REBALANCE
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8
When you come to rebalance
your portfolio, make sure too that
you are not paying over the odds
in fund management fees. Tom
McPhail, Hargreaves Lansdown’s
head of pensions research, says: “In
recent years we have seen greater
transparency emerge on fund costs
and we are continuing to see prices
being driven down. When it comes
to re-balancing portfolios, investors
should also look at what they are
paying and ensure that they get the
best value.”
For an actively managed fund
where the manager buys and sells
stocks on your behalf, you should
not be paying more than around 1
per cent per annum. In the case of
tracker funds, which simply mirror
the performance of an index, you
should certainly not be shelling out
any more than 0.1 to 0.2 per cent.
Over the long term, your investment
strategy is naturally going to evolve
as your goals change. For example,
while taking on a greater amount
of risk in your younger years makes
sense, as it allows your portfolio to
increase in value, it may not be the
best tactic later on in life.
While the new pension rules
now allow savers from age 55 to do
as they please with their nest egg,
many retirees will still want to opt
for the security of an annuity, which
provides a fixed income for life. If
you are looking at taking this route,
de-risking is vital, as you do not
want to see some choppy market
conditions undo your life’s savings.
A good way of achieving this is
gradually moving out of stocks in
favour of bonds and cash. So broadly
speaking, if you are, say, 10 years
away from retirement and are 100
per cent invested in shares, then
think about transferring 10 per cent
across to safer assets each year over
the coming decade.
However, take a hard look at
when you can afford to retire and
be realistic as many people are
now working well into their 60s. If
you think you may be working for
longer than you would perhaps like
to, it may be worth at least keeping
some of your portfolio in high
growth assets: that is to say stockmarket based investments.
Expertly
navigating the UK
Investment trusts from Schroders
For UK investors, home shores can form the bedrock of
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That’s why you’ll find some of our most senior
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make Schroders your first port of call.
There are three trusts in the Schroders UK range:
Schroder UK Mid Cap Fund plc, investing in
medium-sized companies; Schroder Income Growth
Fund plc, aiming to provide both income and growth,
and Schroder UK Growth Fund plc, which seeks to
capitalise on the growth potential of UK companies.
As with any investment, investment trusts carry risk. The
value of an investment trust will rise and fall in value, and
you may not get back what you put in. As these trusts
concentrate on only the UK, they can carry more risks
than those trusts that are spread across a number
of regions.
Whether your focus is growth, income or a combination,
our deep knowledge of the UK can help you chart the
right course. Talk to your financial adviser or visit
schroders.co.uk/its
PERFORMANCE OF INDICES OVER 2YRS
30%
25%
IA North America (22.72%)
IA Japan (16.38%)
20%
IA UK All Companies (5.54%)
15%
IA Global Emerging Markets
(-7.33%)
10%
5%
0%
-5%
-10%
Nov
Sep
Jul
May
Mar
Jan 15
Nov
Sep
Jul
-15%
May
However, Stevenson points out
that out of favour areas, such
as emerging markets, have the
potential to bounce back quickly,
meaning it is important to maintain
exposure to unpopular parts of
the market. “This contrarian
approach tends to pay off in the
long run,” he added.
But while it makes sense for
investors to review and rebalance
their portfolios on a regular basis,
you should beware doing it too
often, as the charges involved could
outweigh any benefits.
Scott Gallacher, director at
independent financial adviser
Rowley Turton, notes that while
it is important to regularly review
the performance of your chosen
funds, it is much more important
to ascertain whether or not they
are being managed in the correct
manner rather than focusing on
actual or relative returns.
He says: “Short or medium
term underperformance should
not be the sole reason for
selling a fund. While short-term
underperformance can be alarming,
it is part and parcel of an active longterm investment approach from
leading fund managers that do not
tend to follow the herd.”
“I would suggest that an annual
review for most people would be
sufficient and even then it might not
be necessary to rebalance each year
if the underlying asset allocation has
not moved significantly, that is to
say more than 5 per cent.”
CHECK YOUR COSTS
Mar
BOUNCING BACK
RE-ASSESSING YOUR GOALS
INVESTORS WOULD
BE WISE TO USE
THE NEW YEAR AS
AN OPPORTUNITY
TO REVIEW THEIR
PORTFOLIO AND GIVE IT
A THOROUGH MOT
Jan 14
diversification makes sense.
He says: “There is also merit
in thinking about which areas
are likely to do best in the year
ahead and slightly weighting your
holdings towards these. Different
assets behave in different ways, so
even though I prefer equities to
bonds, for example, I would still
hold both in a portfolio.”
“In recent years, bonds have held
up much better than many pundits
expected thanks to slower than
expected growth and lower than
expected interest rates. This may
well be the case again in 2016.”
Source: FE Analytics
trustnetdirect.com
Investing for
your world
Fund manager industry experience: Rosemary Banyard: 36 years, Andrew Brough: 28 years, Sue Noffke: 25 years and Philip Matthews: 16 years. The most up to date
key features can be viewed on the UK Investor website via www.schroders.co.uk/investor. Issued in December 2015 by Schroder Unit Trusts Limited, 31 Gresham Street,
London EC2V 7QA. Registered No: 4191730 England. Authorised and regulated by the Financial Conduct Authority. UK09735