Many of our investors like to build their own portfolios but often come to us for guidance on how that portfolio should look.
People often ask us, “How should my portfolio look?”
The truth is that it’s really quite subjective – everyone has a different attitude to risk and preferences for one sector/region or another. But for those of you who would like a rough guide to a sensible split, we have provided the portfolios below.
The idea is that you determine your own attitude to risk. If you are comfortable with short-term losses and happy to invest for a long period of time, then you might think of yourself as ‘Aggressive’. However, if swings in valuation worry you and perhaps you are closer to retirement, you might prefer to take a ‘Cautious’ stance.
Portfolios can sometimes simply be the result of random purchases made over many years. However, there is a huge benefit to taking some time to analyse your portfolio to prevent sector and country biases creeping in. We suggest that you may wish to look at your portfolio on an annual basis and rebalance it where it has moved out of line with your goals.
Here we provide some model portfolios as a guide. Obviously the portfolios can be altered to reflect your own preferences*. It is important to have diversification to reduce risk, but spreading your assets across too many funds means that those which perform strongly will have little impact on overall performance. The number of funds held within these portfolios will vary depending upon the amount invested. As a rough guide, we would expect to have approximately 10 funds in a portfolio of over £30,000 and 15-20 in one of over £100,000.
*Remember, you can switch funds for free via the Chelsea FundStore
Further guidance to help you make your investment choices can be found in the pages of Viewpoint.
There are approximately 3,000 funds in the entire UK market, which may seem a daunting amount to some investors. We shortlist those we think are worth considering as part of a diversified portfolio and have organised our research into three simple tables:
Chelsea's research process
You can look at the funds within our Selection tables with the knowledge that we have met and interviewed every fund manager. We conduct regular analysis of fund performance in every sector, which flags the funds we wish to investigate further. We then interview managers, grilling them on their process, and satisfying ourselves that any outperformance they may have achieved is repeatable.
Once a manager achieves a place on the Chelsea Selection we obtain regular updates. We understand that managers may have short periods of underperformance but, as long as we are confident that they can get their fund back on track, it remains on our tables.