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Suitability of John Baron's Income Portfolio
Chris Howland
Posted: 23 August 2017 19:01:29(UTC)
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Like many others, I started out copying John Baron's 'Income' portfolio, but quickly developed sufficient knowledge and self confidence to identify my own path.

I bought John Baron's book - the one he plugs in his Investors Chronicle column. I found this to be a good primer, but far from instructive. In addition his column in IC has become less informative than hitherto, with very little to show the decision making reasoning. That said - at least I now take a few moments to look at price movements and try to work out why he did what he did. Self education is always a good thing!

In addition to JB's column, there are many other resources that I find useful:

The AIC website - this has a wealth of information on all Investment Trusts (admittedly more where the Trust is an AIC member). Of particular worth are the one and three year discount averages. Pricing data for the close of business the previous day can also be downloaded as a CSV file.

Morningstar have up to date Z info (effectively the number of standard deviation the current price is from the 12 month average). I also use Morningstar to keep track of my portfolio (and it's free).

Trustnet have a 'risk' score for all IT and funds. Some of these look a bit iffy to me, but I use them because they are well maintained and are if nothing else, self consistent.

PIMFA publish their asset allocations (which JB follows as a benchmark) and update in line with economic announcements and/or reports.

Like Baron, I try to buy when the current discount is below the 12 month average and when Z is less than 0. This isn't always possible, but investment decisions are rarely perfect. From what I've been able to glean, this is John Baron's method as well, and he sells when the discount has closed to one he believes is an inflection point...

So far as losses are concerned, I used to look at prices everyday. These days, I take a measure of comfort from the fact that the IT I hold are managed by people with a good track record (e.g. Job Curtis and CTY) and I've stopped looking quite so often... After all, I'm retired and have a great deal more to do with my time!





4 users thanked Chris Howland for this post.
Mike L on 24/08/2017(UTC), Mickey on 25/08/2017(UTC), dlp6666 on 25/08/2017(UTC), Andrew Smith 259 on 11/03/2018(UTC)
Gareth Harries
Posted: 23 August 2017 20:26:00(UTC)
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This has been an interesting debate, but we have strayed a long way from the original posters question and probably not helping them much. My original post was to point out that markets do what they do and starting out with a perspective of being prepared to lose 10% is not necessarily the best way to approach investing, but I will not make any further comment on when a loss is a loss to save someone causing an injury to their head, save that some of the follow up comments were interesting.

I hope we have helped the original poster understand some of the issues about investing!
1 user thanked Gareth Harries for this post.
m crawfy on 23/08/2017(UTC)
Andrew Smith 259
Posted: 23 August 2017 21:06:31(UTC)
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Getting back on topic !!!

I am loosely following JBs Dividend portfolio which is up 12.5% so far this year and up by 16.8% last year.

The Dividend portfolio is not one of the portfolios covered by IC and yields about 5%.

The only IT in this portfolio which I am not totally convinced about is Bluefielld Solar Income IT. It yields just over 6%.
1 user thanked Andrew Smith 259 for this post.
Mickey on 25/08/2017(UTC)
m crawfy
Posted: 23 August 2017 21:23:22(UTC)
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Thanks to everyone who responded to my original post.
Lots of good points well made - the comments have certainly given me food for thought, particularly one made by Money Spider :

Remember, JB will have bought some ITs quite some time ago when they were on higher discounts than they are now. So, if he was making the call today he might not buy some of them (or not so much of them).

Sound advice !
2 users thanked m crawfy for this post.
Mickey on 25/08/2017(UTC), dlp6666 on 25/08/2017(UTC)
Thrugelmir
Posted: 23 August 2017 21:30:52(UTC)
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Big boy;50127 wrote:
Have I read it correctly John Barron is an Investment Trust tip sheet charging £160.00 pa.


A little background for you.

"Biography

John BaronJohn is 57, married with two daughters. His interests include history, theatre/film and financial journalism. After nine state/grammar schools, he finished his sixth form studies at Queen’s College, Taunton.

