Paralysis by Analysis - Xmas Project

[BusyBumbleBee]

Started a daily drip feed split equally between: ...

My daily drip feed at this time of year is split equally between

** Rum
** Coffee
** Ginger Wine
** Hot Chocolate

and my investments seem to do quite well withour any attention from me at all. The End of Tax Year project is somewhat different though.

[Chrysalis]

75% in equities? How do you calculate that?
You have £67k in your investments and £140k cash. I don’t know how the asset allocation works out across your funds but even if it’s 100% equities then you are still less than a third equities. I agree that for your age this is excessively conservative.

As others have suggested, the starting point is what are you investing for? You are renting, I assume that you do not want to die renting, so one of your goals may be to buy a home. If you plan to do that soon, then as others say, the funds you need could be kept in cash.
Otherwise, if you are investing long term, then you need to think clearly about the asset allocation, which will depend on your own personal risk tolerance. Only once you have that clear, should you then decide whether to go active or passive and then choose your funds. (My own approach is 100% passive, it takes a lot of the decision making out of it which I think is key to overcoming behavioural biases).

Then the issue is how to invest. Are you really maxing out pension and ISA contributions? That gives you headroom of 40+20k per annum in tax advantaged wrappers (depending on your earnings of course) and so you could get all your investments into tax shelters over 2-3 years. That might be a good starting point for determining the rate at which you invest. (Although evidence would suggest that investing all at once is likely to produce better returns, the fact that you have been very cautious and are worried about losing money in the short term might suggest you would find a gradual approach easier, and it is administratively much simpler not to invest in a taxable account if at all avoidable).

The trick is to think through your plan, WRITE IT DOWN so you can refer to it later on when you get nervous about a market dip,and then stick to it. I recommend automating as much of the investment purchase process as possible, otherwise every time it is time to buy more, you will worry and procrastinate about it. That’s an entirely normal and predictable human response, so you need to set things up so you remove yourself from the process as much as possible.

[Chrysalis]

Btw, we’ve just had a fairly bad year for equities. That may well mean it’s a good time to buy. It doesn’t mean they can’t go lower, of course. It does mean that it will feel difficult to invest - any time which in hindsight turns out to be a good time to buy is likely to feel like a risky time to buy. We feel good about buying equities when they are going up, which of course is often when they are expensive...
All of this has been written about extensively. We know beyond doubt that we find it easier to buy high and sell low. Doesn’t make it easier to behave differently, but awareness is the first step!

[Aminatidi]

Ah now I'm with you! Sorry, the 75% is from an X-Ray of the investments but as you say if you take cash + investments I see where the 35% comes from.

This is where I'm moving (slowly) more of the cash towards equities, intention being drip and then probably bed & ISA.

[kempiejon]

Ah now I'm with you! Sorry, the 75% is from an X-Ray of the investments but as you say if you take cash + investments I see where the 35% comes from.

This is where I'm moving (slowly) more of the cash towards equities, intention being drip and then probably bed & ISA.

My bold, if that gives you peace of mind and pound cost averaging helps you sleep at night and continue with your plan stick at it and well done for taking the initiative.

But the Vanguard paper linked to in a post above by runnygum shows that most of the time one would be better off sticking it all in because of the lower expected long-term returns of cash compared with stocks and bonds and delaying investment is itself a form of market-timing, something few investors succeed at.

[Aminatidi]

Ah now I'm with you! Sorry, the 75% is from an X-Ray of the investments but as you say if you take cash + investments I see where the 35% comes from.

This is where I'm moving (slowly) more of the cash towards equities, intention being drip and then probably bed & ISA.

My bold, if that gives you peace of mind and pound cost averaging helps you sleep at night and continue with your plan stick at it and well done for taking the initiative.

But the Vanguard paper linked to in a post above by runnygum shows that most of the time one would be better off sticking it all in because of the lower expected long-term returns of cash compared with stocks and bonds and delaying investment is itself a form of market-timing, something few investors succeed at.

Understood, but I quite like the "thrill" of doing a daily deal even if it's just dumping £100 into a fund, sounds a bit sad I know.

I'm also putting in the odd larger amount so for example £3K has gone in since Christmas.

