38-year-old wants "maximum return for minimum effort"

Anand has a pretty active strategy as he’s trying to minimise the impact of overseas currency fluctuations vs sterling. However, he has no desire to spend hours on end researching investments - in fact he wants to keep the time he spends researching to a bare minimum. He admits the only research he does is reading the Investors Chronicle every week.

He holds a concentrated selection of ETFs, as well as some investment trusts and a large amount of cash in a spread betting account - largely to avoid capital gains tax and diversify risk. Generally his spread bet positions are opportunistic and relatively small, and he aims for a return on investment of about 3 per cent a year. His stop losses are tight and guaranteed, so he can get out and retain cash in the case of a major crash. He’s not interested in buy-to-let or other forms of small business. "Maximum return, minimum effort, please," he says.

His portfolio is very equity-heavy and he likes companies with large, growing and sustainable dividend yields - these he holds in his Isa. He's concerned that he doesn’t have enough exposure to bonds, commercial property or emerging markets in his portfolio. He recently tidied up his holdings into a very concentrated portfolio that he intends to hold and build on for the long term.

In general, he adds to his core holdings when the VIX (volatility index) is above 20.

Anand has four questions for our experts:

1. Are there risks (apart from the heavy equity weighting of my portfolio) that I appear to be overlooking?

2. Should I introduce bonds? I don't really see why I would at the moment. Maybe later (long-term) if I want more income/less volatility?

3. Should I introduce commercial property? I don't really see why it would diversify that much - generally it's tied to the economy like equities.

4. Are there other ways that I might reduce investment costs (fees or tax) without having to spend the time researching individual equities and keeping on top of a substantially broader portfolio?

ANAND'S PORTFOLIO

Source: Anand and *According to www.trueandfaircalculator.com

Alan Miller, director at SCM Private, says:

As you say the main risk is the high overall equities weighting, but it is well spread with UK and overseas, large and small cap, and an overwhelming index bias which should shield the overall portfolio from the more erratic movements associated with just one or two concentrated funds.

The risks are obviously much greater within the spread betting accounts and getting currencies right is notoriously difficult.

Despite what you might be told by many commentators at the moment about introducing bonds in you portfolio, there is not a right or wrong answer. My own view is to have balance within your portfolios - ie bonds and equities rather than purely one or the other. In particular, the ability to buy various diversified emerging market bond ETFs yielding around 5.6 per cent a year if US dollar denominated - we use the iShares JP Morgan $ Emerging Markets Bond UCITS ETF (SEMB) - and around 6.5 per cent if local currency denominated - we use the SPDR Barclays Emerging Markets Local Bond UCITS ETF (EMDL) and PIMCO EM Advantage Local Bond Index Source UCITS ETF (EMLB) - is an attractive proposition.

Of course even in good times, the returns here will probably be less than your equities funds but much better than cash in our view. Emerging markets bonds were flavour of the month about a year ago but since then there has been a stampede of money out of this area, significantly increasing the yields on offer whilst the fundamental ability to repay the debt one can still argue is better than the Western government equivalents.

I see you’re also thinking about commercial property funds, but if ever there was a time not to enter commercial property funds, it's now. There are times to buy such funds when they are out of favour, standing at significant discounts to asset value, and the outlook is extremely positive. But property shares in the UK and elsewhere have performed exceptionally strongly over the last 12 months and their normal discounts to asset values has almost disappeared. If you look at the long term, these are truly atrocious investments. The physical property funds mask their huge costs of buying and selling properties which probably amounts to nearly 6 per cent which explains why the only people who do well out of these funds over the long term, are the fund managers, not the investors.

You say you’re also keen on getting some emerging markets exposure, and if ever there was a time to invest in emerging markets, it’s now. It’s a myth that active managers have done better at beating their benchmarks in emerging markets than in other markets around the world. The irony is that when the big houses are pushing emerging markets and launching new funds it tends to mark the top and when they go quiet, the bottom. These markets are standing at five- to 10-year comparative valuation lows whether price to book or earnings against their Western counterparts whilst much of the earnings downgrades have taken place. One way to make it simple is to buy a Global Emerging Markets ETF. You could go for one that gives exposure to large companies, or, there are some interesting ETFs which give you access to smaller companies which tend to give higher growth, and since they’re out of favour, they tend to have a much lower valuation.

Sheridan Admans, investment research manager at The Share Centre, says:

Overall I think you have put together a very sensible portfolio here. But you say you are targeting low-cost investments that are low risk and offer the potential for a high return, yet you are aiming for an annualised return of 3 per cent. And despite not wanting to spend much time doing research anymore, your process seems quite active and is driven around the movement of the VIX.

One possibility for you to think about could be running a mirror portfolio, where you pound cost average your capital into a portfolio of the same investments and see if that not only reduces cost but improves performance. This would mean buying into the market on a regular monthly basis, rather than trying to buy on the dips.

I would also highlight that around 60 per cent of the portfolio is focused on UK large caps, and Perpetual Income and Growth Trust (PLI) charges significantly more than the other two funds you are using to get UK equity exposure.

As you are reinvesting all your income for growth, I think you could consider some fixed income and property investments that would give you an income and help diversify and balance your portfolio. Now might not be the best time to buy but you should think about adding some of these types of income investments to your portfolio over time, so you can reinvest the dividends you make back into your portfolio. I would also suggest that you rebalance the portfolio annually or every six months, as this is likely to significantly reduce the time you spend and avoid the need to try and time the market as you are with the monitoring of the VIX.

To be as tax efficient as possible you need to continue to fully utilise your Isa allowances. Also, considering the changes announced by the chancellor on pensions, you should consider making use of paying into a pension for your wife and even your child, if they don’t currently have one, as you could really benefit from the 20 per cent tax uplift you’d get on these. A £1,000 contribution to a pension on behalf of a non-earning spouse or child would be automatically topped up to £1,250 and then you can benefit from the compounding on that tax relief over many years.

MORE ONLINE: You can watch Anand get advice from our experts online at http://www.investorschronicle.co.uk/your-money/portfolio-clinic in our Reader Portfolio Live feature.