Learn to be a Financial Hunter - Not the Hunted

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How To Easily Build, Manage and Run

a Successful Stocks & Shares ISA

2 ISA Portfolio examples
ISA Portfolio 1: worth £10,000

This is an example of how a 45 year old with £10,000 invested might construct a portfolio using ETFs. Note that I'm going to use the following portfolio allocations as described from the previous page -

  • 55% equities
  • 20% bonds
  • 25% property
I have decided to have no cash element to the portfolio and instead have added an extra 5% weighting to the property asset class.
Some portfolio hacking is required
Because the portfolio is worth only £10,000 I'm going to be doing some portfolio hacking. 'Hacking' or 'a hack' is a relatively new phrase that's used a lot in internet circles (not necessarily relating to the computer though). A hack is a quick and simple solution to any problem, a workaround if you will.

Portfolio hacking is normally required on ISA portfolios of less than £15,000 mainly because it's not economical to buy or sell ETFs of less than £1,000 in value because commissions make the deals expensive.

Take the 55% (£5,500) to be invested in equities as a good example. According to asset allocation table on the previous page the £5,500 is split up as follows -

  • 40% (£2,200) UK equities
  • 25% (£1,100) US/Continental equities
  • 15% (£825) Far East developed, and
  • 20% (£1,100) Emerging equities
So as I refuse to do any deal for less than £1,000 I've employed some hacks (work arounds). My portfolio (for the equity component) therefore looks like this -
  • 40% into UK equities
  • 20% into European equities
  • 20% into Far Eastern developed, and
  • 20% into Emerging markets
The portfolio hacks were as follows -
  1. Reduced the 25% allocation from US/Continental shares to 20%
  2. Decided not to buy any US shares, instead preferring continental markets
  3. Added the 5% to Far Eastern developed
The finished portfolio now looks like this -
Asset Class
%
weighting
ETF
Amount
Equity
allocation
55%
FTSE 100 ETF
£1,100
FTSE 250 ETF
£1,100
MSCI Europe Ex-UK
£1,100
MSCI Japan
£1,100
MSCI Emerging Markets
£1,100
Bond
allocation
20%
UK All Stocks Gilt
£2,000
Property
allocation
25%
UK Property Fund
£2,500
100%
TOTALS
£10,000
The portfolio's initial costs and running costs
7 separate ETF deals were done and with commissions at £12.50 that's £87.50 (0.87% of the total £10,000 investment)

Annual management charges come in at a very competitive 0.42%.

ISA Portfolio 2: worth £25,000
The more capital to invest the less portfolio hacking needs to be, if any. Also, there's more scope to get adventurous with different ETFs.

For example, in the £10,000 portfolio above 20% of the 55% allocated to equities was invested in the MSCI Emerging Markets ETF. This consists of about 25 different country stockmarkets including Brazil, India, Korea and Taiwan.

But you might believe the economies of Korea, Taiwan and Turkey have great potential over the coming years so it's better to invest directly into those markets rather than spreading your cash thinly over 25 different ones. You can see how I've taken account of this below.

Assuming this is a portfolio for someone aged 45 there is more capital to invest in both Property and Fixed Income ETFs. I've therefore added a corporate bond ETF and diversified the property component into Continental Europe as well as Asia.

The portfolio will therefore look like this -

Asset Class
%
weighting
ETF
Amount
Equity
allocation
55%
FTSE 100 ETF
£2,750
FTSE 250 ETF
£2,750
MSCI Europe Ex-UK
£2,750
MSCI Korea
£1,833
MSCI Turkey
£1,833
MSCI Taiwan
£1,833
Bond
allocation
20%
UK All Stocks Gilt
£2,500
£ Corporate Bond
£2,500
Property
allocation
25%
UK Property Fund
£2,083
European Property
£2,083
Asia Property Yield
£2,083
100%
TOTALS
£25,000


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