Equities began the year pretty much where they had left off in 2020 – in a ‘buy everything’ bull market.
Despite some wobbles before Christmas, growth shares made further gains in the first few weeks of the year alongside the recovery trade in value and cyclical stocks. My magpie Isa was 25 per cent up over six months at one point.
Then the wheels came off.
Bond markets started to throw a tantrum about the US Federal Reserve apparently not taking inflation seriously enough, and prices slumped as yields soared.
Brainwork: The Isa was 9.5 per cent up at the end of the first quarter in spite of, rather than because of, some of the choices made in the meantime.
Highly strung markets started to price in rate rises on the less-distant horizon, and the shine came off highly-valued growth stocks that had soared in 2020, including technology, biotech and clean energy firms and funds.
My pick’n’mix thematic Isa rapidly went from – at the time of my first article in the New Year – 20 per cent up since its August opening, to less than 4 per cent, while global stock markets gyrated a bit without suffering any major correction.
Then equities resumed their gains but led this time by value and cyclical stocks, as vaccines were successfully rolled out, began to work, and facilitated a firm reopening schedule for businesses and life in general.
The Isa recovered a bit towards the end of the quarter in spite of, it has to be said, rather than because of some of the choices I’d made in the meantime.
So by 7 April it was showing a gain since inception of nearly 10 per cent.
|L&G BATTERY VALUECHAIN ETF (BATG)||7.7%||15-Sep-20||47.0%|
|EDINBURGH WORLDWIDE IT (EWI)||7.3%||11-Aug-20||28.0%|
|JPMORGAN CHINA GROWTH IT (JCGI)||7.0%||11-Aug-20||29.5%|
|SCOTTISH MORTGAGE IT (SMT)||7.0%||11-Aug-20||33.2%|
|BIOTECH GROWTH IT (BIOG)||6.3%||11-Aug-20||12.0%|
|GOLDEN PROSPECT IT (GPM)||4.2%||11-Aug-20||-20.5%|
|VANECK VECTORS VIDEO GAMING ESPORTS ETF (ESGB)||3.7%||16-Oct-20||6.5%|
|HAN-GINS TECH MEGATREND ETF (ITEP)||3.7%||15-Feb-21||-8.3%|
|HERALD IT (HRI)||3.7%||26-Jan-21||-8.3%|
|MEDICAL CANNABIS & WELLBEING ETF (CBDP)||3.6%||19-Jan-21||4.7%|
|MOBIUS IT (MMIT)||3.6%||15-Dec-20||10.4%|
|BLACKROCK WORLD MINING IT (BRWM)||3.5%||15-Jan-21||8.2%|
|PREMIER MITON GLOBAL RENEWABLES IT (PMGR)||3.3%||15-Feb-21||-11.8%|
|EMQQ EM INTERNET & ECOMMERCE ETF (EMQP)||3.1%||15-Jan-21||-4.1%|
|JPMORGAN JAPANESE IT (JFJ)||3.0%||15-Dec-20||-8.5%|
|VINACAPITAL VIETNAM OPPORTUNITY IT (VOF)||2.9%||15-Jan-21||-4.1%|
|ISHARES MSCI KOREA ETF (IKOR)||2.9%||19-Jan-21||-4.4%|
|ISHARES GLOBAL CLEAN ENERGY ETF (INRG)||2.9%||15-Sep-20||27.5%|
|BLACKROCK ENERGY & RESOURCES IT (BERI)||2.8%||15-Mar-21||-5.3%|
|ISHARES EDGE MSCI USA VALUE FACTOR ETF (IUVL)||2.7%||15-Mar-21||2.0%|
|TEMPLE BAR IT (TMPL)||2.7%||15-Mar-21||0.1%|
|FIDELITY SPECIAL VALUES IT (FSV)||2.6%||16-Nov-20||20.6%|
|JPMORGAN SMALLER COMPANIES IT (JMI)||2.6%||16-Nov-20||25.0%|
|PACIFIC HORIZON IT (PHI)||2.5%||13-Nov-20||19.4%|
|L&G CYBER SECURITY ETF (ISPY)||2.4%||15-Sep-20||12.3%|
|FIDELITY CHINA SPECIAL SITUATIONS IT (FCSS)||2.4%||13-Nov-20||13.4%|
|TOTAL RETURN AS OF 07 APRIL 2021||+9.5%|
|INVESCO MSCI WORLD ETF GBP
|CRYPTOCURRENCIES||= c.7% of Isa total||Monthly from
|Cryptocurrency is held outside the Isa, as it cannot currently be held in one|
Not bad then, but to put it in perspective: global equities, as reflected in the Invesco MSCI World ETF, rose nearly 16 per cent in the same period. The Vanguard LifeStrategy 100% equity fund performed similarly.
