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  1. #1

    30% portfolio allocation, Fundsmith or..?

    Looking at the following:

    30% Fundsmith
    20% Global Tracker
    30% Troy Trojan
    20% GAM Star Credit

    Theory being 50% "risky" and 50% "less risky".

    For the 30% that's Fundsmith I'm now debating whether or not to go 100% Fundsmith or split up between:

    Lindsell Train Global Equity
    Baillie Gifford Global Discovery
    Baillie Gifford International

    or just bloody stick with plan A and look at the others when I next add to the fund (plan is 10k lump now and 10k in before April to use the allowance)

    I'm only asking because Fundsmith looks too good to be true in terms of ongoing returns...

  2. #2
    It's funny arguing against my largest holding, but I'd still say GAM Star's a 10% position.

    Don't take the lack of volatility as a sign of low risk – it's very specialised .. If the fund were called UK Financial Services Junior Debt, it might more accurately describe where it's invested.

    The reason I'm cautious is because, as a less experienced investor, it might not be entirely obvious what to do if such a fund were to run into problems .. There are some funds you can hold forever, and others that shine then fade .. I can't say for sure which GAM Star will be.

    I think you'd be absolutely fine to go 100% Fundsmith .. But actually a top three holding (Paypal) just had 10% wiped off its price, after eBay planned to cut ties – so going 50:50 Fundsmith and LT Global halves what you'd call idiosyncratic risk, without necessarily reducing returns.

    To put a dampener on Fundsmith, I think current cash-flow yields (which predict future returns) are only around 3-3.5% .. I think growth is around 9-10% on that .. So whatever stocks do in the near-term, I wouldn't (by any means) estimate 20% annual returns going forwards .. If it were as easy as picking funds based on how well they'd done over the past 5 years, we'd all be billionaires (and not just Tony Peterson)

  3. #3
    Yes I understand that point, presumably you're into trying to qualify whether the percentage of those who default on that debt is more or less risky/volatile than equity in whoever else.

    Say GAM came down to 10% leaving 10% to complete.

    Suggestions welcome?

  4. #4
    My largest holding is SMT @ 20%. I wouldn't put 100% into any one investment.

  5. #5
    Well I think with the return being so close to stocks, the risk likely is as well.

    I can't quite recall your situation .. If you're going to keep investing, and building up a portfolio, and don't mind volatility, you could go for 10% in a Vanguard Emerging Markets tracker.

    Might sound a bit weird, derisking by putting 10% from bonds into Emerging mkt stocks .. But Emerging Mkts are cheap, and that's one form of diversification you don't currently have .. It's also a much less concentrated bet.


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