The Lemon Fool

Hi there,

I have been doing a lot of research on lazy portfolios over the last few night and have drawn up my own portfolio. I have drawn on information from the Gone fishing portfolio, golden butterfly portfolio, all weather portfolio and lots of information on this site.

I have £10,000 in the S&P 500 and am considering drip feeding this long term as well and using the portfolio below.

I hope to have £30,000 spread across two ISAs to make up the portfolio.

The portfolio looks like:

20% All world / VWRP
20% US small cap value IDP6
15% long term UK bonds IGLT
15% global aggregate bond VAGP
10% emerging markets small cap IEMS
10% developed markets property yield IWDP
10% gold SGLN

Any critique or advice would be greatly appreciated. I am using Trading 212 for my ISA investments.

I am a complete novice to investing so please feel free to advise on any suggested changes. I really want a portfolio that i can leave and just rebalance every year. If this is possible.

Thanks in advance for any suggestions/advice

Hello kdtoal

Personally, I would prefer 40% in the All World, with the remaining %s decreased proportionally, but I guess that takes you away from the balanced %s of the models you are following.

Also, again personally, I would include an allocation of Private Equity in the small cap, and also Infra as part of the property element. But that makes it more messy in the numbers of ETF you hold.

torata

Hi torata,

Thanks for the feedback.

I quite like the more balanced approach rather than putting 40% in to the All World Cap. As I have £10,000 in the S&P 500 as well, do you think this would be best placed in to the All World Cap instead and drip fed? As well as running the sample portfolio?

Any suggestions for a private equity small cap? And what would would you replace this with in the current portfolio? Or would you just add to portfolio and adjust % split.

Thanks
Kdtoal

kdtoal wrote:Hi torata,

Thanks for the feedback.

I quite like the more balanced approach rather than putting 40% in to the All World Cap. As I have £10,000 in the S&P 500 as well, do you think this would be best placed in to the All World Cap instead and drip fed? As well as running the sample portfolio?

Any suggestions for a private equity small cap? And what would would you replace this with in the current portfolio? Or would you just add to portfolio and adjust % split.

Thanks
Kdtoal

Hello kdtoal

Ah OK, I misread slightly. So your total portfolio is (or will be) 40,000. So on a total portfolio basis, as VWRP contains 56% US stocks, you've got a higher concentration of US stock when you include your S&P ETF.

For your first question, if you want to keep the neat allocations you have, then moving it into VWRP is the logical choice, and then drip feeding into the various elements of the total portfolio as they get out of whack. However, if you want to ride the coattails of the phenomenal rise of the S&P, then keep it as it is.

To add in PE, you could use the iShares Listed Equity PE ETF (IPRV) to keep it consistent with the other ETFs, although there are PE investment trusts also. But whatever, I'd split it with IEMS, so it's 5% each.
There are world 'small cap' ETFs, but they are not really that small, and I understand why you've split it up and gone for US SC growth as a standalone ETF.

torata

Diversification is worth having, but private equity is a questionable choice for some, and if you're holding only 5% worth is it really going to swing the needle much to justify its shortcomings? This fella's no fan: https://www.evidenceinvestor.com/how-go ... -honestly/

50/30/10/10 stocks/bonds/reit/gold - a very nice and simple sleep-easy passive portfolio.

It has a very high weighting to smallcaps, so be prepared for the equity components to be more volatile if there is a global downturn.

vand wrote:50/30/10/10 stocks/bonds/reit/gold - a very nice and simple sleep-easy passive portfolio.

It has a very high weighting to smallcaps, so be prepared for the equity components to be more volatile if there is a global downturn.

If I have understood the OP correctly (and I stand to be corrected ) I take it they are drip feeding the proposed portfolio and as such I'd strongly recommend they stick to this tactic as "pound cost averaging" is a simple but effective way to accumulate and avoid the negatives created by volatility.

Dependant upon personal timelines I'd suggest drip feeding should be over 3-4 years. Albeit that may come at a trading cost.

AiY(D)

What is the purpose of this portfolio?

Thanks again torata.

Will have a look at IPRV and will also take a read at what John W has posted.

As a novice investor it's really great feed back and I really appreciate all the advice.

torata wrote:

kdtoal wrote:Hi torata,

Thanks for the feedback.

I quite like the more balanced approach rather than putting 40% in to the All World Cap. As I have £10,000 in the S&P 500 as well, do you think this would be best placed in to the All World Cap instead and drip fed? As well as running the sample portfolio?

