Investor Clinic - Richard 20 years to retirement


#1

Hi,

I am considering investing £4000 and choosing 20 investment trusts at £200 each.

In the selection i have included 4 investment funds that include investment trusts the theory being that the fund manager should be able to pick aggressive funds up at a discount.

The funds would be long holds (5 years plus) and the funds bought when there is a dip in the market or the investment trusts are trading at a discount.

On a scale of 1 to 10, 1 being cautious and 10 being aggressive i am a 7.

The funds are in the attached excel spreadsheet


#2

Here is the suggested portfolio, i appreciate would be more that £200 to buy Personal Assets i would take the difference off Jupiter Fund of Investment Trusts.

Looking to get a broad range of funds to diversify and also so that the portfolio can be left, so if a fund starts to under perform it will not affect the whole portfolio.

I am also trying investment funds of investment trusts, the thinking is that the fund manager will be better able to time purchases and get the investment trusts at a discount, they may also go for more aggressive trusts that may better diversify the portfolio

Would be invested with Hargreaves Lansdown, plan to do at £1.50 per deal on shares no charge for going into investment funds. There would be no annual management fee on the shares but 0.45% on the investment funds.

Considering New City High Yield rather than Invesco Perpetual Enhanced income.
Portfolio Group A: Investment Trust Companies Global emphasisforming the portfolios core bought on London Stock Exchange (LSE) - Whole units only as are buying share
Foreign & Colonial Investment Trust FRCL Global
Personal Assets Investment Trust PNL Global
RIT Capital Partners Investment Trust RCP Global
Bankers Investment Trust BNKR Global

Witan Investment Trust

Portfolio Group B: Investment Trust Company focusing on fixed interest to diversify portfolio bought on London Stock Exchange (LSE) - Whole units only as are buying shares

Henderson Diversified Income Investment Trust

Global High Income

Invesco Perpetual Enhanced Income Global High Income
Portfolio Group C: Investment Trust Companies Geographical emphasis bought on London Stock Exchange (LSE) - Whole units only as are buying shares
Troy Income & Growth Investment Trust TIGT UK Growth & Income
UK Select Trust UKT UK Growth
Henderson European Focus Investment Trust HEFT Europe
JP Morgan American Investment Trust JAM North America
Schroder Asia Pacific Investment Trust SDP Asia Pacific exc. Japan
Schroder Japan Growth SJG Japan
Advance Frontier Markets Investment Trust AFMF Emerging markets

Portfolio Group D : A touch of aggressive
Scottish Mortgages Investment Trust SMT Global

Portfolio Group E: Investing in investment trusts with funds of investment trusts Investment Trust Companies investing in investment trust companies bought on London Stock Exchange (LSE) - Whole units only as are buying shares
JPM Elect Managed Growth Investment Trust JPE Global

Investment Funds (Open Ended Investment Companies OEIC) - fractional units allowed

M&G Fund of Investment Trust Shares. Accumulation units. (OEIC class B) Global

Unicorn Mastertrust. Income units. (OEIC Class B) SEDOL 3121801

Unit Trust- fractional units allowed Consistent Practical Investment SEDOL 0698267

Jupiter Fund of Investment Trusts Global


#3

Richard the spreadsheet isn’t attached.

looking at this I’m wondering what is it you want to achieve? Are you saving for something, is this for retirement planning, saving for school fees?

Why do you want to invest in 20 funds? If it is because of risk then it won’t make your portfolio safer it’ll just make it larger and more difficult to manage.


#4

Had difficulty attaching the spreadsheet it didn’t seems to go up on the board.

Then investment trusts are in the second post.

No great objective other than long term growth, possibly looking for a return of 8 to 10 % on the portfolio.

Thinking of so many funds because

i) Want to use the portfolio as a benchmark for another portfolio held by an IFA so its interesting to see the changes across a number of assets.

ii) There is more funds than necessary (5 to 10 would be fine) but it means the amount invested in each could be kept the same in a simple rebalancing exercise a few years down the line.

iii) The portfolio may be suitable for a low level of management and could be left for a year and any under performance in one fund would not affect the whole portfolio

iv) I am interested to try the funds of investment trusts and there only seem to be 4 of these.


#5

There are also investment trusts that are funds of investment trusts Richard - Miton Worldwide, F&C Managed Growth Portfolio and they have an Income version too, London & St Lawrence, Cayenne Trust. There may be more.

London & St Lawrence has been a great little performer.

The four portfolios above are you intent on choosing one of them or do you want to invest in all four?

 


#6

Hi Jonno,

Thinking of Investing in all the ‘groups’ around £200 in each fund, i was just grouping under some common theme so i could decide which ones i wanted in each group and possibly make reviewing the funds easier in later years.

I like some of the funds you have given such as Cayenne and London & St Lawrence, probably would ditch Bankers Investment Trust for one of them.

Would like to know more OEIC type fund with investment trusts such as the ones M&G Fund of Investment Trusts,Unicorn Mastertrust etc. this is because there is not a dealing charge on the funds and any dividends could be put into the funds.

