Our model portfolio aims to generate good returns over the next 15-20 years but it has already gained 23% in just 12 months, and without taking any big risks.
The table shows how our portfolio has turned £20,000 into £24,603 over the past 12 months, a gain of 23%. Since it contains 11 different funds, we haven’t taken big bets, and there are no high-risk gambles like natural resources or China in the list.
Three funds have gained over 30%. One is not surprising - Investec UK Smaller Companies. When economy is booming and the stock market rising, small companies usually perform well.
Likewise, the fact that Artemis European Growth has gained 36.3% over a year isn’t that exceptional. The Artemis fund managers usually do well in rising markets. But the third top performer is a surprise: SLI Select Property, a fund investing worldwide in commercial property, which has gained 32.5% over the past 12 months.
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How our current Long Term Growth Portfolio has performed
| Fund | Original investment | % of total | Value now | % of total |
| Aegon Global Bond | £2,000 | 10% | £2,046 | 8.3% |
| M&G Property | £2,000 | 10% | £2,176 | 8.8% |
| SLI Select Property | £2,000 | 10% | £2,650 | 10.8% |
| SLI UK Equity High Income | £2,000 | 10% | £2,566 | 10.4% |
| Neptune Income | £2,000 | 10% | £2,488 | 10.1% |
| Investec UK Smaller Companies | £2,000 | 10% | £2,728 | 11.1% |
| Invesco Perpetual Aggressive | £1,200 | 6% | £1,530 | 6.2% |
| M&G International Growth | £2,800 | 14% | £3,564 | 14.5% |
| Jupiter Financial Opportunties | £2,000 | 10% | £2,506 | 10.2% |
| Artemis European Growth | £1,000 | 5% | £1,363 | 5.5% |
| Framlington Japan | £1,000 | 5% | £986 | 4.0% |
| Total | £20,000 | 100% | £24,603 | 100% |
Values at 19/6/2007. Returns include reinvested net income. Source: Trustnet
Markets have been booming but it won’t last forever
Overall, this is a very satisfying result. But we mustn’t be complacent. World markets have been going up, with one notable exception. In fact, some people say markets have gone up too much and that another crash is looming. Should we be worried?
Yes. Investors should always be worried, because there is always something to be worried about. If you can’t worry without being worried sick, you shouldn’t be investing. I’m not going to list all our current worries but here are just a few big ones: too much debt, rising inflation, overheating in China, huge trade imbalances.
So what do we do? Remember we are talking very long-term here, and we can afford to ‘give up’ a bit of the profit we’ve already made- that wouldn’t be a disaster. So we’re just going to fine tune a bit, and switch a bit of money into two areas that haven’t yet boomed.
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Changes to the portfolio
In the UK market, higher-risk investments have done well, so well that the game is getting too risky. So we’re selling Invesco Perpetual UK Aggressive. And we’re also selling M&G International Growth, an aggressive international growth fund.
We’re getting broad international spread with a more conservative fund, Schroder Global Equity Income, in which we’re investing £3,000. That gives us £2,000 to spend, and it’s going equally into two funds: Framlington Japan and Framlington Biotech.
We don’t usually like to have too much money invested with any one management group, and if we didn’t already hold Framlington Japan we’d probably choose another fund in this sector - see the revised Long Term Growth Portfolio for new investors.
| Portfolio funds to sell | Amount |
| Invesco Perpetual UK Aggressive | £1,530 |
| M&G International Growth | £3,564 |
| Total | £5,094 |
| Portfolio funds to buy | Amount |
| Schroder Global Equity Income | £3,000 |
| Framlington Japan | £1,000 |
| Framlington Biotech | £1,094 |
Shifting money in lower risk general funds AND speculative specialists
What we’ve done is to move the core international holding to a lower-risk fund, but increased our holdings in riskier specialist international funds at the same time.
As I’ve pointed out several times in the past year, Japan’s economy is thriving but domestic investors have yet to get enthusiastic about shares- when they do, I expect a solid 2- or 3-year boom to begin. So having 10% of a growth portfolio invested in Japan doesn’t strike me as too adventurous.
I’ve also recently featured Framlington Biotech because biotechnology is now a mature sector where the huge potential of major scientific advances is now being realised. But investors have yet to wake up to what’s going on.
We’re leaving the Aegon Global Bond fund unchanged, despite dismal returns. The fund has produced better performance than most of its peer group and we need some counterweight to the bulk of the money invested in shares and property.
Every dog has its day. At some point, we’ll be glad we included a fixed interest holding in the portfolio, but if we knew when that time would be, we’d be rich already.
How our Model Portfolios are designed
Important Risk Warning
The Everyinvestor model portfolios are for general guidance only and do not constitute a recommendation for any investor. Everyinvestor does not provide individual investment advice. Your own personal circumstances and tax position must be taken into account in selecting investments. We recommend that you obtain advice from an authorised financial adviser before making investment decisions.
The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not an indication of future performance.
