# Investment Portfolio



## Basicilly09 (18 Feb 2013)

I'm in my mid thirties and have dabbled in investing for a few years on and off. I am looking at something more long term with low maintenance as I do not have much time to spend on investing. Based on some research I have opened a Rabo Direct account and am aiming to buy 4-5 funds with an initial lump sum and to top these up monthly for 5-10 years approx. 

Below is the allocation i am considering but i'd be greatful for any advice whatsoever as i'm not really sure how balanced it is?

40% - Mixed - BNP Paribas Plan Target Click Fund 2020 Acc
20% - Bond - Templeton Global Total Return A Acc EUR
15% - Equity Asia - Robeco Asia-Pacific Equities high
15% - Equity Tech Global - Henderson Horizon Global Tech A2 Acc
10% - Equity Europe - JPM Europe Strategic Dividend Fund
Cheers


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## mercman (18 Feb 2013)

Well, it's pretty obvious that you don't mind paying Hefty Management Fees, which over a period of time will erode any profits you make.


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## Jim2007 (18 Feb 2013)

I don't have the time nor the inclination to go digging through these funds to figure out the asset allocation, but in addition to the high fees already mentioned, it strikes me as an old man's portfolio.


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## PMU (19 Feb 2013)

Why not first read Rory Gillen’s excellent book ‘3 Steps to Investment Success’ http://www.askaboutmoney.com/showthread.php?t=174019&highlight=gillen and them make a decision?


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## Basicilly09 (19 Feb 2013)

Wow, i didn't realise i was that far of the mark. I did some more risky trading in the past with FX's particularly and some stock picking. Since then however i have become a parent and have as a consequence become a lot less risk tolerant. The rates in savings accounts are pretty awful so i'm just looking for something that gets 6-10% growth each year. Unambitious i know but achievable with minimal effort and risk i'm thinking. 

Mercman - are you suggesting ETF's to avoid fees? Are all funds really that poor in relation to fees? 

PMU - Thanks for the advice on the book which i will take a look at but prob won't be until later in the year at the earliest.


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## Billo (19 Feb 2013)

Basicilly09 said:


> The rates in savings accounts are pretty awful so i'm just looking for something that gets 6-10% growth each year. Unambitious i know but achievable with minimal effort and risk i'm thinking.



6 - 10% looks very ambitious to me. Good luck.


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## mercman (19 Feb 2013)

Basicilly09 said:


> Mercman - are you suggesting ETF's to avoid fees? Are all funds really that poor in relation to fees?



There has been many articles written about the effect that Management Fees have on funds. I found the sheets of one of the articles and if the Mods allow it, I will post them on this thread. It's a real eye opener. Re ETFs, they are the cheapest way to have your money managed, especially in comparison to Funds.


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## ashambles (19 Feb 2013)

There maybe a little too much discouragement going on, I think it's a reasonable looking portfolio to start off with.

If you go all out for risk at the start it could blow up and you get discouraged, or you spend so long looking for investment opportunities you do nothing. 

Fund charges are too high, however regardless of that you do need to do something to get a return. Would this fund selection despite charges have out performed cash last year - I'd guess it would have - pretty much every fund outperformed cash last year.


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## dub_nerd (20 Feb 2013)

OP, do you know the tax implications of the Rabo funds? Someone may correct me, but I believe most of them are UCITS incurring 36%. Also you can't offset losses in one against gains in another. So you could end up making an overall loss and still having to pay tax!


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## mercman (20 Feb 2013)

dub_nerd said:


> So you could end up making an overall loss and still having to pay tax!



Plus any losses that might be made cannot be used to offset against future profits.


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## ashambles (20 Feb 2013)

The OP offered a specific investment plan and is getting mostly general reasons to not go with it.

I’d be the one of the first to complain that taxes and charges are high, but as of yet they’re not a reason to not invest. 

There’s going to be taxes and charges on all alternative forms of investments, the OP mentioned that they’ve dabbled in shares and doesn’t have the time to do so long term. I’d even say that Rabo funds are particularly awkward regarding tax – especially once the 8 year rule kicks in – this put me off of them.

But If someone doesn’t have time to spend buying shares, and if funds and ETFs are out due to taxes and or charges – what’s left in terms of liquid financial investments?


