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Growth for the next decade...

General discussions about growth strategies which focus primarily on investing for capital growth
morefoolthanlemon
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Growth for the next decade...

#434675

Postby morefoolthanlemon » August 14th, 2021, 1:48 am

As the title suggests looking everyones thoughts, critiques and advice on maximum capital growth in the next decade and beyond. Fairly new to investing so please excuse some youthful naivety. To assist everyone a little bit about me - i'm in my 20s, UK based investor, current value of stocks and share ISA £60,000, no requirement to touch this money aiming to leave it at least 15+ years likely significantly longer, planning to contribute £1667 a month to maximise yearly ISA contibutions and also help to drip feed money in. Prepared to tolerate signficiant levels of risk and volaitily in the hope of maximising end value and in light of this have choosen to go with 100% equities at present this will likely be reviewed at a latter stage. All monetary funds will be held within stocks and shares ISA on Hargreaves Lansdown platform, with the platform fee 0.45% (capped at £45) for UK and overseas shares, investment trusts, exchange-traded funds, VCTs, gilts and bonds. Significantly higher platform fees for holding mutual funds so will not be holding any.

Planing to hold investment trusts with primary focus of capital growth with background of consistent performance and outperformance against there relative benchmark. Despite research I have read regarding the benefit of passive funds and liklihood of actively managed assets not to outperform the relevant index the allure of outperforming has proved too strong. With that in mind I have tried to keep shortlisted investment trusts ongoing charge to a minimum.

The target aim is thus of: - maximising capital growth with acceptance of high levels of risk and volatility
- drip feeding money monthly to maximise yearly ISA allowance
- holding equities for a minimum of 15 years

Inital shortlist I have compiled:
- SMT Scottish Mortgage: Annual Charge 0.34%, Annual Dividend 0.25%
- Pacific horizon investment trust, Annual Charge 0.92%, Annual Dividend 0.03%
- Bailie Gifford US Growth Trust Annual Charge 0.75%, Annual Dividend N/A
- JP Morgan Emerging Market Trust – Annual charge 0.9%, Annual dividend 1.09%
- Oryx International growth - Annual charge 1.6%, Annual dividend N/A
- Standard life Uk smaller companies - Annual charge 0.88%, Bi-annual Dividend 1.2%

First 5 are trustnet 5 star investment trusts, standard life 4 - I have to be honest while writing this there appears to be selection bias towards investment trusts who have done well particularly recently rather than maybe trusts for the next 10 years. Anyway all thoughts appreciated.

Annual charge = £45 platform fee + based on the assumption of equal division of funds between investment trusts - £10000 per trust initially - 0.89%

Anyway thats my inital musings all criticisim, advice and thoughts are much appreciated!

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Re: Growth for the next decade...

#434678

Postby 1nvest » August 14th, 2021, 3:23 am

In your 20's and you may have 50 years of investment time ahead of you, maybe more. If investment rewards are 8% but after fund fees you pocket 7.11% then you're taking on 100% of the risk for 66% of the reward.

1.0711^50 / 1.08^50 = 0.66

In addition to that yet other hidden/obscure costs likely are involved, on average countries levy a 20% dividend withholding tax for instance, so if 2% of the reward are via dividends, a further 0.4% reduction, reducing it down to you taking on 100% of the risk for 55% of the reward. Then there's the taxman who'll want a cut, your broker, the market maker etc. Saving into a ISA is obviously one step in the right direction at minimising costs/expenses. Some costs to do business are only to be expected, Some charging 1.6% perhaps on the pre-text that they'll alpha-add that and maybe more is far from assured and either way they still get their cut. It's little things like that that see the financial sector as the worlds richest sector, with high salaries and expensive buildings etc.

Itsallaguess
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Re: Growth for the next decade...

#434684

Postby Itsallaguess » August 14th, 2021, 7:09 am

morefoolthanlemon wrote:
Anyway that's my initial musings all criticism, advice and thoughts are much appreciated!


You'll get some great advice here, but I just wanted to say well done on seeing this type of long-term investment opportunity so early on in your life.

With a 50-year investment horizon, time itself will do much of the heavy lifting for you, so it seems like you're putting yourself into a fantastic position - well done.

Don't forget to treat yourself a bit as well though...

Cheers,

Itsallaguess

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Re: Growth for the next decade...

