Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

Introduction: My Portfolio
MrC
Posted: 27 July 2017 12:20:51(UTC)
#1

Joined: 25/07/2017(UTC)
Posts: 5

Thanks: 6 times
Was thanked: 4 time(s) in 2 post(s)
Hi All,

Great forum, I have learnt a lot since coming across it 6 months ago. I have decided to post a bit about me (engine engineer in motorsport, lots of coding/analysis) and my portfolio as I am not sure if at my age (mid 30’s) I am in the minority/majority of having a decent amount of my savings tied up outside of regular savings accounts, but thought others my age might find it useful; I know how daunting a feeling it was when I clicked “buy” for the first time! There is a couple of questions posed to the forum at the end of my waffle!

I started out just after I left university in 2006 with an Alliance and Leicester Stocks and Shares (hence the high amount of L&G funds) and paying in regularly it enabled me to acquire a decent deposit for my first house 8 years later.

After the house was bought I took more interest in money and the markets and initially started buying equities; I relatively quickly realised it wasn’t for me as I was nervous to see where the market was going and the percentage swings and subsequent money loss and gain left me always wondering whether I should sell or hold.

I made some money out of it (although I do regret selling Amazon in early 2015 after making what I thought at the time was a decent return….) but after a couple of reasonable losses mid 2015 which wiped out some of the profits I’d made, I decided that perhaps funds were more for me. Since then it has meant I can check once a week instead of continually checking feeds

As life has gone on, I have recently had a child and so have taken the time to re-evaluate where I am as my priorities in life have somewhat changed. My goal now is to target approx. 10-15% growth a year with a small level of income. The plan would be to not leave it untouched, but to take out money when something comes up in life that needs some cash – kitchens etc. Currently my portfolio is split as follows:

Schroder Income Maximiser 3%
Fidelity Index US 3%
M&G Global Income 3%
GAM Star Credit Oppurtunities 3%
L&G Global Health & Pharmaceuticals 17% (this has a monthly payment going in)
Cash (Santander 123, Short term high interest current accounts) 57%
ISA - To invest 14%

I recently moved 12% out of investments (L&G Global Technology and L&G UK 100) into Cash but am considering using some of that to re-invest; I got a very good return on the Global Technology over 2 years and I fear for the time being the FTSE has peaked so decided to cash in my gains and use that to benefit my family

I am therefore now looking to invest the remaining cash in the ISA into some new funds (with the exception of L&G, I use HL as a platform). Reading through this forum, I am thinking to invest in the following with the 14% split equally and a monthly contribution to each. These would all be income, as I quite like the thought of getting some regular income in the future – it will be reinvested in the short term

Vanguard Life Strategy 80% Equity
M&G Global Income (in addition to what I already have)
Lindsell Train Global Equity
Marlborough MiroCap

I am not sure if there is too much overlap on the existing portfolio, or if the spread is to much – I know the LandG global health is disproportionate but I want to not move out of the L&G wrapper

Any advice greatly appreciated. I also am looking at:

RIT Capital Partners but given the premium currently, wondered if it is a risky one?

Cheers
1 user thanked MrC for this post.
Mark Anderson on 28/07/2017(UTC)
Tony Peterson
Posted: 28 July 2017 17:00:00(UTC)
#2

Joined: 10/08/2009(UTC)
Posts: 1,012

Thanks: 593 times
Was thanked: 1143 time(s) in 499 post(s)
So you have decided to make fund managers rich, rather than yourself ("it wasn't for me").

Tragic.

You need a self select stocks and shares ISA ,and to put a bit of critical analysis into what major equities have on offer to their owners. Be your own fund manager.

I have been continually advised to keep a large chunk in cash by well-intentioned posters on this site over the last 8 years. If I had acted on their advice I would be at least a million poorer.