Any suggestions for a private equity small cap? And what would would you replace this with in the current portfolio? Or would you just add to portfolio and adjust % split.

Thanks
Kdtoal

Hello kdtoal

Ah OK, I misread slightly. So your total portfolio is (or will be) 40,000. So on a total portfolio basis, as VWRP contains 56% US stocks, you've got a higher concentration of US stock when you include your S&P ETF.

For your first question, if you want to keep the neat allocations you have, then moving it into VWRP is the logical choice, and then drip feeding into the various elements of the total portfolio as they get out of whack. However, if you want to ride the coattails of the phenomenal rise of the S&P, then keep it as it is.

To add in PE, you could use the iShares Listed Equity PE ETF (IPRV) to keep it consistent with the other ETFs, although there are PE investment trusts also. But whatever, I'd split it with IEMS, so it's 5% each.
There are world 'small cap' ETFs, but they are not really that small, and I understand why you've split it up and gone for US SC growth as a standalone ETF.

torata

kdtoal wrote:
Any critique or advice would be greatly appreciated.

Without any detail on what the portfolio is for, or your attitude to risk, it is difficult to provide any feedback.

CliffEdge wrote:What is the purpose of this portfolio?

The portfolio is to save for retirement or at least put my money somewhere where it may make better interest than in my personal account.

I plan to invest up to £40,000 each year using the ISA allowance from my own and my wife's ISAs.

I do not want to actively trade stocks and shares. I am looking for a portfolio that I can invest into and rebalance each year.

dealtn wrote:

kdtoal wrote:
Any critique or advice would be greatly appreciated.

Without any detail on what the portfolio is for, or your attitude to risk, it is difficult to provide any feedback.

I am comfortable with medium to high risk as this is a long term plan and not for short term gains.

Please see above message detailing what the portfolio is for.

kdtoal wrote:

dealtn wrote:

kdtoal wrote:
Any critique or advice would be greatly appreciated.

Without any detail on what the portfolio is for, or your attitude to risk, it is difficult to provide any feedback.

I am comfortable with medium to high risk as this is a long term plan and not for short term gains.

Please see above message detailing what the portfolio is for.

Well if saving for retirement is the goal (and its not clear how far away that is, nor where in the world you are and intend to retire to - UK, both?) it doesn't appear unreasonable, although I know very little about funds (not something I would ever buy).

Beating the interest rate on a savings account isn't a particularly high hurdle, and you can do so, in the longer term without stretching into that "medium to high risk" territory. I would ask myself the question whether that was a genuine target, or that of retiring sooner, or with more capital (or income) were actually more important.

Particularly if low returns were my aim, I would be looking at lower risk (less volatile) investments, but concurrent with that would be a focus on fees/charges/costs. Even with a 5% real return on the portfolio a 1% cost isn't small - its 20% of your return going to someone else. It is intuitive to most that paying interest at 20% on a credit card isn't a good idea (particularly over any length of time), but surprisingly many don't consider gifting 20% of investment returns a particularly troublesome choice.

It sounds like you are the type that is happy to be able to sleep at night and ignore the portfolio, bar an annual review and rebalance. There will be others with a similar mindset able to better advise you than me as I am at the other end of the spectrum when it comes to investing. Best of luck on that journey.

dealtn wrote:Particularly if low returns were my aim, I would be looking at lower risk (less volatile) investments, but concurrent with that would be a focus on fees/charges/costs. Even with a 5% real return on the portfolio a 1% cost isn't small - its 20% of your return going to someone else. It is intuitive to most that paying interest at 20% on a credit card isn't a good idea (particularly over any length of time), but surprisingly many don't consider gifting 20% of investment returns a particularly troublesome choice.

Probably one of the most overlooked points for entrants to the financial world of pensions and ISA's. Absolutely great point.

At the risk of going "slightly" off topic. I am with Standard Life and they charge me less than 1%. But they seem to do so in a way that continues to baffle me. They apply charges at the end of each day. They add back my rebate (based on the size of the pot) daily too (iirc).

Does this amount to the headline rate they show me or, cynically, much more?

Thank you

Take care

AiY(D)

dealtn wrote:

kdtoal wrote:

dealtn wrote:

kdtoal wrote:
Any critique or advice would be greatly appreciated.

Without any detail on what the portfolio is for, or your attitude to risk, it is difficult to provide any feedback.

I am comfortable with medium to high risk as this is a long term plan and not for short term gains.

