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Small diversity
Q:
If you are lucky enough to have a portfolio of, say, £50k, I would say that ‘diversifying your portfolio’ as a way of reducing the impact of market falls on one’s wealth was common sense.
For those of us without that sort of money, what are our options to protect more modest sums? Most brokers and others I encounter are not interested because giving advice is costly to them and out of proportion to the commission they may receive.
I favour monthly savings schemes and currently have a unit trust holding in a special situations fund worth about £6k. This has been replaced by another unit trust savings scheme, only this time in an income fund worth around £1k. The
fund has a good record of producing above-average dividend and capital growth. Both are within ISAs.
I recently inherited about £30k and want to invest around 50 per cent of it in the stock market. How do I start to diversify and protect the value of my investments?
Should I spread the money evenly around top-performing funds in Europe, America and emerging markets, or ‘drip feed’ the money into these sectors to avoid any timing problems? Am I best sticking to unit or investment trusts, accepting the bid/offer spread or going for single-priced OEICs?
Mr J Treacy, via email
A:
Anna Bowes replies:
As you rightly point out, diversification is an important factor when considering investment. With exposure to uncorrelated assets, volatility should be lower. Time in the markets is also important. Keep a comfortable sum in cash for short-term expenses and emergencies, which will allow you to leave the rest of your investments for the long term.
Smaller investors can get exposure to a range of areas, either by deciding on the amount to invest into each sector or by choosing a global fund where the manager will choose the countries, such as Neptune Global Equity. Lump sums as small as £500 are normally accepted; alternatively you can invest smaller amounts on a monthly basis.
In order to get more diversification and exposure to a wide range of assets, you could also consider a multi-asset fund, such as CF Miton Arcturus, with exposure not only to
equities but also fixed interest, commercial property, structured products, hedge funds, etc.
There’s no real difference between investing in OEICs or unit trusts – pick the most appropriate fund and use ISA allowances if available.
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The limitations of nominees
8 August 2008 [0 comments]Q:
Having read various pieces in your magazine at different times regarding the merits and demerits of certificated and nominee share dealing, it seems to me that certain advantages of holding certificates have been missed.
Indeed, I recently attended an Alliance Trust Roadshow and sat on a ‘shareholder club’ discussion group, where I was amazed to find, among a fairly sophisticated bunch of investors, such a lack of appreciation as to the shareholder rights one loses with a nominee account.
As an extra thread, I also recently attended the AGM of an investment trust in Edinburgh. As a trustee to my grandchildren’s funds, my name was missing from the list at reception. I was told that I was welcome to the meeting as long as I didn’t participate in the voting.
I was further informed that had I informed the plan managers of the trusts beforehand, I could have voted. It occurred to me that nominee shareholders may well find that if they feel strongly about an issue, they might be able to exercise their voting rights in a similar way. I would be interested in your panel’s thoughts on this subject.
Bev Wilkinson
via email
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