5 users thanked Tony Peterson for this post.
Keith Cobby on 28/07/2017(UTC), Captain Slugwash on 28/07/2017(UTC), Mickey on 28/07/2017(UTC), Mark Anderson on 28/07/2017(UTC), halfinchnut on 28/07/2017(UTC)
Richard Lambert
Posted: 28 July 2017 17:13:02(UTC)
#3

Joined: 17/08/2010(UTC)
Posts: 24

Thanks: 9 times
Was thanked: 32 time(s) in 13 post(s)
Tony Peterson;49315 wrote:
So you have decided to make fund managers rich, rather than yourself ("it wasn't for me").

Tragic.

You need a self select stocks and shares ISA ,and to put a bit of critical analysis into what major equities have on offer to their owners. Be your own fund manager.

I have been continually advised to keep a large chunk in cash by well-intentioned posters on this site over the last 8 years. If I had acted on their advice I would be at least a million poorer.



Given what Mr C says in his post Tony, your 'advice' is a little misplaced however well intentioned.
King Lodos
Posted: 28 July 2017 17:37:31(UTC)
#6

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
Unless you've got a strategy that specifically relies on individual stock picking (or you're managing such a large amount of money, you need the liquidity), I think funds make more sense for most.

An old aphorism is that 40% of a stock's price move is the market; 30% is the sector; and 30% is the stock itself .. Well, these days, with the amount of money flowing into ETFs, the amount an individual stock contributes is getting smaller.

e.g. You can generally take any 3 or 4 large stocks in any sector, and get collective performance very close to the ETF of that sector (only you pay fewer fees, and cut your stock-specific risk by a factor of 10 or 20).


On the portfolio .. I'd say 10-15% growth is optimistic given where market valuations stand today .. US stocks are predicted (on past data) to return little over inflation over the next 10 years, from CAPE ratios of around 30 .. About the second most expensive the stock market's ever been .. Bonds are the most expensive they've ever been.

I'd say the best hope for 10-15% over the next decade is a sharp market crash in the next few years, and having enough cash on the sidelines to take advantage of whatever stimulative measures central banks take.

Waiting for the crash is a mistake, because markets could grind up for the next 10-20 years .. You need an event as a catalyst .. But the decision to move out of Global Tech and UK 100 was – I'd say – a bad habit .. That kind of market timing is usually wrong, and at best a dice roll.

I think any active strategy or specialist funds need to be following a *specific* market inefficiency (such as value or momentum), and a very specific strategy .. Otherwise you're best just choosing an allocation to stocks that fits your risk tolerance, and investing very simply in a FTSE or MSCI World tracker, or Vanguard LifeStrategy.

You might pick a great outperforming fund, but if it's only 10% of a portfolio, it has such negligible impact, and is probably offset by one that underperforms .. Taking decisions out of the process makes it easier to avoid mistakes, and fees.
10 users thanked King Lodos for this post.
Guest on 28/07/2017(UTC), Tim D on 28/07/2017(UTC), Vince. on 28/07/2017(UTC), halfinchnut on 28/07/2017(UTC), Jenki on 29/07/2017(UTC), Mike L on 29/07/2017(UTC), gillyann on 29/07/2017(UTC), MrC on 29/07/2017(UTC), Guest on 30/07/2017(UTC), Guest on 05/11/2017(UTC)
sandid3
Posted: 29 July 2017 01:52:18(UTC)
#7

Joined: 18/02/2013(UTC)
Posts: 270

Thanks: 152 times
Was thanked: 293 time(s) in 128 post(s)
MrC may I suggest you use your edge, " lots of coding/analysis", and investigate Technical Analysis.

A good thing today is that there are lots of secondhand books available from Abebooks, Worldofbooks, Awesomebooks. Buy a copy of Stan Weinstein's Secrets For Profiting in Bull and Bear Markets.

Start with moving averages, particularly the 50-day and 200-day moving averages as discussed in the book. Download the historical data for the S&P500 from Yahoo here. As an exercise, write a program to analyse 'crossings'. Find the best buy and sell crossing signals that will maximise profit while minimising 'drawdown' or 'pullback'.