#434700

Postby xeny » August 14th, 2021, 9:42 am

morefoolthanlemon wrote:- Oryx International growth - Annual charge 1.6%, Annual dividend N/A


Saying you don't intend to hold funds. due to the higher fee they attract on HL, and then listing a 1.6% fee IT seems irrational.

If you're prepared to consider paying 1.6% in fees, surely you should be prepared to pay ~ 1% in fund fees and .45% HL fees and consider funds? FS and Bluewhale on that logic would sit on your shortlist as the obvious examples.

Personally I'd be looking to move away from a % fee broker for the size of portfolio you're looking to end up with, or evaluate accumulating on a % fee platform and periodically do transfers to a fixed fee platform.

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Re: Growth for the next decade...

#434714

Postby Midsmartin » August 14th, 2021, 11:07 am

If you want to hold funds, interactive investor charge a flat fee of a tenner a month, and that's it. Showing that HL fees are a rip off.

I reckon that a simple world tracker etf, such as SWDA is cheap and has performed very well. Historically it's been good because "world" had been heavily weighted towards the USA, which could change. Who knows.

Investment trusts like Bankers, Monks have also done well historically.

In recent years I've also been buying holdings in shares tipped by Small Company Sharewatch, and the investment in the subscription has payed off well so far.

morefoolthanlemon
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Re: Growth for the next decade...

#434720

Postby morefoolthanlemon » August 14th, 2021, 11:24 am

Thanks for all the replies so far!

Saying you don't intend to hold funds. due to the higher fee they attract on HL, and then listing a 1.6% fee IT seems irrational.

Very valid point and thats an oversight on my behalf. Exclusion of oryx (annual charge quoted as 1.6%) reduces annual average charge from 0.89% to 0.75% with the yearly platform fee for such a constellation of investment trusts only £45 per year which seems reasonable.

Showing that HL fees are a rip off
This is the reason I had been trying to avoid selection of mutual funds as for example FS annual charge 0.96% with platform fee works out at 1.41% which as you have rightly said significantly more expensive than other platforms. Whereas £45 total yearly cost for investment trusts/shares seems more reasonable.

In recent years I've also been buying holdings in shares tipped by Small Company Sharewatch, and the investment in the subscription has payed off well so far.
Would be interested in maybe adding a few suitable holdings to the portfolio for a longtime alongside a core group of investment trusts. Have you found it beneficial to your returns/ had much success?

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Re: Growth for the next decade...

#434722

Postby Dod101 » August 14th, 2021, 11:37 am

In place of Oryx I would put a big generalist like Alliance or F & C. I am personally not very keen on specialist ITs, say smaller companies, or which confine themselves to specific geographic areas. I think a broader mandate tends to work out better, although not always of course, but it gives the managers more scope. Something like RIT or Caledonia could be added later.

Whilst a £45 fee with HL is perfectly good, you are restricting yourself to having no funds, not that that bothers me but if you use say Interactive Investor for instance the charges are modest whatever you hold. You are likely as time goes by to increase the number of holdings and probably the type of holdings so it would be good to give yourself maximum flexibility from the start. However you need not be too ambitious to start with but get some experience for the next couple of years or so and take it from there.

Whatever you do good luck and great to start at an early age.

Dod

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Re: Growth for the next decade...

#434734

Postby mc2fool » August 14th, 2021, 12:23 pm

morefoolthanlemon wrote:
Showing that HL fees are a rip off
This is the reason I had been trying to avoid selection of mutual funds as for example FS annual charge 0.96% with platform fee works out at 1.41% which as you have rightly said significantly more expensive than other platforms. Whereas £45 total yearly cost for investment trusts/shares seems more reasonable.

As far as fees go IWeb is the best deal around with no annual or regular charges at all, and that includes for holding shares, ITs, ETFs and funds. They do currently have a £100 account opening fee (one fee covers both a share dealing a/c and an ISA), which you'll "make back" in just over 2 years compared to your HL cost. At £5 a trade IWeb is also cheaper for buying and selling, although the fiver also applied to funds trades, which with HL is free.

IWeb also has the advantage of being part of the Lloyds banking group, and is operated by Halifax Share Dealing. The downside over HL is that they don't do any "sophisticated investor" type investments (warrants, traded ETPs, etc), but as long as you're sticking to common or garden shares, ITs, ETFs and funds they're fine.

https://www.iweb-sharedealing.co.uk/our-accounts.html

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Re: Growth for the next decade...

