Simplifying my ITs

[OLTB]

Afternoon all

My IT 'portfolio' was started using the John Baron portfolios and they have done ok since I started a year or two ago. However, when I look at the value of the total, I think I'm being a little silly in choosing such a diverse number of ITs.

There are 24 different ITs in the 'JB Summer' portfolio and as the value of the ITs is about £64K, the average holding is about £2,500. I also have a separate investment in Bankers IT and this has done very well by itself.

I'm thinking I need to stop @rsing around and just have a vastly smaller number of steady ITs (like Bankers), diverse enough to cover the major areas, rather than the Heinz variety I currently have.

To the experienced investors out there - does this sound sensible to you? I was thinking of:

Bankers (BNKR) 30% - Global
Caledonia (CLDN) 25% - Flexible Investment
Finsbury Growth & Income (FGT) 20% - UK Equity Income
Templeton Emerging Markets (TEM) 10% - Global Emerging Markets
Standard Life Investment Property (SLI) 5% - Property Direct (UK)
Oryx International Growth (OIG) 5% - Global Smaller Companies
Henderson Far East Income (HFEL) 5% - Asia Pacific (excluding Japan)

Maybe if my portfolio was valued at £640k, a 24 IT range would be more appropriate, but not this current amount.

Thanks in advance, cheers, OLTB.

[StOmer]

Hi,
I guess it depends on whether you like to get involved with the investments. For my grandchildren, I put them 100% into Foreign & Colonial but for myself, I like to get my hands dirty so prefer a portfolio of a few IT's.

I did subscribe to the JB portfolios and found them very interesting. He does prefer to have a mix of IT's rather than go with Global for a core holding. Sometimes it is commented that he tinkers too much but I found that if you are following just the one portfolio then he does very little. I once asked JB why so many IT's and was it appropriate for a smaller investor with say less than 100k. He thought it was, so thinking that you have already paid for the dealing etc then first I would ask if it is desirable to incur those costs again. If yes then I would think about the number of holdings, Morningstar reckons 7 is the optimum for risk v reward whilst I have read brokers say not more than 10% in any one IT or fund.

I like to hold around 10, sometimes up to 15 IT's within a core/satellite structure where 70% are core holdings. I also have a max holding of 15% per IT, min holding of 5% and no more than 25% with any 'house'. For example, I wouldn't usually have more than 25% with Baillie Gifford although it is very tempting to put the lot with them, I did allow Scottish Mortgage to get up to 20% holding until mid-2018 when I cut it back to 10% as it sat alongside Edinburgh Worldwide which had grown quite a lot also to make the BG holding above 30%.

Caledonia has obviously gotten popular recently, the discount has come down almost 10% to around 13% which is possibly still a decent value. However, I would question how much of the year's gains are down to the narrowing discount rather than the portfolio. Historically CLDN is a bit of a dog but I tend to hold it when the discount is near 20 and sell when it has narrowed.

Perhaps an OEIC such as Lindsell Train Global, Blue Whale Growth or Fundsmith might be a better bet until discounts appear in the Global IT's.

[scotia]

If you have already purchased 24 different ITs, then you have paid the commission, duty, and spread on each. If you start selling them in order to consolidate with fewer ITs, you pay the price again - only twice over - i.e. the selling and the buying charges. So I would favour leaving well alone. If you feel that some of these ITs are underperforming, then by all means sell them and invest the cash into one of you favoured ITs. And you presumably will invest new money into your selected choices.
At the risk of encouraging you to spread your investments a bit further, could I draw your attention to two Global funds - Fundsmith and Lindsell Train Global Equity. The have substantially outperformed Bankers - I know, since I have investments in all three! However if you want to stick to Global ITs, the Scottish Mortgage IT (SMT) is a high flier, but is a bit more volatile. And remember - past excellent performance does not guarantee future excellent performance.
Edit:- StOmer seems to have responded while I was preparing my response - and has covered much of the above ground,

[OLTB]

Thank you both StOmer and scotia for your comments - very useful and pragmatic.

The additional charges/spread issue had me concerned a little as well so perhaps I should see the portfolio through and just add to the more generalist ITs as and when capital becomes available rather than just continually switching strategies.

I don't tend to top slice or tinker when JB suggests as selling/buying when the figures involved are in the mid hundreds of pounds results in too high a percentage going to charges for such an exercise and any financial gain is pretty much eliminated or affected - I just tend to sell or buy ITs outright when recommended by JB. Perhaps I'll stick with this for the time being.

Thanks again, OLTB.

[Aminatidi]

I have my money across five cores.

* Capital Gearing Trust
* Fundsmith
* Lindsell Train Global Equity
* Finsbury Growth Trust
* Troy Income & Growth Trust

Along with some in Buffettology and Blue Whale.

If I get past the instinct to tinker I struggle to see much point in chopping and changing.