[Aminatidi]

Back on this as part of my "project' was to get all my ISA's and investment accounts in one place which has now happened (stunned how quickly HL handled the transfers ).

I'm leaning towards dropping Personal Assets and Capital Gearing as they are simply too sluggish and as has been pointed out at length with so much cash in the bank and 15-20 years worth of new money feeding the "engine" I should be focussing on growing the pot rather than simply "better than cash".

Options I'm considering alongside the allocation to Fundsmith and Lindsell Train Global Equity:

* VWRL FTSE All World
* Finsbury Growth Trust
* Scottish Mortgage Trust
* Troy Income & Growth Trust
* Blue Whale
* Buffettology

I'm already feeding Lindsell Train Global Equity, Fundsmith, Buffettology and Blue Whale into a General Investment account as I'm outside of wrapper allowances but I want to focus on the 50% or so of the ISA that losing those two funds will free up.

Finsbury and Troy Income & Growth look like "steady Eddie" options but of course with the former there is some overlap with Lindsell Train Global Equity, not necessarily a bad thing if you have faith in the fund manager and I do in Nick Train.

I'm also leaning slightly towards something that produces a mix of income and growth just because it's nice to see dividends rolling in and having the choice where to reallocate them.

Given the amounts are reasonably large I'd prefer ETF/IT for these just to reduce fees a little.

Thoughts welcome.

[TUK020]

I have been using Legal & General Global 100 ETF as a 'bucket' for new money into my long term (SIPP, non drawdown account) when I don't have anything else I fancy.
In the Drawdown account that I am likely to touch sooner, I use CTY IT for the same function.

[TUK020]

Having just said I use the L&GGlob100 for new money, I am also thinking about putting this on hold as I perceive the US market to be overpriced, and the Glob100 is a significant % in the USA

[Dod101]

If the US market is overpriced, and Emerging Markets/Far East are suffering from a China downturn, I think there is a lot to be said for the UK and Europe in general. I do not think that the UK market is overpriced.

Dod

[Aminatidi]

If the US market is overpriced, and Emerging Markets/Far East are suffering from a China downturn, I think there is a lot to be said for the UK and Europe in general. I do not think that the UK market is overpriced.

Dod

Assumption being there is less of a "bubble" to burst?

I am cautious that it would leave me quite heavily in UK (around 50%) but I keep hearing look at where these companies earn their money and they're essentially global.

I guess the basic question is, other than over-analysing where I may do slightly better, is there anything awfully wrong or missing with a roughly even split between:

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

[Dod101]

I see absolutely nothing wrong with splitting your funds between these four ITs/funds. As I have said before it is more conservative than I would be but there is nothing wrong with that and I expect you will have less downside risk than going for something more adventurous. We must all do as we feel comfortable and you appear to be a conservative type. Good. There is nothing wrong with that.

I think that on the whole the UK market is lowly rated. Just look for instance at the yields on offer. Brexit is probably a cause and it may or may not be a valid one. We cannot know so I tend to ignore it.

Good luck to you whatever you do but do not agonise for too long!

Dod

[Aminatidi]

I see absolutely nothing wrong with splitting your funds between these four ITs/funds. As I have said before it is more conservative than I would be but there is nothing wrong with that and I expect you will have less downside risk than going for something more adventurous. We must all do as we feel comfortable and you appear to be a conservative type. Good. There is nothing wrong with that.

I think that on the whole the UK market is lowly rated. Just look for instance at the yields on offer. Brexit is probably a cause and it may or may not be a valid one. We cannot know so I tend to ignore it.

Good luck to you whatever you do but do not agonise for too long!

Dod

What would you consider not conservative out of curiosity?

Scottish Mortgage?
Private Equity?

Also appreciate any views people might have on alternatives such as REITs. I've steered clear of them because I don't know enough about them whilst I do know plenty about Alcohol (Diageo) and Burberry and Hargreaves Lansdown etc.

[Dod101]

I do not want to get too far into this because it is just my view but Scottish Mortgage (or Monks, also from Baillie Gifford and maybe a little less 'techy') would I think be a good, less conservative IT. You appear to be looking for general trusts/funds and any REIT is likely to have, apart from being by definition a property company, a specialisation within that sector. I would not have thought that that would appeal to you.