Download a copy of IncredibleCharts here. That gives you all the TA methods and access to all the end-of-day data for the London stock market fore free - including ETFs and ITs.

IncredibleCharts doesn't have backtesting. For that you will need to buy a copy of Amibroker for $279 here.

Once you have a set of tools and parameters to give buy and sell signals for the S&P500 you can apply those to other indices.

Unfortunately data is not available for UT/Oeics for analysis but the TA tools and charts are available at InteractiveInvestor.

Iterate through buying books and testing for the next ten years until you have a robust system.

(I'm sorry this is so short - lack of time.)
1 user thanked sandid3 for this post.
MrC on 29/07/2017(UTC)
King Lodos
Posted: 29 July 2017 04:18:35(UTC)
#9

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
^^ Having done a lot of the above ... What can be concerning is how well 200 SMA rules have worked on the S&P500, but how terribly they've worked on the (very similar) FTSE 100.

I'd say if you're really serious about backtesting, you can do a lot in Excel, but you'd do well to learn Python (which the OP probably knows inside out), which makes it very easy to get going ... (actually personally I hate Python, and prefer C/C++, but I mostly just use Excel – and Portfolio Visualizer for quick testing)

I think moving averages are still a great resources, but as trading rules, they worked better before everyone was using them .. 40 years ago you could invent an Exponential Moving Average, and go beat markets easily for the next 10-20 years .. But things change, and they're very blunt tools.

In fact my best run of momentum investing (I'm still at a 40% return over 12 months, and have been over rolling 12 month periods for a bit now) has come since I've stopped using moving averages and mainly relied on looking at charts .. You can learn what a trend looks like – all you're really trying to do is say "up" or "down" .. And your own neural networks can do that 1,000x better than a moving average crossover (in my opinion).

What I'd say is you need to approach the problem with the mind of a 6-year-old playing Minecraft – learn how everything works through pushing and pulling .. Then conceptualise how it works like a philosophy grad .. Anything you can read in a book: the market already knows .. and then you have to think: what happens to this rule if everyone's already using it?


3 users thanked King Lodos for this post.
sandid3 on 29/07/2017(UTC), gillyann on 29/07/2017(UTC), MrC on 29/07/2017(UTC)
Tug Boat
Posted: 29 July 2017 08:47:39(UTC)
#10

Joined: 16/12/2014(UTC)
Posts: 133

Thanks: 1 times
Was thanked: 177 time(s) in 73 post(s)
Just pick something you fancy.

I worked in control theory when they tried applying it to markets. What a laugh. First you characterise the plant, the planet in this case, too complex. Then you examine the inputs, apply filters and analyse the signal - far too many.

In short, you only have old data to apply to a random system.

I think Asia and EM will beat the debt ridden West over coming years. However, that might not be the case! Smiley face.
3 users thanked Tug Boat for this post.
Keith Hilton on 29/07/2017(UTC), Mr Helpful on 29/07/2017(UTC), MrC on 29/07/2017(UTC)
Mr Helpful
Posted: 29 July 2017 13:07:27(UTC)
#11

Joined: 04/11/2016(UTC)
Posts: 413

Thanks: 461 times
Was thanked: 481 time(s) in 237 post(s)
Tug Boat;49337 wrote:

I worked in control theory when they tried applying it to markets. What a laugh. First you characterise the plant, the planet in this case, too complex. Then you examine the inputs, apply filters and analyse the signal - far too many.
In short, you only have old data to apply to a random system.
Smiley face.


Which work is being referred to here; and do any publications or links exist ?

My copy of Didier Sornette's book is now residing with the local charity shop.
Catchy title though ('Why Stock Markets Crash').
Some other punter may be equally disappointed.

Do find some aspects of Classical Control Theory useful to aid the investment process, hence the interest.

Many Thanks
Mr H
1 user thanked Mr Helpful for this post.
MrC on 29/07/2017(UTC)
King Lodos
Posted: 29 July 2017 15:07:34(UTC)
#12

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
Control Theory sounds basically like what Jim Simons (70% annual returns) does.