Although that, of course, is how a lump sum invested at the start of the period would have performed, whereas I have been drip-feeding – which in a steadily rising market is less rewarding.
HOW MANY HOLDINGS!?
… is what many grizzled investors glancing at the table of my portfolio will be exclaiming. ‘This man needs to make up his mind and be selective!’ And to that I’d say several things, the first of which is, ‘Yes, you’re right.’
Second, however, trading fees aren’t making a huge difference. In the case of my platform they are low, at £5 a purchase.
That would apply whether I bought the same thing every month or different things. To minimise trading costs, I’d buy just one thing every month (which might be sensible, instead of two or three), and not sell anything.
Third, if you’ve identified a theme or a sector or a geography, I don’t see the harm in having more than one vehicle to represent it, depending on how much of the portfolio it comprises. They might have different approaches, different holdings; you might have one active and one passive.
You are hedging your bets, yes, but it’s also another level of diversification.
Fourth, overlap: I don’t really see the issue as long as you are aware of it, and happy with the resulting exposure.
TenCent and Alibaba are the most replicated shares, with both appearing in six of my vehicles. But the former stock makes up just 1.85 per cent of my portfolio, and the latter only 1.26 per cent.
Still, it’s far from clear whether ‘trying to be clever’, and picking sectors that I think will do better than average, will achieve higher total returns.
I also paid significantly more in fund fees – averaging out at 0.89 per cent – than the Invesco ETF’s 0.19 per cent ongoing charge.
The caveat to this ‘underperformance’ of course is that I am investing for the long term, and the Isa shouldn’t be judged on a quarter-to-quarter basis.
But there is room for short and medium term-judgements and tactical adjustments, even in a long-term project.
Would I make more over 10 years by just buying a global equities tracker every month? Well it’s a moot point, but it wouldn’t be much fun would it?
And it certainly wouldn’t make for an interesting series of articles.
As long as I stand a chance of doing better than the average, I’ll give it a go.
Disposals and acquisitions
I read so many alarming articles in early January predicting a big correction in tech stocks, that I decided to trim my excessive exposure by getting rid of two of the tech-orientated trusts I held, Polar Capital and Allianz.
I made a decent profit on them and used the money in part to buy into more value-orientated vehicles. But in truth most of my purchases in this quarter came a bit of a cropper.
Attempts to get extra exposure to Vietnam and South Korea slumped into the red almost immediately – as did my Japan investment trust bought in December.
I thought Herald investment trust would be a sensible bet given the great prospects for UK smaller companies but it was hit by the tech sell-off.
Global equities, as reflected in the Invesco MSCI World ETF, have risen nearly 16 per cent in the period that the Isa has been open.
Most irritating of all was my choice for extra exposure to the renewables sector, beyond my holding in the volatile iShares Clean Energy ETF. I agonised over the various investment trusts in the sector and some of the other ETFs.
A week after I plumped for the Premier Miton Global Renewables Trust, it had fallen by 20 per cent.
Yes investing is a marathon not a sprint, but it hardly helps if you start off up to your waist in a bog.
The irony is that one of the reasons behind the sudden drop in PMGR might well have been washback from a restructuring of the huge iShares ETF.
More successful was my play on the commodities super-cycle, with BlackRock World Mining Trust going in the right direction. But, never one to buy one fund when there are two available, I also went for BlackRock’s sister trust, Energy and Resources Income, which so far has fared less well.
The revamped Temple Bar investment trust and a US value stocks ETF are further attempts to get some exposure to value and cyclicals. They will hopefully not make me wish I’d just opted for a FTSE 250 index tracker.
All of which is starting to make that global equities ETF look more attractive by the day.
Wanting some more diversification away from equities than my gold punt, I decided to start a small crypto-currency fund. The FCA has seen to it that crypto exchange traded products aren’t offered by UK investing platforms – and even if they were they might not be allowed in an Isa.
So since December, I’ve been drip-feeding a small amount each month into bitcoin and ethereum using an app called Ziglu. As of the end of the first quarter this was nearly 30 per cent up and equivalent to about 7 per cent of my Isa fund.
In a further diversification I’d like to add a couple of property-related vehicles, and some more income-focused products.
Overweight in Asia: How the Isa is allocated geographically – as revealed by Morningstar’s X-Ray tool.
Heavy on basic materials and healthcare: How the Isa is allocated sectorally – as revealed by Morningstar’s X-Ray tool.
TOP SIPPS FOR DIY PENSION INVESTORS
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