In October the topics covered by our guest experts on the IC Personal Finance Podcast have included how much cash to hold in retirement, choosing investment trusts and Japanese income.
Adrian Lowcock, head of investing at AXA Wealth, joined us in the studio on 16 October. He addressed a reader's concern with a portfolio held half in cash. Was our reader being overly cautious or is there a case for holding cash?
Mr Lowcock said: "Half in cash does seem like a lot. Inflation is running at minus 0.1 per cent, so cash is actually returning a real return at the moment but it's not a great return and it's not set to get very high in the next few years. Interest rates may rise but they're not going to go very high in the next few years and who knows where inflation is going to be in the future. If oil prices rise from here we could see higher inflation in a few years time or even in a year's time."
He concluded by saying our reader should carry around three years' income as cash in his portfolio but stay invested.“This gives them the flexibility to have the money on hand that they need in the short and medium term, up to three years, whilst having more money going into their Isas and topping up their pension,” he said.
In the 23rd October investment trust podcast we asked Richard Curling, manager of Jupiter Fund of Investment Trusts,(GB00B6R1VR15), for advice when selecting, pruning and keeping on top of an investment trust portfolio.
He said: "To get a reasonably diversified portfolio across all markets you need only around 15-20 trusts," he said. "But I think that misses a big opportunity in the investment trust area. There are so many really interesting new ideas coming along that I think it would be quite good to have some exposure to those, so more holdings might be a way to play it."
He also filled us in on his three-step selection process: "We want to get asset allocation right so first we think about how much we have in Japan, for example, then the second thing is to pick the best manager in each area. Third it's trying to add value by buying through the discount - buying good managers cheaply."
On 2nd October Helal Miah, investment research analyst at The Share Centre, was on hand to give advice about diversifying a portfolio too concentrated in familiar FTSE names.
He said: "While the investor does have some big blue-chips from various parts of the world, I think there's too much of a concentration towards stocks he is aware of and knows a bit about. The issue is that these stocks are industrial and technology focused and two of them are on the large side. He's got Unilever (ULVR), which is a company we like but at 18 per cent of the portfolio that's a bit too much. Then he's got 3M (US:MMM), the US industrial group, at 15 per cent of the portfolio it's too much. Ideally, we generally recommend to consider a maximum exposure to any one stock of 10 per cent per cent for practical purposes."
He also had views on investing in Japan for income: "The Japanese index has a dividend yield of 2 per cent and the UK index has a yield of 3.5 per cent, but if Japanese companies do change their strategies to become more shareholder friendly we may see the dividend payout ratio, at the moment in the region of 20-30 per cent, rise up to more western standards (payout ratios are 50-60 per cent in Europe)."
On the 30 October we spoke to Simon Crinage, head of investment trusts at JPMorgan Asset Management, about how to deploy investment trusts in a retirement portfolio and why they are such good options.
He said: "Whether the trust invests in the equity market, the bond market or in alternatives, there is a choice of products out there. There are over 400 investment trust companies. Then you've got the benefit of the structure, with things such as gearing and the ability to borrow money to enhance returns over time. You've also got professional management and the fact they are managed by investment managers, then the oversight you get from a board.
"Look at the long-term track record of the managers. Be aware of the discount or premium but don't make too big an issue of that. Be alert if the trust is trading at a significant discount or premium and be aware of the fees. But remember that the returns you look at are returns net of fees. I'd say you need a minimum time horizon of three years and the longer the better. If you can afford to invest your income in the early years it has an enormous impact on returns."