Please see above message detailing what the portfolio is for.

Well if saving for retirement is the goal (and its not clear how far away that is, nor where in the world you are and intend to retire to - UK, both?) it doesn't appear unreasonable, although I know very little about funds (not something I would ever buy).

Beating the interest rate on a savings account isn't a particularly high hurdle, and you can do so, in the longer term without stretching into that "medium to high risk" territory. I would ask myself the question whether that was a genuine target, or that of retiring sooner, or with more capital (or income) were actually more important.

Particularly if low returns were my aim, I would be looking at lower risk (less volatile) investments, but concurrent with that would be a focus on fees/charges/costs. Even with a 5% real return on the portfolio a 1% cost isn't small - its 20% of your return going to someone else. It is intuitive to most that paying interest at 20% on a credit card isn't a good idea (particularly over any length of time), but surprisingly many don't consider gifting 20% of investment returns a particularly troublesome choice.

It sounds like you are the type that is happy to be able to sleep at night and ignore the portfolio, bar an annual review and rebalance. There will be others with a similar mindset able to better advise you than me as I am at the other end of the spectrum when it comes to investing. Best of luck on that journey.

Hi dealtn,

Thanks for your comments.

Apologies, that I haven't provided more info. I am completely new to this but understand I should have provided a bit more background info.

I live in the UK and am 36 years old. I would ideally like to retire around 60. I work as a dentist and have being paying into an NHS superannuation scheme for the last 7 years or so. The contributions to the superannuation scheme has significantly decreased in the last 2 years though as my practice has changed. I am currently setting up a pension and plan to max out pension contributions each year and invest through the ISAs.

I am really looking for a passive portfolio where I am putting in as much effort now (researching and asking others for advice) so I can hopefully sleep better at night and just rebalance once a year. I'm well aware that no-one knows where the markets will go next and that some investments come with a higher level of risk.

I had thought that if this was a long term plan, my increased acceptance of risk was manageable, and by diversifying the portfolio might slightly reduce the risk of bigger losses.

Again, I am still learning about investing, but I really appreciate your input.

I run a similar portfolio, and have done for about five years. It was designed to try and reduce the volatility I had experienced with a mostly equity portfolio during the preceding fifteen years.

I find I sleep much more soundly now than I used to.

My circumstances are different to yours, so my experience may not be relevant.

AsleepInYorkshire wrote:

vand wrote:50/30/10/10 stocks/bonds/reit/gold - a very nice and simple sleep-easy passive portfolio.

It has a very high weighting to smallcaps, so be prepared for the equity components to be more volatile if there is a global downturn.

If I have understood the OP correctly (and I stand to be corrected ) I take it they are drip feeding the proposed portfolio and as such I'd strongly recommend they stick to this tactic as "pound cost averaging" is a simple but effective way to accumulate and avoid the negatives created by volatility.

Dependant upon personal timelines I'd suggest drip feeding should be over 3-4 years. Albeit that may come at a trading cost.

AiY(D)

Thanks for your comments.

I plan on initially investing £10,000 into S&P 500 and the other £30,000 into the portfolio. Then each month transfer money into S&P and across the portfolio. If I were to base the monthly deposits on the initial investment it would work out as 25% into S&P and 75% split across the portfolio.

When you say drip feed over 3-4 years do you recommend drip feeding the £30,000 into the portfolio over these 3-4 years? Or what so you mean?

I would like to use up my ISA allowance each year to invest into the portfolio and S&P 500, although this may not be totally achievable. Approximately £1000-1500 per month and reassess at year end and consider an extra instalment.

Thanks again

AsleepInYorkshire wrote:

dealtn wrote:Particularly if low returns were my aim, I would be looking at lower risk (less volatile) investments, but concurrent with that would be a focus on fees/charges/costs. Even with a 5% real return on the portfolio a 1% cost isn't small - its 20% of your return going to someone else. It is intuitive to most that paying interest at 20% on a credit card isn't a good idea (particularly over any length of time), but surprisingly many don't consider gifting 20% of investment returns a particularly troublesome choice.

Probably one of the most overlooked points for entrants to the financial world of pensions and ISA's. Absolutely great point.

At the risk of going "slightly" off topic. I am with Standard Life and they charge me less than 1%. But they seem to do so in a way that continues to baffle me. They apply charges at the end of each day. They add back my rebate (based on the size of the pot) daily too (iirc).

Does this amount to the headline rate they show me or, cynically, much more?