After a gap year traveling in Eastern Europe and the Middle East, John studied Law, History and Politics at Cambridge. He then joined the Army and The Royal Regiment of Fusiliers. After Sandhurst, he served on a number of tours and postings including Berlin, Northern Ireland and Cyprus, before finishing in Germany as the Battalion Operations Officer.

On leaving the Army, he entered the City and ran a wide range of portfolios for charities and private clients as a Director of Hendersons and then Rothschild Asset Management. He remains a member of the Chartered Institute for Securities and Investment (CISI).

Since leaving the City, he has assisted charities to monitor their fund managers. He also writes a monthly column for the Investors Chronicle magazine (donating his fee to charity), regularly speaks at financial seminars, and has written the ‘FT Guide to Investment Trusts’. He is also a Director of Equi Ltd which runs an Investment Trust website.

Into politics

John was the Conservative Parliamentary candidate in Basildon in 1997. He was elected as the Conservative MP for Billericay and District in 2001, and served on Parliament’s Education Select Committee before becoming a Shadow Health Minister in 2002. However, he resigned from the Front Bench in 2003 in order to vote against the Iraq war.

He was subsequently re-appointed as a Shadow Health Minister with responsibilities including cancer services. He moved from Health to join the Opposition Whips’ Office in the summer of 2007. In 2010, he left the Whips’ Office, turned down a Cabinet PPS position, and stood for election as Chairman of the Foreign Affairs Select Committee, of which he is now a member – having stood again for Chairman in 2015."
2 users thanked Thrugelmir for this post.
Tim D on 23/08/2017(UTC), Andrew Smith 259 on 23/08/2017(UTC)
Gareth Harries
Posted: 23 August 2017 22:08:33(UTC)
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As far as I'm aware JB's portfolio is actively reviewed, so I would be surprised to see a selection of an IT that had not been reviewed for current suitability.

There are other ways to go and these include:

https://whichinvestmenttrust.com/

This provides a list of Investment Trusts that covers a range of the market.

TB wise Income

This provides a 1 stop shop for this that are seeking to gain a regular income of approximately 5% per annum, plus increases to capital and therefore a growth in income

I have looked at this fund on many occasions, but not utilised it as it does not fit my profile, but it may well fit yours
2 users thanked Gareth Harries for this post.
antigricer on 24/08/2017(UTC), Mike L on 24/08/2017(UTC)
Alan Selwood
Posted: 23 August 2017 22:09:56(UTC)
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With a CV like that, we clearly need to take careful note of what he says!

I sometimes wonder if his portfolios have too many holdings and a bit of duplication, but you can't argue with his results, any more than you can with people like Terry Smith, Nick Train, Keith Ashworth-Lord or John Lee in their narrower focus on particular styles of equity investing.

If you like the idea of investing but are not a nuts and bolts nerd like some of us on this forum, and want the chance for better results than you'd typically get from a global tracker, I think you could do far worse than follow JB as your personal guru costing £160 p.a.
http://www.johnbaronport.../subscriptionservice.php
3 users thanked Alan Selwood for this post.
Andrew Smith 259 on 23/08/2017(UTC), Mickey on 25/08/2017(UTC), dlp6666 on 25/08/2017(UTC)
King Lodos
Posted: 24 August 2017 01:39:18(UTC)
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Re: Crystallising a loss

The term has *some* meaning .. If you're tax-loss harvesting (maybe a slightly American term), you may 'crystallise' a paper loss by selling the stock – then buy the stock back, because you still like it as a trade.

This gets conflated with another sort-of-truism, that if you buy near the top of the market, and sell at bottom (as many do), then you've effectively *banked* that loss, if you're not going to get back into the market.

But the idea that a loss isn't a loss until you've sold is very misleading – and creates a tendency for people to hold onto losing stocks too long.


