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30% portfolio allocation, Fundsmith or..?
Aminatidi
Posted: 02 February 2018 07:55:15(UTC)
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Looking at the following:

30% Fundsmith
20% Global Tracker
30% Troy Trojan
20% GAM Star Credit

Theory being 50% "risky" and 50% "less risky".

For the 30% that's Fundsmith I'm now debating whether or not to go 100% Fundsmith or split up between:

Fundsmith
Lindsell Train Global Equity
Baillie Gifford Global Discovery
Baillie Gifford International

or just bloody stick with plan A and look at the others when I next add to the fund (plan is £10k lump now and £10k in before April to use the allowance)

I'm only asking because Fundsmith looks too good to be true in terms of ongoing returns...
King Lodos
Posted: 02 February 2018 08:13:31(UTC)
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It's funny arguing against my largest holding, but I'd still say GAM Star's a 10% position.

Don't take the lack of volatility as a sign of low risk – it's very specialised .. If the fund were called UK Financial Services Junior Debt, it might more accurately describe where it's invested.

The reason I'm cautious is because, as a less experienced investor, it might not be entirely obvious what to do if such a fund were to run into problems .. There are some funds you can hold forever, and others that shine then fade .. I can't say for sure which GAM Star will be.


I think you'd be absolutely fine to go 100% Fundsmith .. But actually a top three holding (Paypal) just had 10% wiped off its price, after eBay planned to cut ties – so going 50:50 Fundsmith and LT Global halves what you'd call idiosyncratic risk, without necessarily reducing returns.

To put a dampener on Fundsmith, I think current cash-flow yields (which predict future returns) are only around 3-3.5% .. I think growth is around 9-10% on that .. So whatever stocks do in the near-term, I wouldn't (by any means) estimate 20% annual returns going forwards .. If it were as easy as picking funds based on how well they'd done over the past 5 years, we'd all be billionaires (and not just Tony Peterson)
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Aminatidi
Posted: 02 February 2018 08:33:38(UTC)
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King Lodos;56348 wrote:
Don't take the lack of volatility as a sign of low risk – it's very specialised .. If the fund were called UK Financial Services Junior Debt, it might more accurately describe where it's invested.


Yes I understand that point, presumably you're into trying to qualify whether the percentage of those who default on that debt is more or less risky/volatile than equity in whoever else.

Say GAM came down to 10% leaving 10% to complete.

Suggestions welcome?
Keith Cobby
Posted: 02 February 2018 09:01:41(UTC)
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My largest holding is SMT @ 20%. I wouldn't put 100% into any one investment.
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Aminatidi on 02/02/2018(UTC)
King Lodos
Posted: 02 February 2018 09:02:15(UTC)
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Well I think with the return being so close to stocks, the risk likely is as well.

I can't quite recall your situation .. If you're going to keep investing, and building up a portfolio, and don't mind volatility, you could go for 10% in a Vanguard Emerging Markets tracker.

Might sound a bit weird, derisking by putting 10% from bonds into Emerging mkt stocks .. But Emerging Mkts are cheap, and that's one form of diversification you don't currently have .. It's also a much less concentrated bet.
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dlp6666
Posted: 02 February 2018 09:48:16(UTC)
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Aminatidi;56347 wrote:
I'm only asking because Fundsmith looks too good to be true in terms of ongoing returns...


I'm beginning to think (and seems King Lodos similarly) that GAM Star also looks too good to be true and have today (sadly) decided to reduce my exposure to it by around 35% (shifted into short duration inflation-linked bonds).
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King Lodos on 02/02/2018(UTC), Aminatidi on 02/02/2018(UTC)
King Lodos
Posted: 02 February 2018 10:12:59(UTC)
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Well it's still my largest holding – and I think the manager is one of the best around (certainly in bonds).

So I wouldn't necessarily say sell .. It's just an inexperienced investor might not know what kind of things can happen when you're overexposed to a sector .. I'd keep hold of it 100% while it's performing flawlessly though.
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Aminatidi on 02/02/2018(UTC), dlp6666 on 02/02/2018(UTC)
Aminatidi
Posted: 02 February 2018 10:17:27(UTC)
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King Lodos;56351 wrote:
Well I think with the return being so close to stocks, the risk likely is as well.

