Wednesday 31 May 2017

Long-term Investment Portfolio - Part 2

In this second part of my investment portfolio blog, I will give you details about my investments in Active mutual funds. Over the last few years, I've been adding and removing a few mutual funds in my portfolio as I wasn't finding the right balance of enough diversification and at the same time, concentrated portfolio because I didn't want to stretch my time to look after 10s of mutual funds regularly. I think I have now completed the construction of my core holdings and will share my ideas here.

My investment philosophy is to buy and hold. And, hence, naturally, I'm drawn to mutual funds where investment managers have a similar style in their investments, either in stocks or in bonds, with a very low turnover rate. Currently, I'm holding good position sizes in each of the below-mentioned funds.

As with any investment decision, it is very likely that I may change my view on these funds in the future and increase or decrease my holdings. It is also possible that these funds may get a new investment manager or a different stratergy that may change my original thesis. And, hence, you should need to do your own research before you decide if any of these funds are a right choice. I have given a percentage allocation recommendation for each of these funds where I have assumed that I have only these assets in my portfolio.

1. Fundsmith Equity Fund
Terry Smith, chief investment manager, and his colleague, Julian Robins, run this fund with 20 to 30 share holdings. Their Annualized Rate of Return since 2010 has been +19.8%, which is exceptional when you compare it to Index funds or return by other active managers in the similar asset class. Of course, there is no guarantee that the return will be repeated for the next 5 or 10 years, however, the investment team is sticking with their investment philosophy and I'm very optimistic that the fund will generate a good rate of return in the future. I would allocate 25% of my investment assets in this fund.

2. Lindsell Train Global Equity
This fund is similar to Fundsmith and investment managers hold 20-35 companies in this mutual fund. The mutual fund company, Lindsell Train, has a few funds in their portfolios, however, this Global Equity Fund combines the best ideas from their other funds and bring US, Japanese, UK and European companies in one fund. The company publishes very detailed monthly reports and annual report is very educational as well. I would allocate 20% of my savings to this fund.

3. Stewart Investors Asia Pacific Leaders
The above two funds invest in the developed market only. For those who are looking to invest their savings in China, India, etc 'emerging market' companies, I found this fund is the best in class. Similar to Fundsmith and Lindsell Train, this fund has very few holdings and invests in large and mid capitalization equities in the Asia Pacific region (excluding Japan). I would allocate 20% to this fund.

4. Marlborough Global Bond
Marlborough Fund Managers' founder Geoff Hitchin launched this award-winning Marlborough Global Bond Fund in 1987 and remains at its helm today. The fund invests in bonds issued by governments and companies around the world. Portfolio turnover rate is 20.52% and the fund is unconstrained in its allocations to countries and regions. I would allocate 20% of savings to this fund.

5. MandG Emerging Market Bond
At least 70% of this fund's asset is invested in bonds issued by the governments, government agencies or companies of emerging market nations. The fund is currently offering more than 5% of underlying yield. Compared to the above 4 funds, however, this fund may have wider price fluctuations in a short period but this shouldn't concern a long-term investor. I would allocate the remaining 15% of my asset to this fund.

Important Information:  This is not an investment advice and hence you will need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser.

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