Size of holding

[Monty]

Any thoughts on the size of portfolio to make an Investment Trust worthwhile holding?

My own practive has typically been to hold no less than 5% but I wonder if this is actually too low for the IT to make a meaningful contribution to the portfio. Lately I have been thinking of upping this to reflect conviction that something is worthwhile holding. I am aware that John Baron holds around 15 to 20 Trusts in his main portfolios and maybe that's the best way to go. If for example I were to own HGT and PIN it would make sense (perhaps) to count these as Private Equity and add the holdings together to reflect the amount of PE within the portfolio. That suggetss better to determine a sector % rather than an individual holding %.

Another idea behind raising % holding would be to restrict the number of holdings to a nice manageable level, perhaps no more than 10. I would be grateful for any thoughts or examples of how many IT's or funds others hold in a portfolio. Currently I am holding just 3 ETF's in my portfolio but with a likely switch back into IT's soon, I would likely be uncomfortable holding jjust 3 IT's.

[rhys]

No matter what the number of ITs, I think it's worth looking at the whole ("portfolio X-ray") to assess overlap once individual holdings are counted. eg Apple often makes, to me, a disconcertingly high %, if you were to focus on, worst case, a global tracker.

Here are my interests:
AIC sector Company name epic

Asia Pacific:
Schroder Asian Total Return ATR
JPMorgan Asia Growth & Income JAGI
Invesco Asia Trust IAT
Schroder Oriental Income SOI
Fidelity Asian Values FAS

Commodities & Natural Resources:
BlackRock World Mining BRWM

Global:
F&C Investment Trust FCIT
Alliance Trust ATST
Brunner Investment Trust BUT

Global Emerging Markets:
BlackRock Frontiers BRFI
Gulf Investment Fund GIF

Global Equity Income:
Henderson International Income HINT
Murray International Trust MYI

India :
India Capital Growth Fund IGC

UK Equity Income:
City of London Investment Trust CTY
Merchants Trust MRCH
Law Debenture Corporation LWDB

[Urbandreamer]

Any thoughts on the size of portfolio to make an Investment Trust worthwhile holding?

My own practive has typically been to hold no less than 5% but I wonder if this is actually too low for the IT to make a meaningful contribution to the portfio. ...
Another idea behind raising % holding would be to restrict the number of holdings to a nice manageable level, perhaps no more than 10. I would be grateful for any thoughts or examples of how many IT's or funds others hold in a portfolio. Currently I am holding just 3 ETF's in my portfolio but with a likely switch back into IT's soon, I would likely be uncomfortable holding jjust 3 IT's.

Well we obviously have very different ideas.

My portfolio has 22 holdings only about half of which are IT's, the other half being trading companies.
One of my IT holdings is less than 1% of the portfolio in value (SSIT).

Do I expect it to make a meaningful contribution, yes I do. A meaningful financial contribution, well that is less certain. Of course I can buy more, and sell some of other holdings. I've done so in the past.

To be honest my concern is the other end of things. The point at which one holding comes to dominate the portfolio. But then I tend to invest in specialist IT's doing my own diversification.

[88V8]

Any thoughts on the size of portfolio to make an Investment Trust worthwhile holding?
My own practice has typically been to hold no less than 5% but I wonder if this is actually too low for the IT to make a meaningful contribution to the portfolio.

In the interest of diversification, 5% per holding and 10% per sector is quite classical, so I would say that 5% is fine.

I tend to suffer from sweetshop syndrome, and our portfolio at present comprises 26 HYP shares, 28 Prefs/Corp bonds, and 22 ITs. There is a slight air of 'hobby' about it, and some thinning would not come amiss.

Holding size also depends on value. 5% of a small portfolio might be trivial, but 5% of a six-figure income might feel more significant.

V8

[UncleEbenezer]

Is there any inherent reason for either an upper or a lower bound to size of holding?

That is, beyond eggs-in-one-basket arguments at the top, and wiped-out-by-dealing-charges arguments at the bottom!

[Urbandreamer]

Is there any inherent reason for either an upper or a lower bound to size of holding?

That is, beyond eggs-in-one-basket arguments at the top, and wiped-out-by-dealing-charges arguments at the bottom!

