Defensive v sit on cash?

[bitchstewie]

Interested in views on two views I run into when exploring what to do with my S&S ISA.

I'll prefix by saying the money I'm putting in is money I shouldn't need for minimum 10 years and plan on adding to for 10-20 years so I aim to be in this for the long term, and I believe right now I'm very much "accumulating".

One view is to be to have a balanced set of holdings so that in good times one part prospers and in bad times another part hopefully holds up to make up for the losses elsewhere, funds such as Troy Trojan and Ruffer get mentioned a lot and I guess it can be summed up as what's the equity allocation.

The other view is that if you're accumulating don't worry so much about balance, rather just hold back cash as that's your best diversifier because it means you can be "greedy when others are fearful" to borrow a phrase.

[bitchstewie]

Thanks Julian, for the moment I'm foregoing the "asset classes" and rather than try and balance things such as gold and bonds I'm simply keeping cash back and focussing on equities and "style" of investment where I am trying to ensure I have reasonable diversification.

[bitchstewie]

Thank you both, I wouldn't claim to have an investment "style" but I have noticed when playing around with backtesting that the more things you add into the mix suddenly the returns start to look an awful lot like a world tracker so I completely get the point about diluting too much.

I won't be giving it all to Terry Smith but I can just about understand the approach Fundsmith and a couple of similar themed funds take, buy quality companies then do as little as possible, so for now my ongoing intention is to hold three such funds.

I already have a chunk in RCP which is an interesting one, never sure how much it's defence v attack but it is massively diluted so if i feel the need to do so I can add to that.

[bitchstewie]

I think I trust him to know enough, the track record seems to be there pre-Fundsmith.

I don't have all my eggs in the Terry Smith basket, call it smart or cowardice but there's room for similar approaches to dilute the fund manager should he go a bit nuts after a heavy lunch

[bitchstewie]

Good watch (as are all the Fundsmith videos) https://youtu.be/Un9e5T0pxNI

[bitchstewie]

Testaburger said:

Good points, which I'll try to do some learning with.

My understanding, and I speak as a total novice, is that much of the FS portfolio is comprised of defensive stocks (Unilever and the like) which generally generate revenues in down markets too. Granted, a fair percentage is now in tech - presumably because it was a small share but has outperformed and the fund hasn't been rebalanced.

Of course, FS in its current form hasn't been around in a down market, so nobody has seen his approach or results in such an environment.

I'd like to gain more knowledge on the subject, but quite honestly, I know that there is nigh-on zero chance of outperforming an established manager with a good record..

I listen to a lot of Terry Smith stuff as I try to expand my own knowledge.

You're right nobody knows how Fundsmith and similar will perform in a bear market but I think the basic logic is people will keep on cleaning their teeth whilst you might choose to run your car for another year or not buy that shiny new Samsung TV you want.

In Terry's case (like I said I have some held there but only an allocation) he has been around the block, there's a good video on Youtube around the Tullet Prebon pension fund - I think some people (HL?) make it sound as if he just woke up one day aged 60 and setup Fundsmith