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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 This has been replaced by another unit trust savings scheme, only this time in an income fund worth around £1k.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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22 August 2008 [0 comments]Q:
I currently hold shares in an AIM-listed company and was about to sell these to realise losses (to offset against gains elsewhere), but the shares have since been suspended and I think the company is now in administration.
The current value based on the suspended price is around £1,400, and the realised losses based on that value would be around £12,000.
The losses are more valuable to me at the moment than the actual value of the shares themselves, and I need those available by the end of this tax year. I assume it’s not possible to roll gains forward?
Is there any way that I can now realise these losses given that I cannot sell the shares? I am wondering if gifting them might be a way of releasing the losses? I’m thinking perhaps either to my brother (but am not sure what tax implications this might have for him) or to charity (and whether I could then claim tax relief on the value gifted)?
Is any of this possible, or are there any better alternative routes? Any advice would be very much appreciated.
Mrs K Hall
Kent
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