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Emily Watson
Posted: 02 July 2012 12:54:49(UTC)
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I have a significant investment fund portfolio, above £200,000, which is made up of about 40 funds. I do pay attention to proper asset and geographical allocation. I am now concerned, however, that I have too many different funds which could potentially hold back performance in future. Is there an ideal or maximum number of funds that I should hold in my portfolio.
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Mervyn Austwick
Posted: 02 July 2012 13:05:46(UTC)
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I think it depends how much time you want/have to devote to monitoring your portfolio. If you don't have too much time you could maybe use mixed assett funds where the manager makes the assett allocationand timing calls for you. I have about 200, 000 in my portfolio and have 35 funds at the moment. It is a good question how many to have. I've heard some say don't have more than 12, otherwise you are too diluted, but I think less than 25 is not diversified. I think 30-35 is the ideal amount for me.
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Emily Watson on 04/07/2012(UTC)
TJL
Posted: 02 July 2012 17:24:53(UTC)
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One issue could be whether you have any duplication of stocks.
If you subscribe to Morningstar Premium (I don't - too stingy), you'll be able to check using the 'analysis' tool and I'm sure will already have done so.
The first paragraph of this link could be relevant -
http://www.trustnet.com/...Research.aspx?id=348685
If you hold 2 or 3 UK funds in the same sector which duplicate a popular stock, and it goes down, you would obviously lose out 2 or 3 times.
It probably applies to me as I hold IP Income, High Income, Artemis and Unicorn and the first 3 probably have similar top 10 holdings - must look into it.
I currently hold 17 funds and 2 ETFs (have just started to dabble with ETFs); it was 21 funds at one point but I started to feel I was getting carried away.
I am now looking at diversifying into investment trusts, but am wary of even more duplication as I assume the top stocks are held by good investment trust managers just as much as they are held by good unit trust managers.
I read some HL literature some time ago which made reference to 30 funds being about as many as you want, but that's not to say the man was right?
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Emily Watson on 04/07/2012(UTC)
sgjhaghsdg
Posted: 03 July 2012 06:52:24(UTC)
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The plural of "fund" is "tracker".
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datamonkey on 03/02/2013(UTC), dlp6666 on 11/03/2013(UTC)
Matthew Charles Flinders
Posted: 03 July 2012 08:37:14(UTC)
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Certainly more then 20 ish in my opinion and you are running a serious risk of dilution. You shouldnt need that amount. Have a re-think on your strategy and assess each funds geographical/industry allocation as well as performance and from that decide which funds are either pointless or worthless and act on that. There must be at least a couple of dogs in that bunch!
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Emily Watson on 04/07/2012(UTC)
J Thomas
Posted: 03 July 2012 15:04:23(UTC)
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Someone in your position may wish to consider Standard Life My Folio Funds. These may be bought directly with no fees or commisions payable to an IFA. There are five levels of risk from 1 ( 95%corporate bonds/gilts/cash ) to 5 ( 99% equities ) There are 12 to 13 funds in each level which are rebalanced on a monthly basis. AMC is 0.8% per annum. I am currently invested in My Folio II which is 59% defensive assets, 41% growth assets. I would recommend this fund as it has preserved its value during stock market falls and increased modestly during rallies. Also you won't need to monitor the fund every day on the internet, you can go and do other things and not worry about it.
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Emily Watson on 04/07/2012(UTC)
J Thomas
Posted: 03 July 2012 15:27:38(UTC)
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Apologies, have double checked there are 17 funds in the My Folio II
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Emily Watson on 03/07/2012(UTC)
Emily Watson
Posted: 03 July 2012 15:39:03(UTC)
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Thank you very much for your input. I think I need to get into tidy up mode.
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Danny Audritt
Posted: 03 July 2012 17:43:44(UTC)
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As well as having funds have you considered individual equities? If you, for example, own the 'big' UK equity income funds it is a fact that they all have very similar holdings, why pay them a commission on any dividend? I use ETFs for commodity trading rather than index tracking but I have plenty of time to play and trade long and short, in the end I think 25-35 holdings is enough to spread the risk as always D Y O R and watch those fees!!
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Emily Watson on 04/07/2012(UTC)
Mickey
Posted: 03 July 2012 19:53:52(UTC)
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A Morningstar study found that 7 funds was a figure that made sense from a standard deviation/risk point of view. I used to look at multi-manager portfolios a lot and they seemed to like about 15 funds. Nowadays I find that the ideal number for me is 5 - 10 and no more, having fewer funds focuses the mind and cuts down on the work. Of course those that worry will want a lot more funds so that they minimise the risk of selecting a bad fund.
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Emily Watson on 04/07/2012(UTC), dlp6666 on 11/03/2013(UTC)
simon bradley
Posted: 04 July 2012 05:48:36(UTC)
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Hi,
I tend to hold approx 10-13 funds in each of my stocks and shares ISA and SIPP. This seems to give the balance i require. Due to my age (29) my portfolio is more postioned for growth but hold a couple of lower risk funds such as corporate bonds to help balance my portfolio. My larger holdings are in global growth and emerging markets but have increased my cash holdings in both accounts recently until things start to settle down.
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Emily Watson on 04/07/2012(UTC)
AJMcG
Posted: 04 July 2012 11:59:48(UTC)
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I would like to suggest that forty funds are forty funds too many. The management fees and commission payments eat into your investment and for that reason the recommendation is always to look at investing in investment trusts. These will give you the risk spread without the high management costs. You don't find them being pushed by IFAs because of the lack of commission incentives for them. (This makes the term "Independent" in their title somewhat laughable.) Another major advantage of investment trusts is the fact that you can trade in them at any time during the normal working day and you know what the price is before you deal. None of this lottery where it can take two days before you know how much you've received if you've sold or how many units you've got if you've bought. As for number I would suggest that between ten and fifteen is a manageable number.
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sgjhaghsdg on 04/07/2012(UTC), Paul Davies on 04/08/2012(UTC), I predict a riot on 07/12/2012(UTC), Guest on 02/03/2013(UTC), dlp6666 on 11/03/2013(UTC)
Suze Jamieson
Posted: 04 July 2012 12:06:11(UTC)
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I have over £350k in funds/etfs and trackers, numbering about 20 holdings in total. I find that I just feel uncomfortable having more than, say £25k in one etf/fund, so it's less for reasons of diversification per se that I have so many holdings, and more because I want to spread the risk of having all my savings with one supplier! It enables me to sleep at night.
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Emily Watson on 04/07/2012(UTC), dlp6666 on 11/03/2013(UTC)
donald waugh
Posted: 04 July 2012 12:19:17(UTC)
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Surely the weighting must play a part in how many different funds to hold ?
Are 40 weighted equally in terms of outlay?
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Emily Watson
Posted: 04 July 2012 12:57:13(UTC)
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Donald,

