Guide to the 80-20 Investor Best of the Best Selection

9 min Read Published: 17 Aug 2016

80-20 Investor Best of the Best PortfolioSolving choice overwhelm

One problem all investors face is the sheer number of options out there. Without doubt investment funds are the best route for most DIY investors as they enable you to invest in a wide range of assets and businesses cost effectively. Yet there are over 2,000 funds out there to choose from. How do you know which ones are good or which ones to avoid? Also, how do you know whether to invest in a UK focused fund or maybe one that invests in companies in Europe? What about investing in technology companies?

Unsurprisingly most DIY investors give up due to the overwhelming choice. The good new is that 80-20 Investor's Best of the Best Selection removes this barrier so that anyone, even a complete novice, can easily make informed decisions and invest with confidence. Don't just take my word for it, this is what one 80-20 Investor member wrote about the service:

'80-20 Investor solves the problem of ‘choice overwhelm’ that faces anyone new to investing'

The chart on this page shows how the funds from the Best of the Best Selection have performed versus the market and the typical managed fund run by a professional fund manager.

What is the 80-20 Investor Best of the Best Selection?

Our Best of the Best Selection is designed to provide a balanced shortlist of low, medium and high risk funds invested across a range of asset types. It forms the basis of my own successful £50,000 portfolio which I run for the benefit of 80-20 Investor members.

The 80-20 Investor Best of the Best Selection is a shortlist of funds updated at the start of every month. It is typically made up of 10 low risk funds, 10 medium risk funds and 10 high risk funds, to give a balanced spread, chosen by the 80-20 Investor algorithm.

The risk assessment of the funds is determined by how the fund manager has invested his/her money and the way the fund’s returns have been achieved. To get the Best of the Best Selection, all funds from across all of the Investment Association's (IA) official fund sector groupings are analysed and split into the three risk categories (low, medium and high). Then those which the 80-20 Investor algorithm rates most highly across a range of sectors are selected. So members can use the Best of the Best Selection to chose a selection of funds based upon the funds’ risk profiles (low, medium or high). Also the daily 80-20 Investor stop loss alerts are based off the Best of the Best list.

How I use the 80-20 Investor Best of the Best Shortlist

When I review my £50K portfolio I first check to see which funds within it are still within the Best of the Best shortlist. Any that aren't are flagged for further consideration. I then look at the asset allocation of my portfolio (i.e the amount invested in UK equities, US equities, global bonds etc) and compare it to that of the Best of the Best Selection. I determine the asset mix of my portfolio using the 80-20 Investor asset allocation tool. As a collection of funds the mix of the Best of the Best Selection is equally weighted across low, medium and high risk funds. On account of my age and risk tolerance I am happy with that spread. An older more cautious investor would want to focus more on the medium and low risk funds. As a steer the 'age guide', whereby you try and equate the percentage exposure of your portfolio to low risk funds with your age, is a good starting point. So a 50 year old with a medium attitude to risk may have up to 50% of their portfolio in low risk funds. A more cautious 50 year old may have a lot more than 50% in low risk funds.

I personally try and keep an equal spread across the three risk levels as it suits me. Given that the 80-20 Investor algorithm has favoured a particular mix I also try and replicate it as much as possible in my £50k portfolio. The reason I can only 'try' and replicate it is that I don't buy all 30 funds listed in the Best of the Best Selection. Instead I only hold 7-10 funds at any one time as this is a manageable number. So to sum up I look to mirror the asset allocation of the Best of the Best Selection while trying to have an equal weighting across all three risk buckets (low, medium and high). This is just a personal choice.

Finally I make fund switches accordingly to try and ensure that I hold funds that are in the Best of the Best Selection. Where that's not possible, if for example the investment platform I use doesn't have them available, I chose one of its peers from the same sector using the Best funds by Sector shortlists.

80-20 Investor past performance

While past performance is not a guarantee of future returns the chart on this page shows how the Best of the Best Selection has outperformed the market and professional managed funds, assuming that all funds within the shortlist were held and updated at the start of the month.

The material in any email, the website, associated pages / channels / accounts and any other correspondence are for general information only and do not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation. See full Terms & Conditions and Privacy Policy
Neither Investor nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested.
Information provided by Investor is for general information only and not intended to be relied upon by readers in making (or not making) specific investment decisions.
Appropriate independent advice should be obtained before making any such decisions. Leadenhall Learning (owner of Investor) and its staff do not accept liability for any loss suffered by readers as a result of any such decisions.
The tables and graphs are derived from data supplied by Trustnet. All rights Reserved.