The background to my £50,000 portfolio challenge
Back in March 2015 I decided to invest £50,000 of my own money using 80-20 Investor. The purpose was two-fold, firstly to show how you can use 80-20 Investor to invest and outperform the market with only a few minutes effort every now and then. Secondly, no other investment commentator, journalist or research provider invests their own money for fear of failing. This is a sorry state of affairs and is precisely why I committed to openly running my own portfolio for 80-20 Investor members to see.
Since then I have periodically changed my portfolio using the fund suggestions provided by the 80-20 Investor algorithm and associated research. I always disclose the changes at the time they are made.
Performance review
My portfolio has performed brilliantly since it was launched in March 2015, and particularly since I made the most recent fund changes in May. The portfolio does not take excessive risks, as typically only around 60% of the portfolio is invested in equities.
Since I started the challenge I have outperformed the market, passive portfolios and 90% of professionally managed funds. In fact I have even outperformed the 'legendary' fund manager Neil Woodford. For those of you who don't know, Neil Woodford is placed up on a pedestal by lots of investors and financial journalists as possibly the greatest fund manager to walk this earth. He used to manage the Income fund and High Income fund at Invesco Perpetual before he left to set up his own fund management firm. In fact, if you believe the PR circus that surrounds Neil Woodford you might start to think he can actually walk on water.
In truth Neil Woodford's new fund has performed very well since its launch in June 2014 and is the top performing fund within its sector (UK Equity Income) . Out of all 327 funds in either the UK Equity Income sector and the UK All Companies sector only 4 funds have outperformed him. Clearly the man knows what he is doing.
Yet the table below shows how my own portfolio has not only outperformed fund managers, the market and a passive investment approach but also Neil Woodford. Remember he has the advantage of being able to invest 100% in equities which gives him greater upside potential. Whereas my portfolio is diversified with typically around 60% exposure to equities.
My portfolio has produced a profit despite the various crises we have experienced including a Greek crisis, a Chinese economic slowdown as well as a commodity crisis.
The table below shows how my portfolio has performed since the portfolio was launched in March 2015:
| Portfolio | % return since March 2015 |
| Damien's £50k portfolio | 3.72 |
| CF - Woodford Equity Income | 1.96 |
| Passive Vanguard benchmark | -0.04 |
| Average fund manager | -1.99 |
| FTSE 100 | -8.02 |
The Brexit impact & Fed uncertainty
In recent months equity markets initially have had to deal with the renewed uncertainty over whether the Federal Reserve will increase interest rates sooner than previously anticipated. Then, more recently, the very real threat of a potential Brexit has caused another stock market wobble. In these volatile markets a lot of investors have been caught out by the sudden market swings.
The chart below shows how my portfolio (the green line) has outperformed the aforementioned benchmarks since my most recent fund changes on 19th May 2016 and during the recent bouts of market volatility.
Portfolio changes
As you can see from the chart above the portfolio has performed well in the current volatile environment. The current funds in my portfolio are shown in the table below. All the funds highlighted in green are still in the Best of the Best Selection for June and so will remain in my portfolio.
| Fund | % allocation |
| Fundsmith Equity Fund | 20.27% |
| Fidelity Global Dividend | 13.36% |
| Barclays - Sterling Bond | 4.82% |
| Vanguard Lifestrategy 20% Equity | 20.16% |
| Legg Mason Japan Equity | 7.61% |
| First State - Global Listed Infrastructure | 13.35% |
| Jupiter Absolute Return | 6.78% |
| Troy Trojan | 5.06% |
| Threadneedle Global Bond | 8.59% |
| TOTAL | 100% |
As I stated in my last portfolio review the Fidelity Global Enhanced Income fund is in this month's Best of the Best Selection, as opposed to the Fidelity Global Dividend fund which I hold. But if you look at the chart displayed in my last review it shows that the performance of the Enhanced Income fund versus the Fidelity Global Dividend fund are almost identical, suggesting that they are essentially the same fund. So therefore I will keep the Fidelity Global Dividend fund in my portfolio.
Turning our attention to the remaining three funds....
- Threadneedle Global Bond
- Legg Mason Japan Equity
- Troy Trojan
While Threadneedle Global bond has dropped out of June's Best of the Best Selection it has regained a place in the Best funds by sector section. So I am loathed to change it in this volatile environment especially given that global bonds have been a beneficiary of the recent bouts of market risk aversion
Next, we have the Legg Mason Japan Equity fund. The chart below shows the performance of the fund versus the average Japan fund since I bought it on the 7th March 2016, when it was highlighted by the 80-20 Investor algorithm (Click to enlarge).
The outperformance has been incredible and is a credit to the 80-20 Investor algorithm. However the level of risk being taken by the fund has increased relative to its peers which is why it has dropped out of all the 80-20 Investor shortlists. You can see how this week it dropped 5% in value in a single day. That would have triggered an 80-20 Investor stop loss had it been in the current Best of the Best Selection.
Therefore I am selling this holding and pocketing the handsome profits. I would normally be inclined to switch into another Japan fund which is currently in the Best of the Best Selection. However, given the volatility in markets and the upcoming referendum I will sit on the cash until after the vote next week.
That finally leaves the Troy Trojan fund. This fund has only just missed out of being in the 80-20 Investor shortlists yet is likely to return to the fold soon. However, I am happy to increase my UK fixed interest exposure, if only temporarily to bring my portfolio more in line with the current asset mix of the 80-20 Investor Selection. So I will switch all of my Troy Trojan holding into the Barclays Sterling Bond fund which I already hold.
Summary of fund switches
- Switch 100% of my holding in Legg Mason Japan Equity into Cash (still within my ISA wrapper)
- Switch 100% of my Troy Trojan fund into the Barclays Sterling Bond fund
My new portfolio
| Fund | % allocation |
| Fundsmith Equity Fund | 20.27% |
| Fidelity Global Dividend | 13.36% |
| Barclays - Sterling Bond | 9.88% |
| Vanguard Lifestrategy 20% Equity | 20.16% |
| Cash | 7.61% |
| First State - Global Listed Infrastructure | 13.35% |
| Jupiter Absolute Return | 6.78% |
| Threadneedle Global Bond | 8.59% |
| TOTAL | 100% |
My new asset allocation
This gives my portfolio the following approximate asset allocation (numbers in brackets represent the previous allocation before the fund switches):
Global fixed interest - 20% (20%)
US equities - 26% (26%)
European equities - 8% (8%)
UK equities - 9% (9%)
Japanese equities - 2% (9%)
Other international equities - 0% (7%)
Cash - 13% (5%)
Property - 0% (0%)
UK Gilts - 3% (3%)
UK Fixed Interest 12% (4%)
Alternative assets/strategies - 7% (9%)
This is probably my most cautious asset allocation for a while. While I am of course investing for the long term it still seems sensible to re-enter the market with my cash holding once the referendum is out of the way. The changes also brings the equity exposure of my portfolio more in line with the current 80-20 Investor portfolio albeit with a slightly different geographical mix.
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