No they are not. I suppose you could say I have much higher holdings in the core funds I hold, with smaller 2-3k held in funds in "areas that have been recommended" in financial press/websites etc
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Guest on 08/07/2012(UTC)
David 111
Posted: 04 July 2012 13:06:40(UTC)
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Danny Audritt makes a good point. I switched a while ago from unit trusts to investment trusts in the hope, inter alia, of reducing the amount lost to management fees. Nevertheless they (the fees) remain a signifiant drain on my wealth, particularly in an era of low growth. Therefore I am currently in the process of getting out of my UK focused investment trusts and investing directly in UK shares. I am retaining some overseas investment trusts, however, because of the difficulty in investing direct in Asian stocks. Depending on the proportion of your portfolio invested in the UK I would have thought with £200,000 in total you could (should?) do something similar.
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Emily Watson on 04/07/2012(UTC), I predict a riot on 07/12/2012(UTC)
AJMcG
Posted: 04 July 2012 13:19:30(UTC)
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David 111;15499 wrote:
Danny Audritt makes a good point. I switched a while ago from unit trusts to investment trusts in the hope, inter alia, of recucing the amount lost to management fees. Nevertheless they (the fees) remain a signifiant drain on my wealth, particularly in an era of low growth. Therefore I am currently in the process of getting out of my UK focused investment trusts and investing directly in UK shares. I am retaining some overseas investment trusts, however, because of the difficulty in investing direct in Asian stocks. Depending on the proportion of your portfolio invested in the UK I would have thought with £200,000 in total you could (should?) do something similar.


I'm surprised at the assertion that costs are high in relation to investment trusts. "Bestinvest" will charge a maximum of £50 in annual fees (£12.50 per quarter) for normal investment accounts and ISAs and £100 for SIPPS which hold shares. Investment Trusts are shares so there is no difference in costs between them and what you describe as "UK shares" and the costs of dealing in both can be as little as £7.50 per trade with "Bestinvest".
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Paul Davies on 04/08/2012(UTC), dlp6666 on 11/03/2013(UTC)
mark senior
Posted: 04 July 2012 13:27:44(UTC)
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Hi Emily,

Without knowing what your asset allocation strategy is, it is difficult to say whether you have too many funds.

My feel for this is that you probably have 20 too many.

If you want to publish your ideal asset allocation then that will make it easier to respond.

kind regards

Mark
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Emily Watson on 04/07/2012(UTC)
JEL G
Posted: 04 July 2012 13:34:09(UTC)
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It is purely and simply what you can cope with and how much direct interest you have in managing your portfolio.
I am invested directly in 37 different companies all paying net dividends of over 4.7% on my initial buy costs.
My portfolio is roughly valued at 750K and my average net yield currently 5.91%.
I manage my portfolio totally myself thus cutting out the middle man. Hence only costs incurred are my initial buy costs.
Works extremely well for me in my retirement. .......... and its a fun thing to do, having built up over very many years.
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Emily Watson on 04/07/2012(UTC)
Emily Watson
Posted: 04 July 2012 13:39:24(UTC)
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Mark,

In rough terms, from memory, geographically - UK 40%, Europe 15%, US 15%, Japan 5%, Asia/Emerging 25%
I have mainly equities but also about 10-15% in bond funds and have commodity and property funds in their also
Age 48!
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