Investing strategy and diversification

(Gary) #1

Evening everyone. I am am relatively new to investing and I am building a long term investment ISA; planned for the next 20 years + to bolster my retirement pot.

I currently hold several investment trust after doing some research; Alliance trust, SMT, BG Japan, Fidelity China special and some Renewable infrastructures. Lots I know but I got excited and carried away with this sparkly new FT app and wanted diversification!

Thing is I have been reading more and looking at global tracking ETF’s. I want one! But it’s hard to add to them all as my monthly top ups are relatively small; £50 am thinking.

I am thinking rightly or wrongly that it is better to have a smaller number with more money invested in them? Trouble is I like my choices and am loathed to sell as they are predominately in the green.

I know I have to make my own decision but interested in the experience of this community.

Appreciate your views :+1:t2:

(Jeff puckering) #2

Welcome to the party, I have a similar investing profile to you and started about 6 months ago averaging about £50 a month. I have written a little about my first few investments here,

I have been wrestling with exactly what your talking about. I intend to write a post about it soon when I get 5 minutes but essentially I am trying to think about some of the general stock categories I think will be important in the next 20-30 years and research some etfs that I think have a good spread across those companies e.g. robo, emerging markets.

There are some fairly standard ways of categorising stocks but I have really found they tend to be too generic for me. I wrote a few up in a spreadsheet a while ago and had a think about what % of my portfolio I want in each.

Ultimately as you say it’s your choice! But £50 a month is plenty, there are loads of ETFs less than that and no harm in waiting a couple months to buy any more expensive ones that catch your eye.

(Gary) #3

Appreciate your input Jeff, it’s a mine field isn’t it! I had a look at your post and noted the responses regarding the crossover between ETF’s (MSCI/S&P etc). Something I had not really considered. Will have to look into that. The ETF’s I have looked at are not yet on FT either.

I have the luxury of having a previous ISA that I cashed in so have invested a few K, and have a few K burning a hole in my pocket so to speak :grimacing: don’t want to make the wrong choices though.


I think you have to decide where your priorities lie. Having learnt from your readings, would you still buy your current holdings today?

If you want to go global for a wise long term investment, VWRL is in the app and one of the best out there. It’s currently £66/share, but you could buy a share every other month, and get 2 shares when you have enough remainders.

VWRL probably holds everything your existing ITs hold (but do check), so if you’re of the belief and desire that you should diversify even more throughout the globe, then you’re not doing your strategy any harm by selling everything to go all-in on VWRL.

If you’ve studied the numbers and think 1 or more of your ITs will assuredly outperform VWRL, you can easily justify keeping it/them in a 5-10% weight to give your returns a boost.

(Gary) #5

Definitely some good ideas there sendu, I had been looking at the Vanguard All World but not considered comparing the stocks held between the investment trusts. I will look into it.

I like the idea of looking into the numbers going forward between the VWRL and IT’s with regard to one out perform the other. Do you have advice on the best place to check this out? Morningstar maybe?


That would be fine. I like the look of HL’s website more. As long as you can find the information it doesn’t really matter though.

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(Harry) #7

Good discussion to be having! I suppose starting points would be MSCI World or Vanguard as mentioned above, this will get you market exposure and is diversified regionally. You would then want to have a think about other ETFs; some are broken down regionally (S&P500 = US, China, EM etc), others thematically (L&G’s Robo), so you can think about where you think growth may come from in the future, a macro approach, and decide to go overweight in that area.
ITs are managed and can out perform ETFs, which are designed to track an index or basket that falls into a certain category (companies focussed on robotics etc), but can underperform also. It can diversify you however as you can get diversification via management style i.e. their stock selection bias or criteria is different and may be differently correlated to the S&P500 etc.

Also worth thinking about asset type. All the above is publicly listed equity, you mentioned TRIG (renewables) which is generally private equity and one can gain diversification through this different asset class, a number of other Private Equity investment trusts can provide the same thing, and SMT you mention has a number of private holdings also. Same with Bond ETFs, different asset class.

Hope this helps :slight_smile:

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(Joe) #8

No matter how big or small your investments can be each month they will soon add up with compound interest and natural inflation rates.

ETF’s are also very low cost for the S&P 500 and FTSE trackers by iShares and Vanguard. You’ll be looking at slightly more expensive ones for specific industries and special indexes. For example the L&G Robo one I think racks up 0.40% OCF compared to 0.07% OCF on the Vanguard and iShares S&P 500 ETF.

If you’ve got enough money to do it my current savings strategy is a 20/30/50 split in to my Help to Buy ISA / First Direct 5% interest savers account / Freetrade . Any spare money I also chuck in the Freetrade account.

This gives me a nice split and diversity. I currently save about 65% of my salary. The rest I still have money for rent and bills and going out with friends. Gotta make sure you live that nice balance :smiley:

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(Gary) #9

Every little helps Harry, thank you.

So do you think it’s ok to hold several trusts like the ones I have as well as global ETF trackers? Or focus your attention on one IT? I have read lots of different theory’s; one even saying 10-16, 20 at the most!!

(Gary) #10

Cheers Joe.

I see where your coming from but compound interest as I see it is reinvesting dividend payments? If your dividends are really low due to you only being able to drip feed several funds with relatively small amounts then will it make much difference overall? Compared to focusing on one let’s say, increasing your dividends and receiving more compound interest?

Is £66 per share relatively cheap in the fund/IT world :grimacing: I keep hearing this but to me it’s a dear do :joy:

By the way fair play on saving 65% of wages! I couldn’t do that, think my balance is to enjoy more now in case I die before retirement :joy:

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(Joe) #11

Yeah I think you can be feeling the effect much more at the moment due to fractional shares not being available yet. Once they are out you can invest with whatever money you have and not have to worry about buying whole shares :slight_smile:

I absolutely agree with you. Live now whilst young. If there’s anything I ever want to go and do I don’t hesitate or think “Oh I’m not going to be able to save however much this month”. Numbers in your bank are certainly not more important than enjoying life and doing stuff with friends and family :smiley:

(Harry) #12

Haha yes diversification is great, but over diversifying is pointless - after a while you may as well just hold MSCI world as you’ll hold most things anyway!
Personally, I hold 3 ETFs and 5 investment trusts. ETFs are regional, 2 of the investment trusts are Private Equity, and the others I’ve looked into their holdings and methodology and think it makes sense. I will aim for these collectives to eventually be 60-65% ish of my portfolio, with the rest as direct equity.

(Gary) #13

Yeah I know what you mean, don’t want to replicate and not make the best use of your investment. I think I worry a little that I will get rid of a trust and see it perform better than the ones I have kept :grimacing: but maybe I am over thinking!


Something out there will always outperform whatever you have… but never for very long. If you’re investing for many decades, don’t worry about it.

(Gary) #15

Good call sendu, I am in it for the long hall. I think because I really enjoy the whole process of it and I am reading lots I check my portfolio too much.

Green :smiley:
Red :grimacing:

Need to be strong!

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VWRL is the bedrock of my portfolio. I’m a fan of Lars Kroijer -