Ben Yearsley: How we can get investment back on the right road

The Analyst

One thing I often get asked is whether I practice what I preach when it comes to investment. Hargreaves Lansdown are often in the press giving an opinion on a particular fund or market, but does that carry through to our own personal portfolios?

Customary investment wisdom dictates that being a young investor (I'm 33) with a long-time horizon, my balanced portfolio should have around 50% in the UK, 10% in the US, 10% in the Europe and very little in areas such as fixed interest. The last two years have shown that conventional strategies aren't always the best.

I have had to change my thinking of what I thought was suitable for my portfolio. For example, in the autumn of 2008, I had a large part of my ISA invested in gilts for the first time. Much of this money has since been recycled into absolute return funds that I see as a core of my portfolio for the long term; they are generally looking to achieve around a 10 per cent return each year, regardless of what happens to the market.

I took a large position in corporate bond funds, something I never thought I would buy. They simply fell in price so much that the potential return was too good to ignore. Admittedly I bought too early and was showing a loss for a long time, but I continued to buy and recently my investments became profitable as the bond market bounced.

The toughest part of any investment is deciding when to sell. I sold part of my bond holdings after making a 10% profit, but corporate bonds still look attractive and I am holding onto the remainder. It remains to be seen how long this opportunity will last and I'm not sure my portfolio will still contain bond funds by the end of 2010.

The profits were reinvested in several ways with Russian, Chinese, and infrastructure funds all getting additional exposure. Emerging markets have the best long-term growth potential, while infrastructure is a more predictable growth story happening in both developed and emerging nations.

I also sold other investments that made good gains since March and started moving the money into areas that have been left behind and now seem good value.

For example I have bought Neil Woodford's Invesco Perpetual UK Equity Pension fund for my SIPP. This fund, which is similar in many ways to his equity income funds, is defensively positioned. This hasn't been ideal over the last three months, but I have confidence in Neil Woodford over the long term.

The last year has shown that pragmatism is needed when investing. It is difficult trying to time an investment at the bottom of the market, therefore I took the view to keep investing sometimes weekly, sometimes monthly in order to average out my purchase prices. I am still following this philosophy with the remaining cash in my ISA and SIPP.

The recent strong market bounce seems to suggest we are over the worst. However, the economy isn't out of the woods yet, so holding different types of fund seems sensible. The same is also true for bonds – you don't want just investment grade or high yield, having both is probably optimal if you're willing to take the greater risks in high yield bonds.

As I said, I continue to invest with Neil Woodford and his "boring" defensive stocks. I also have funds with large banking exposures such as Schroder UK Alpha Plus. When taking the corporate bond and emerging market funds into account, it may sound like I'm being inconsistent. However, I think this diversification is pragmatic and hopefully it will work. Sometimes you need to turn conventional thinking on its head and look at alternative ways of constructing your portfolio.

Ben Yearsley is investment manager at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
    10 best statement lightbulbs

    10 best statement lightbulbs

    Dare to bare with some out-of-the-ordinary illumination
    Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

    Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

    Briton pumped up for dream meeting with world No 1
    Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

    Nick Bollettieri's Wimbledon Files

    It's time for big John Isner to produce the goods to go with his thumping serve
    Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

    Dustin Brown

    Who is the German player that knocked Nadal out of Wimbeldon 2015?
    Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

    Damien Martyn: 'England are fired up again, just like in 2005...'

    Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test