Long-term Investment Portfolio - Part 1

In this blogpost, I will go through my Investment Portfolio, focusing on Index Funds. As a long-term investor, my aim is to preserve and grow the real value of my assets. World's most renowned investors, including Howard Marks & Warren Buffett, suggest low-cost tracker (Index) funds as a best for retail investors to invest their money in. These funds should be used for a long-term investment (5-10 years) and not advised to do short term trade in and out.

Most of the below funds are available as an either income or accumulation share class for the UK investors. Furthermore, most of the funds are also available with another layer of discounts as some of the investment platforms have negotiated further discounts on already low-cost ongoing charges (OCF).

1. BlackRock Corporate Bond Tracker Fund

This is a low cost tracker fund which tracks the performance of the Markit iBoxx GBP Non-Gilts Overall TR Index. The OCF for the fund for a retail investor is 0.16%. The fund is currently yielding just above 3% and gives a good exposure to world's corporate bond market.

2. Legal and General European Index

Legal and General Investment Management has done a great job of providing very low cost index funds across the major investment sectors. This is an Equity index fund tracking the performance of the FTSE World Europe (excluding UK) Index. The Index consists of a broad spectrum of European companies and currently advertised at OCF of 0.12%.

3. Legal and General UK 100 Index Trust

It is a well known fact that most of the investors have a home bias when it comes to investing their savings. Being aware of that and also knowing that a few of my individual stock investments are within FTSE 100 companies, I have a minor portfolio holding in this fund.

4. HSBC FTSE 250 Index

Again, this is one of my smaller portfolio holding. This fund provides tracking of FTSE 250 Index and has OCF of 0.18%.

5. Legal and General US Index

This fund replicates the performance of FTSE USA Index. This index has a few more companies compared to SP 500 index. For the UK retail investor, I found that this fund provides the lowest OCF compared to an SP 500 index fund and hence I have selected this fund over an SP fund.

I do not have any emerging market index tracker funds. There are few reasons behind this as I think most of the emerging market indices do not correctly represent emerging or developing markets. The second reason is that I do not believe that those markets are efficient or free from inside trading.

I hope the above list will give you a good starting point to start constructing a balanced portfolio and than add an active investment funds. It is possible to reduce the number of Equity Index funds from four to a single fund by investing in an International Index Trust if you do not want to allocate your funds to these individual funds.

I will write a separate blog featuring my investments in Active Mutual Funds.

Important Information: I do not give investment advice so you need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser.

Value Investing

Few years ago, while reading an article about various investing methods, I came across the value investment approach, which was first introduced by Benjamin Graham, and made popular by Warren Buffett. Those who are not familiar with either of them, I would recommend these books: 'The Intelligent Investor' by Benjamin Graham, and either 'The Snowball' by Alice Schroeder or 'Buffett' by Roger Lowenstein.

At the heart of the Value Investing, there is a simple concept of buying a share in the company where its shares are selling at considerably less price than company’s total net asset (generally, value of its tangible asset) value and sell the share when it reaches near to that value. Of course, there is a lot more investigation required by an investor to find out a company's valuation and where the other part of the value investment principle, of 'margin of safety', becomes invaluable.

If you would like to start investing in the UK and EU based companies or want to start your research, I found below websites are very useful:

Fidelity [Mainly mutual funds]

HL [Stocks, ETFs and Active Saving]

Freetrade [Stocks, ETFs and Gilts]

It has never been easier and cheaper to start investing, especially true for the UK residents. One can start investing in the stock market (or in bonds, gold, etc. for that matter) with as little as £25 per month with low management fees.

Some of the UK based Mutual fund managers I follow are:

http://www.lindselltrain.com [Fact sheets & insights]

https://www.fundsmith.co.uk [Annual reports and videos]

http://www.sanford-deland.com [Fund based upon Buffett's investment methods]

and US based websites:

http://www.berkshirehathaway.com [Annual reports and letters]

https://www.oaktreecapital.com [Memos from Howard Marks]

http://www.theinvestorspodcast.com [Books reviews, interviews & Podcasts]

I leave you with the below quote which caution a potential investor before buying shares in a 'turnaround' company:

"When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."

- Warren Buffett

Important Information: I do not give investment advice so you need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser.

