Combined Income and Growth IT portfolio

[jackdaww]

Far, far too many holdings for my taste (I'd go for a maximum of 15 or so) which simply must involve unnecessary duplication. But if you enjoy building a large portfolio, the choice is yours. One good reason for holding some money in a world tracker fund is that it gives you an instant point of comparison for all your other holdings.

=================================

but does duplication actually matter ?

as long as the chosen trust gives some diversification ..

[richfool]

On the general subject of having too many holdings, which I do acknowledge, I run a spreadsheet showing my holdings within their various sectors. I then compare the performance* of each with its peers in the same sector. Thus, if I feel any particular trust is under-performing without good reason, I can consider offloading it. (*For performance read: dividend yield, capital appreciation and TR).

For example, I have been watching my holdings within the global growth & income sector, of which I currently have four: JGGI, HINT, SAIN, and MYI.

HINT and, until recently, MYI have disappointed in terms of their capital appreciation. Though MYI has the best dividend yield. SAIN has better capital performance, than those two, though a lower dividend yield. But JGGI has by far the best capital performance and a good dividend yield. My holdings, whilst bought and topped up at different times, have performed:-

MYI - 1%
HINT +1%
SAIN +6.7%
JGGI +36.8%

So, I ask myself, do I sell HINT and/or MYI, which I have considered doing? (In fact, I did sell MYI last year, and only bought back in recently, - in the light of an improvement in its performance, plus the fact that it had a lower exposure to the US and a higher exposure to EM, some fixed interest and the best dividend yield).

So perhaps HINT should go. BUT, I feel its only fair to allow managers to follow their strategies/themes. A manager can't be top of the tables all the time. At times he will under-perform and likely so if he has taken a position that has yet to pay off. HINT is currently in that category. So I conclude that I mustn't indulge in "short-termism", but must allow managers time (a few years) to fulfill their objectives. So I am in no rush to "prune" the portfolio.

Similarly, I monitor holdings in, for example: BGEU and BRGE in the Europe sector, and AAIF, JAGI and SOI in the Asia Pacific Income sector. All of which are performing very well.

In the case of smaller, more speculative, or "growthier" holdings, like VOF, or PHI, if they perform particularly well I can take profit from them and top up the more general global G &I trusts.

I do have a plan that if I start approaching "gaga-ism", then I will progressively withdraw to mainstream global growth and global growth and income trusts.

[88V8]

Of richfool's portfolio, the only ones I hold are BERI (topped up a while ago) and MUT which I decided not to top up this morning due to the low yield.
After a recent splurge, I hold fourteen ITs as part of an HYP + FI portfolio, all purchased for income.

Too many really to keep a proper eye on them.
I think I shall try to limit myself to looking when I have cash to reinvest, see how the SP has gone, yield, discount.
This investment lark is interesting, but it can be a real time-sponge.

A happy new year to all LemonTrusters.

V8

[richfool]

Of richfool's portfolio, the only ones I hold are BERI (topped up a while ago) and MUT which I decided not to top up this morning due to the low yield.
After a recent splurge, I hold fourteen ITs as part of an HYP + FI portfolio, all purchased for income.

Too many really to keep a proper eye on them.
I think I shall try to limit myself to looking when I have cash to reinvest, see how the SP has gone, yield, discount.
This investment lark is interesting, but it can be a real time-sponge.

A happy new year to all LemonTrusters.

V8

V8, I took some profit from MUT and switched it into DIG, just after MUT went ex dividend 29/10 (and I had secured the larger dividend for December), and because the dividend on MUT in the spring will be a lot lower. That was just before MUT assimilated the Perpetual (?) IT and the SP fell back. DIG had a higher yield and was on a better discount at the time.

[88V8]

I took some profit from MUT and switched it into DIG....

Mmm, yes. DIG didn't get onto the dividend radar, not being an AIC 'hero'.
I see they have plenty of reserves, cover is OKish. Dividends have been up & down. Small discount at close. Hmm.

I do have some profits in MUT, perhaps a tinker, or maybe just add DIG as I have cash kicking around and I value MUT's solid dividend record. Anyway, thankyou.

Although that would be fifteen to keep an eye on. Sigh.

V8

[Newroad]

Hi Richfool (or anyone else with an interest).

What are your current thoughts on HINT, which you hold, from the Global Equity Income sector?

Regards, Newroad

[richfool]

Hi Richfool (or anyone else with an interest).

What are your current thoughts on HINT, which you hold, from the Global Equity Income sector?

Regards, Newroad

Yes, I too would be interested in some views on HINT!

My own views are mixed. The dividend yield is adequate, just under 4%. Dividend cover low at 0.61%. It seems to be holding a good range of sensible stocks, but it doesn't seem to be delivering in terms of capital performance. At times I ponder offloading it, but am I expecting too much from it?

