OH).
We will hold c.2 years’ expenses in cash/PBs and invest the balance. This will increase our investments by c.55% from their current level and we will hopefully build them a little more before retiring.
Current investments are:
- Fidelity Index World, 22%
- Royal London Short Duration Credit, 17%
- Capital Gearing Trust, 16%
- Stewart Investors Asia Pacific Sustainability, 13%
- Fundsmith Sustainable Equity, 10%
- Liontrust UK Smaller Companies, 6%
- T Rowe Price US Smaller Companies, 4%
- Royal London Short Duration Global Inflation Linked Bond, 4%
- Barings Europe Select, 3%
- BlueStar Israel Technology ETF, 3%
- Fidelity Index Japan, 2%.
The equity themes are: overweight to small/midcaps; a slight tilt towards growth; North America kept under 40%; Stewart Investors as a proxy for emerging markets and although high on India I have faith in the manager. On bonds, I sold Vanguard Global Bond Index a few months ago and bought the I/L fund as a hedge against higher than expected inflation; if that does not materialise I would expect equities to benefit.
I have been dialling down risk over recent years and want to do that a little more, especially as the coming years are more unpredictable than the last decade and trying to be too clever would lead to sleepless nights. For long term holds I still like small/midcaps (although relatively low volatility, as both Barings and Liontrust historically have been), although I only hold T Rowe Price to balance the tech-heavy aspect of the US index. As you can tell from Fundsmith, I like a little quality.
My thoughts for adding funds are:
- maintain equities around 70% of the total
- increase CGT to 20%; if in future I take WP over 20% I would look at other providers (Ruffer, PNL)
- slightly scale back the small/midcaps, esp. US and Europe (if doing this from scratch I might buy European index rather than Barings, but I have made that swap a couple of times and need to stop messing with it)
- possibly reduce Fundsmith a little
- BlueStar ETF was bought just before MIFID II and cannot be increased but I will sit on it
- I am conscious the 17% RL fund is high, but I like the low volatility and looking at its record they seem to select good bonds (generally BBB); however, should I dip back into the ‘vanilla’ Vanguard index fund? Yes, it’s the eternal (since eternity began six months ago) question of how to invest non-equity funds.
Thanks in advance for input.
Very good point, and apart from the tweaks I mentioned the answer is generally Yes. However the reason for a little de-risking (a bit less in small/midcaps, a little more in WP) is that I knew this inheritance would come to me one day and approx. how much it was likely to be, and I knew it was invested below my personal risk tolerance; so during recent years I invested my funds towards the high end of my risk tolerance and figured that when this day came I would dial down the risk a little.
It's one of the most advanced countries in the world for new tech (some say second only to Silicon Valley) so it interested me. It went up strongly after I bought it but has lost a fair amount of those gains during the last year. Anyway, you cannot buy it because of MIFID II since the US-based company that manages it has not done the paperwork to make it available in the UK.ChilliBob said:Israel Technology, thats a new ETF to me, curious as to your reasons for something that niche? I have my fair share of thematic ETFS myself for all kinds of reasons. Also small holdings thankfully, as most have done pants!0 -
Would the time for a bond switch be when interest rates have settled at a higher level than now? On the equities, I agree it is tinkering so my question is whether anything looks plain(ish) wrong? I over-obsess a little about geographic spread, perhaps at the expense of more important issues. On UK large caps, between Fidelity Index, Fundsmith (4.5% UK) and CGT (45% risk assets, of which 28% UK) I think I am OK.masonic said:It would probably be worth thinking about a transition from the RL funds to something more conventional, although now is perhaps not the time to make the change. On the equities side, there is not much to be gained from tinkering with holdings that make up just a few percent, or making small adjustments to your 10% Fundsmith holding. Overall, the geographic spread looks pretty balanced, with only a notable underweight in UK large caps (not a criticism), although I don't know what might be lurking in the Fundsmith fund.
0 -
aroominyork said:
Would the time for a bond switch be when interest rates have settled at a higher level than now? On the equities, I agree it is tinkering so my question is whether anything looks plain(ish) wrong? I over-obsess a little about geographic spread, perhaps at the expense of more important issues. On UK large caps, between Fidelity Index, Fundsmith (4.5% UK) and CGT (45% risk assets, of which 28% UK) I think I am OK.masonic said:It would probably be worth thinking about a transition from the RL funds to something more conventional, although now is perhaps not the time to make the change. On the equities side, there is not much to be gained from tinkering with holdings that make up just a few percent, or making small adjustments to your 10% Fundsmith holding. Overall, the geographic spread looks pretty balanced, with only a notable underweight in UK large caps (not a criticism), although I don't know what might be lurking in the Fundsmith fund.I suppose a good indicator of when to switch would be when there is uncertainty over the direction of the next rate move (thinking mainly of the US, since it is leading the charge).I don't think anything looks plain wrong with the equities. So Fundsmith is UK neutral, the Fidelity index is neutral by definition. I think you are overestimating what is in CGT. The latest factsheet shows it is 16% equities. Your 28% UK figure includes both equities and property. The last full holdings list showed it held ~4% UK large cap equities, so I'd suggest that figure looks like the one to use (this would represent a quarter of current equities). My guess is that you are getting about 0.6% UK large cap exposure from CGT, 0.9% from the Fidelity index, and 0.45% from Fundsmith sustainable, summed and divided by your 66% equities = 3%. This is only a 25% underweight to the market cap of 4% of global. You are holding more than triple that in UK small caps. Just an observation.1 -
Thanks for the info regarding the ETF. I had no idea
Regarding infra, I have recently opepend a small position in the L&G infra index fund. Looks decent enough and its low cost
VT RM Alternative Income is on my list, but I keep sitting on the fence on it - it's not as steady as say CG Absolute, and a lower return the L&G tracker, but something keeps drawing me to it. Perhaps because it is that middle ground.0
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