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Portfolio For 20 year old

A helpful place to also put any annual reports etc, of your own portfolios
mark85
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Re: Portfolio For 20 year old

#507469

Postby mark85 » June 15th, 2022, 7:23 pm

Thanks for the very detailed and informative answers.

You haven’t convinced me to change my portfolio, but thanks for sharing your ideas. But you don’t have to convince me, you have to convince yourself in 10 years time when you review your portfolio and it’s doing so-so.


May I ask where you hold your equity investments? I presume a global index tracker. Do you think there is a role for actively managed assets in an equity portfolio? If so what?

Hariseldon58
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Re: Portfolio For 20 year old

#507470

Postby Hariseldon58 » June 15th, 2022, 7:30 pm

Global Investment Trusts tend to perform in live with a tracker, higher costs but the gearing tends to cancel that out.

The Global tracker is low cost and has no issues with change of managers etc.

I’d go with 75% in the global tracker and the balance in Global Investment Trusts ( 3 or 4 for manager dispersion) to avoid the occasional issues with market exuberance , eg Japan becoming about 50% of Global tracker before falling back to less than 10% (There is a danger that the IT managers can’t resist the pressure to overweight an area where returns are very high.)

Alternatively the 25% could be in a value index or perhaps something like the RAFI index. To counterbalance any region or sector doing extraordinarily well. Provided you leave things alone it would work out !

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Re: Portfolio For 20 year old

#507527

Postby JohnW » June 16th, 2022, 1:22 am

I’d suggest a good choice is not based on what someone else chooses, but rather the pros and cons of different choices, according to your values; that is more substantial and able to be tested.
I think you and I want a broadly diversified equity fund(s) at low cost (particularly for you with a longer investing time for compounding), and currency hedged or not. Beyond that, the issues seem less important. Cap weighted or equally weighted or by profit or whatever; anything other than cap weighting means you can regret not getting market returns and blame yourself. A tilt towards home country, or include/exclude emerging markets are less important with no predictable winners, but the broader it is the better the risk adjusted returns according to the current thinking.
A lesser issue is also the index a tracker follows. Creating indices is an industry itself now that people are flocking to index funds, and you can find bits here and there about what makes a better or worse index.

I don’t think ‘active or not’ is only the issue. More, if it’s active, the more active it is the less it will look like ‘the market’, the higher the costs are likely to be, the more you’re dependent on the manager not changing or just changing their style, and how comfortable you are to get below market returns looking for above market returns. The more of us choosing ‘active’, the more the industry collects from us in fees, trading costs, taxes perhaps, turnover buy/sell spreads, and all that money has to come from our investment returns (or we pay for it out of our wages). But what do we get, on aggregate amongst all active investors we can only get market returns. I can’t see the point of handing some market returns, or my wages, over to the financial services industry unnecessarily, but others can hoping they can outdo the market. We’re all different.
If a 100% non-biased market index isn’t risky enough for you, and you’d like to take more risk with an active approach, then consider staying with the non-biased approach but borrow money to leverage your investment.
Others will reply with relevant issues I’ve missed that you can evaluate in the mix.

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Re: Portfolio For 20 year old

#507560

Postby tjh290633 » June 16th, 2022, 9:41 am

If you want low costs, the answer is to be your own fund manager. Not easy with a small portfolio, but you can build up to it gradually. When PEPs began you could only subscribe £2,400 in the first year, £3,000 the next then £6,000 after that. Individual shares at first then they allowed funds in. Percentage fees at first then capped, nowadays fixed at a low value, like £40 per year. You will pay far less than any fund or IT charges, but you do have control.

You do have the problem of choosing what to buy (or sell) but it is not hard to beat the market over the years. My belief is that nominally equal weighting, within limits, is a better way than market weighting, which fund managers have little choice about. Rebalancing, when needed, provides a ratcheting effect on dividend income.

Selection criteria depend on what you are looking for, but diversification between sectors is a priority.

TJH

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Re: Portfolio For 20 year old

#523715

Postby 1nvest » August 19th, 2022, 12:21 pm

tjh290633 wrote:If you want low costs, the answer is to be your own fund manager. Not easy with a small portfolio, but you can build up to it gradually. When PEPs began you could only subscribe £2,400 in the first year, £3,000 the next then £6,000 after that. Individual shares at first then they allowed funds in. Percentage fees at first then capped, nowadays fixed at a low value, like £40 per year. You will pay far less than any fund or IT charges, but you do have control.

You do have the problem of choosing what to buy (or sell) but it is not hard to beat the market over the years. My belief is that nominally equal weighting, within limits, is a better way than market weighting, which fund managers have little choice about. Rebalancing, when needed, provides a ratcheting effect on dividend income.

Selection criteria depend on what you are looking for, but diversification between sectors is a priority.

TJH

Terry's (TJH) and his HYP style is a great coach IMO.

Fundamentally diversify across sectors/stocks in around equal capital value weightings, selecting by value (slightly above average dividend yields - but best to target secure firms that are more inclined to recover sooner or later than dive out of existence). And roll that - looking to reduce those that have done well, price risen and/or dividend yields declined to being at/below average, reducing sectors that have done well, add to those that are lagging (direct toward maintaining equal weightings but in a loose manner).

