Monday, 12 November 2018

Mini Market Melt-Down

There’s a been a bit of tinkering since October’s mini-meltdown. In summary:

  • Taking advantage of the rare reduction in premium to add to Scottish Mortgage Trust (SMT)
  • Selling some of the individual European stocks to buy the Ashoka India Trust (AIT)
  • Selling all of my holding in Fundsmith’s Emerging Market Trust (FEET) and the iShares European Property Yield ETF (IPRP)
  • Adding to HSBC’s FTSE 250 tracker, buying Baillie Gifford’s UK Growth Fund (BGUK), and adding to the Vanguard Small Cap Index Fund

I sold my holding in FEET as it has been a disappointing investment, which when coupled with its incredibly high fees means it had to go. I appreciate past performance is no guide blah blah blah but the trust would have to outperform exceptionally from this point to make it worth the cost of ownership.

Buying AIT is based on long-term faith in India and the fact that this trust has a performance fee model, which I prefer to the alternative.

Overall the changes give me another incremental move to lower fees, and shift a few % of the portfolio from income to growth, hoping that there will be moves in the coming 12 months to make-up for the recent sharp falls.

I’m keeping faith in the UK on the basis that a Brexit deal will be done, and that the people and business community of this country will do what they do well and to the best of their ability in-spite of the worst efforts of the self-serving duplicitous politicians that we are unfortunate enough to have, both in Government and opposition.

Wednesday, 3 October 2018

Another Index Fund

Continuing the process of moving gradually away from managed to index funds I've swapped my holding of First State Global Infrastructure for the iShares Pacific ex-Japan fund.

This gives me an OCF (Ongoing Charges Figure) saving of about 0.6% a year. In real terms, based on the size of the holding that's a difference of about £3,500 over 10 years, assuming 5% annual growth.

It's not just about the charges though. I'm finding that in making my own decisions it's easier to work with fewer variables, which means not holding so many specialist funds. These are ones that can seem so attractive because it's easy to understand what they do e.g. mining, agriculture or biotech.

Instead, I'm more interested in looking at the geographical balance of my portfolio, and in these terms it's a move that adds weight to Australia/developed Asia at the expense of North America/developed Europe.

The Rural Investor

Thursday, 13 September 2018

Summer Review

We spent the Summer meandering through selected parts of Europe in our campervan. The constant outdoor activity of an August camping trip provided an enforced but welcome escape from the regular feed of news and information and was a great chance to reflect on life and priorities.

Also having time away from a computer and TV finally gave me time to get to grips with my new Olympus PEN-F camera. It's a wonderfully stylish piece of retro design, that lets me do clever things with colour, without having to suffer the trauma of learning PhotoShop!

Anyway, this is an investment blog, so back to the subject. Driving through France, Italy, Austria, Germany, Belgium and Holland I was looking around and hoping to maybe gather real-world insights that would help me to make better investment decisions.

I noticed the Germans and Austrians are spending more than the value of a few HS2s on motorways, bridges and tunnels, and just like us when we build infrastructure over here they use German machinery. I noticed again that Italy is two countries (a rich one and a poor one), that rural France is barely awake, that Belgium can match us for potholes and that Holland is unbelievably cycling friendly.

These observations are nothing new, however, but they do give me comfort that the economic engine of the Eurozone is keeping its foot on the investment pedal.

It also made me wish that the UK could take a more decisive approach to develop infrastructure, with less talking, fewer endlessly time-consuming reports and studies and more digging.

The Germans and Austrians wouldn't put up with terrible road and rail links between two of their major cities, as is the case with Manchester and Sheffield for example; they'd have got to work years ago and dug a very long tunnel.

Behaving as equities have done since the beginning of time my investments went up and then came down again to finish the Summer where they started. The graph was a striking virtual copy of the real mountains I'd been exploring.

Looking to the future I have decided to move my daughter's Junior ISA to another provider (more on that in another post), and I have just noticed three quite interesting new investment trust launches that will take place over the next month or so - Mobius Investment Trust, AVI Japan Opportunity and Smithson. I am having to repeat to myself over and over again "do not invest at IPO stage, do not invest at IPO stage, do not invest at IPO stage."

History tells me (or rather shouts at me) to sit on my mouse hand when tempted to subscribe to an  Investment Trust IPO as if I'm patient I'll almost certainly be able to buy-in later at a discount.

The Rural Investor

Tuesday, 17 July 2018

12 Month Performance

I've done some light analysis of my investment performance over the last 12 months, looking specifically at my personal return i.e. taking account of what I've bought and sold over the year, rather than just looking back at the current holdings' returns over the previous 12 months.

My own share selections are doing well against my chosen benchmark (Morningstar's Global Flex-Cap Equity), 14.2% vs. 7.5%.

The collection of Investment Trusts and ETFs are doing well too at 10.4%, but the funds are lagging at 6%. There was a large holding in Woodford's Equity Income Fund, now sold. With that and some other changes, I'm confident my funds will do better now.

Unfortunately, the funds are the largest proportion of my holdings. Such a such a large part that my weighted average return is a shade under 7%, so lagging the benchmark a bit. Grrrr.