Any other comments ?

Bye for now

Richard.


#7

If you’re only paying £1.50 to invest in a trust (if I’m getting this right) I wouldn’t be concerned with dealing fees.

How the portfolio is constructed is very unusual. I wouldn’t construct it like this. I would put my £4,000 in to four good investment trusts and then let it grow.

I realise this is not what you are asking for but what you are asking for I find really strange.

I’d put £1k equally in to:

Witan - For wide international exposure

Henderson Diversified Income - For income

Scottish Mortgage - for global growth and technology

Scottish Oriental Smaller Companies - For expert exposure to an area of the world that it still growing.


#8

Hi Citygirl,

Fair point, i think i will cut down to 15 funds ! and run with it for a while and then reduce down to 10.

Scottish Mortgages is a good investment trust but i feel it is very aggressive and could go pop! soon, similarly i think the Oriental Smaller Companies is aggressive but worth while putting on a watch list.

I am interested to try the funds of investment trusts as i think the fund manager will potentially buy aggressive assets when they are trading at a discount


#9

The issue with Unit trust fund of investment trusts is the one’s I aware of don’t perform as well as the trusts they invest in. I don’t know if it is because of the additional layer of fees or because being open ended they need a liquidity or cash buffer to pay for redemptions.

I kind of think that using a unit trust to invest in an investment trust is sort of defeating the purpose. A number of things contribute to investment trust performance, non needing to manage liquidity being one of them.

Halifax and Jupiter and the two that I’ve looked at and they’re both 4th quartile overall.

I’m more tempted by @Citygirl’s sensible suggestions. I don’t see unit trust/OEIC fund of investment trusts as being as attractive an option Richard.


#10

Sorry to agree with everyone else @phippsit but I’d go for @Citygirl’s suggestion or something close to it.

 


#11

There is an issue with Attachments not uploading we’re trying to resolve right now.

Hopefully we’ll have it fixed soon.

Thanks


#12

Hi Jonno,

I agree that the funds of funds will not perform as well as the assets they hold if they where held individually.

The Unit Trust fund i have looked at (Jupiter Fund Of Investment Trusts) is poor as has a bid offer spread of 6%.

I am a bit more open minded regarding investment trusts investing in investment trusts.I am tempted by an argument that a fund manager looking after a trust of trusts with a lot of diversified aggressive investments can lead to a more cautious offering.

Cayenne (an investment trust of investment trusts) i believe is in the 1st quartile of global.

I am not so sure of OEIC’s investing in investment trusts and am led to your argument re: the need to maintain liquidity in an OEIC which could be a problem for performance.


#13

Regarding using OEICS to invest in investment trusts e.g.: through M&G Fund Of Investment Trust shares.

If investing small amounts e.g.: £100 then some platforms will charge £10 to do the trade straight away, this may be reduced to £1.50 if it is part of a regular investment.

Hargreaves Lansdown do not charge to go into investment funds e.g.: OEICS.

So an OEIC of investment trust shares may be of use if someone regularly pound cost averaged small amounts. Maybe it may be worth buying the individual shares in the company if the cost of buying the investment trust shares was under 5% of the amount to be invested so the trading fee could be paid for in the first years growth.


#14

Think of ongoing fees too. The Investment Trust still have theirs and so does the OEIC.

I would agree with @citygirl in that you need say 4-6 stocks. If you are a 7 out of 10 risk investor then your original list is too low and I can not see a potential 8-10% p.a. return from it. As well as @citygirl’s list you could look up Finsbury Growth & Income (UK Growth - Risk 7) and City of London (FTSE 100 income - risk 6 maybe). If you have some low risk stocks you can certainly add SST and if your time period is 5+ years I would not worry about volatility. Just buy more in the dips if you can.

Scottish Mortgage is good and not likely to go pop, I think! Try Murray International if you like instead. It pays more income than Murray Income at present. Jupiter European Opps for Europe…


#15

Had another go, this time 13 investment trusts. £200 each and 1 share of Personal Assets (around £330). Making an initial portfolio of around £2800.

Have a core set of trusts (PNL,FRCL,WTAN,RICA) a bit of fixed income to cover any dealing fees and charges on the portfolio (HDIV). Some aggressive assets (SMT,BGFD,HSL,JEO).

Then some trusts of trusts (FMPG and LSLI).

Finally some OEICS of IT’s as there is no dealing charge on some platforms for these and they could take in any dividends from the other IT’s.

Questions:

Are their any OEICS that would be beneficial to this portfolio ?

Would this portfolio potentially achieve an 8 to 10% annual return at risk level 7 where 1 is cautious and 10 is aggressive over a 5 year period ?