I hold JGGI, MYI, SAIN & HINT. I prefer my holding of JGGI in that sector.

[Newroad]

Hi Richfool.

I hold MYI and it's one of those stocks which might be an alternative (to my current thinking of MNKS or MNP) to replace it.

However, like you, the reasons for it's relative underperformance aren't clear (except for the obvious re Amazon, Tesla etc).

Regards, Newroad

[Wuffle]

In a small (and developing) portfolio where loads of holdings wouldn't be appropriate, I see HINT as my developed economies bedrock and have it alongside MYI as a bit more emerging economies. I intend to run these alongside a low yielding growth vehicle but have procrastinated far too long, partly because there are so many 'glory seekers' in this space.
Structured thus I have options regarding the highly rated US market.
Though clearly the option of buying the damp thing would have been the correct one.

W.

[Hariseldon58]

An interesting question arising from this discussion is how many holdings is too many?

Does it depend on the portfolio size ? The minimum amount that is economic to buy and sell?

I have recently increased the size of my portfolio from 11 to 17 ( in the past I have had 50+ with a lot of overlap... ) with a few more in mind, when is it a stamp collection ?

Is it reasonable/sensible to obtain diversity by holding a number of mini portfolios, which in turn will cover multiple possibilities to cover different environments. Holding multiple funds/trusts in each mini portfolio to minimise idiosyncratic risk.( I think so)

If one is saving for retirement over an extended period of time, with a modest amount of savings then all in on a Vanguard Life Strategy / Global World tracker is a pretty good idea, but if you covering your retirement expenses over a thirty year period, is that passive approach the best one ? I have had a single 7 figure passive holding for some time over the last few years, as the market was pretty much heading in one direction, but I see the future becoming more interesting...

Thus why focus on a combined Income and growth portfolio, when you can hold a growth portfolio alongside an income portfolio.( and others..)

[Newroad]

Hi HariSeldon58.

What you ask below could be the subject of a thesis, but I'll risk being trite and answer "it depends". To give an almost certainly incomplete longer answer ... it first depends on whether you mean single shares or grouped holdings, e.g. investment trusts, as per Richfool's predominant holdings in the OP? I don't know the answer, but my choice is four grouped holdings per sub-portfolio (one sub-portfolio for SIPP's, one for ISA's and one for JISA's).

It's almost certainly is constrained by net portfolio financial value - if large, one can probably have as many or as few holdings as one deems desirable - if smaller, it probably becomes uneconomic at some point having more, as you allude to. Also, the maintenance effort of many holdings with a modest financial value might not be worth the reward, even if it were to prove (marginally?) superior.

I'm not sure mini-portfolio's is the answer, if, in the end, one judges performance as a whole (my sub-portfolios are not so judged - they are viewed individually, especially the JISA's for the children). Further, I would have thought idiosyncratic risks would pervade either one or many portfolios. However, if one is implementing them to provide structure (and hope to minimise idiosyncratic risk in the original creation of the structure) then maybe - but how does one then ensure it keeps to it at a practical level?

As an example relating to the above, I have dealt with the above consideration as follows. To give a potted explanation, for the ISA's and SIPPS, I target 66.6% equities and 33.4% bonds (this is not about whether these ratios are correct - let's avoid getting sidetracked). Within those, I go 50% passive and 50% active, giving an extraoplated target of 33.3% global equity tracker ETF, 33.3 global equity investment trust, 16.7% global investment grade bond tracker ETF, 16.7% global high yield bond investment trust. The only thing I monitor (for purposes of investment/reinvestment) within the structure is the net equity holding (via Morningstar's X-Ray tool). If it's above target, I buy bonds, if it's below target, I buy equities - topping up whichever has the lower net current value of the two possible choices.

Allowing myself to get sidetracked briefly but only at a high level, the above is middle of the road re active vs passive (and has plenty of diversity in net underlying holdings). I can see cases where either might be better - though if I was allowed only one for the long term, it would probably be passive. However, it's likely to be somewhat cyclical IMO, so I'm hoping the top-slicing and re-balancing will either work slightly better and/or be less risky than one or the other alone. Whether holding bonds is correct these days is a whole different question ...

I think the above tries to answer your "... why focus on a combined Income and growth portfolio, when you can hold a growth portfolio alongside an income portfolio (and others ...)" question - it's horses for courses and depends on one's own taste for simplicity, self-restraint etc.

Regards, Newroad

[richfool]

An interesting question arising from this discussion is how many holdings is too many?

Does it depend on the portfolio size ? The minimum amount that is economic to buy and sell?

I have recently increased the size of my portfolio from 11 to 17 ( in the past I have had 50+ with a lot of overlap... ) with a few more in mind, when is it a stamp collection ?

