Brendan,
I have thought long and hard about your comments and I wish to clarify a few of your points.
Firstly on diversification. I defer to my learned friend....
"Diversification is the only free lunch in investing" Dr. Harry Markowitz, Nobel Memorial Prize in Economic Sciences 1990.
Secondly, as a matter of accounting the poster has a net worth of just €35,749 once the mortgage is accounted for.
Which would suggest the following asset allocation:
REITs €5,700
ISEQ 20 €3060
Euro Stoxx 50 €10650
ISEQ 20 (again throught the Freeway funds) €3550
Emerging Markets €3550
Cash €9239
Of course, we also need to properly adjust the overall weightings to correctly account for the fact that Ireland is also represented in the Euro Stoxx 50 with CRH making up 0.65% of that index.
So, we actually need to add back €115 to Ireland and deduct this from Europe giving an overall allocation of:
REITs €5,700 (15.94%)
Ireland €6725 (18.81%)
Europe ex Ireland €10535 (29.47%)
Emerging Markets €3550 (9.93%)
Cash €9239
Total €35,749
We could have a debate for hours about the overall merits of this allocation but let's just focus for now on the Irish equity allocation.
A total of 18.81% against a rational market allocation of 0.07% by market cap according to Morgan Stanley.
That is 268 times overweight Irish Equity. To put this in perspective an investor in the USA would have to invest 14,740% of their capital in US stocks to have the same overweight position. A UK investor around 2680% of their capital and so on.
The inference here is that those 20 Irish companies are 268 times better than all of the tens of thousands of other investment opportunities out there like Microsoft, Wall Mart, Shell, BAT, Google, Apple, IBM, Sony, Toyota,AXA, Gazprom. China Mobile, Johnson and Johnson etc etc etc.
This never ever made any sense and never ever will. It is a simple manifestation of a home bias and nothing more. Our familiarity with the names gives a false sense of security about the investment being made. However, markets do not reward investors for investing in familiar companies. A company half way across the world you have never heard of is not necessarily a more risky investment.
Ask yourself this question: If you lived in Canada, the USA, Japan, the UK, most of Western Europe or virtually anywhere except Ireland would you ever consider investing in the ISEQ 20?
Now let's break down the allocation to the stock level.
We know that CRH is 20% of the ISEQ 20 and therefore the weighting to that company is 20% of the Irish Stock allocation or €1345 (this is 3.76% of the total portfolio not 1%)
We also know that Kerry Foods is 16% of the index so that is another €1076 in Kerry Foods (3.01% of the total)
Put another way we have 6.77% of the entire portfolio invested in just 2 stocks in Ireland where presumably the OP has their home and business interests. Could you imagine if they were actually employed by an Irish Company as well. I think the phrase eggs and baskets comes to mind....
Just for reference there are 5000 companies listed on the New York Stock exchange alone. Yet the OP has no allocation at all to the USA (which represents some 55% of the global market cap) and nobody said a word.
This simple failure to appreciate appropriate proper global diversification is a contributing factor to the problems facing Irish investors today.
Just for illustration, a simple alternative of an MSCI World Index tracker would offer exposure to around 1000 companies for half the cost each year of the Quinn Funds.
That said, we would typically have between 12,000 and 15,000 stocks in a typical client portfolio. This represents proper global diversification reducing the idyosyncratic or stock specific risks that investors are not being paid to take as set out in the 1960s in the Capital Asset Pricing model by Bill Sharpe again Nobel Prize in Economics 1990.
Regarding your comment about Gold, I would be interested to see where I have frequently suggested that people should invest 10% in gold. For the avoidance of doubt our Private client advisory portfolios have had a maximum allocation of 5% to Gold since Jan 2008. I would therefore be delighted if everyone reading this would please search askaboutmoney.com and please confirm exactly the number of times I have recommended putting 10% of a portfolio in Gold.
Be that as it may the difference between an allocation of say 3% to gold and 3% to a single stock is simply this: how many times in recorded history has the value of a stock gone to ZERO........NIL.....NOTHING........SUSPENDED.
Now, how many times in the last 2000 years has anyone with some gold been told; "I'm very sorry Mr TutanKhamun but your seemly bluechip investment is now totally worthless but don't worry you can carry it forward as a tax write off"?
I don't expect to change people's opinions. We are all entitled to believe what we wish and to invest accordingly but I do think it is important that the facts are presented in a fair and balanced way.
All the best to everyone on askaboutmoney and a Happy New Year to all.