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Agent Red Proposed Portfolio

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agentred
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Agent Red Proposed Portfolio

#157321

Postby agentred » August 5th, 2018, 1:08 pm

I have been slowly investing in ETFs for the past 6 years and have built up £70k in a simple portfolio. Having read Tim Hale's Smarter Investing, Lars Krojer's Investing Demystified I have decided that my current portfolio is not very sensible and in need of a tweak. I would welcome any comment/criticism about my plan. I am 31 and plan on investing for the next 15-20years, adding around £10k per year.

My current portfolio is as follows, originally this only comprised of the 2 ETFs but I have added the investment trusts and fund as I try to move towards something more sensible:

ETFs
57% IWRD iShares MSCI World ETF
37% IFFF iShares MSCI AC Far-East ex Japan
Funds
2% iShares Global Property Securities Index Fund (acc)
Investment Trusts
2% TMPL Temple Bar IT
2% ASL Aberforth Smaller Companies IT


Proposed Portfolio:

Global Shares
65% VWRL Vanguard FTSE All-World ETF
Global Property
10% iShares Global Property Securities Index Fund (acc)
Smaller Companies
5% Global - Vanguard Global Smallcap Index Fund
5% UK - Aberforth Smaller Companies IT
Value Shares
5% Global - VHYL Vanguard FTSE All-World High Dividend Yield ETF
5% UK - Temple Bar IT
Emerging Markets
5% Vanguard Emerging Markets Index Fund


Does this make sense? Am I over complicating things?

Thanks

Agentred

forlesen
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Re: Agent Red Proposed Portfolio

#158110

Postby forlesen » August 9th, 2018, 12:21 am

Several years ago, I read the second edition of Tim Hale's Smarter Investing. I didn't get round to actually implementing his ideas (although I did switch a significant amount of my investments from ITs to Vanguard ETFs). But I did set up a model portfolio on Trustnet to track his most complex growth oriented portfolio mix, the one he termed Smarter Investing Portfolio 6 in Table 9.9 (SP6 for short). This consisted of the following asset mix:



I gave this a nominal start date of Jan 2010 (reflecting the 2009 publication date of the book), although I actually set it up a couple of years after that date. It was actually quite difficult to find suitable low-cost ETFs and OEICs to represent all these elements, and some of my selections were rather awkward, but I think it captured the general essence of Tim Hale's ideas (at least, his ideas circa 2009).

The performance of the different elements over the past 5 years has been all over the map, but I would say that overall, SP6 did okay (+73% total return). However, it under-performed my own actual portfolio, and indeed the much simpler FTSE World index, and also my model portfolio of core ITs (mostly global growth oriented ones). It was pulled down by the somewhat excessive UK weighting, by the value tilts and by the commodities tilt.

Obviously, the whole point of such portfolios is to try to find somewhat uncorrelated asset mixes to reduce overall risk (risk of loss and risk of retirement wipeout), whilst still giving good growth. It is very likely that over specific timeframes, they will perform worse than specific simpler portfolios, but that is not the point.

Your proposed portfolio looks similar to this, albeit rather simpler (it lacks the UK / world Ex UK split, and also has no commodities). I'm guessing you derived it from Tim Hale. I think it would have performed better than SP6, due to the lower UK weighting and the removal of commodities, which were the worst performing element by far.

So, to attempt to answer your questions, here are my personal opinions (NB opinions, not advice!):

Does it make sense? I think what you have come up with looks like a reasonable plan, although obviously none of us knows how any portfolio will work out going forwards.

Are you over-complicating things? In the long term, it looks fine to me, but it may be a little too complex if you are just starting out.

It's not clear from your original post how much you already have saved. In the early days of saving, the most important factor by far for your growing wealth is your regular savings contributions. Investment returns eventually become the dominant factor, but that typically takes quite a few years (I would guess at least 10 or 15 years in my own case). I personally kept my portfolio very simple till it reached 6 figures, just a couple of Global ITs (now, I would probably replace at least one of those with VWRL or similar). Once you reach that sort of level, you can comfortably diversify over 7 or 8 different assets without incurring excessive costs, or suffering from excessively small holdings. Also, you can keep things reasonably balanced without needing to split each month's contribution into 7 or 8 small chunks (each incurring dealing charges), just top up one or two assets as you see fit.

One other change you might like to consider for long term growth. Rather than a 10% value tilt, how about putting some of that into a technology tilt? A few percent in something like Scottish Mortgage, for example. It's bound to be a highly volatile element of the portfolio, but if I had put 5% of SMT into SP6 back in 2010, the 5 year TR for the whole portfolio up to Aug 2018 would have risen from 73% to 90%!