#434755

Postby Aminatidi » August 14th, 2021, 1:35 pm

Nothing wrong with limiting yourself to IT's but doing so just because of platform fees is perhaps letting the tail wag the dog.

15 years is a long time and I can't think of anything today that I'd be confident of investing in for 15 years so I would definitely be thinking how "hands on" you want to be.

On the actual trusts two observations are (assuming equal amounts initially) 50% in Baillie Gifford which might be a concern (I have 40% with Fundsmith/Smithson so I'm not saying that's wrong just something to consider).

Also Oryx is pretty much run by Chris Mills I thought and politely how likely it he to be managing it for another 15 years? Again might not be an issue but with ITs you have premiums/discounts which can move on sentiment.

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Re: Growth for the next decade...

#434778

Postby tjh290633 » August 14th, 2021, 4:42 pm

I think that you are on the right lines. As others have said, H-L can be pricey if you indulge in funds.

You have made your choice of ITs, but bear in mind that the return they give is after fees. If that is better than low fee alternatives, then you are winning regardless.

If you want to diversify further, or replace a poor performer, then perhaps a commodity oriented IT or a REIT might be worth thinking about. Commodity funds have tended to be cyclical and often detached from the performance of the market as a whole. I have had a commodity fund since 1970, originally Ebor Commodity but after several changes now JP Morgan Natural Resources. It has returned 11.6% over the years and I have taken cash out on 4 occasions. I have been making monthly payments since 1978, increasing the amount as time goes by. Maybe the Blackrock IT would be worth considering.

REITs come in various flavours, if you compare BLND, SGRO, PHP and DIGS, for example. Always worth thinking about.

I wish you well.

TJH

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Re: Growth for the next decade...

#434795

Postby Dod101 » August 14th, 2021, 6:43 pm

tjh290633 wrote:I think that you are on the right lines. As others have said, H-L can be pricey if you indulge in funds.

You have made your choice of ITs, but bear in mind that the return they give is after fees. If that is better than low fee alternatives, then you are winning regardless.

If you want to diversify further, or replace a poor performer, then perhaps a commodity oriented IT or a REIT might be worth thinking about. Commodity funds have tended to be cyclical and often detached from the performance of the market as a whole. I have had a commodity fund since 1970, originally Ebor Commodity but after several changes now JP Morgan Natural Resources. It has returned 11.6% over the years and I have taken cash out on 4 occasions. I have been making monthly payments since 1978, increasing the amount as time goes by. Maybe the Blackrock IT would be worth considering.

REITs come in various flavours, if you compare BLND, SGRO, PHP and DIGS, for example. Always worth thinking about.

I wish you well.

TJH


But REITs are still a single share. We should not over complicate the issue. I would urge the OP to leave REITs to one side at this stage.

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Re: Growth for the next decade...

#434807

Postby morefoolthanlemon » August 14th, 2021, 7:34 pm

H-L can be pricey if you indulge in funds

Nothing wrong with limiting yourself to IT's but doing so just because of platform fees is perhaps letting the tail wag the dog.

Interactive Investor for instance the charges are modest whatever you hold. You are likely as time goes by to increase the number of holdings and probably the type of holdings so it would be good to give yourself maximum flexibility from the start.


These have all been accurate comments and to be truthful I maybe should have given greater consideration to the impact of platform fees. I have had a good look through all options and particularly like Interactive Investor with a bonus £100 cashback running at the moment for ISA transfers. With the regular investing option it should work out significantly cheaper than HL so thanks to all who have contributed with regards to this.

On selection of investment holdings I've aimed for more investment trusts, initally due to HL fee structure (now resolved if using interactive investor) and through investment trusts tending to outperform their open ended counterparts over the longterm. From the inital list Oryx has been removed, several underpinning reasons - annual charge considerably higher than others and as rightly pointed out potential contingency issues down the line.
Oryx is pretty much run by Chris Mills I thought and politely how likely it he to be managing it for another 15 years
Saying you don't intend to hold funds. due to the higher fee they attract on HL, and then listing a 1.6% fee IT seems irrational.


Which leaves
- SMT Scottish Mortgage: Annual Charge 0.34%, Annual Dividend 0.25%
- Pacific horizon investment trust, Annual Charge 0.92%, Annual Dividend 0.03%
- Bailie Gifford US Growth Trust Annual Charge 0.75%, Annual Dividend N/A
- JP Morgan Emerging Market Trust – Annual charge 0.9%, Annual dividend 1.09%
- Standard life Uk smaller companies - Annual charge 0.88%, Bi-annual Dividend 1.2%

Maybe the Blackrock IT would be worth considering.