If for instance each year you were seeing 5% dividends and another 5% from sales (reductions of the better performers where value had been outed) and reinvesting that 10% back into value additions (or top ups), then you might both average-down the average cost of stock over time in addition to seeing top end (growth).

Terry does periodically report yearly best/worst rankings of his holdings and multi-year sometimes see the prior years worst being the next years best and the differences are large. Capturing even a small amount of that effect can compound to significant amounts over time.

Maybe start small, £30K with £10K in each of three sectors/stocks, and over time widening that to more sectors, maybe £90K 9 stocks, then double up on the number of stocks in each sector £180K 18 stocks. Then maybe onto 3 per sector (27 stocks/£270K) and thereafter start increasing the average £ per stock. Along with value rotation type 'trading', redeploying top-sliced gains plus dividends into value, and that can total return compound at a decent rate. Maybe each year just let dividends and savings accumulate and then reduce some of the best gainers to supplement that cash pot amount - and then look where to share that combined cash pot around.

Terry's rules are along the lines of cutting stocks that cut their dividends, reducing stocks that have grown to a capital value of 1.5 times the median of all holdings value by selling down around half of those relative gains (sell enough such that the stocks value is 1.25 times the median stock value) ...etc.

In some ways its very similar to how Warren Buffett operates, he sees his role as asset deployment where after cash has build up through dividends/disposals (reductions) he looks to deploy that cash where there is apparent value at the time. Terry is all-in stock, Buffett however also likes to keep back 10% in cash for if/when the whole market dives, or for the occasional occurrences of where a stock might be selling for 50p on the £1.

When you can work both the top and bottom ends overall rewards can be very good. If stocks broadly gain 10% and you capture that, whilst having traded in a manner where you started with 100 shares but ended a decade with 110 shares through 'trading' (value), then you compound at over a 10% faster rate than the 'average'.

From personal observation Terry's advice to equal weight is very sound IMO. The FT100 stock index for instance has tended to lag due to becoming excessively overweighted into stocks/sectors that have then endured hits, dragging down the whole. Tech stocks pre dot.com bubble bursting, financials pre 2008 financial crisis ..etc. Reduction of such bias to more equal weighting means a lower hit/loss, leaving you more relatively ahead. The FT250 as a benchmark is IMO a better choice, as that catches stocks that are possible value candidates i.e. fallen out of the FT100, ejects those that have performed well into the FT100, and is deep/broad enough that the holdings are comparable to being more equally weighted (no single stock being more than 2.5% of the total portfolio ... type effect, whereas at times the FT100 might hold 10% in single stocks, and several such large stocks in the same sector. The FT250 also holds a broad bunch of Investment Trusts, that adds to overall diversity. In US scale the UK FT250 is small, and also has some value like characteristics, small cap value in the US is suggested as being more volatile (risk) and as such expected to be more rewarding overall.

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Re: Portfolio For 20 year old

#546330

Postby elephanthunt11 » November 13th, 2022, 7:56 pm

I think your fund choice and rationale is good. My suggestion would be to either reduce the weighting of your satellite funds or diversify them slightly.

If it's a battery tech specific fund instead diversify to a general fund which includes battery tech among genomics, robotics, automation etc.

Also pay attention to fees - I'm 30 years old but wouldn't touch anything over .5% AUM despite the potential for future success.

Overall it sounds like you have got your head screwed on for this.

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Re: Portfolio For 20 year old

#546338

Postby moorfield » November 13th, 2022, 8:39 pm

tjh290633 wrote:My inclination would be to just go for one of the global ITs, like FCIT. That's what I have done for my grandchildren with more than acceptable results over 20 years.


+1. agree with TJH here

Keep it simple. Lump as much as you can as often as you can into a global IT, FCIT. I have done the same for my children.

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Re: Portfolio For 20 year old

#546774

Postby TUK020 » November 15th, 2022, 4:07 pm

moorfield wrote:
tjh290633 wrote:My inclination would be to just go for one of the global ITs, like FCIT. That's what I have done for my grandchildren with more than acceptable results over 20 years.


+1. agree with TJH here

Keep it simple. Lump as much as you can as often as you can into a global IT, FCIT. I have done the same for my children.

FCIT does seem like a low risk for the long term core holding

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Re: Portfolio For 20 year old

#546807

Postby tjh290633 » November 15th, 2022, 5:32 pm

TUK020 wrote:+1. agree with TJH here

Keep it simple. Lump as much as you can as often as you can into a global IT, FCIT. I have done the same for my children.

FCIT does seem like a low risk for the long term core holding[/quote]
Of the three ITs which I have used, in terms of TR over different periods, FCIT is ahead of ATST and WTAN.

FCIT 13.87% since June 2003,
ATST 9.88% since April 2004
WTAN 9.10% dince December 2001.

The start dates will have had an effect, In terms of share price so far this year, FCIT is level tonight, ATST is -0.20% and WTAN is -9.33%. That also tells us something.

TJH

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Re: Portfolio For 20 year old

#547981

Postby 1nvest » November 19th, 2022, 3:07 pm

Slow to load for me, but found some interesting threads over on citywire and discussions about FCIT, for example ...

https://moneyforums.citywire.co.uk/yaf_ ... acker.aspx

(among others that a google search such as "fcit citywire" presents).


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