We're starting this month with our most adventurous Master Portfolio, our Global Growth portfolio aimed at equity investors looking for some racy returns built around investing globally – there are no bonds at all in this portfolio as we believe that their relative returns are potentially too low over the long term.
In the details of this portfolio below you'll also see an alternative title for the portfolio – Target Date 2040. This language is built around a growing body of analysis (and a gaggle of funds in the US) that looks at portfolio construction through the lens of building up a savings pot that will pay for your retirement. The target is the date is when you aim to retire – this portfolio is built around retiring in 2040. Whatever date you choose, all of these lifecycle portfolios are built around a simple idea, namely that as you grow older you attitude towards risk and return and your exposure to the long term impact of inflation changes.
If you don't plan to use your capital invested in a portfolio for a very long time, you might be willing to take greater risk. But if you're planning to retire in just a few years, you're key goal might be preservation of capital at all costs, especially against inflation. As time goes by you'll move along something called a glidepath where risky assets are slowly substituted for less risky assets. This portfolio is right at the beginning of that glide path.
Adviser view
"I am a passionate advocate of using passive funds for investing and would therefore recommend building this portfolio using low cost trackers whether they be OEICs or ETFs. The beauty of this portfolio is it simplicity. With a handful of funds it is possible to have an extremely well diversified portfolio. It is a matter of buying into global capitalism and letting the markets do the work. Sit back and watch (not too often) and consider occasional rebalancing to realign the asset allocation. Anyone with a spare five minutes to check the websites of a few of the main providers of index funds could put this portfolio together. Some of my preferred funds would be the Lyxor FTSE 100 and 250 funds, the DBX Emerging Markets fund and iShares Infrastructure and REITS funds. For Global Developed Market exposure I would look consider either the iShares or Lyxor fund."
James Norton is Investment Director at financial planners Evolve
1. Overall allocation | ||
Equities | 90% | |
Alt Assets | 10% | |
2. Allocation within alt assets | ||
Commodities | 67% | |
Others | 33% | |
3. Allocation within Equities | ||
Mainstream | 80% | |
The Rest (reits and infrastructure) | 20% | Including REITs and Infrastructure |
4. Within mainstream equities | ||
UK | 25% | |
International | 75% | |
5. Within International | ||
Emerging Markets | 50% | |
Global Developed | 50% | |
6. Within UK | ||
FTSE 100 | 50% | |
FTSE 250 | 25% | |
FTSE Small Cap | 25% |
Portfolio Name : GLOBAL GROWTH Lifecycle Target Date : 2040 (probably in their thirties with 30 years or less to retirement) ■ Global Equity bias ■ No bonds at all ■ Biased towards emerging markets equities ■ International bias vs UK. ie we're more optimistic about international stocks relative to UK stocks ■ Heavy exposure to "equities rest". We use this term to describe funds that invest in global infrastructure and REITs (real estate investment trusts) ■ Size bias within equities. This means that instead of just favouring a whole index like the FTSE All Share we think you should bias certain bits of the index based on the size of the company i.e focus on small caps in UK |