Our 10-year Growth Portfolio has gained nearly 20% in the past 12 months. Great news, but investors now need to make a couple of strategic switches.
The 10-year Growth Portfolio aims for maximum growth and is for investors who are prepared to take risks, which in this case could include seeing the value of your investments down 20-30% in a year.
Fortunately, since we set up the Portfolio a year ago, the markets have been favourable and the overall return has been just short of 20%. If you did that every year it wouldn’t be long before you were a millionaire (to be precise, if you had started with £20,000 it would take another 19 years).
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Good returns with limited risk
Note that we didn’t do this by shooting the lights out – i.e. getting lucky with one or two hotshot selections. Our investments are spread across no less than 12 different funds - which is no pain and no problem if you use a fund supermarket to run your portfolio.
The best performer made us 32% over the year, Threadneedle European Smaller Companies, while Aberdeen Asia Pacific made 32%. Three others made over 20%. Only two did badly: the two fixed interest funds, which are there as a bit of ballast for stormy times and which we are certainly not going to throw overboard now.
The Original 10-year Growth Portfolio
| Fund | Investment | % gain in a year | Value now | Return over 3 years |
| Aegon Global Bond | £1,000 | +2.8% | £1,028 | +20.9% |
| Framlington Pan-Euro bond | £1,000 | +8.7% | £1,087 | +29.0% |
| M&G Property | £1,500 | +9.6% | £1,644 | +8.3% |
| Standard Life Select Property | £1,500 | +25.1% | £1,876 | NA |
| Standard Life UK Equity Hi Income | £3,000 | +19.9% | £3,597 | +85.3% |
| Invesco Perpetual UK Aggressive | £1,500 | +25.5% | £1,883 | +88.5% |
| Framlington UK Smaller Co's | £1,500 | +22.2% | £1,833 | +105.4% |
| M&G International Growth | £2,000 | +18.9% | £2,378 | +91.8% |
| JPM Global Equity Income | £2,500 | +10% | £2,750 | NA |
| Jupiter Financial Opportunities | £1,500 | +17.3% | £1,760 | +94.9% |
| Threadneedle Euro Sm. Co's | £1,500 | +39.3% | £2,090 | +162.7% |
| Aberdeen Asia Pacific | £1,500 | +32.0% | £1,980 | +108.0% |
| Total | £20,000 | +19.6% | £23,906 | +108.0% |
Portfolio returns 12 months to 7/7/2007. All returns with net income reinvested. Source: Trustnet
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Three funds to sell and three to buy
So far so good. But what now? World markets have been rising since 2003 and some areas are looking toppy. One is the UK commercial property market, where investors have been buying offices on rental returns of as little as 4%. So we suggest selling the M&G property fund and switching to New Star International Property, which is investing heavily in the more attractive European property markets.
We also suggest selling Invesco Perpetual UK Aggressive, which has done well out of thee London takeover boom but is a riskier proposition now than when we bought it a year ago. Likewise the Asia Pacific markets, which will be hit if, as we expect, China’s overheated market takes a tumble. So we suggest selling Aberdeen Asia Pacific.
Our new purchases are in Japan - which we continue to regard as the world’s most undervalued stock market- and in the biotech sector. Unlike the currently fashionable ‘green energy’ fad, biotech is a mature industry which is just starting to generate ‘blockbuster’ healthcare products. Over the next few years this could be a riproaring success.
The two funds we are buying are Framlington Biotech and JP Morgan Japan.
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The revised £20,000 10-year growth portfolio for new investors
| Asset Class | Investment | Amount | Proportion of total |
| | | |
| Cash | | £0 | 0% |
| Fixed interest | | £2,000 | 10% |
| | Aegon Global Bond | £1,000 | 5% |
| Framlington Pan Euro Bond | £1,000 | 5% |
| Property | | £3,000 | 15% |
| *New Star International Property | £1,500 | 7.5% |
| Standard Life Select Property | £1,500 | 7.5% |
| Shares | | £15,000 | 75% |
| UK (25%) | Standard Life Equity Hi Income | £3,000 | 15% |
| Framlington UK Smaller Companies | £2,000 | 10% |
| International (50%) | M&G International | £2,000 | 10% |
| JPM Global Equity Income | £2,000 | 10% |
| Threadneedle Euro Smaller Companies | £2,000 | 10% |
| Jupiter Financial Opportunities | £1,000 | 5% |
| *JPM Japan | £2,000 | 10% |
| *Framlington Biotech | £1,000 | 5% |
| Total | | £20,000 | 100% |
*New holding
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Many advisers will tell you that our portfolio has too little invested in the UK. We say this is old world thinking. Britain is in fact economically part of Europe and in any case, in today’s globalised world, the actual place where a company is registered - which may not be where it does most of its business - is increasingly irrelevant.
If you want to be nerdy you can say our European holdings are about 35% of the total rather than the 25% shown in the table.
Many growth investors make the mistake of piling too much money on too few counters. As we’ve seen over the past year, there are usually one or two star areas. If you can collect 30% from a stake of 10-15% of your total investment over a year or two and then find another good prospect, you can cruise towards wealth rather than risking a wipe out if one big call goes wrong.
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Important Notice and 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. EveryInvestor recommends that you obtain advice from an independent 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.