They employ experts in speech recognition and particle physics .. fields in which you're dealing with data that's inherently random, chaotic, fuzzy.

e.g. In physics, you can't predict where an electron will be, but you can predict how likely it is to be there. (physics experts might want to pull me up on that) .. And they study everything, from price data to bank liquidity, volumes to moon cycles.

You could look at hiring patterns at an aluminium plant in Brazil, and find it's predictive of aluminium prices.. But the key is how you turn all that data into a profit.

If you can predict the outcome of a coin toss with 51% accuracy, you can make whatever return you want .. First you'd have to find a way of making the bet thousands of times (to filter out chaos), then you'd use leverage to turn the small positive return into whatever you want .. That's the principle the world's best hedge fund uses .. Of course, the risk would be that your observation stops working .. So you do this across thousands of different assets, and find mechanisms to control risk exposure on each trade.

It's the same principle I use, but because of the amount of leverage they use, they're forced into much shorter time-scales, where statistical edges are closer to 51%, while I'd guess what I do tends to be up in the 60s.
MrC
Posted: 29 July 2017 15:17:39(UTC)
#8

Joined: 25/07/2017(UTC)
Posts: 5

Thanks: 6 times
Was thanked: 4 time(s) in 2 post(s)
Thanks for all the answers, I was taken aback when I saw 7 people had replied within the time of me last checking to see if it had been posted to now.

I guess that's one of the key things I should point out; time - or rather a complete lack of it - is one of the reasons that I have turned to Funds and not stocks

King Lodos;49334 wrote:
I'd say if you're really serious about backtesting, you can do a lot in Excel, but you'd do well to learn Python (which the OP probably knows inside out), which makes it very easy to get going ... (actually personally I hate Python, and prefer C/C++, but I mostly just use Excel – and Portfolio Visualizer for quick testing)


sandid3;49334 wrote:
MrC may I suggest you use your edge, " lots of coding/analysis", and investigate Technical Analysis....

Start with moving averages, particularly the 50-day and 200-day moving averages as discussed in the book. Download the historical data for the S&P500 from Yahoo...

(I'm sorry this is so short - lack of time.)


I have done exactly that, the API that Yahoo have is pretty good and I have built up a nice VBA backend for a spreadhseet that allows me to quickly pull out a stocks history and do some basic trend analysis. Whilst I find it fascinating, I don't at this point in my career have the time to dedicate to doing the necessary analysis that would lead me to commit money based on the trends. It would be nice in the future to be able to do this more, but I enjoy my current line of work more than I do stock analysis...

Tony Peterson;49334 wrote:
You need a self select stocks and shares ISA ,and to put a bit of critical analysis into what major equities have on offer to their owners. Be your own fund manager.


That would be great and is perhaps something for the future and I hope that the returns when doing this are a lot more than I currently get

Tony Peterson;49334 wrote:
If I had acted on their advice I would be at least a million poorer..


I salute you if you've made that much, that level of accumulation of wealth seems a fair way off for me now; I'm realistic given how much time I can invest what I can hope to return. I am fairly happy with my returns so far, so just looking to continue the upward trend. I could have just sat and let it sit in current accounts and ISA's but can tolerate a bit of risk and like correlating markets to world events for example

Tug Boat;49334 wrote:
Just pick something you fancy.


Exactly, hence the Healthcare and Global Tech, I follow these on a daily basis so know a bit more about what's going on in these spheres

The book recommendations I will certainly look up, something to read on a long haul!
Stephen B.
Posted: 29 July 2017 15:20:12(UTC)
#13

Joined: 26/09/2012(UTC)
Posts: 226

Thanks: 14 times
Was thanked: 181 time(s) in 103 post(s)
There do seem to be some similarities between market crashes and other extreme events like earthquakes and avalanches, but I don't think it's much practical use because it basically tells you that it's unpredictable - you get lots of small events of which a few become bigger and most don't, with no way to pick out which is which. At best it might help a bit in probabilistically simulating the outcomes of different strategies.