Is it reasonable/sensible to obtain diversity by holding a number of mini portfolios, which in turn will cover multiple possibilities to cover different environments. Holding multiple funds/trusts in each mini portfolio to minimise idiosyncratic risk.( I think so)

If one is saving for retirement over an extended period of time, with a modest amount of savings then all in on a Vanguard Life Strategy / Global World tracker is a pretty good idea, but if you covering your retirement expenses over a thirty year period, is that passive approach the best one ? I have had a single 7 figure passive holding for some time over the last few years, as the market was pretty much heading in one direction, but I see the future becoming more interesting...

Thus why focus on a combined Income and growth portfolio, when you can hold a growth portfolio alongside an income portfolio.( and others..)

I choose to hold a combined portfolio because I want to keep things simple for myself and also for my Executor when I pass on. Thus I don't want to hold multiple portfolios.

I lived overseas for many years and during that time I maintained an ISA., but had to put new money into a share dealing account. It was quite frustrating when I wanted to top something up, as I couldn't add new money to the ISA and therefore only had the dividend income arising to play with. Similarly, if I was a bit short on a proposed top up in the share dealing account, I couldn't draw on funds available in the ISA, without formally withdrawing them, paying a fee and transferring across. In the end I closed the ISA and amalgamated the funds.

Since returning to the UK I have opened a new ISA, built up the funds, and run down my share dealing account. That is where I want to be, all in the one ISA. The only minor concern I have is the lack of protection on balances above £85K with the one investment manager, which wouldn't be the case if I had a portfolio with 2 different investment managers.

I can and do measure the performance of individual holdings, growth or income parts of my portfolio and analyse sector weightings etc, by playing with them in my spreadsheets.

[OldPlodder]

My portfolio, which is all in my ISA, combines an income component, roughly 60% by value, and a growth oriented component for the remainder. It has only 11 holdings, but it is still diversified enough since all are collectives, mostly ITs, which cover different regions and aspects. I don't feel that I need to separate this into two portfolios. I am only interested in the overall outcome, and that it fulfils our income needs, which it is designed to do with plenty of spare(in 2021 we will only need 76% of the income, much less if EAT continue with their current policy of paying out 6% of NAV, which could result in a large increase for 2021 as it is based on the calendar year end NAV, which was published yesterday, and it well up) . I have planned it so I don't need to touch that portfolio much beyond re investing the spare income twice yearly, and rebalancing the growth/income components every few years. No cuts in 2020 at all by the way, divi per Inc unit slightly up, income well up due to reinvesting mostly, plus a bit of consulting income. This does not mean that I am not watching it, as of course major events can happen to any portfolio, but as I said we have slack in the income front, so should see us through most events. Rishi might gave other ideas, however...I would hate to hold the Covid-poisoned chalice this very capable man has inherited.

Plodder

[Hariseldon58]

Thanks for the replies to my musing, I have been considering a shift in my focus for almost a year...something got in the way in February !

I was rereading Antifragile by Nasim Taleb in January to March, on a long trip around South America with limited patchy internet, plenty of time to think about a more resillient portfolio construction, rather ironic really, as by February Covid had struck and I was unable to act or deal until late March when I returned to the UK. I traded through the summer but it's now time to think ahead longer term.

I normally invest more along the lines of SalvorHardin, distinct groupings of assets, but of recent years had tended to a portfolio that "looked through the contents" to one portfolio mix.

Interesting to hear what take people have, when I have completed the thought process, I will post a new thread.

[mc2fool]

Thus why focus on a combined Income and growth portfolio, when you can hold a growth portfolio alongside an income portfolio.( and others..)

I choose to hold a combined portfolio because I want to keep things simple for myself and also for my Executor when I pass on. Thus I don't want to hold multiple portfolios.

I lived overseas for many years and during that time I maintained an ISA., but had to put new money into a share dealing account. It was quite frustrating when I wanted to top something up, as I couldn't add new money to the ISA and therefore only had the dividend income arising to play with. Similarly, if I was a bit short on a proposed top up in the share dealing account, I couldn't draw on funds available in the ISA, without formally withdrawing them, paying a fee and transferring across. In the end I closed the ISA and amalgamated the funds.

Since returning to the UK I have opened a new ISA, built up the funds, and run down my share dealing account. That is where I want to be, all in the one ISA. The only minor concern I have is the lack of protection on balances above £85K with the one investment manager, which wouldn't be the case if I had a portfolio with 2 different investment managers.

I'd say you are conflating portfolio with account, and of course you can look at it that way if you want, but you can also look at a portfolio as a grouping/sub-grouping of holdings, irrespective of where they are held.