On the actual trusts two observations are (assuming equal amounts initially) 50% in Baillie Gifford which might be a concern (I have 40% with Fundsmith/Smithson so I'm not saying that's wrong just something to consider).
FS and Bluewhale on that logic would sit on your shortlist as the obvious examples.


With interactive investor opening up options I think Fundsmith is a worthwhile addition with proven track record.
- Fundsmith Equity Annual charge 1.06%, Bi-annual Dividend 1.35%

At the moment I don't see Bailie Gifford as an issue, however as time goes on I think it will mostly likely be wise to avoid such concentration but currently in style and in favour. Diversification could also be added upon with Blackrock world mining trust Annual charge 0.99%, Annual Dividend 3.31%

As always thanks for everyones input

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Re: Growth for the next decade...

#435213

Postby Hariseldon58 » August 16th, 2021, 7:29 pm

It’s a learning process, I did something similar in 1989/90 and it let me me retire at 49 in 2007. Investment trusts did it for me and since then I have added passive ETFs/Funds

Interactive Investor are good and it works out a bit cheaper than HL and you can use funds if you wish. HL is good provided its not funds.

The temptation is to change horses too frequently….

The fund ratings tell you little about the future.

I would add a mini passive portfolio onto the list for regular savings but keep it forever, its a great benchmark.
My preference would be;
VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%
Blended costs ,14% all accumulation class

The thought you can do better is almost inevitable, but if you had this All World passive combo then it’s a real comparison. You can replace Developed World and Emerging Markets by the combo VWRP @.22%

When I was in the pre early retirement stage I held Foreign and Colonial Investment Trust in the same role as a benchmark and whilst I did beat it over the years it was never worth the effort but I enjoyed the game !!!

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Re: Growth for the next decade...

#435249

Postby morefoolthanlemon » August 16th, 2021, 11:55 pm

It’s a learning process, I did something similar in 1989/90 and it let me me retire at 49 in 2007.

That's the plan, something consistent to stick to over the years and hopefully let the money do most of the hard work.

VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%
Blended costs ,14% all accumulation class


Really like this idea, as you have said the overwhelming temptation is to think you can do better than the benchmark but by incorporating that into the portfolio would really put things into perspective. I will make a similar post to this in the passive investing section with regards to a diversified passive growth portfolio in comparison to an investment trust one. Will post a link for anyone interested once created.

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Re: Growth for the next decade...

#435261

Postby GeoffF100 » August 17th, 2021, 7:24 am

Hariseldon58 wrote:My preference would be;
VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%

The MSCI World Small Cap index is not small cap by FTSE standards. It will mostly be duplicating shares that you already have in the other funds. The may be OK if you just want to overweight the smaller large caps and the larger medium caps though.

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Re: Growth for the next decade...

#435471

Postby Hariseldon58 » August 17th, 2021, 6:13 pm

GeoffF100 wrote:
Hariseldon58 wrote:My preference would be;
VHVG Vanguard Developed World 85%
VFEG Vanguard Emerging markets 10%
WLDS iShares MSCI World Small Cap 5%

The MSCI World Small Cap index is not small cap by FTSE standards. It will mostly be duplicating shares that you already have in the other funds. The may be OK if you just want to overweight the smaller large caps and the larger medium caps though.


There is some duplication but not very much, I split Developed World into S&P500, Vanguards Europe ex UK, FTSE, Japan and Asia Pacific ex Japan and then I downloaded the constituents and analysed the contents.

A little tedious but quite interesting, there are some anomalies. In addition I analysed the proportionate holdings ( I threw in S&P400,S&P600 and FT250 , Developed World, All World and Vanguards Emerging Markets for good measure) The anomalies are interesting but not relevant to this thread and the overlap is about 20% of the small cap ETF with Developed World , the blend is going to cover virtually the whole world at low cost and it’s simple.

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Re: Growth for the next decade...

#436344

Postby LooseCannon101 » August 20th, 2021, 8:17 pm

Growth need not mean so-called growth trusts. Total return is what matters and as others have said this might be from any corner of the world.

If you are going to be a long-term, buy and hold investor, I would recommend more generalist trusts like F&C, Alliance and Witan. Dividend re-investment and compounding over time will turn your £60k into about £2m in 40-45 years assuming 8-9% average annual returns.