There's an easy solution to this underperformance - I could choose a different benchmark. Let's say I go for UK Large-Cap Growth Equity at 6% over the last 12 months. Hooray, I'm ahead!

Actually no, I won't do that. I would only be cheating myself, as teachers used to say to me.

The Rural Investor

Wednesday, 27 June 2018

The Shares I Own

Here's a dull but comprehensive list of all the individual shares I currently own. There are quite a few as I only sell when there's a really good reason, for example when Tesla was close to 400 and it just seemed too high to last.  There's a mixture of growth, income and speculative bets, including a few that would be called 'special situations'.

UK Listed
US Listed
De la Rue
United Continental
Walt Disney
First Group
Continental Europe Listed
Novo Nordisk
Rolls Royce
Sports Direct
Stobart Group
Thomas Cook
Ultra Electronics

Thursday, 17 May 2018

How to Choose a Fund

Fund supermarkets or platforms offer a valuable, comprehensive and low-cost service to retail investors.

However, using the fund information provided by the platforms is not always the best way to select funds for your portfolio.

Yesterday, as a test, I looked at a fund supermarket, picked a random managed sector, and selected ten funds at random. Their fund information all showed essentially the same chart!

In fact, pretty much every fund I chose has a sales patter that says their product is a skillfully managed ultra-sophisticated benchmark-beating machine. The sales information for all of them has graphs where there's a line that is above another line. Guess which line represents the fund, and which one the benchmark?

In the early days of my independent investment career, using charts like this gave me FOMO (fear of missing out), so I bought a lot of funds. I wanted to own all these great products managed by brilliant people who could make me rich.

Eventually, I realised that by buying so many varied products I was now the proud owner of a very expensive world tracker.

So, I now treat a fund supermarket like a real shop - I prefer to know exactly what I want before I go in. I use other sources of research (Morningstar, general financial press, my own experience, etc.), and compare different funds and benchmarks together.

I have a very clear idea of the geographical split I want and if I can't find managers in whom I have the confidence to beat my benchmark then I go for a cheap tracker.

Where I do have managed funds they are now with a limited range of individual managers who have a style I like (I read what they write, watch what they record, see how invested they are in their funds and look at their portfolios and activities). Alex Wright, Nick Train and Terry Smith are three examples of rock-star managers whose funds I hold.

Having fewer funds and a small range of managers to assess means that I don't fall into the trap of merely looking backwards, I can make a judgement about how well the funds are positioned to preserve and grow my wealth in the future.

To conclude, fund supermarkets offer great benefits to private investors, but they offer a huge choice and it's easy for the client to confuse sales information with impartial facts. So I do plenty of research of my own and know what I want before I log-in to make a new investment.

The Rural Investor

Thursday, 10 May 2018

Focus on Costs

If I could give one bit of advice to myself as a novice investor 20-25 years ago it would be to take costs seriously. I remember thinking "1%, that's OK" when looking at an early PEP (now ISA) that I opened.

A rough calculation tells me that all the avoidable charges I've paid over the years would compound up to the value of a very fancy car, something red and Italian. That's platform percentages, wealth management costs and IFA commissions.

I really became aware of this issue when I started using a discretionary wealth manager for a large proportion of my assets. They sold me on the skill and personal attention that would be given to my portfolio in return for 1% a year and then proceeded to charge way more than that. They invested the money mainly in c.£5K chunks charging £90 commission a time (i.e.£180 for a sale and purchase) and churned regularly. They would even buy tracking ETFs for my portfolio, so I was paying £90 plus 1.15% a year for something I could have bought for £10 plus 0.15% a year.

The moment of clarity came when after a presentation from a small telecoms company my wealth manager bought over £10K worth of their shares for me. Soon after the shares halved, so the manager doubled-down, as 'the investment case has not altered'. Soon after this, the company failed.

I was existing in a state of cognitive dissonance, telling myself they knew what they were doing, justifying my original decision, but after this large capital loss I admitted what was really happening and withdrew my assets (incurring huge dealing fees). It was at this point that I started trusting my own decision-making ability above that of paid experts.

I chose a platform charging 0.3% a year, which seemed really low. The portfolio did well, and I was a happy investor.

But a couple of years ago when the value of the investments had grown through appreciation and new contributions I took another look at the costs and realised I could make large additional savings (several thousand pounds a year) just by moving to a fixed fee platform - so that's what I've done.

But what about people who don't have any knowledge or expertise about investing, shouldn't they trust experts?

If I was qualified to advise (I'm not) I would say this - pay a qualified adviser on a fee basis to get your asset allocation and risk appetite agreed, and then invest in the cheapest Vanguard (or similar) product that gives you the allocation and level of risk you need. Choose either a percentage charge or fixed fee platform, depending on the value of your assets and your withdrawal plans.

I would suggest that most people need to look no further than Vanguard's own platform and their LifeStrategy or Target Retirement products until they find their feet and start looking at other trackers, investment trusts, funds and possibly individual shares.

The Rural Investor

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Mini Market Melt-Down

There’s a been a bit of tinkering since October’s mini-meltdown. In summary: Taking advantage of the rare reduction in premium to add to...