Anyway this discussion seems to have veered somewhat from the original question. I think the basic approach is reasonable but perhaps could be a bit more diversified - even with a small number of funds it would probably be worth including Europe and the Far East. Also for the global investments have a look at what the underlying investments are and see how much duplication you have, there isn't much point in having funds with a high degree of overlap. You mention RIT, and I'd say the advantage there is that it's rather different from anything else.

My other suggestion would be to have a target allocation to each area and rebalance every so often. For example, if your target is 10% in Europe you might sell down if it gets to 15% and buy more at 5%. That way you automatically tend to sell at highs and buy at lows - most investors do the opposite!
Alan Selwood
Posted: 29 July 2017 15:30:30(UTC)
#14

Joined: 17/12/2011(UTC)
Posts: 2,486

Thanks: 489 times
Was thanked: 3870 time(s) in 1450 post(s)
Using HL ISAs for funds adds considerably to annual charges.

Try putting/moving money you want to hold in funds in (for example) iWeb or its sister Halifax Share Dealing.

If it's investment trusts or individual shares you want to hold, iWeb and X-O sharedealing are economical since they not only have no annual platform charges but also offer cheap dealing commissions.
King Lodos
Posted: 29 July 2017 15:36:08(UTC)
#15

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
This is one of the best quick tools for testing portfolio ideas:

https://www.portfoliovisualizer.com/backtest-asset-class-allocation

– Should you rebalance between European, Asian, Emerging, etc. equities?

I don't think there's much point myself .. With Emerging Mkts there could be an argument – because you can trade around the volatility a bit – but there's no easy way to beat a World index, which, in letting regional allocations drift, is keeping your portfolio representative of the global economy.

Personally I don't think buy-and-hold investors need separate European, Asian, US, etc. funds .. I think it's just a way for fund firms to justify making lots more funds, and giving themselves easier benchmarks to beat .. The only benchmark should be the FTSE or MSCI World – which VERY few funds would beat.
2 users thanked King Lodos for this post.
Tim D on 29/07/2017(UTC), Guest on 30/07/2017(UTC)
Stephen B.
Posted: 29 July 2017 15:36:59(UTC)
#20

Joined: 26/09/2012(UTC)
Posts: 226

Thanks: 14 times
Was thanked: 181 time(s) in 103 post(s)
BTW, I am a physicist, but I wouldn't say that the approach helps much with stockmarket analysis, if anything the reverse. Physicists start with the assumption that there are underlying laws, and relatively simple and stable ones at that, and then find ways to construct experiments and deal with noise to extract those laws. In stockmarkets there's no particular reason to think there are any underlying laws, or at least not in a way that can be usefully determined. However, if you engage in data mining to look for patterns in random data you will certainly find them, and the more data and the more computing power you apply the more patterns you'll find. Whenever someone tells you they have an algorithm which works really well in backtesting you should ask how many other algorithms they tried and discarded along the way, explicitly or implicitly.

It's also worth pointing out that even when there are laws they don't always lead to predictability. The underlying laws governing fluid flow are completely understood, but they don't even let us predict how water flows out of a tap, never mind forecasting the weather!
Stephen B.
Posted: 29 July 2017 15:50:43(UTC)
#16

Joined: 26/09/2012(UTC)
Posts: 226

Thanks: 14 times
Was thanked: 181 time(s) in 103 post(s)
King Lodos;49353 wrote:

– Should you rebalance between European, Asian, Emerging, etc. equities?

I don't think there's much point myself .. With Emerging Mkts there could be an argument – because you can trade around the volatility a bit – but there's no easy way to beat a World index, which, in letting regional allocations drift, is keeping your portfolio representative of the global economy.



I don't see any reason why a portfolio should be representative of the global economy, rather the reverse. As a small investor I can invest in lots of small companies and niche areas with the same weight as the mega-cap multinationals and get a lot more diversification.

