Ben Yearsley: How we can get investment back on the right road
Saturday 01 August 2009
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; request a free guide on NISAs from Hargreaves Lansdown
New essay by JK Rowling went live on Pottermore site on Friday
Top Gear presenter is no stranger to foot-in-mouth controversy
New UK station Russia Today gives a very bizarre view of Britain
10 tips for taking out a personal loan
Santander's new current account is not quite as easy as 1, 2, 3
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
The 10 Best money-saving sites
Simon Read: Payday loans that are marketed at kids? Why not? They're already brainwashed into wanting products
- 1 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 2 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 3 Top Gear presenter Jeremy Clarkson criticised for beer tweet
- 4 Woman blinded as a child can see again after hitting her head on a coffee table
- 5 The bubble bursts for Sodastream
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...
Day In a Page
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000