I can't quite recall your situation .. If you're going to keep investing, and building up a portfolio, and don't mind volatility, you could go for 10% in a Vanguard Emerging Markets tracker.

Might sound a bit weird, derisking by putting 10% from bonds into Emerging mkt stocks .. But Emerging Mkts are cheap, and that's one form of diversification you don't currently have .. It's also a much less concentrated bet.


Thank you, suggestions welcome if GAM came down to 10%?

Again this is "just" an initial £10k of what should be £20k/year ongoing so it can be changed easily down the road I'd just like to get as much right first time as possible so most months I'm just bunging in a set amount with known ratios unless there's a reason to change it.

@Keith Cobby I agree, this thread was around whether Fundsmith should be 100% of the 30% chunk if that makes sense.

It's now looking like yes they will, but GAM will come down from 20% to 10% with something else being that 10%...
Tug Boat
Posted: 02 February 2018 12:03:11(UTC)
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You could try property in the form of REITs or property debt.

BLND or RECI worth a look. Both will generate some income which is always useful.
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Aminatidi on 04/02/2018(UTC)
AHICK
Posted: 02 February 2018 15:15:37(UTC)
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King Lodos;56348 wrote:


I think you'd be absolutely fine to go 100% Fundsmith .. But actually a top three holding (Paypal) just had 10% wiped off its price, after eBay planned to cut ties – so going 50:50 Fundsmith and LT Global halves what you'd call idiosyncratic risk, without necessarily reducing returns.


I believe Lindsell Train Global also holds Paypal...the point is perhaps more generally still valid - but there is a bit of overlap...
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Aminatidi on 04/02/2018(UTC)
King Lodos
Posted: 02 February 2018 19:08:40(UTC)
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AHICK;56384 wrote:
King Lodos;56348 wrote:


I think you'd be absolutely fine to go 100% Fundsmith .. But actually a top three holding (Paypal) just had 10% wiped off its price, after eBay planned to cut ties – so going 50:50 Fundsmith and LT Global halves what you'd call idiosyncratic risk, without necessarily reducing returns.


I believe Lindsell Train Global also holds Paypal...the point is perhaps more generally still valid - but there is a bit of overlap...


Huge overlap .. If Quality investing goes through a 10 year downturn, they probably both will
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Aminatidi on 04/02/2018(UTC)
King Lodos
Posted: 02 February 2018 19:15:37(UTC)
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Aminatidi;56363 wrote:
King Lodos;56351 wrote:
Well I think with the return being so close to stocks, the risk likely is as well.

I can't quite recall your situation .. If you're going to keep investing, and building up a portfolio, and don't mind volatility, you could go for 10% in a Vanguard Emerging Markets tracker.

Might sound a bit weird, derisking by putting 10% from bonds into Emerging mkt stocks .. But Emerging Mkts are cheap, and that's one form of diversification you don't currently have .. It's also a much less concentrated bet.


Thank you, suggestions welcome if GAM came down to 10%?

Again this is "just" an initial £10k of what should be £20k/year ongoing so it can be changed easily down the road I'd just like to get as much right first time as possible so most months I'm just bunging in a set amount with known ratios unless there's a reason to change it.

@Keith Cobby I agree, this thread was around whether Fundsmith should be 100% of the 30% chunk if that makes sense.

It's now looking like yes they will, but GAM will come down from 20% to 10% with something else being that 10%...


If you're investing £20k a year, you're 'accumulating' for a good while.

What that means is, the money you put in each year is diversifying you .. If stocks fall 60%, you're still buying, which is all diversifying's really about .. The aim is just to own more stocks – so price falls are great early on .. not something you want to be paying to protect against.