An example that touches on this, that I think helped someone find clarity on a similar concept:

– Let's say I buy an iShares Financials ETF .. it goes up 25%;

– Then I buy a Vanguard Financials ETF (same index) .. and Financials go down 10%;

– So now I've got one ETF on a 15% profit (simplifying the maths), and the other on a 10% loss;

– Say I want to reduce my exposure: does it make any difference which one I sell?


I could crystallise a loss on one ETF, or bank a profit on the other .. But it makes no difference at all .. The only thing I'm controlling is how much exposure I've got to that sector going forwards, and both funds provide exactly the same thing, and leave me with exactly the same amount of cash in my pocket.

This touches on another concept very important in trading: markets don't care where you bought .. In fact, where you bought is meaningless as soon as you make the transaction .. If you were given 1,000 shares in a company, you've not idea what they might have been bought for – whether they lost someone a fortune or made them one .. And it's purely academic, because the only reality is the value of that investment right now

1 user thanked King Lodos for this post.
Andrew Smith 259 on 24/08/2017(UTC)
Big boy
Posted: 24 August 2017 07:35:41(UTC)
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PaulSc......... Be carefull thinking a yield will support a share price. Some Investment Companies have borrowings which inflate the yield and cost of debt can be put against capital. When the assets decline and move to-wards the LTV the revenue can't be distributed as the debt provider has first call and shareholders have no income and potentionally loose all their money. This happened in the SPLITs and Property market.
This is why you should understand how the yield is achieved ie cost of debt.running costs and fees....taken from capital or revenue or split.
3 users thanked Big boy for this post.
Skald on 24/08/2017(UTC), Tim D on 24/08/2017(UTC), Mickey on 25/08/2017(UTC)
Big boy
Posted: 24 August 2017 08:16:08(UTC)
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THrugelmir...23 Aug. 21.30........From what you say he was an Investment Manager but not a Fund Manager. They are very different ...I was both.

During the last 12 months Investment Trust NAVs (trust portfolios)have underperformed share prices by approximately 6% as discounts have narrowed ......can that continue without a correction???
1 user thanked Big boy for this post.
Mickey on 25/08/2017(UTC)
Mr Helpful
Posted: 24 August 2017 09:43:44(UTC)
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JB's Income Portfolio is presently positioned :-
19% Bonds
29% UK Stocks
19.5% International Stocks
16.5% Themes (bit of a mix)
12.5% Commercial Property
3.5% Cash

If we strip it apart a little and rebuild like a soccer team, we have an attacking force of Stocks, from which most of the long-term growth should hopefully come, and the defence of non-Stocks or semi-non-Stocks which then looks like :-
60.0% Attack (Stocks), UK+Int+some of Themes
40.0% Defence (non-Stocks, etc), Bonds + Property + some of Themes + Cash
So a very traditional 60/40 Asset Class Allocation underneath.

The point made by earlier posters about holding more cash, is worth spending time considering in depth in conjunction with personal circumstances.
This issue is aggravated by the Bonds chosen tend to be correlated to some degree with Stocks, so that should Stocks fall in price the Bonds may also fall.
Now hasten to add am not saying JB is wrong in his choice of Bonds, as he has so often proven in the past his ability to see through these kind of apparent discrepancies and come triumphantly out the other end.

So final thoughts :-
+ Fine portfolio.
+ Fits the needs
+ Consider upping Cash dependent on personal circumstances, and view of today's market valuations.
+ Or maybe move money gradually into position over a few years (using Pound Cost Averaging, Value Averaging, or 10% of deviation from target per month), if for no other reason than to retain psychological equanimity should all hell break loose for Stocks and JB's selection of Bonds happen to go down with Stocks
+ Keep up to date with JB's allocation changes
7 users thanked Mr Helpful for this post.
Tim D on 24/08/2017(UTC), Andrew Smith 259 on 24/08/2017(UTC), m crawfy on 24/08/2017(UTC), Mike L on 24/08/2017(UTC), Jon Snow on 24/08/2017(UTC), dlp6666 on 25/08/2017(UTC), Guest on 19/09/2017(UTC)
Andrew Smith 259
Posted: 24 August 2017 14:01:47(UTC)
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For those who have subscribed to JBs web site, an e-Mail is sent out immediately after any changes are made to the various portfolios including those portfolios covered by IC.
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Mr Helpful on 25/08/2017(UTC)
Thrugelmir
Posted: 24 August 2017 22:48:08(UTC)
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Big boy;50220 wrote:
THrugelmir...23 Aug. 21.30........From what you say he was an Investment Manager but not a Fund Manager. They are very different ...I was both.