Thank you

Take care

AiY(D)

I am using Trading 212 who charge no fees. I'm assuming there are fees attached within each EFT, which differs with each EFT?

I may well move away from Trading 212 at some point as they don't have as many available stocks/shares/bonds. Although if it stick with this portfolio that shouldn't really matter. Long term though I feel I may be more comfortable with my money in a larger firm like HL, although I've heard they do charge high enough fees.

vand wrote:50/30/10/10 stocks/bonds/reit/gold - a very nice and simple sleep-easy passive portfolio.

It has a very high weighting to smallcaps, so be prepared for the equity components to be more volatile if there is a global downturn.

Thanks for your input vand.

Could you offer any adjustments to % across the portfolio to reduce this, or any alternative options to consider?

kdtoal wrote:Thanks for your comments.

I plan on initially investing £10,000 into S&P 500 and the other £30,000 into the portfolio. Then each month transfer money into S&P and across the portfolio. If I were to base the monthly deposits on the initial investment it would work out as 25% into S&P and 75% split across the portfolio.

When you say drip feed over 3-4 years do you recommend drip feeding the £30,000 into the portfolio over these 3-4 years? Or what so you mean?

I would like to use up my ISA allowance each year to invest into the portfolio and S&P 500, although this may not be totally achievable. Approximately £1000-1500 per month and reassess at year end and consider an extra instalment.

Thanks again

Bear with me as I know what to say but I have a terrible knack of babbling - I've even been known to spout bullsh1t . Let's say you buy £30K of S&P 500 tomorrow. Totally for example let's say the price is £1.00 per share. Tomorrow the S&P 500 falls by 10% and you're out of pocket by £3K. Let's assume the S&P 500 enters a bear market. I recall (and obviously check yourself) that if you're buying into an equity/fund you should consider defensively buying in over time. The strategy is known as pound cost averaging.

Let's assume you buy £625 of S&P 500 each month. In month one the value of the fund falls by 10%. You loose £62.5. But you are then buying another £625 of S&P 500 at that reduced price. So you buy the ups and downs and achieve a reasonable price without huge risk.

Obviously the above is a very simple analogy to explain the strategies essence. How you employ this is really down to your own personal choice. There are currently two main arguments in the marketplace. One suggests the S&P 500 is over-valued. The other that it is not. I couldn't say either way what direction it will go in the short term. I don't have to as pound cost averaging is benefiting me as I add cash to my pension pot.

Your ISA can be accessed to suit you. So if you over indulge with additions during the year and suddenly find you need a little more cash you can remove that from the ISA. The downside is you may be selling cheaper than you purchased. The upside is the opposite.

I can't point you in one direction or another but I can, at the risk of annoying you, suggest you review pensions. Time is on your side.

If you invest £18,000 per annum in a pension you will get £3,600 added to the pension. You've just made 20% for nothing. If you earn over £50,000 you will also attract additional tax rebates. I've no idea what you earn and it's none of my business. But let's assume it's slightly less than Google's average UK Dentist salary of £72K. If you put £18,000 into a pension each year you will get £7,200 tax rebate.

This is a much quicker way to put together a pot of money for retirement. Try not to look at the downside, because there isn't a great deal of that in my opinion. If you are ill and can no longer work modern pensions can be drawn down before retirement age (iirc). The LTA isn't a huge burden at all - it can be managed. And your pension is outside of IHT and will pass to your nominated beneficiary. They can immediately draw down from this at their tax rate as the pension withdrawal age has already been achieved by you.

I did a quick "what if" scenario on my spreadsheet. Assuming you add £18K per year to a pension and attract 40% tax relief and the fund grows by 8% per annum you will have a pension pot of £3.41M.

Assuming growth is 6% it will only be £1.87M at your age 60.

I am not suggesting you go all in to a pension. But if you invested £18K (plus rebate at 40%) for the first 10 years and stopped adding to your pension at that point but continued to let it grow then at 6% it would be worth £1.3M by your age 60. An ISA (i.e. without tax rebates) would be worth £979K. An approximate difference of £320K or just short of 33%.

May I suggest that it's good to have an entrance strategy. But you also need an exit plan too. If by 40 your pension is banked (subject to 6% growth over the next 20 years) and your £18K can go into ISA's, sports cars or charities then you're in a great place.

There will be others who know more about this than I do and will be able to explain in more detail. Some good eggs hereabouts

Take care and don't hesitate to check my maths

AiY