So I'd forget Troy Trojan and GAM, and just go 50:50 Fundsmith and Global Market Tracker if you want .. Or 100% one or the other .. Or 25:25 LT Global and Fundsmith .. It will make virtually no difference – your returns for a long time will just be determined by how much you're investing .. I'd say by about £100k, you might want to start building defence – but right now, there really aren't many options other than cash


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Aminatidi on 04/02/2018(UTC)
Peter59
Posted: 02 February 2018 20:43:45(UTC)
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Terry Smith certainly has a fan club. A friend with no knowledge of investing recently put £50K into Fundsmith as she knew someone that worked with him and had invested everything in his fund. I tried to argue the case for a diversified portfolio, but will she be the one swanning round the world in retirement with me fretting about my equity-bond allocation? For the record, I mostly stick to around 20 holdings of approx 5% and funnily enough, I sleep really well!
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Pensioner
Posted: 02 February 2018 22:15:15(UTC)
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Fundsmith is a solid holding. If you research the man through google. You will find he has been a successful business man. Launching his Fund Nov 2010 with 25Million Pounds, and as I remember investing a further £115 million in 2015 or 2016. He puts his money where is mouth is, I'm all for that. In the UK Fund managers don't have to invest in funds they manage, In the US they do. He has identified 50/70 companies in the world which make a good ROCE. In 7 years he has bought into 28 companies, of those 50/70 companies he has researched. He has kept costs to a minimum with minimal buying and selling of shares which many fund managers seem to do. For me and my wife via an ISA with Fundsmith it has proved a brilliant investment. All my family including grandchildren drip feed money into Fundsmith either direct or through the broker HL.
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Aminatidi on 04/02/2018(UTC)
Pensioner
Posted: 02 February 2018 22:31:08(UTC)
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Further more Fundsmith is a Global Fund which is classified as an OEIC and low cost, which I also hold with HL and as a very liquid investment, I can easily turn into cash. As an alternative investment, another solid hold with 4 divis a year is Foreign & Colonial Investment Trust, 150 years old this month, which my wife holds in an ISA. This is also a global fund of about 500 companies in about 30 countries, and doing well under manager Paul Niven, and backed by the largest bank in Canada, The Bank Of Montreal. I rest my case.
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Fell Walker on 03/02/2018(UTC), Aminatidi on 04/02/2018(UTC)
damper
Posted: 03 February 2018 13:14:02(UTC)
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King Lodos;56348 wrote:
To put a dampener on Fundsmith


It's 'damper'.
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King Lodos on 07/02/2018(UTC)
Aminatidi
Posted: 07 February 2018 18:55:13(UTC)
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And ironically in the time it's taken to open my ISA we've got the current market tremor so do I stay or do I go...

I know, it's not timing the market it's time in the market :)
kWIKSAVE
Posted: 07 February 2018 19:27:35(UTC)
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Aminatidi

You have answered your own question !
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Aminatidi on 13/02/2018(UTC)
Aminatidi
Posted: 13 February 2018 17:52:05(UTC)
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Well I put my first small chunk of my ISA into Lindsell Trains Global Equity.

My reasoning is that it's the "buy good companies and do nothing" philosophy that Fundsmith employ but with a wider global exposure.

I'm now wondering if it would be a "mistake" to go with an equal chunk in Fundsmith?

I use the word "mistake" in quotes simply because there is a degree of overlap between the two but being brutally honest I trust their judgement over what's going to be a safe long term bet more than I do my own so whilst UK Small Caps look good on paper I'm not sure I trust myself enough to make that judgement.
John Miskelly
Posted: 13 February 2018 18:14:57(UTC)
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Aminatidi;57095 wrote:
Well I put my first small chunk of my ISA into Lindsell Trains Global Equity.

My reasoning is that it's the "buy good companies and do nothing" philosophy that Fundsmith employ but with a wider global exposure.

I'm now wondering if it would be a "mistake" to go with an equal chunk in Fundsmith?

I use the word "mistake" in quotes simply because there is a degree of overlap between the two but being brutally honest I trust their judgement over what's going to be a safe long term bet more than I do my own so whilst UK Small Caps look good on paper I'm not sure I trust myself enough to make that judgement.


I'm planning to split mine between LTG and Fundsmith. The way I look at it, it'll minimise my losses if one of the non-overlapping companies tanks.
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Aminatidi on 13/02/2018(UTC)
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