Passion for Career, Hobby or for Life

We often see most of our friends are being passionate about their careers. Not all career opportunities give hefty financial returns. Still, most people are very ambitious about their careers. Almost everyone wants to reach to the "highest" position in their career ladder.

Some of us divert this passion to achieve something totally different. Many artists love their skills and sometimes go beyond anyone's imagination to achieve their dreams. They create astonishing art even their career doesn't bring financial or social stability. While others, devote their entire life for the service to others.

I have a passion for day-to-day life. It's certainly not a struggle for me to survive a day. However, I like to make the most out of everyday. For some unknown reason, I "don't" have any dream which I want to achieve in my life. For me, living a life is an ultimate satisfaction. That doesn't mean that I don't think about short term goals. I do. And I'll try my best to fulfil them. My passion is knowledge, I like to know more, want to understand everything there is in the nature to understand, want to live in the present time and enjoy the most out of it. 

As Gautama Buddha has said,

"Do not dwell in the past, do not dream of the future, concentrate the mind on the present moment."

We can't change what has already happened in the past. In the present moment, we can't do anything to influence our faraway future. Hence, I think the best way to enjoy the life is to be passionate about the life and enjoy the current moment.

Most people have few goals in their life, they may want a managerial post at some point in their career, earn thousands if not millions of pounds, have a luxurious life style, own the costliest technology products, have a big and a beautiful house, etc etc. For me, I have none of these things as goals. I believe that if I can be here, without thinking about the future and planning ahead for 2-5 years, I think I can be a good position with just living a life without targeting any of these so called "goals". Money does bring happiness. More money also brings more happiness and more ownerships of the objects. However, there is no end to this acquisitiveness.

One should feel satisfied with what he or she owns. We should be thankful for the food and shelter. We should be more focussed towards helping family and community. We should share knowledge and have a desire to learn more. By living a simple life, we can achieve more.

Selfishness

I see everything happening in and around the world, always have some resemblance in our personally life, too. The recent volcanic ash incident brought various political, psychological and scientific thoughts in my mind. Until last Thursday night, everything was fine on the ground and in the air in the UK. But, when I tuned into news on Friday morning, I found that due to ash clouds from Icelandic volcano has caused airspace closure and there is no flights to and from UK airports. The situation worsened during the weekend as that ash covered most of the Europe and literally whole Europe was under no fly zone.

The weirdest part of the whole incident was that everything felt very calm and normal on ground level. There wasn’t any single thing I noticed different in day-to-day life. But when I read more about the affects of airports closures, almost no commercial flights services and economic effects of it in almost every parts of the world, I released how severe the problem was.

We all know that we are helpless against nature’s will. We don’t have knowledge to predict such an event neither we have power to stop such a thing happening. But, we are definitely strong enough to help people after this kind of incident. And, I have seen that UK government has helped people and authorities in such events, more recently in earthquake-hit Haiti, Southeast Asia when Tsunami struck, etc. But, I see very less help on this case when hundreds of thousands of British people are stranded all over the world. There has been some development in bringing these people back to home, but it’s a very little effort when you know how much resources British government has. If government really cared about their own people, they just could use their unused military aircrafts, they could use money to hire private aeroplanes so that they can take stranded passengers from UK to their destination country and bring British people back to home. But, they aren’t doing such a thing. I see government is letting commercial Airlines’ to sort this issue out. And, we all know that Airlines are not in business to help people, they are in business to make money.

All these lead to me a typical human behaviour. We do not act very fast and with confidence when our loved ones asks for our help or when they ask us to be there in their side in problem. This is a very common but a bizarre psychology that I have seen in people. Why some of us act very fast to help someone else's issue and why we hesitate to help our own people? When a person or as in above case, government, justify this by giving reason that because they are our own people, they will understand why they have given them second priority while placing something else before them. I strongly disagree with that. How can we expect British people to understand why government is not acting to bring them quickly to home while sending millions of pounds to a country where they do not have direct connection? How can a person understands a reason when his or her loved once put her or him second and gives a priority to a third person?

I believe that if we can take care of our own family first, and if everyone does so, then the whole world will be a far better place. Sadly, most people consider this kind of act as selfish. But, I don’t see that way. I firmly believe that we have to be on the side of our loved ones first before we think about how that decision will affect anybody else. Even if that means that we may not be able to satisfy everyone but at least we will be able to make our loved one happy. And, if we will be able to do so, then I am sure that everything will work out for the best at the end for everyone.