Options for Equity Portfolio

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Hi I am looking for opinions on what do with a low six figure portfolio of shares which I inherited. It is currently a managed portfolio with a UK firm who charge 1.25% + VAT per annum. Shares are predominantly UK/Global companies.

I've done of lot of reading and research on shares and investing etc over the last 12 months and in an ideal world my preference would be just to put the lot into an ETF FTSE 350 tracker but the exit tax position is not ideal.

Having ruled that out my preference is have a selection of FTSE 100/250 companies to by and hold, self managed.

With that in mind I opened a DeGiro account with small money and bought the top 6 preferred shares from my selected 20 odd shares. I also created a dummy portfolio to 'invest' the six figure sum in the 20 shares.

I did this just to give me a little bit of confidence that investing is not rocket science, but I guess what I am asking is how long would you let a dummy portfolio run before pulling the trigger on the real thing? I get that you cannot measure investment performance in a timescale of two months but equally I don't want to spend an additional 1.25% + VAT for the next 5 years.

For reference if you take the FTSE 350 return as a benchmark - the managed portfolio is -1.65% (before fees), the Degiro is +2.8%, and the dummy is +0.4%.

What you do if you were in my shoes? Move the funds now, wait 3 months, 6, a year?
 
Hi spanners

Only a handful of people in history have managed to pick winners successfully. It does not matter how much study you do, you will not be able to beat the market. It's quite possible that luck alone would help you beat the market for a few years, but it would not be due to skill.

For a proper answer, you would need to complete a full fact find along these lines:
Basic information required for the "Money Makeover" forum

If you have a mortgage or any other debt, you should probably pay that off first. If you don't own a home, then that should be your priority. If you are a top rate tax payer, you should probably be maxing your pension.

Having done all that, then you should either buy a diversified portfolio of about 10 shares nationally and internationally.

Alternatively, you could buy a low cost Exchange Traded Fund.

Brendan
 
Investing all your portfolio in UK shares directly or through a fund would not be advisable. You would be too exposed to currency risk as the performance would be strongly linked to the UK economy and sterling - even though most or all of these companies have foreign earnings.
 
Brendan Burgess said:
Only a handful of people in history have managed to pick winners successfully. It does not matter how much study you do, you will not be able to beat the market. It's quite possible that luck alone would help you beat the market for a few years, but it would not be due to skill.
Click to expand...

My thinking in picking individual shares rather than a fund is because it is more cost and tax efficient. I am not actively trying to beat the market. As I said in an ideal world I'd buy an ETF but I don't care for 8 year disposal rule.

Brendan Burgess said:
If you have a mortgage or any other debt, you should probably pay that off first. If you don't own a home, then that should be your priority. If you are a top rate tax payer, you should probably be maxing your pension.
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I own a home mortgage free. I have no debt. I am in low tax bracket.

Brendan Burgess said:
Having done all that, then you should either buy a diversified portfolio of about 10 shares nationally and internationally.
Click to expand...

That's what I think also, notwithstanding there is an element of share picking. I guess I am just nervous about leaving the safety net of the investment manager, albeit he is expensive.

But as you rightly point out "only a handful of people in history have managed to pick winners successfully." If it is unrealistic to expect this guy to be one of the handful, I might as well manage it myself!
 
Brendan Burgess said:
Investing all your portfolio in UK shares directly or through a fund would not be advisable. You would be too exposed to currency risk as the performance would be strongly linked to the UK economy and sterling - even though most or all of these companies have foreign earnings.
Click to expand...

Currently it is all in STG and I think it might as well stay in STG which is pretty weak at the minute. I have tried to diversify the national and currency risk with the shares I have selected.
 
If your objective is to have exposure to a widely diversified equity portfolio, at a reasonable cost, while avoiding the exit tax/deemed disposal regime, why not invest in a global investment trust like Foreign & Colonial Investment Trust Plc?

Stock picking is not a good strategy for most people.
 
Sarenco said:
What a bizarre comment. FTSE Russell is a highly respected index provider.
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Having spent almost thirty years working in the area of performance and attrition, I’m well aware of the players. FTSE indexes are a very poor yardstick.
 
Jim2007 said:
Having spent almost thirty years working in the area of performance and attrition, I’m well aware of the players. FTSE indexes are a very poor yardstick.
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Well Vanguard disagrees with you - they switched from MSCI to FTSE as their index provider for a large number of their passive funds years ago.
 
Thanks all, some helpful comments. I did not mean to start any rows re indices or financial advisors!

I have already taken the decision for this money to be 100% equities, so I am not looking for professional advice on asset allocation. For the rest of the professional benefits I might as well stick with the investment manager I have now, rather than engaging somebody else.

I suppose that's what I am struggling to decide. Do I leave him or not.
 
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Marc said:
So all you can compare is an alternative option.

Discretionary managed portfolio of US ETFs

0.22% TER
0.55% Discretionary manager fee inc Vat
0.11% independent custodian fee
0.50% typical adviser fee

Total 1.38% and you are paying what????

1.25% plus vat
Plus dealing charges
Plus fx costs can be up to 4%
Plus rebates
Plus commissions on bank deposits
Plus fees on own brand funds
Plus dealing costs on securities within own brand funds plus FX fees on dealing on securities within own brand funds etc etc etc

Woody Allen said;” a stockbroker is someone who invests your money until its all gone”
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Just checked and it is 1.2% + VAT - all inclusive
includes dealing charges & custodian fees.
Currently no fx costs.
Rebates not sure on.
No commissions on bank deposit, though they do apply the 1.2% fee to cash deposits with them. In fairness to date they try not to hold cash - they either invest it or send it to me to hold.
Currently I don't hold any of their own brand funds, but if they purchased some for me fees would be similiar to other funds/investment trusts etc.

TBH that seems like reasonable value compared to 1.38% for US ETFs.
 
Marc said:
Well there’s your answer

If it’s Irish Vat that’s a total cost of 1.476%pa if it’s UK vat a total of 1.44% vs 1.38%

If you think your current portfolio of just x stocks will beat a global portfolio of 10,000 stocks in both developed and emerging markets and including REITs and taking account of volatility drag and monitored daily and trigger rebalanced for approximately the same cost will do the same return then that’s your answer.

Although just for reference, pretty much every academic study for the last 50 years would expect you to lose.
Click to expand...

Presumably I can't see the historic performance a discretionary managed portfolio of US ETFs as different managers will pick different ETFs? Do you have an example of an ETF/group of ETFs that will provide the above - i.e the exposure to a global portfolio of 10,000 stocks etc etc?
 
Marc said:
Discretionary managed portfolio of US ETFs

0.22% TER
0.55% Discretionary manager fee inc Vat
0.11% independent custodian fee
0.50% typical adviser fee

Total 1.38% and you are paying what????
Click to expand...
Why anybody would pay 1.38% for a bunch of index funds is beyond me.
 
Marc said:
If your portfolio is falling behind that by 1 or 2%pa then it’s time to shift.
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Your costs, as set out above, would add 1.16% to the cost of investing in the underlying ETF.

So, by definition, an investor is guaranteed to lag the fund's performance by 1.16%, all things being equal.

Even if you manage to shave ~10bps off the cost of the fund by accessing an institutional share class, the investor is still falling behind the fund performance by over 1%.

Happy to be corrected.;)
 
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