My Strategy & Your Opinion

Hello all,

Have a sum to invest and am looking for some input. I want to put it out there for the medium term and Im looking for some comments on the strategy that Im thinking of. Basically I was thinking of breaking the sum into parts as follows

Gold 10 / 12%
Pacific Rim Fund 15%
Green or Alternative energy 20%
Investment Bond 15%
Cash on short term deposit 20%

These percentages are not set in stone and neither are the 5 segments outlined. I am looking for comments about the above strategy and also any other options. Will keep a few bob in irish shares but thats more for an interest than a profit play.

Should I be thinking of / looking at other avenues or am I overlooking something ? ?

All and any comments welcomed and more info supplied if necessary to facilitate a response

Thanks,

Westgolf.

Westgolf said:

Gold 10 / 12%
Pacific Rim Fund 15%
Green or Alternative energy 20%
Investment Bond 15%
Cash on short term deposit 20%

All and any comments welcomed and more info supplied if necessary to facilitate a response

Click to expand...

You have no exposure to euro-denominated equities. As you will presumably be spending the proceeds of your investment in the euro zone, investing in euro-denominated developed market equities should be a core component of your strategy. There is no currency risk with euro-denominated equities.
You have 30% in cash and cash equivalents (i.e. Gold 10 / 12%; Cash on short term deposit 20%). Normally cash is for precautionary savings and not an investment as it is eaten up by inflation. You should consider reducing this amount if inflation returns.
Pacific Rim Fund 15%. Pacific Rim is a geographical area not an asset class. If you invest in this you, in effect, invest in foreign developed market equities (e.g. Japan and Australia) and emerging markets (e.g. Taiwan, HK, etc.) (also foreign currency denominated) with a ‘Pacific’ tilt. Why not just invest directly in foreign developed market equities and emerging markets (unless you think the Pacific ones will outperform over the course of your investment).
Green or Alternative energy 20%. I’m not sold that ‘green energy’ is an asset class. If you invest in this you will probably end up investing in foreign developed market equities (with a ‘green’ or small-cap tilt.)
Investment Bond 15%. It all depends what the bond covers.
So (a) you’ve no exposure to euro-denominated developed market equities; (b) you’ve 35% exposure to foreign developed market and emerging market equities, both with currency risk;(c) your cash is probably too high for the long term.
[Disclaimer: Note that the above is comment / observation and is not a recommendation to follow any particular investment strategy.]

I'd agree with much of PMU's post. Green energy is not an asset class and the Pacific Rim has the same expected return as the UK, USA Europe and any other developed equity market.

You need to be clear about what represents an asset class.

If we look at two diversified portfolios over 90% in the differences in performance can be explained by three factors:

1) exposure to stocks in general
2) exposure to small companies
3) exposure to stocks with a high book-to-market or "value" stocks.

So, the default position should be I'm going to invest 100% in equities broadly by market capitalisation (40% USA, 10% UK etc) then to ask what are my risk preferences i.e. do I want more risk and a higher expected return as compensation in which case I should tilt more to smaller companies, value companies and Emerging Markets which will increase my expected return?

Or do I want to tilt more to cash, fixed interest or gold? This should reduce my volatility but may also reduce my return.

Finally do I want to add anything else property for example?

Marc

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Hi lads,

Firstly thank you both for the detailed responses.

The first point I would like to clarify is the "labels",I used these as indicators, in a general sense, of the areas that I am thinking of approaching. They are not exact because Im not exactly sure myself. I consider the alternative / green energy topic to be one of considerable interest as we approach peak oil etc and I would therefore put some thing into that sector.

I'm not ignoring the eurozone, just looking to broaden the range of options available and looking for alternatives and advice please

Westgolf