Anyway, best of luck, whatever you decide.

forlesen
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Re: Agent Red Proposed Portfolio

#158112

Postby forlesen » August 9th, 2018, 12:26 am

Sorry, I've just realised you did post your current portfolio value.

I have been slowly investing in ETFs for the past 6 years and have built up £70k in a simple portfolio.


So my remarks about keeping it simple early on are not really relevant.

77ss
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Re: Agent Red Proposed Portfolio

#158144

Postby 77ss » August 9th, 2018, 8:27 am

agentred wrote:.....
Proposed Portfolio:

Global Shares
65% VWRL Vanguard FTSE All-World ETF
Global Property
10% iShares Global Property Securities Index Fund (acc)
Smaller Companies
5% Global - Vanguard Global Smallcap Index Fund
5% UK - Aberforth Smaller Companies IT
Value Shares
5% Global - VHYL Vanguard FTSE All-World High Dividend Yield ETF
5% UK - Temple Bar IT
Emerging Markets
5% Vanguard Emerging Markets Index Fund


Agentred


Just one thought. In the property sector, you might like to look at TR Property (TRY) - an investment trust.

Not the same beast as the iShares fund - actively managed and exclusively invested in Europe, but if I understand the figures the performance has been significantly better.

tjh290633
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Re: Agent Red Proposed Portfolio

#158149

Postby tjh290633 » August 9th, 2018, 8:52 am

Just one thought. Property funds which are open ended, and which invest in actual property, have got into problems in the past when there have been substantial withdrawals. This is because they had to sell properties to find the cash. Investment Trusts and REITS do not have this problem, nor do open ended funds which invest in property shares.

Be careful what you choose.

TJH

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Re: Agent Red Proposed Portfolio

#158668

Postby Hariseldon58 » August 10th, 2018, 11:26 pm

Tim Hale dropped the suggestion of commodity funds in a later edition of the book.

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Re: Agent Red Proposed Portfolio

#159569

Postby TimR » August 14th, 2018, 3:48 pm

agentred wrote:Global Shares
65% VWRL Vanguard FTSE All-World ETF
Global Property
10% iShares Global Property Securities Index Fund (acc)
Smaller Companies
5% Global - Vanguard Global Smallcap Index Fund
5% UK - Aberforth Smaller Companies IT
Value Shares
5% Global - VHYL Vanguard FTSE All-World High Dividend Yield ETF
5% UK - Temple Bar IT
Emerging Markets
5% Vanguard Emerging Markets Index Fund




Is VHYL regarded as 'a value etf' as it contains global high dividend companies (unless you want regular dividends ?)
I would have thought that VVAL would the best etf for value shares ?

Tim

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Re: Agent Red Proposed Portfolio

#159650

Postby b0f77 » August 14th, 2018, 7:45 pm

TimR wrote:Is VHYL regarded as 'a value etf' as it contains global high dividend companies (unless you want regular dividends ?)
I would have thought that VVAL would the best etf for value shares ?
Tim

VWRL and VVAL have a higher than 50% allocation to North American stocks. If you want a value tilt, some diversification and not too much North America VHYL is a good option I think - it is about 36% USA allocation. I use VHYL because I already have a USA tilt from stock benefits due to my employment with a US company, stocks which I am offloading using a capital gains tax harvesting strategy. I also like the regular dividends from VHYL - although that has some forex risk and costs involved. If you look up the "Simplicity Portfolio" on The Escape Artist blog, he recommends VHYL for similar reasons.

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Re: Agent Red Proposed Portfolio

#159895

Postby Hariseldon58 » August 15th, 2018, 5:00 pm

VVAL effectively reinvests its dividends so you have the complexity of finding the Excess Reportable Income to put on your tax return unless the holding is in a SIPP/ISA etc.

Clearly the higher the foreign income, the more withholding taxes on dividends, a bit of a downside of VHYL, VVAL looks for value by a wider range of metrics which are actively selected, its done ok ( I bought a small holding for £20k and its now worth around £37k just 2 ½ years ago and thats clearly satisfactory. Value has been out of favour for some years and when it rotates back into favour then VVAL could do well. The downside for VHYL I seems that with low interest rates it means income is in demand and companies provide what the market seeks, such that VHYL holds less Value elements than usual and by its indiscriminate nature there is a risk of holding value traps.

The simple World Tracker is a good starting point and your extras look sensible, personally I'd give property REITs a miss , TJH makes valid points about holding actual property ( many REITs have elements of leverage that can go both ways !)

To go with or instead of your UK Investment Trusts I have found a 50:50 blend of FTSE100 and FT250 trackers has performed well, good yield with very low costs.


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