Proposed Changes to your Portfolio:
Our Reeves Confidence Barometer, a major factor in our tactical asset allocation, remains negative.
This means that we believe a fall in the world's equity markets to be more likely than a rise over the coming months.
Impact on portfolio
We remain satisfied that the make-up of our current portfolio is appropriate for this eventuality, so no major changes are required to our present asset allocations.
Our positions of higher levels of cash, property and gold mean that our exposure to equities is lower across all risk profiles than comparable portfolios.
Higher risk portfolios remain more exposed to a fall in equity markets.
In 2018 we aim to have higher conviction with greater concentration in our investment selections, reducing them to 20 holdings.
Changes as discussed
We currently hold two technolgy funds which we will retain and aim to hold 5% in each in positive times. These funds are regarded as a higher risk with greater volatility than standard funds but they have great growth potential.
We currently hold eight property funds, forming 15% to 25% of our portfolio. They are diversified, with residential property exposure, commercial property funds, specialists reits, and investment trust. This month we will review the mix and aim to reduce the holding to four.
When we increase our UK equity holdings- which we certainly will when we judge the time is right- we will have a further investment trust (Fidelity Special) to add to our growing portfolio trusts. We currently have 22% of our holdings in investment trusts compared with 2% of our peer advisers.
Over the past two years we have tentatively increased our holdings, as historically investment trusts have delivered better returns than unit trusts due to their ability to use gearing. Extra dealing fees make us less keen on frequent buying and selling with investment trusts.
F&C Property remains our biggest individual holding but its performance continues to disappoint us. We have met and talked personally with the fund manager several times in the past 18 months. We retain our position because their property holdings are broadly spread, with less exposure to the overheated London property market. The regions have some catching up to do in terms of property values and they have attracted less institutional money, making values less vulnerable in the event of a wholesale withdrawal of funds following an event such as Brexit.
As a result of transactions and our funds under management, we now have an opportunity to reduce costs. We can now use a different class of investment fund which means the same performance at a lower cost. In simple terms, we can now benefit from the wholesale as opposed to retail price.
The information in this blog or any response to comments should not be regarded as final advice. Please remember that the value of your investment can go down as well as up, and may be worth less than you paid in. Information is based on our understanding at June 2018.