Well some would argue that as you need to put some effort into all your holdings, the return on smaller holdings can make them counterproductive to have.
Of course this depends upon how much effort your larger holdings take.

Personally I'm quite happy the idea with hobby holdings.

[DavidM13]

No matter what the number of ITs, I think it's worth looking at the whole ("portfolio X-ray") to assess overlap once individual holdings are counted. eg Apple often makes, to me, a disconcertingly high %, if you were to focus on, worst case, a global tracker.

Here are my interests:
AIC sector Company name epic

Asia Pacific:
Schroder Asian Total Return ATR
JPMorgan Asia Growth & Income JAGI
Invesco Asia Trust IAT
Schroder Oriental Income SOI
Fidelity Asian Values FAS

Commodities & Natural Resources:
BlackRock World Mining BRWM

Global:
F&C Investment Trust FCIT
Alliance Trust ATST
Brunner Investment Trust BUT

Global Emerging Markets:
BlackRock Frontiers BRFI
Gulf Investment Fund GIF

Global Equity Income:
Henderson International Income HINT
Murray International Trust MYI

India :
India Capital Growth Fund IGC

UK Equity Income:
City of London Investment Trust CTY
Merchants Trust MRCH
Law Debenture Corporation LWDB

The new "My portfolios" tool on the AIC website allows you to have a visual on your entire portfolio on an AIC sector level. Alas, it doesn't have the underlying stock detail required to run the x-ray. I agree its a pretty important tool. One can quickly find out they have a massive part of their pot in Amazon or Tencent etc otherwise! I think Trustnet and Morningstar had x-ray tools but I have never quite got them to work and given up. Do you use one and does it work?

[Spet0789]

Putting up to 100% of your wealth in a broadly diversified IT like Foreign and Colonial is perfectly ok from an economic perspective (ie your risk is to non-economic factors like fraud).

I’d say a core and satellite approach of say 3x20% holdings in diversified trusts and then a few more in specific themes which take your fancy is fine.

10 days ago put 3% in URNP (a Uranium focussed ETF). So far +16%. Better lucky than good.

[Monty]

Putting up to 100% of your wealth in a broadly diversified IT like Foreign and Colonial is perfectly ok from an economic perspective (ie your risk is to non-economic factors like fraud).

I’d say a core and satellite approach of say 3x20% holdings in diversified trusts and then a few more in specific themes which take your fancy is fine.

10 days ago put 3% in URNP (a Uranium focussed ETF). So far +16%. Better lucky than good.

I like the idea of core & satelitte, it is something that I have often followed since reading about it in a book written by John Chatfeild-Roberts of the Jupiter Merlin fund of funds range. He wrote I believe, that analysis showed a core of 65% to be optimum. Where I struggle nowadays is opting for the core to be in IT's where I have to pay stamp duty for an entity that will do well to better a global ETF such as SWDA or VEVE. Best of luck with the Uranium.

[DrFfybes]

Core holdings are OK if you have a strategy, or as Rhys says are aiming to avoid being highly exposed in a certain share or sector.

For me I started moving towards ITs about 20 years ago, using the Xray to check the overlap of underlying holdings to make sure I was diversified.

Eventually I realised I was rubbish at chosing individual shares or regions where to invest, and had spent a lot of time and money (especially the latter) in what was effectively a replication of a Global tracker but skewed towards the smaller and emerging markets as I was equal weight in (say) ATST and Jupiter China Fund and a BRIC fund.

I'm now probably circa 30% in VEVE/VHYL, 5% in BRKB, 10% each in ATST and FCIT, 12% or so in a 80/20 fund, and the rest it still in various ITs that I'm slowly dragging across to trackers. The choice of the individual investment is partly down to the charges on that plaatform and any tax implications. I also have about 10% in a 'play' account where I dabble in things I think suffered harshly or might take off, currently contains stuff like PIN (will it ever get back towards NAV?) L&G, Direct Line, Rivian, SONG, and BP and Shell that I gambled relatively large chunks on during Covid (I also bought some banks in Covid but cashed out). The thing about this is I can pretend I'm Warren Buffet but even if one of the shares tanks completely it is still less of an impact than my VEVE can move in a day.

