Gadgeisbackagain wrote:https://monevator.com/9-lazy-portfolios-for-uk-passive-investors-2010/
Some interesting ideas there on defensive portfolios.
My thoughts:
What you seek, does not exist. You want Gilts but when they were actually defensive and not hugely overvalued as they are now, so inherently risky. You don't like Corporate Bonds which are the nearest alternative. You probably don't want cash either due to the low returns.
Everybody seeks what you want. Some means of reducing their risk profile to equities that also pays a great yield.
There is no such animal, although in my view Gilts in emerging markets comes close and high yield corporate bond ITs may not be as high risk as you think.
I would question why you are so overweight to the UK?
It is only 7% of the global stock market yet you have more than that in just two stocks, let alone the ITs.
That is fine if you believe that the UK is undervalued and will recover soon but do you?
If you really do, then think about IVI which offer great shares and an amazing discount on the underlying assets today.
You seem massively underweight the best market in the world, The USA.
That has demonstrably cost you dearly in the last year.
I think the best investment decision that I have made in years was to sell almost everything in the UK (except FGT) and invest instead in USA / Global shares directly, or via ITs like Fundsmith and Lindsell Train.
I now find myself looking at UK shares like Leg & Gen, comparing them with Paypal, for example, and find it incredible that I ever found the UK shares interesting as business propositions.
Would you sooner own:
Paypal
Microsoft
Disney
Nestle
LVMH
Or
Vod
GSK
BATS
etc
One last point, CGT is also available now as a fund which would avoid the premium on the IT.
Don't buy it somewhere like HL though or their .45% platform charge will defeat the whole thing.
Gadge
Hi Gadge, I always look out for your posts and value your input.
You raised a number of points in your post, which I feel I should respond to and/or put into context. Bear in mind my post & portfolio was about increasing my defensive positioning, (of a predominantly income focused portfolio).
Firstly, I had decided to leave fixed interest alone, APART FROM the exposure I already get through multi-asset trusts like MATE & SIGT and trusts like Shires and MYI. (E.g. Shires: 25%. MYI = 18%. SIGT = 11%. MATE = 15%
Re Global and US exposure, it should be noted that several of the global trusts have higher exposure to the US - e.g. JPGI @ 53%. and HINT 30%, along with multi-asset trusts like MATE @ 32%. Note also that JPGI, which is my second largest holding, although a growth & income trust, has exposure to technology stocks. I also have a large holding of MCT which gives Canadian and some US exposure.
I had previously reduced my exposure to the US (which involved selling NAIT - North American Income Trust), partly in anticipation of a market correction and partly to try and reduce the number of trusts I hold, relying instead on the exposure provided by the global trusts, though maybe I have reduced my US exposure too much. .
So accepted I probably do have too much UK exposure and am underweight the US. I have in mind the possibility of re-purchasing NAIT if and when a US correction arises, or alternatively adding to JPGI and HINT with future top-ups.
Though again, please note re the UK, I had deliberately increased my weighting there, because I considered the UK to be under-valued because of Brexit uncertainty, and I have therefore been waiting to take advantage of a post-Brexit recovery. I added Murray Income trust (MUT) a year or so back to aid that objective and that has performed well.
Aberdeen Standard Equity Inc (ASEI) has been my biggest under-performer, which I think is because of its exposure to UK small and mid caps, thus I am hopeful of a recovery there in due course. If not that may find itself in my "to be pruned" list.
As a guide the sector sizes as a percentage of the whole portfolio, at the time of posting, were:
UK - 22.5% (includes mid & small cap trusts)
UK direct stocks - 7.7%
Sub-total of UK exposure: 30.2%Global G&I - 19.5%
Multi-Asset - 9.3%
North America (MCT) - 6.7%
Asia Pacific - 7.3%
Sub-total of Global exposure: 42.8%Property - 12.1%
Environmental/Renewables - 4.8%
Infrastructure 4.4%
Utilities - 1.6%
Pharma - 1.9%
Gold & Resources 2.2%
Thanks again for your thoughts.