Help an Economics & Finance Uni student develop an ISA portfolio in the current climate?

5th May '20 by Dickysam

6 comments 693 reads

I recently posted my fund portfolio ideas to a forum on this website and received some great constructive feedback that has helped me greatly to revise my current thinking which I would like to now share for opinions on strategy content, weightings and investment timing.

I am looking to build a long term funds’ portfolio through my ISA and start now in this bear market with investment trusts, funds and ETF’s – whatever looks like consistent good value.

I want to invest in high quality investment products that I can leave to compound in interest overtime - growth focused and manged through own quarterly reviews and rebalancing.

Currently my thinking is picking Morningstar 3*,4* & 5* rated relatively low cost funds/trusts/ETF’s that have had consistently strong growth (10% + over 3yrs) while picking a relatively low standard deviation within its peers and picking those showing stronger growth in the short term compared to others in its sector, while also comparing holding to ensure I am not buying funds too similar. I also look into managers ratings and managers holding s via Citywire

I have used Morningstar’s Sector performance ranking to base my thinking on and current sectors Global No looks like this:

Global
North America
Healthcare

This has led me to pick the following funds and contemplate the following associated weightings:

iShares S&P 500 information sector UCITS ETF = 30%

Exposure to USA and in particular technology. I believe over time the S&P will recover over time and invested heavily in strong US tech companies it has good growth prospects.

Scottish Mortgage (SMT) = 30%

I want to have global/tech exposure. This one is a low-cost investment trust that has continued to outperform its benchmark over time. With some exposure to China through this fund it allows me to have diversification in China through some of the stocks SMT invests in without directly exposing myself in an area that is quite unknown to me.

Baillie Gifford Positive Change Fund = 20%

Further, this fund invests in stocks that are making a positive change such as education and healthcare I believe will continue to benefit from the move in sentiment towards more sustainable/green investment.

Edinburgh Worldwide Investment Trust (EWI) = 20%

I believe this sector will benefit from the recent focus in this area and further still in…

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Macro

5th May '20

All looks good to me. At your age all that really matters is that you study ("invest in yourself"), work save invest and stay healthy ("your health is your wealth").

In normal times I would point you towards efficient frontier portfolio theory and the work of Craig Israelsen. See a very accessible Youtube talk at:

Or, his book on the same 7-12 approach at: https://www.amazon.co.uk/7twel...

But these are not normal times and you may want to be protective of your initial capital based on your view of the COVID-19 recession / depression.

Obviously when you are starting out you might not have enough capital for 12 positions. The ones you have selected look fine to me for the current climate.

However, if you want to take advantage of more diversification through a collective approach that uses modern technology and an inbuilt equal risk model with quarterly re-balancing then have a look at the work of Scaleable Capital: https://uk.scalable.capital/ . That would let you concentrate on your studies and living life while letting the theory, computers and compounding effects work their magic over the next 30-40 years.

William K

Interesting post. I can't find much with which to disagree.

If I were to change anything I would consider:

1. Splitting your investment in the S&P500 with the Nasdaq 100. If you believe that US technology will do well over the next 20-30 years, the Nasdaq with probably outperform the S&P500 (£EQQQ is one option and there is a currency hedged version if you believe the GBP will strengthen agains the USD over your time frame).

2. I'd drop the gold and go for a global equity fund instead. Over the long term gold is historically a poor investment although it's done well over the last few months.

3. On the whole I'd prefer an Emerging Markets fund to a China fund. It would spread the net wider and include India which might well overtake China in the next ten years. (Vanguard and Baillie Gifford both offer decent Emerging Market mutual funds.)

These are just my personal thoughts and I certainly wouldn't want them to be construed as advice.

Dickysam

Thanks for your feedback, really appreciate it.

Thanks for taking the time to respond, really interesting and helpful thanks again.

Danny001

6th May '20

If you look in the meetups section, you would be welcome to join an investor meetup. They are online via Zoom etc.

Wayneskie

24th Jul '20

Hi, Where would I find this meetup section? Sounds fun...

Help an Economics & Finance Uni student develop an ISA portfolio in the current climate?

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Dickysam

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