E.g. within your single ISA you could regards yourself as having an Income portfolio and a Growth portfolio ... or maybe an ETFs portfolio and an ITs portfolio ... or both, indeed, as they're not exclusive. Then you could manage, measure and compare them as separate portfolios, even though they're in the same account, and I note you say you do do that, but I think that's what Hari meant, rather than multiple accounts...

[Hariseldon58]

@mc2fool
Thank you, you have expressed that distinction well.

That is what I was referring to, viewing a Portfolio as "groupings",ignoring the underlying accounts.

[Newroad]

Hi HariSeldon58/Mc2Fool.

For many (though not all) that would be a distinction without a difference. Take me for example, where the X-Ray tool works on each account (really a sub-account) within my overall II account.

That said, it's entirely possible to consider it as you suggest - and for larger portfolios (alluding to the earlier discussion) it may be easier - as it's probably relative more practical to formalise the splits (different accounts and/or different brokers) which you later re-aggregate to reflect the preferred groupings.

Regards, Newroad

[richfool]

Yes that, for me, would be a distinction without a difference, as Newroad puts it. I want things kept as simple as possible for those who come after. I don't need to hold them in separate accounts or separate portfolios. I can see, analyse and monitor what I want via my spreadsheets.

Why seek to complicate things unnecessarily. I spend too much time monitoring things now. I believe in the KISS philosophy.

[mc2fool]

I want things kept as simple as possible for those who come after. I don't need to hold them in separate accounts or separate portfolios. I can see, analyse and monitor what I want via my spreadsheets.

And that is exactly how most people who do so classify their holdings as in separate portfolios, virtually within a spreadsheet or similar. It doesn't affect those that come after in the slightest.

My point was just that portfolio doesn't (necessarily) equal account, which appeared to be the way you understood Hari's post. Whether you have one portfolio or several is just a matter of how you view it, not (necessarily) any complication of anything separate physically. That's all.

[OldPlodder]

My portfolio, which is all in my ISA, combines an income component, roughly 60% by value, and a growth oriented component for the remainder. It has only 11 holdings, but it is still diversified enough since all are collectives, mostly ITs, which cover different regions and aspects. I don't feel that I need to separate this into two portfolios. I am only interested in the overall outcome, and that it fulfils our income needs, which it is designed to do with plenty of spare(in 2021 we will only need 76% of the income, much less if EAT continue with their current policy of paying out 6% of NAV, which could result in a large increase for 2021 as it is based on the calendar year end NAV, which was published yesterday, and it well up) . I have planned it so I don't need to touch that portfolio much beyond re investing the spare income twice yearly, and rebalancing the growth/income components every few years. No cuts in 2020 at all by the way, divi per Inc unit slightly up, income well up due to reinvesting mostly, plus a bit of consulting income. This does not mean that I am not watching it, as of course major events can happen to any portfolio, but as I said we have slack in the income front, so should see us through most events. Rishi might gave other ideas, however...I would hate to hold the Covid-poisoned chalice this very capable man has inherited.

Plodder

Follow through: As I guessed, EAT have announced today their divi for the year. The relevant part of the RNS is:

From: European Assets Trust PLC ("the Company")

Date: 7 January 2021

Dividend announcement

Highlights

· Total dividends declared for 2021 will be 8.00 pence per share. This represents an increase of 14.0 per cent from the 2019 dividend of 7.02 pence.
· Continued policy of six per cent dividend on year-end net asset value per share for annual distribution to shareholders.

· Dividend to be paid in four equal instalments of 2.00 pence per share in January, April, July and October 2021.

Dividend for 2021
The Board is pleased to confirm that the Company's stated distribution policy of declaring, barring unforeseen circumstances, an annual dividend equivalent to six per cent of the net asset value per share at the end of the preceding year will be continued in 2021.

The net asset value per share increased over the year which will result in an increase in total dividends payable by the Company for 2021 to 8.00 per share. This represents an increase of 14.0 per cent from the 2020 dividend of 7.02 pence per share.

The 2021 dividend will be paid in four equal instalments of 2.00 pence per share on 29 January, 30 April, 30 July and 29 October 2021.

The January dividend payment of 2.00 pence per share will be paid to shareholders on 29 January 2021, having an ex-dividend date of 14 January 2021 and a record date of 15 January 2021.

These kind of divis from capital obviously go up and down, which is to be expected as it reflects how the portfolio performs, which in some ways I quite like. I have held it for a longish while, and the divi CAGR is nudging 7% over that period, despite strong ups and downs. I have been, as usual, very picky in my entry point and topping ups (time to invest certainly not always now for me, I sometimes wait years for an opportunity in something I am interested in), XIRR over 14%. Last to up was at bargain price too! Suits my needs in the income component, lots of good smaller Cos in the portfolio, the manager seems to know his business. Guess we won't see many 14% increases in higher yielding stuff for a while. My spare divis will thus increase and will still go to my growth component though.

Plodder