John Evans is looking for income and growth from his £430,000 portfolio of funds and shares. You can see more details of his portfolio here. Below, you can read the views of Chris Dillow and Richard Hunter.
Chris Dillow, economist, Investors Chronicle:
This is a very well diversified portfolio, spiced up with some interesting bets. The main equity holdings are a nice mix of some higher-beta stocks (Apple, Investec) and defensives (Glaxo, United Utilities, BAT), with more defensiveness added by the gilts and better quality corporate bonds.
The spice comes from a handful of more speculative investments. But there's a problem with these. Some are so small as to be as relevant to your overall performance as an afternoon in the bookies.
Take your holding of JP Morgan's Indian investment trusts, one of the bigger bets. Even if this were to double in price, it would add a mere 1.7 per cent to your overall portfolio. And the circumstances in which this might happen would be those in which global markets generally are doing well, and so the rest of your shares would be rising.
This doesn't mean such holdings are pointless. What it means is that the returns to these consist not just of their financial element, but of a psychological one. If Jubilee Platinum or Trafficmaster (say) rise sharply, you'll not get much richer, but you will get a sense of satisfaction from knowing you've spotted a good investment. Economic theory often ignores this psychological aspect.
A further issue with this portfolio is: what's your exposure to a rising market? Yes, if the market generally rises many of your speculative plays (JP Morgan Indian, iShares Brazil, the smaller commodity stocks) should do well. But your higher-beta stock holdings are quite highly concentrated in just a few companies; Investec, Google, Apple. It's theoretically possible that these could do badly (simply because of bad stock-specific luck) even as the market rises, with the result that you miss out on a market recovery.
This danger is magnified by the fact that you seem under-exposed to "value" stocks, such as banks, housebuilders or general retailers. If markets were to anticipate an easing of the credit crunch or end of the recession, value stocks would probably rise most, and you'd miss out a little.
Of course, you might well be very happy to bear this risk - after all, there are many worse things in life than missing out on a gain. But it's a question to consider.
Richard Hunter, head of UK equities at Hargreaves Lansdown:
The construction of the portfolio over 50 years has led to a very diversified list, including across countries and asset classes.
Indeed, the first observation is whether the portfolio is somewhat unwieldy, and whether the investor is comfortable managing 74 different lines of stock. Given the value of the portfolio, the reader could consider tidying up holdings of (say) less than £1000, which would immediately reduce the holdings by 12.
Taking this theme one step further, there are also 15 different managed funds and if there is room for manoeuvre and the reader is comfortable from an investment viewpoint, it might be worthwhile to consider consolidating some of these, which might then be accompanied by an annual saving in management fees.
Within the favoured sectors, the defensive areas of oil and gas, tobaccos and pharmaceuticals are well represented, which will have been of benefit to the investor given the recent turbulence in global markets. Within these sectors, there may be a case for slightly less reliance on the shares held – of the oil holdings, the vast majority is just in BP and in tobacco the entire holding is in British American Tobacco.
Otherwise, there is ample exposure to both managed funds and fixed interest stocks. Given the potential need for income in future years, perhaps the fixed interest could also be reviewed – for example, if 2009 does turn out to be defined by deflationary fears followed by a return to inflationary fears, the reader may also wish to consider some inflation-proof investments, such as index-linked gilts.
In all, however this is a well diversified portfolio, clearly painstakingly constructed over a period of time.