[monabri]

I'd be tempted to POSSIBLY do nothing with the existing funds .. none have had a chance to do anything other than cost you fees. Whatever you trim will undoubtedly decide to fly in value. You do say that your IT portfolio has " done ok"....

I say "possibly " because if you have an IT that has a high management cost and you can find something similar in the iShares or VG range then maybe it's worth considering the swap as the savings on fees will pay for the transfer.

(Why "HFEL" other than for the yield?...bit of a strange bedfellow to BNKR and CLDN).

[Parky]

Afternoon all

I'm thinking I need to stop @rsing around and just have a vastly smaller number of steady ITs (like Bankers), diverse enough to cover the major areas, rather than the Heinz variety I currently have.

I have just consolidated my ISA portfolio into the following ITs, which I intend to leave alone (barring disasters).

British Empire BTM
Caledonian CLDN
Middlefield Canadian MCT
Personal Assets PNL
RIT Capital Partners RCP
TR Property TRY


and my wife's ISA into:-

CLDN
MCT
PNL
Murray Income MUT
Murray International MYI
Ruffer RICA
Temple Bar TMPL

A mixture of "Value", Income, Property and "Capital Preservation", geographically diversified.

[Charlottesquare]

I am currently on 17 though the sharp eyed will spot Berkshire in that list which I am treating as a proxy IT (I know it is not but it covers my USA exposure.

I aim for geographic spread though am currently out of Europe and do not touch Russia

I suspect Blackrock World Mining is the most likely to be sold at some point, it is possibly a little too sector specific for my current tastes.

I may also, once I need to consider using the income, redeploy some which do not pay dividends and may also become more UK focussed, to reduce currency exposure in retirement, but right now I am more comfortable with ROW exposure which I believe will see better growth over the next 7.5 years. The aim is to compound 7% p.a. over the next 7 or so years and then target (currently) an average circa 4% yield in retirement.

The above are certainly not all equal in value, holdings like Athelney,Blackrock frontiers, Blackrock mining,Dunedin JPM India and JPM Emerging are smaller holdings, circa 66% by value of the others.

Aberdeen Asian Income Fund Ordinary NPV Shares *1
Aberdeen Latin American Income Fund Ord NPV *1
Athelney Trust Ordinary 25p *1
Berkshire Hathaway Inc Class B USD0.0033 *1 *R
BlackRock Frontiers Investment Trust Ordinary 1p *1
BlackRock World Mining Trust Ordinary 5p *1
City Of London Investment Trust Ordinary 25p Shares *1
Dunedin Enterprise Investment Trust Ordinary 25p *1
Fidelity China Special Situations PLC Ordinary Shares 1p *1
Henderson Far East Income Ltd Ordinary NPV *1
JPMorgan Emerging Markets IT plc Ordinary 25p *1
JPMorgan Indian Investment Trust Ordinary 25p *1
Merchants Trust plc Ordinary 25p *1
Middlefield Canadian Inc - GBP PC Part Pref Shs Npv *2
Murray International Trust plc Ordinary 25p Shares *1
Standard Life Investment Property Income Trust Ord 1P *1
Utilico Emerging Markets Trust plc Ordinary GBP 0.01 *1

I do also still hold Shell, Unilever and recent addition, Begbies Traynor (If Brexit is a real disaster corporate insolvencies may increase and they may benefit, certainly my thinking, but as this is a pretty small holding re my investment in it, being just 50% of the main ones, it is not core, more a punt)

I tend to invest the dividends once a quarter, next small purchase possibly April, likely one gets topped up unless I decide a gradual reinvestment into Europe is warranted (Previously had EAT)

I think , to get targeted world coverage ,including the UK, Asia, Europe, Latin America, North America, China, India, Frontiers and Smaller Cos, I likely would want minimum twelve holdings, probably nearer fourteen, but accept if more UK centric could likely drop to about seven.

[Hariseldon58]

The short answer is stay the course, the temptation is to do something but you could just sit on your hands and look back a few years later...

Practically you invest £64k in say 5 trusts you pay £320 in stamp duty and say £50 in dealing fees, .57% in all, the additional cost of having 24 share is 19x £10, £190 buying costs total .88% not significant over the long term.

If your following John Barons approach then you have 5 or 6 mini portfolios , each with 4 or 5 shares, it’s not unreasonable ...

If you decide to have a mini portfolio covering say property, you could opt for the iShare iukp which contains multiple REITs at a cost of .4% or buy your own collection of say 5 REITs and the additional purchase costs are probably around a years iShares fees, so fairly sensible.

If you had a mini portfolio covering UK equity income , splitting it across 4 or 5 trusts covers the ups and downs of an individual trust , the thing is not to tinker , if one trust does well one year and another badly, best to do nothing than constantly chase the better performer, mean reversion is a powerful influence.

As an aside the various UK Equity Income ETFs and tracker like funds in general have not fared well compared to an average of comparable investment trusts, I suspect gearing, discounts and managers less likely to get stuck in ‘value’ traps than an alogorithm.