Also there's a lot of talk about "the world economy" as though everything moves together. There's clearly some truth to that, economies are more integrated than they used to be, but there's still a lot of dispersion too, it's entirely possible for e.g. the US economy to be doing quite a bit better than Europe, as has been the case for the last few years. You also have a lot of country- or region-specific effects, e.g. the eurozone crisis, brexit and the corruption cases in Brazil.
King Lodos
Posted: 29 July 2017 15:59:23(UTC)
#21

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
Stephen B.;49354 wrote:
BTW, I am a physicist, but I wouldn't say that the approach helps much with stockmarket analysis, if anything the reverse. Physicists start with the assumption that there are underlying laws, and relatively simple and stable ones at that, and then find ways to construct experiments and deal with noise to extract those laws. In stockmarkets there's no particular reason to think there are any underlying laws, or at least not in a way that can be usefully determined. However, if you engage in data mining to look for patterns in random data you will certainly find them, and the more data and the more computing power you apply the more patterns you'll find. Whenever someone tells you they have an algorithm which works really well in backtesting you should ask how many other algorithms they tried and discarded along the way, explicitly or implicitly.

It's also worth pointing out that even when there are laws they don't always lead to predictability. The underlying laws governing fluid flow are completely understood, but they don't even let us predict how water flows out of a tap, never mind forecasting the weather!


It's what Jim Simons at Renaissance Technologies does .. He's by far the most successful fund manager in history .. 70% annual returns before fees since the 80s (regular cash distributions) .. I don't think they've ever had a down quarter.

It is data-mining .. Academics (like Fama & French) have identified hundreds of market anomalies (factors) through mining, which people are still profiting from and which influence the design of funds we probably hold .. What Simons and co. are doing is just looking for anomalies across a much wider range of scales and data sets.

My field is emergent logic .. So if you're familiar with like Langton's ant – when you've got lots of traders following simple rules, they inadvertently create behaviours and rules that no one's necessarily looking for .. And you can only really find them through mining – but as with Renaissance: if you've got a mined anomaly, AND you can explain why it's there, then you've got something interesting.
1 user thanked King Lodos for this post.
Tim D on 29/07/2017(UTC)
Alan Selwood
Posted: 29 July 2017 16:03:53(UTC)
#22

Joined: 17/12/2011(UTC)
Posts: 2,486

Thanks: 489 times
Was thanked: 3870 time(s) in 1450 post(s)
It's often possible to have a strong hunch about future outcomes, but since there are so many variables (many or most of which cannot be controlled by the individual investor), it usually pays to hedge your bets by spreading the risk over a number of apparent 'dead certs' plus some backstops that are expected to have different outcomes from each other (even though sometimes they all act like lemmings when portfolio theory says that they shouldn't!).

Consequently, I find myself having (via various ITs or funds or directly) both cash and gold and I-L NSCs and then among equities a modest number of megacaps, more medium caps and still more small caps (where the risk of any one holding suffering total wipe-out is probably greater).

Over some 50 years of investing ('It seems like only yesterday'!) I have come to the conclusion that because markets and individual stocks can rise sharply or creep up slowly or rise and fall unpredictably or drop suddenly by 20% or more, you need to think about not only maximum return but maximum survivability. So a spread of assets, preferably in different geographical locations as well as of different type (equities/bonds/property/cash/gold) is a reasonable compromise between keeping up with the braggers who take alarmingly high risks (sometimes without realising it until it's too late) and preserving the means of staying alive if nearly everything suddenly crumbles. (Asteroid strikes, super-volcanoes and major political upheavals being the bit beyond the 'nearly' in the previous sentence).
5 users thanked Alan Selwood for this post.
Sara G on 29/07/2017(UTC), Mickey on 29/07/2017(UTC), Mr Helpful on 30/07/2017(UTC), john brace on 30/07/2017(UTC), Guest on 30/07/2017(UTC)
Stephen B.
Posted: 29 July 2017 16:14:08(UTC)
#23

Joined: 26/09/2012(UTC)
Posts: 226

Thanks: 14 times
Was thanked: 181 time(s) in 103 post(s)
70% returns over 30 years is a factor of about 8 million, i.e. an initial fund size of $10 million would now be worth $80 trillion, which is bigger than all the world's stockmarkets put together ...

