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. At the time of writing my portfolio is up 11.75% since March 2015!
Performance review
Obviously I am very pleased with the result to date given my balanced approach in not taking excessive investment risk and has outperformed the FTSE 100 (up 2.8%), passive investments (up 8.5%) and the average managed fund (up 6%). However, a number of the funds within my portfolio have now dropped from both the Best of the Best Selection as well as the Best by Sector tables.
That's not to say they are suddenly bad funds. Far from it. In many cases they are just outside the shortlists. However, by selling these funds and moving into other funds identified by the 80-20 Investor algorithm I avoid the common mistake of holding on to funds for too long and eventually losing the profits I've made should their performance start to dip. I want to stick to a process otherwise old habits (emotional investment decisions) can creep in. Don't forget that the very funds that have fared so well in my portfolio were only picked using this process and at the time one or two of those decisions were uncomfortable, yet have ultimately proved profitable.
As part of the changes I've looked to bring my portfolio back in line with the rough asset mix of the Best of the Best Selection. That means reducing my US exposure but increasing my UK, European and Property exposure. This all might seem counterintuitive from an emotional viewpoint as the US has been hitting all-time highs. However, I am comfortable with it as it broadens my asset mix further yet maintains a global focus, which would prove beneficial if the pound continues to weaken.
So my portfolio before the new changes was:
| 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% |
Fund switches
I am making the following fund switches
- Switch out of Fidelity Global Dividend & Fundsmith Equity and split the combined proceeds equally across 4 funds, namely 1) Marlborough European Multi-Cap 2) Schroder US Mid Cap 3) Schroder Global Real Estate Securities Income 4) Franklin UK Equity Income
- Switch 100% from Vanguard Lifestrategy 20% Equity into BlackRock Overseas Corporate Bond Tracker
- Switch 100% out of Jupiter Absolute Return into Threadneedle Defensive
With regard to switching out of the global equity funds (Fundsmith and Fidelity Global Dividend) I split the proceeds geographically in order to reduce my US exposure. As I've highlighted in my previous research piece global funds aren't typically very global at all, but mostly US focused. So one way to ensure a more geographical split is to invest in geographically focused funds.
I always look to avoid funds with bid/offer spreads, instead favouring single priced funds, to avoid being penalised upon switching. Although two of my new funds do have bid/offer spreads via the platform I use but they are negligible and not worth worrying about. The funds in question are BlackRock Overseas Corporate Bond Tracker and Schroder US Mid Cap.
Threadneedle Global Bond is hanging in there by the skin of its teeth having dropped out of the Best of the Best Selection and only just reappearing in this week's Best by Sector list. It is likely that this fund could face the axe in due corse.
Timing
There had been a lot of speculation that the Bank of England would cut interest rates and possibly launch more quantitative easing after its meeting on Thursday 4th August. Such a significant move was likely to send the pound falling which would be beneficial for my portfolio with its global focus. I therefore decided to wait to make the above changes until after the Bank of England meeting otherwise my portfolio would have been in transition (so out of the market) and any uplift would have been missed. This wasn't a case of trying to market time, as I am now making the changes regardless of the short term impact of Thursday's decision. However, it is just prudent to change funds (jump ship) in less choppy waters.
My new portfolio
So my new portfolio will look like this:
| Fund | ISIN Code | SEDOL Code | Citicode / TIDM | Allocation |
| AXA - Framlington Japan | GB00BRJZVR88 | BRJZVR8 | M3CM | 8.38 |
| Barclays - Sterling Bond | GB00B72Y6K08 | B72Y6K0 | I0TI | 9.29 |
| BlackRock - Overseas Corporate Bond Tracker | GB00B58YKH53 | B58YKH5 | G6ID | 19.15 |
| First State - Global Listed Infrastructure | GB00B24HJC53 | B24HJC5 | A6X1 | 14 |
| Franklin - UK Equity Income | GB00B7DRD638 | B7DRD63 | G25P | 8.64 |
| Marlborough - European Multi-Cap | GB0001719730 | 171973 | CA33 | 8.64 |
| Schroder - Global Real Estate Securities Income | GB00B50MLC91 | B50MLC9 | MEL9 | 8.64 |
| Schroder - US Mid Cap | GB00B7LDLV43 | B7LDLV4 | 0V2Q | 8.64 |
| Threadneedle - Defensive | GB0032010042 | 3201004 | TC71 | 6 |
| Threadneedle - Global bond | GB00B8C2M701 | B8C2M70 | GDYT | 8.62 |
My new asset allocation
My new asset allocation is listed below with the previous allocation in brackets
Global fixed interest - 29% (20%)
US equities - 16% (26%)
European equities -10% (8%)
UK equities - 10% (9%)
Japanese equities - 9% (10%)
Other international equities - 0% (0%)
Cash - 4% (5%)
Property - 9% (0%)
UK Gilts - 0% (3%)
UK Fixed Interest 10% (12%)
Alternative assets/strategies - 3% (7%)