[Monty]

Core holdings are OK if you have a strategy, or as Rhys says are aiming to avoid being highly exposed in a certain share or sector.

For me I started moving towards ITs about 20 years ago, using the Xray to check the overlap of underlying holdings to make sure I was diversified.

Eventually I realised I was rubbish at chosing individual shares or regions where to invest, and had spent a lot of time and money (especially the latter) in what was effectively a replication of a Global tracker but skewed towards the smaller and emerging markets as I was equal weight in (say) ATST and Jupiter China Fund and a BRIC fund.

I'm now probably circa 30% in VEVE/VHYL, 5% in BRKB, 10% each in ATST and FCIT, 12% or so in a 80/20 fund, and the rest it still in various ITs that I'm slowly dragging across to trackers. The choice of the individual investment is partly down to the charges on that plaatform and any tax implications. I also have about 10% in a 'play' account where I dabble in things I think suffered harshly or might take off, currently contains stuff like PIN (will it ever get back towards NAV?) L&G, Direct Line, Rivian, SONG, and BP and Shell that I gambled relatively large chunks on during Covid (I also bought some banks in Covid but cashed out). The thing about this is I can pretend I'm Warren Buffet but even if one of the shares tanks completely it is still less of an impact than my VEVE can move in a day.

Thanks,
I am currently 41% VWRL (FTSE All World) which has suffered a little from its emerging market element, 23% VEVE (Developed World), 11% JGRE (Global Active) and 24% VUSA (S&P 500), have recently sold two bond ETF's (VGOV and VAGP). VWRL and VEVE are my core (65%) whilst my satellitte holdings are JGRE and VUSA. This setup has done very well but my attention is turning back to IT's which I had switched out of some year and a half back due to their not holding their own against ETF's. I had hoped the IT managers would be safer hands during the sell off but that didn't prove to be the case.

I'm currently looking at Oakley Capital, HG Trust, Global Opportunities Trust and Pershing Square Holdings. The reason for my question regarding 'size of holding' being that I wondered if buying 5% of any of these was worthwhile or should I opt for a larger holding of 10 to 20 percent to make their impact meaningful. For a Global IT to replace VWRL my old preference would have been for Scottish Mortgage, Mid Wynd, Caledonia, Brunner and Martin Curries Global, I'd probably add F&C IT to that if I were opting for 10 holdings of 10% apiece. Decisions decisions

[DrFfybes]

Thanks,
I am currently 41% VWRL (FTSE All World) which has suffered a little from its emerging market element, 23% VEVE (Developed World),

I think it was Geoff100 who pointed out VEVE is 90% of VWRL but at about half the cost (0.22% compared to 0.12%). There is also a Vanguard fund that effectively makes up the missing 10% and buying them separately is cheaper than VWRL.

The reason for my question regarding 'size of holding' being that I wondered if buying 5% of any of these was worthwhile or should I opt for a larger holding of 10 to 20 percent to make their impact meaningful.

For it to be meaningful it needs to be IMO 10% or more. Smaller holdings are purely for psychological benefit, especially if you look at things in pounds rather than percentage.

Paul

[monabri]

Thanks,
I am currently 41% VWRL (FTSE All World) which has suffered a little from its emerging market element, 23% VEVE (Developed World),

I think it was Geoff100 who pointed out VEVE is 90% of VWRL but at about half the cost (0.22% compared to 0.12%). There is also a Vanguard fund that effectively makes up the missing 10% and buying them separately is cheaper than VWRL.

The reason for my question regarding 'size of holding' being that I wondered if buying 5% of any of these was worthwhile or should I opt for a larger holding of 10 to 20 percent to make their impact meaningful.

For it to be meaningful it needs to be IMO 10% or more. Smaller holdings are purely for psychological benefit, especially if you look at things in pounds rather than percentage.

Paul

10% VFEM .."emerging markets".

[Monty]

I think it was Geoff100 who pointed out VEVE is 90% of VWRL but at about half the cost (0.22% compared to 0.12%). There is also a Vanguard fund that effectively makes up the missing 10% and buying them separately is cheaper than VWRL.


For it to be meaningful it needs to be IMO 10% or more. Smaller holdings are purely for psychological benefit, especially if you look at things in pounds rather than percentage.