It is true that there may be real underlying correlations which are genuinely predictive, but the question is whether you can separate them from all the noise, and whether they remain stable. Long Term Capital Management had found real arbitrage opportunities which worked well - until the bond market hit a regime it hadn't experienced before, and then it collapsed and nearly took the whole market with it. Also of course there are now lots of people looking for such opportunities, and the nature of arbitrage is that when enough people do it the gap will close. Personally I think the only things which are likely to be reasonably stable are the ones rooted in basic psychology, e.g. herd behaviour, i.e. people don't like being out of step with everyone else.
Tyrion Lannister
Posted: 29 July 2017 16:15:51(UTC)
#4

Joined: 03/03/2017(UTC)
Posts: 234

Thanks: 145 times
Was thanked: 150 time(s) in 95 post(s)
Tony Peterson;49315 wrote:
So you have decided to make fund managers rich, rather than yourself ("it wasn't for me").

Tragic.

You need a self select stocks and shares ISA ,and to put a bit of critical analysis into what major equities have on offer to their owners. Be your own fund manager.

I have been continually advised to keep a large chunk in cash by well-intentioned posters on this site over the last 8 years. If I had acted on their advice I would be at least a million poorer.



I see what you mean with this, paying say 1% pa to invest in funds will make a massive difference to the growth of my portfolio value over time.

However, I invest purely in funds (ITs and UTs) 1. because I don't have the confidence or know how to invest in individual stocks and 2. because I know myself and I'll find it extremely difficult to refrain from emotive decisions.

As a compromise, I'm considering whether to start investing new money in individual stocks while keeping the funds I have.

Where to start, and how to select are the two big hurdles in the way.

One idea I have is to simply select from the top 10 individual stocks held in my favourite funds.

What do you think?
King Lodos
Posted: 29 July 2017 16:16:12(UTC)
#17

Joined: 05/01/2016(UTC)
Posts: 2,088

Thanks: 389 times
Was thanked: 2995 time(s) in 1186 post(s)
Stephen B.;49355 wrote:
King Lodos;49353 wrote:

– Should you rebalance between European, Asian, Emerging, etc. equities?

I don't think there's much point myself .. With Emerging Mkts there could be an argument – because you can trade around the volatility a bit – but there's no easy way to beat a World index, which, in letting regional allocations drift, is keeping your portfolio representative of the global economy.



I don't see any reason why a portfolio should be representative of the global economy, rather the reverse. As a small investor I can invest in lots of small companies and niche areas with the same weight as the mega-cap multinationals and get a lot more diversification.

Also there's a lot of talk about "the world economy" as though everything moves together. There's clearly some truth to that, economies are more integrated than they used to be, but there's still a lot of dispersion too, it's entirely possible for e.g. the US economy to be doing quite a bit better than Europe, as has been the case for the last few years. You also have a lot of country- or region-specific effects, e.g. the eurozone crisis, brexit and the corruption cases in Brazil.


It depends what way you look at it.

I take Efficient Markets as my base case .. The argument being that the cap-weighted distribution of stocks/regions is the best risk-adjusted return possible, from the collective intelligence of the market .. i.e. when you make more from Micro-caps, Private Equity, Emerging Mkts, etc. it's simply because you're taking more risk, and accepting a wider distribution of possible outcomes.

So because you can always increase your exposure to a market to make a higher return (whether that's going from 50 to 60% equities, or using leverage), unless you've found a specific anomaly that's likely to persist, it really makes more sense to invest in the cap-weighted portfolio, and just increase your exposure .. Jack Bogle jokes that the easiest way to double the market's returns is to invest with 2x leverage – and he's absolutely right.




3 Pages123Next page
+ Reply to discussion

Markets

Other markets