During the last 12 months Investment Trust NAVs (trust portfolios)have underperformed share prices by approximately 6% as discounts have narrowed ......can that continue without a correction???


Unsure what this to do with what JB offer smaller investors. Who wish to use IT's as the backbone of their portfolios.

As an aside it is possible to subscribe for free for a period. Enabling one to see the make up of the individual portfolios.

I follow him through the column he writes for the Investors Chronicle. Not that I mirror the portfolios. Though have found that he recommends IT;s that I've been tracking.
Mickey
Posted: 25 August 2017 08:47:58(UTC)
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Thrugelmir;50266 wrote:

As an aside it is possible to subscribe for free for a period. Enabling one to see the make up of the individual portfolios.

He offers a free 7 day trial at http://www.johnbaronport...subscriptionservice.php

I believe a portion of the subscription goes to charity and the remainder to pay website costs, sort of fits in with his IC column fee also going to charity, I don't know which he supports.
raybd
Posted: 11 March 2018 12:56:24(UTC)
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Jon Snow;50142 wrote:
Big boy;50127 wrote:
Have I read it correctly John Barron is an Investment Trust tip sheet charging £160.00 pa.


Yes it is, however you can get a peek at the holdings via IC -

https://www.investorschr...stment-trust-portfolio/

I think someone posts on the forums when the portfolio is updated.

I hold HFEL, SLI and NCYF, also I prefer CTY to MRCH, so I use bits of his portfolio that suit my needs.

raybd
Posted: 11 March 2018 12:57:27(UTC)
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Jon Snow;50142 wrote:
Big boy;50127 wrote:
Have I read it correctly John Barron is an Investment Trust tip sheet charging £160.00 pa.


Yes it is, however you can get a peek at the holdings via IC -

https://www.investorschr...stment-trust-portfolio/

I think someone posts on the forums when the portfolio is updated.

I hold HFEL, SLI and NCYF, also I prefer CTY to MRCH, so I use bits of his portfolio that suit my needs.

raybd
Posted: 11 March 2018 13:01:37(UTC)
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re Jon Snow "That's the way to do it". Use the tips, with your own research and needs in mind. I use solely ITs. Can't look through 350++ companies, or 400 ITs or 4000? UT?OEICS. ray
Chris Moore
Posted: 17 June 2018 13:15:22(UTC)
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m crawfy;50070 wrote:
I hope to retire when I turn 60 in two years time.

To supplement my occupational pension, which will cover my basic day to day living costs, I intend to set up a portfolio with a sum of £300k to generate income.

Being a relative novice to investing and not wishing to constantly monitor any portfolio I set up I had thought of following John Baron's income portfolio which historically has delivered a yield of around 4% which would be more than adequate for my needs.

I'm not averse to some risk and would be able to take a loss of around of 10 %.

I would welcome any comments or advice on this possible course of action.

I should add that I had initially thought about using an IFA but had thought otherwise when told of the exorbitant fees !



So m Crawfy - what did you decide?

I'd be interested to know as I too plan to invest £200K-£300K in JB's winter portfolio as part of my retirement income.

I've done quite a lot of research on ready made portfolio's as well as JB himself. My view is that you won't go far wrong following his portfolio's. £170K/year may seem a lot but it's preferable to the fee's you would pay to an IFA for something similar.

Chris
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Andrew Smith 259 on 17/06/2018(UTC)
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