The Lemon Fool

Hi all, I'm aiming to have a range of ETFs, mainly passive tracker and low cost, that can provide me some growth over the next 20+ years of investing so looking at long term strategy. I’m not a fan on bonds in the current climate (though there might be arguments both ways looking at historical data) so looking for another diversifying vehicles.

I’m in accumulation phase so my plan would be to sit once or twice a year and add into the low performers or add new sectors the global situation may demand - sitting in a bit of cash not reflected below (10% on the side) to buy only in the event of a big crash should this happens, but looking at inflation not sure if should place this in something that yields anything.

Interested in any feedback, replacements or suggestion that you may have - am I overcomplicating vs a world tracker with low cost?
Am I missing something obvious?
Are there cheaper alternatives to the picks below?


Truly appreciate any feedback and thanks again for this forum!

Equities (60%)
VEVE: Developed World Tracker 0.12% costs - 30% (Heavy US)
VEUR: Europe Tracker 0.11% costs - 10% (Weighting bit more in EU)
VUKE: UK Tracker 0.09% costs - 10% (Weighting bit more in UK)
HMEF: Emerging Markets 0.15% costs - 10%

Gold&Gold Producers (20%)
SGLN: Physical Gold ETC 0.12% costs - 10%
SPGP: Gold Producers ETF - 0.55% costs - 10% (Higher cost but higher growth potential than Gold)

Commodities&Mining (20%)
CMFP - All Commodities 0.3% costs - 10%
BRWN: Blackrock World Mining 0.99% costs - 10%

Certainly seems quite complicated and will be interesting but difficult to keep on top of but will probably do the business as well as any other portfolio choices
You obviously realise that the portfolio is similar to a global equities index tracker which will be cheaper and easier to manage and likely realise the same growth rate if not more.
Most investors start as you have done then start simplifying as they learn more about the vagaries of investing-a learning process which we all have gone through
Bonds come into play when you have accumulated a reasonable amount of savings and a stockmarket downturn as we are currently going through become painful to your personal stomach acid/able to sleep at night test!
Your age minus 10 in bonds as a % of your portfolio is a good rough guide
xxd09

I agree that holding bonds makes little sense.

I would suggest switching the Blackrock fund for some REIT exposure to give more diversification but generally this looks a lot like my own portfolio. Personally I would just hold VEVE and HMEF. If I was going to tilt I would tilt away from US to Asia.

Like you I have exposure to both gold miners and gold via the same ETFs you use. As well as higher growth, Gold miners are a more effective portfolio diversifier than gold as they have more price volatility to gold than gold does (due to the inherent operating leverage in their business.) Or expressed mathematically, they give you more covariance to equities.

xxd09 wrote:Certainly seems quite complicated and will be interesting but difficult to keep on top of but will probably do the business as well as any other portfolio choices
You obviously realise that the portfolio is similar to a global equities index tracker which will be cheaper and easier to manage and likely realise the same growth rate if not more.
Most investors start as you have done then start simplifying as they learn more about the vagaries of investing-a learning process which we all have gone through
Bonds come into play when you have accumulated a reasonable amount of savings and a stockmarket downturn as we are currently going through become painful to your personal stomach acid/able to sleep at night test!
Your age minus 10 in bonds as a % of your portfolio is a good rough guide
xxd09

The few bond funds that I currently hold are dropping in value at least as reliably as my shares so I would not be taking much comfort from holding a much larger percentage of my total in them. I just do not agree with these comments re bonds.

Dod

For the equities part of your portfolio at least, I recommend sticking with a global tracker. I used to slice and dice to try and save a few bips but quickly learned it’s futile and got fed up with lots of spreadsheet work to update weightings. Keeping things simple is key.

Note having a FTSE Developed World tracker and an MSCI tracker doubles up on South Korea and Poland (IIRC).

Depending on broker as to its viability, the HSBC FTSE All World C is a decent fund at 0.13% with low tracking error.

I'm an under informed amateur, so just questions from me rather than answers.

