Balanced portfolio

[RLve]

Recent talk of recession in the UK and diminishing returns and increased risk in emerging markets has cast doubt on the distribution of my current investments. Here's my current exposure - Comments / constructive advice would be most welcome.

Edited by RLve on Wednesday 15th August 22:33

[ellroy]

If that’s all equities it’s not what most professionals would call balanced.

You need uncorrellated assets to dampen down the risk.

How much, where etc? That’s risk, timescale, taxation, objective and perspective based.

[RLve]

1/3 equities. The rest in cash (premium bonds, NS&I isa and cash at hand). A proportion of the cash will be invested or used to pay off a chunk of the mortgage later this year - we haven't decided yet as it's nice to have that 'cushion' but the returns on cash are close to nil.

Edited by RLve on Wednesday 15th August 22:33

[Jon39]

RLve said:

Recent talk of recession in the UK and diminishing returns and increased risk in emerging markets has cast doubt on the edistribution of my current investments. Here's my current exposure - Comments / constructive advise would be most welcome.

As you show precise percentages for each continent, then presumably you might be holding funds having shareholdings within those continents.

Most of the giant UK FTSE100 companies transact business around the world, some in more than 150 countries, so they provide quite a spread of geographic and currency risk.

Several of them do their accounting in US$, so whenever the British Pound reduces in value against the Dollar, your dividend income will increase, even though there might be no increase in the dividend amount. Those circumstances will of course also increase their profits, in Sterling terms.
We do need to remember though, that it works the other way around too

Holdings in the big FTSE 100 companies do not create a balanced portfolio, but I only mention them because some people appear to believe, you have to invest in foreign countries to obtain exposure to those markets.

Edited by Jon39 on Wednesday 15th August 10:01

[ellroy]

RLve said:

1/3 equities. The rest in cash (premium bonds, NS&I isa and cash at hand). A proportion of the cash will be invested or used to pay off a chunk of the mortgage later this year - we haven't decided yet as it's nice to have that 'cushion' but the returns on cash is close to nil.

Paying off debt is a very effective way of getting a 'guaranteed' risk free return ahead of inflation given the costs of borrowing. In 99% of cases that's a very sensible starting point.

I'd still say that if you look at the overall position you've still not got balance in the professional sense, Bonds(Various-but expensive currently), Property (commercial-liquidity issues), Commodities (too many to mention), Alternatives (such as Hedge Funds, Private Equity, Infrastructure etc) all have their place in giving 'balance', whatever your risk budget, timescale and tax position.

[williaa68]

Premium bonds and Ns&i are certainly valid investments but with returns around 1%, you could double that on a 1 year bond with some of the challenger banks and, assuming it is 85k or less or you spread it around still be basically risk free.

[anonymous-user]

30% Far East
12% North America
4% Developed Europe

Absolutely crazy IMO, but each to their own.

[RLve]

@ rockin - as my initial post I'm considering whether I'm too exposed in emerging markets. Could you elaborate?

[Rovinghawk]

You show geographical spread but not type of investment. If all of your worldwide investments were eg in toothbrush manufacturers then you're not diverse/balanced regardless of their location.

Think about type of business rather than just location.

[RLve]

Thanks RH. Here's a breakdown by sector. I'm underweight on commodities maybe, probably because I got stung in the past, but overall not a bad spread?

[btdk5]

With that weighting of equities its such a low risk portfolio I'm not sure what you're expecting to get out of it??

[RLve]

The weighting in equities will increase when we use some of the cash to reduce the mortgage and maybe invest more in funds.

As you can probably tell I'm an amateur when it come to investments. I've had some success over the years but possibly more by luck than management.

I'm 15-20 years from retirement and other than university fees for our 7 year old am not intending to cash in anytime soon so do not have to be too risk averse...

[anonymous-user]

RLve said:

@ rockin - as my initial post I'm considering whether I'm too exposed in emerging markets. Could you elaborate?

Yes, you’re heavy in the Far East but more importantly you’re virtually ignoring Germany and other major European economies. And to my eye pretty light in North America as well. But these choices are always a personal thing.