A married couple want to check if they should switch any of the funds held across their Isas
My husband and I each invest £250 a month and would like to know if the fund choices we made after asking for advice from Investment Doctor last year are still suitable.
In my Stocks and Shares Isa, I invest £50 each into Fundsmith Equity, HSBC American, Jupiter European and Vanguard LifeStrategy 100% Equity. I also invest £25 each in Vanguard Global Small-Cap Index and Stewart Asia Pacific Leaders within this Isa.
My husband has a Lifetime Isa (Lisa), in which he invests £25 each into Legal & General International Index Trust and Vanguard Global Small-Cap Index.
In addition, he allocates £50 each into JPMorgan Emerging Markets, Scottish Mortgage Investment Trust and Newton Global Income, plus £25 each into Jupiter India and Man GLG Japan CoreAlpha within his Stocks and Shares Isa.
Initial diagnosis
Jason Hollands, managing director for business development at Tilney Group, thinks your combined exposure to the US is too high.
“Each month, around 40% of your cash is going into US-listed companies,” he says. “That is too high for a UK-based investor and should be reined back to around 20%.”
A lack of UK exposure is another concern.
“You have just 8% in the UK, where it should be 30% to 40% of a sterling-based investor’s portfolio for currency-risk reasons,” he adds.
Treatment plan for you
Mr Hollands suggests swapping HSBC American for a UK equity fund, such as Liontrust Special Situations or Lindsell Train UK Equity.
Juliet Schooling Latter, research director at fund ratings agency FundCalibre, agrees that the equity bias in the portfolio makes sense.
“When you have a long-term time horizon, it becomes viable to take on greater levels of risk in a bid for higher returns,” she says.
However, she is also concerned about the lack of UK exposure. She suggests swapping Vanguard LifeStrategy 100% Equity for a UK equity fund.
“A UK small-cap fund might be a good idea because they tend to outperform larger companies over the long term,” she says. “My favoured fund is Unicorn UK Smaller Companies.”
Treatment plan for your husband
Ms Schooling Latter suggests substituting one of the index trackers in your husband’s portfolio for a global actively managed fund. A lot of markets have performed well, so if things get trickier it could make sense to back an active manager.
“He could consider swapping the Legal and General fund for Guinness Global Equity Income, whose managers have a very long-term time horizon,” she says.
Peter Sleep, senior investment manager at Seven Investment Management, praises your husband’s Lifetime Isa for its simplicity. He points out that the funds are large, low-cost and broadly diversified.
“Over the longer term I’d expect emerging market equities to outperform, so he could put 20% into Vanguard Emerging Markets Stock Index tracker, but this is not essential,” he says.
Mr Sleep believes your husband’s Stocks and Shares Isa, meanwhile, is rather adventurous.
He suggests a fund such as T Rowe Price Frontier Markets Equity fund, which has exposure to countries such as Vietnam, Argentina and Nigeria, could improve diversification.
“They tend to be higher growth countries and their stock markets tend to behave in an independent fashion to big, developed and emerging markets,” he says.
Mr Hollands describes Man GLG Japan Core Alpha fund as erratic and suggests it could be replaced by LF Morant Wright Nippon Yield fund.
“It has been a much more consistent performer and provides greater exposure to small and medium sized Japanese companies,” he says.
Rob Griffin writes for The Independent, Sunday Telegraph and Daily Express
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