You are effectively 40% commodities in a long term fund. Commodities seem to me be be very cyclical. While they are arguably cheap at the moment, would you rebalance if they did very well over periods, and would you continue to chuck money at them if they underperformed for extended periods?

I can understand the UK overweighting - UK looks cheap and I guess you are Britsh? You are also overweight EM. While EM economic growth is likely to exceed developed world over a long period, my experience is that does not necessarily translate to strong growth in their stock markets.

And, just a question, why Europe? Can understand wanting to dilute USA, by why not, say, Japan?

I guess my point is that long term, your choices could do very well, but there is certainly the potential for them to do rather badly, as compared to the usual market-weighted balance. If you want more risk/reward, why not a global small cap fund or similar?

It's widely spread and sensible enough. Whatever you feel comfortable with.

Personally i would never ever hold bonds, particularly when inflation looks like starting to accelerate as now. But I suppose I am fortunate in that I am sufficiently well off not to be worried about a 50% fall in share prices. I just have a total aversion to bonds, other than index linked, having seen what has happened to the value of money over the last 55 years (my investing history!)

Spet0789 wrote:I would suggest switching the Blackrock fund for some REIT exposure to give more diversification but generally this looks a lot like my own portfolio. Personally I would just hold VEVE and HMEF. If I was going to tilt I would tilt away from US to Asia.

Thanks for the suggestions - will look into them. The logic not to hold just VEVE was to give more weight to EU and UK is effectively to tilt away from US heavy weight in the global trackers (70% roughly in most) and align a bit more to % of global GDP from each region - Asia is covered in HMEF (Korea, China, India), though Japan could be an option to review.

NotSure wrote: You are effectively 40% commodities in a long term fund. Commodities seem to me be be very cyclical. While they are arguably cheap at the moment, would you rebalance if they did very well over periods, and would you continue to chuck money at them if they underperformed for extended periods?

Thanks for pointing - I can elaborate a bit on this - I believe that Commodities will do well in the coming decade and that's why they have that weight in my portfolio, but as the global geo-political situation evolves, this would be annually reviewed and can be adjusted - gold is a good edge to equities, but the other 20% is the one that could be adjusted a bit as time goes.

NotSure wrote: I can understand the UK overweighting - UK looks cheap and I guess you are Britsh? You are also overweight EM. While EM economic growth is likely to exceed developed world over a long period, my experience is that does not necessarily translate to strong growth in their stock markets.

And, just a question, why Europe? Can understand wanting to dilute USA, by why not, say, Japan?

I tend to think EM will do well long term (China, India, Brazil...) and tried to capture exposure there by allocating that 10%, might be overweight for some, not in my view looking at the size of those growing economies but definitely risk factors associated.

I picked Europe and UK as I think both can grow but I'd look into Japan, thanks for that, captured some exposure there in global tracker but not much, maybe a UK/EU/Japan could make sense there.

NotSure wrote: I guess my point is that long term, your choices could do very well, but there is certainly the potential for them to do rather badly, as compared to the usual market-weighted balance. If you want more risk/reward, why not a global small cap fund or similar?

I guess my concern is how heavy weighted US is in any global market trackers (70% of most I saw when economy is 25%? of global GDP) so I tried to look into diluting US cheaply by giving exposure to other regions to reduce the risk of that heavy US influence.

As others have said, you will probably do better tracking the All-World index. VFEM is a better partner for VEVE than HMEF, because they both track FTSE Russell indices. VEVE is not heavy US: the market believes that it has the correct weight. Over-weighting regions and sectors that you fancy is not a good idea unless you know more than the market.

Gold generates no income and has little intrinsic value. As Warren Buffett said, you dig it out of one hole at great expense, so that you can put it in another and pay someone to guard it.

I think the OP's equity portfolio is fine. With just 4 holdings, I'm amazed some here are saying it's too complicated!

It's also reasonable to downplay the US a bit too if that's what you want. That market certainly looks frothy with demanding valuations. There are plenty on these boards who are nearly 100% UK stocks (at least going by what they talk about) so you are lot nearer to world weightings than those folk.

Your instincts are fine IMO. You have good diversity and low expenses there.