Dod

[Aminatidi]

I do not want to get too far into this because it is just my view but Scottish Mortgage (or Monks, also from Baillie Gifford and maybe a little less 'techy') would I think be a good, less conservative IT. You appear to be looking for general trusts/funds and any REIT is likely to have, apart from being by definition a property company, a specialisation within that sector. I would not have thought that that would appeal to you.

Dod

Sums up my view on Scottish Mortgage to be fair, and as you say it's just a view and for me I still struggle with the volatility of SMT, wish I had the nuts to be a bit better with that but not yet

Thank you!

[ermintrade]

One way of coping with the volatility of SMT and the like is perhaps to use a 'barbell' approach. Pair SMT with a fund/IT having low volatility. So possibly SMT plus CGT or Personal Assets. Then add some 'high quality' funds/ITs following the Buffet/Train criteria eg LT Global Equity, FGT, or Buffetology. Then rebalance the selection once a year.
Regards
ermintrade

[Aminatidi]

One way of coping with the volatility of SMT and the like is perhaps to use a 'barbell' approach. Pair SMT with a fund/IT having low volatility. So possibly SMT plus CGT or Personal Assets. Then add some 'high quality' funds/ITs following the Buffet/Train criteria eg LT Global Equity, FGT, or Buffetology. Then rebalance the selection once a year.
Regards
ermintrade

I think I'd struggle with doing that. PNL and CGT just don't seem to move, I get the whole point is to do a job, but I think on balance I'd sooner have more assets that are somewhat volatile than less assets but that are more volatile, if that makes sense?

I was just looking at my company pension providers default portfolio and as I'm > 15 years from retirement it's literally stocks and property with a small allocation to other stuff.

Message there seems to tie in with the message here, I'm too far out to be focussing on preserving.

RLP Cash Plus 1.00%
RLP Property 17.50%
RLP Long (15yr) Gilt 1.40%
RLP Long (15yr) Corporate Bond 1.27%
RLP Long (15yr) Index Linked 1.02%
RLP Global High Yield Bond 0.08%
RLP Short Duration Global High Yield 0.60%
RLP Commodity 3.75%
RLP Global Managed 73.38%

[Dod101]

Actually it is all very well to write of SMT being volatile but over the last few years it has not been at all volatile. Since September 2014 when it was £2.33 it was pretty much a one way escalator upwards until September 2018 when it peaked at around £5.45. Since then it has wobbled a bit and has been around £4.6/4.75 ever since. That is not much of a history of volatility. In any case, no share will go up for ever without a few pauses along the way.

For what that is worth.

Dod

[Aminatidi]

Dod yes, thanks, I'm sure you're right but for me there's a perception there around SMT and volatility which Trustnet seems to support over 1 and 3 years, and I have to be able to sleep at night

Where I am as of now after a couple of tweaks:

Holdings Type Assets %
Fundsmith Equity I Acc 26.79%
Lindsell Train Global Equity Fund B GBP Inc Fund 26.79%
Capital Gearing Trust Plc 17.86%
Finsbury Growth & Income Trust Plc 17.86%
Troy Income & Growth Trust 10.71%

I also have a non-ISA account with an equal split between Buffettology, Lindsell Train Global Equity, Fundsmith and Blue Whale.

I think it'll be interesting come April 1st when the new ISA allowance is available plus any impact of Brexit on markets.

I may just go hide in a hole for a couple of days

[Aminatidi]

So here we are in April with the new ISA years allowance available.

Current thoughts for the new money are to add to CGT and one of LTGE or Finsbury with a leaning towards bringing the allocation to the latter up a little.

Debating losing TIGT and either using to contribute to the move above, or possibly a small position in RIT Capital.

Current thinking is I'm reasonable content concentrating the things that should take me up.

I would like a lot of diversification in the things that should help me if things start to come down.

Every so often I do just think why not do a simple 50:50 for 50:25:25 between CGT and one/both of Finsbury Growth Trust or Lindsell Train Global Equity for an easy life