Doing absolutely nothing works wonders! How do you know what will be the winning trusts of the future? These trusts have been around a long time and with prudent management should be around for many decades to come.

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Re: Growth for the next decade...

#436665

Postby alphab1 » August 22nd, 2021, 4:00 pm

Being interested in Growth Stocks - not dividend incomes - I found a recent article in SippDeal's Share magazine giving lists of best performing FTSE
250 firms (as it calls them) over three, five and ten years. I was also previously interested in SMT (Scottish Mortgage), USA (Baillie Gifford) and OIG (Oryx). Here I have tabulated the performance (%) over 3 months, 1 year, 3 year (annualized) and 5 year (annualized) of some of these stocks:

Period  3 mths  1 year   3 yrs    5 yrs 
SMT 17.5 - 48.9 - 36.1 - 35.0
USA 18.7 - 50.0 - 38.0 - ***
OIG 28.7 - 89.7 - 32.2 - 25.7
FUTR 33.6 - 166.0 - 113.5 - 102.7
RCH 65.6 - 672.3 - 79.3 - 32.1
GAW 4.0 - 36.6 - 53.6 - 87.7
LIO 46.0 - 81.7 - 54.7 - 49.3
KNOS 35.0 - 72.9 - 75.5 - 63.3

(*** new Trust, less than 5 years old)

FUTR, RCH and LIO stand out followed by KNOS with OIG perhaps doing well recently. It is of course difficult to quantify the rank but SMT and USA (dependent far too much on US technology stocks) are not doing all that well.

Any comments?

Cheers
Moderator Message:
Tidied your table up a bit and added headers.

TJH

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Re: Growth for the next decade...

#436871

Postby alphab1 » August 23rd, 2021, 4:14 pm

Thanks TJH. More readable now.

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Re: Growth for the next decade...

#436904

Postby 1nvest » August 23rd, 2021, 6:36 pm

Back in my 20's (now early 60's/retired) and I went for a home first. A small maisonette bought when interest rates were massively high, up at 15%+ some years. Contributed to a occupational pension and paid in National Insurance contributions so also a state pension come age 67. Owning avoids having to find/pay rent to others. Now retired, not having to find/pay rent to others is a considerable comfort and the house value might serve as late life care home fees cover so less worries there also.

Stocks and bonds have had a great run since those high interest rate years, seeing progressive interest rate declines bolstered stock and bond rewards. Even cash deposits have rewarded real (after inflation) gains. Going forward 15+ years, who knows, that rising tide effect is unlikely to repeat excepting perhaps if high inflation/interest rates spike up sharply to then repeat a prolonged decline. If a spike does occur then that can devastate stock/bonds (but such declines can be great for younger accumulators).

Investing is typically/maybe 30 years of accumulating, maybe another 30 years in drawdown/retirement. Over my accumulation and retirement decades this is the sort of motions that have occurred (FTAS = FT All Share, PO = price only, TR = total return i.e. with dividends reinvested)

Image

Image

I actually started work age 16 in 1976, buying Gilts (via the Post Office) with spare cash. Later and most of my cash went into the home (mortgage payments). Only in later years were stocks bought/added.

100% anything is a concentration risk and the 1980 through 1990's period isn't the best example case of what stocks (and/or bonds) might return outside of those great decades. Diversification and periodic rebalancing will tend to see the average more closely aligning with the best asset, not as good, but not that distant either. And what turns out to be the best asset(s) over a 15+ year period can often surprise.

It can be easy to fall into illusional traps. When I first started accumulating stocks the likes of the FT30 were the rage. Subsequently other indexes took over to be the 'guide to historic average stock' rewards, that were better than the FT30. Taxes and costs also ate a lot more into returns. IIRC my broker used to charge £100/trade back then, and taxes for even basic rate taxpayers were relatively high. Keep in mind that the financial sector is the world largest and richest sector and they're well adapt at promoting their products and extracting 'value' that facilitates them being paid high wages and working out of expensive buildings/locations.

Not sure how I'd start if 20 again in the present day. I suspect my parents would be more affluent than my parents were and would likely help me in a substantial way to secure my own home. I guess stock heavy with many decades of accumulation ahead could work out well. However in the absence of a own-home and maybe a later desire to buy such, all-stock could see the timing of more affordable house prices coinciding with declines in stock values.


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