Paul

10% VFEM .."emerging markets".

The last time that I looked it was 8% emerging markets in VWRL but I doubt the additional couple of percent in VFEM would matter, indeed EM is perhaps due a bounce so it could work out for the best. I tend to prefer holding VWRL so as to avoid fees when rebalancing but confess to not working it out as to the most cost effective option which I suspect depends on the frequency of having to rebalance.

[Lootman]

10% VFEM .."emerging markets".

The last time that I looked it was 8% emerging markets in VWRL but I doubt the additional couple of percent in VFEM would matter, indeed EM is perhaps due a bounce so it could work out for the best. I tend to prefer holding VWRL so as to avoid fees when rebalancing but confess to not working it out as to the most cost effective option which I suspect depends on the frequency of having to rebalance.

Why would you ever have to rebalance? If your starting positions in VWRL and VFEM are in the correct proportion then they will remain in the same proportion without you doing anything.

There is nothing magical about 8% or 10% that would require you to maintain that percentage.

[moorfield]

Any thoughts on the size of portfolio to make an Investment Trust worthwhile holding?

My own practive has typically been to hold no less than 5% but I wonder if this is actually too low for the IT to make a meaningful contribution to the portfio. Lately I have been thinking of upping this to reflect conviction that something is worthwhile holding. I am aware that John Baron holds around 15 to 20 Trusts in his main portfolios and maybe that's the best way to go. If for example I were to own HGT and PIN it would make sense (perhaps) to count these as Private Equity and add the holdings together to reflect the amount of PE within the portfolio. That suggetss better to determine a sector % rather than an individual holding %.

Another idea behind raising % holding would be to restrict the number of holdings to a nice manageable level, perhaps no more than 10. I would be grateful for any thoughts or examples of how many IT's or funds others hold in a portfolio. Currently I am holding just 3 ETF's in my portfolio but with a likely switch back into IT's soon, I would likely be uncomfortable holding jjust 3 IT's.

I have appropriated ideas from HYP Practical and initially selected 15 (albeit from just 10 different AIC sectors), and use the TJH method to determine top up rankings - I disqualify any holding which if topped up by 20% would exceed currently 1/12 th of either share of income or cost - that effectively imposes a cut-off point of 7.0% of either parameter. Sooner or later I expect a state of equilibrium might arise such that all holdings will be disqualified by those limits, and at that point will add a 16th.

[moorfield]

Putting up to 100% of your wealth in a broadly diversified IT like Foreign and Colonial is perfectly ok from an economic perspective (ie your risk is to non-economic factors like fraud).

I am currently running a paper portfolio which I am calling SHYIT (a Single High Yield Investment Trust) - more on this next April...

[Spet0789]

Putting up to 100% of your wealth in a broadly diversified IT like Foreign and Colonial is perfectly ok from an economic perspective (ie your risk is to non-economic factors like fraud).

I am currently running a paper portfolio which I am calling SHYIT (a Single High Yield Investment Trust) - more on this next April...

Sounds like you’ll need paper to clear that up.

[Mememe]

I have about 50% of my portfolio in all world trackers. The rest is in 7 Investment Trusts. Private equity 10% (hvpe and HGT), 10% global smaller (what was FCS), Em with JMG at 10%, commodities brwm at 4%, high yield debt 5% SMIF, infrastructure/renewables JLEN 5%.

I’ve tried to keep my active funds to no more than 8 in total. Lowest exposure I would go to on one individual holding is 2.5%. There’s no particular data or reasoning to these soft barriers, just what I feel I can justify to myself. Most of the time I’m reluctant to have a holding less than 5%.

I don’t change my portfolio much but if I do want to bring in something new then I’ll usually choose something that needs to go first. This for me just makes sure I’m fully committed to the case for bringing in the new and I’m not just bored/trying to be clever. Watch list has SMT, Bh Macro, Pershing, TR prop on it. Doubt I’ll bring any of them in though.

For me multiple funds from the same sector mean you should just buy a tracker instead. Blows my mind when I see 4/5 funds from UK equities in people’s portfolios for example. I like John Baron but I feel the same about his portfolios. Way over diversified. Must be loads of cross over