Personal Assets Investment Trust PNL

Foreign & Colonial Investment Trust FRCL

Witan Investment Trust WTAN

Ruffer Investment Trust RICA

Henderson Diversified Income Investment Trust HDIV

Scottish Mortgages Investment Trust SMT

Baillie Gifford Japan Investment Trust BGFD

Henderson UK smaller companies Investment Trust HSL

Jupiter European Opportunities JEO

F & C Managed Portfolio Trust Investment Trust (Growth shares) FMPG

London & St Lawrence Investment Company Investment Trust LSLI

M&G Fund of Investment Trust Shares. Accumulation units. (OEIC class A) SEDOL 3128868

Unicorn Mastertrust. Income units. (OEIC Class B) SEDOL 3121801


#16

Why are you being driven by the notion of investing £200 in each IT? In the first post of this thread you had £4000 to invest, but now it is down to £2800 - all due to a reduction in the proposed number trusts. Why isn’t the full £4000 being invested in fewer trusts? A number of commentators have said that the proposed number of trusts is way too many, but reducing their number whilst retaining the same amount of cash invested in each will still have the same issues with regards to charges as a percentage of investment amount, etc.

 

Regarding holding a portfolio of trusts and funds-of-ITs, then choose one method or the other, but not both. Unless a fund-of-ITs holds different types of ITs to those held directly then it isn’t going to add much - if anything - to your portfolio. Ditto, the other way round: unless the individual IT is something that the fund-of-ITs would not hold then it is unlikely to bring any benefit. On the contrary, if the fund-of-IT’s doesn’t hold it then your doing so might be counter to what the f-o-IT’s manager is trying to acheive, reducing your overall returns as a result.


#17

Good points which i take on board.

The aim is to get a diversified portfolio that is low maintenance that is started at a low amount and then could have cash added to over time, keeping the same number or less investment trusts.

A secondary aim is to get some experience of different IT’s in different sectors.

So starting at £2800 and could invest in the IT’s at the rate of £1000 per annum across the IT’s or in ones that showed good value.

  1. Re: £200 in each investment trust

I feel this is the minimum amount for an investment trust. Buying or selling can incur a deal charge of £10 on many platforms and this would work out as a trade being 5% of the amount invested which could be recovered in 1 years of growth.

  1. Way too many IT’s

This is partly true, the portfolio would be fine with half the number of IT’s, however they are focusing in different areas, having PNL,FRCL,WTAN and RICA would not produce 8 to 10 % per annum but adding more aggressive IT’s such as SMT and BGFD helps to increase the return.

I think after a year the IT’s could be trimmed down taking out any poor performers.

There is the argument that some of the IT’s would start to work against each other.

I am not fully convinced by the need for HDIV, it does produce a bit of income to cover fees but may not greatly add to diversification.

  1. Funds of IT’s

The funds of IT’s and IT’s of IT’s do tend to hold different IT’s, generally more aggressive e.g.: TR property and Biotech Growth.

I am not totally convinced by these and would be interested to give them a go.

The idea is to reduce the monitoring of the portfolio.

An OEIC of IT’s has advantages on some trading platforms as there is no charge to invest in the OEIC (unlike the investment trust shares) meaning that they can soak up any dividends or the growth taken off.


#18

I don’t follow much of your logic I’m afraid. If you want to see how trusts behave you can and should use the historical data. If you are aiming at 8% + p.a. then you have too many defensive trusts. Fixed income is not the only source of income and I would not like to be adding to this sector at the moment, although HDIV could be more resistant to rate rises since a large chunk of the book is linked to LIBOR. Fund of funds are just extra unnecessary expense and as @arkwelder says not a policy that is worth having unless it really gives you something you can’t access with a trust - which it generally can’t.

I wouldn’t think of TR Property as aggressive either. As for OEICs - Wrong place to ask - the structure of them is flawed for long term growth so don’t use any - getting annoyed now. Try 8 x £500 as I think £200 is too small andI think you are looking down the telescope from the wrong end.

What do you really have to invest? Invest it. Add a regular amount (good) that is defined from the outset.


#19

Just a point about the choice of platform - HL does offer monthly dealing at £1.50 a trust, BUT the list of available investment is limited to those generally in the FTSE350. So many of the smaller or more niche trusts might not be available. If not eligible then the £11.95 standard dealing charge would make the £200 per trust option too exepnsive in my opinion.

Also the monthly dealing option with HL (like ATS) requires a monthly direct debit and the monthly dealing money to come from new money added to the account. I suppose you could still set a monthly DD up for one month and then cancel it.

A better option might be interactive investor - they seem to allow any trust to be chosen and you can use money held on the account for monthly dealing.

I started off many years ago with IT savings schemes, but have gradually moved generally to lump sum investing and typically consider ~£1500 to be the minimum amount per trust given the costs of buying and selling.

 

 


#20

I don’t know much about IT saving schemes though I met a bloke at an investment event who swore by them @scjim because they are very cheap and if you go with Aberdeen or Baillie Gifford you’ve got the choice of a few good trusts.

ATS charge £5 for regular investing which is just too much on the amount I save. I’m gonna check out iii, I hadn’t thought about them. Cheers.