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## maturin (20 Feb 2013)

there are 2 reasons why i wouldn't invest in the funds proposed by the OP:

1. for some of the funds it's not clear what the target benchmarks are or even what they invest in 
2. the charges are high

For 2 of the funds with clear benchmarks (Robeco Asia-Pacific Equities high (msci asia pac index)  and JPM Europe Strategic Dividend Fund (msci europe index)), it should be possible to identify EFT funds that target the same indexes but have very significantly lower charges than the 0.75% in/out + 1.5% pa charges of these funds. For example, an ishares europe etf has a charge of 0.35% per annum. That would represent a quite significant saving over 5-10 years. Would the Rabo funds outperform the indexes over this period by a large enough factor to overcome the charge differentia


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## Basicilly09 (21 Feb 2013)

Thanks to all for your comments and insights. The overall issue other than the old man nature of the portfolio which i'm fine with at the moment  (first year of parenthood can make you feel like an old man sometimes) seems to be the fees/taxes charged by mutual funds for retail investors. 

It sounds as though ETF's are the way to go to avoid this. I guess the only other question would be do ETF's generally provide similar or better returns than managed funds?

Also, what are the best platforms to trade ETF's on. I have  a Davy account in addition to my Rabo account.


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## ashambles (21 Feb 2013)

I’d be inclined to buy ETFs myself as I think the argument they should outperform managed funds over the long term is persuasive. I’m think that argument goes along the lines of that managed funds make up a large portion of the stock market, for one fund to do well it’s argued to be at the expense of another fund. So on average managed funds will return the market growth – since they are the market – however it’ll be less their high charges. 

ETFs are simply designed to return the market growth less their lower charges – since the management is automated – so they should in the long term win. I’m not sure the logic holds if ETFs become more significant than managed funds. 

While that sounds good - you've still got the problem of which market(s) to pick. All very well tracking an index, you want to track good indexes, and there's lots of ETFs.

If you buy your ETF through a provider like Davys you need to watch the minimum charge. They charge 0.5% or 14.99 minimum, so if you put 500e a way per month your entry fee is 14.99 or 3%. Over a year that starts to add up. There’s also the 80 euro a year account charge. 

Rabo will charge a flat 0.75% on all investments made with a minimum investment of 100e. So for most small to medium investors they’ll be cheaper for entry fees than what might seem a cheaper provider. 

Regular investing suits ETFs and funds, not sure if Davys charges encourage that?


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## Jim2007 (21 Feb 2013)

Basicilly09 said:


> It sounds as though ETF's are the way to go to avoid this. I guess the only other question would be do ETF's generally provide similar or better returns than managed funds?



Over the long haul manage funds very often under perform their benchmark, in buying an ETF, you are buy the benchmark...


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## Basicilly09 (21 Feb 2013)

Thanks both. The logic seems pretty sound in relation to the managed funds v ETFs. I guess the counter arguement goes something like this;  if you pick the right funds you will outperform the index and vice versa which is somewhat similar to a share portfolio but I guess over the long run the ETF provides more stable returns and costs less.

Davy's minimum charge doesn't really suit my plan of regurlar investing after an initial lump sum investment. Rabo don't seem to trade ETFs so just wondering if anyone uses a good platform for ETF trading?


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## 3CC (21 Feb 2013)

T D Waterhouse


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## dub_nerd (21 Feb 2013)

Basicilly09 said:


> Also, what are the best platforms to trade ETF's on. I have a Davy account in addition to my Rabo account.


 
I'd like to know too. Someone else mentioned iShares. Which is better?


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## 3CC (21 Feb 2013)

TD Waterhouse, Davy, Redmayne Betley and Campbell O Connor are all stockbrokers. If you have any account with any of them, they will buy/sell investments such as ETF's/shares etc on your behalf.

iShares are a company that provide many different ETF's that are traded on the stock exchange. 

So it is not a choice between iShares and TDW. You need both a broker and then a security that you wish to buy.

3CC


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## Basicilly09 (21 Feb 2013)

Just had a look at TD waterhouse and it seems its a min of EUR 15 per trade for ETF's. This wouldn't work for a regular investor portfolio of 5 trades per month which is what i'm thinking of.  I guess it depends how much your puttiing in each month but for funds that costs 2.5% to invest in i would need to invest 3k per month to get better value (ie EUR 75 fees)

Anyone know of any other stockbrokers with lower minimum charges on ETF's?


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## 3CC (21 Feb 2013)

I doubt there are any cheaper than TDW. May I ask how much you intend to invest per month?


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## ashambles (21 Feb 2013)

Most of the advice I read to go for ETFs seems to be coming from the US, but there you can get commission free investing in ETFs, via the likes of Schwab and Vanguard.

Maybe ETFs just aren't that viable an alternative for Irish investors who don't have very large sums to invest?

Having (arguably) better funds than Rabo's is a compromise if it is at the expense of regular investing.


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## 3CC (21 Feb 2013)

Let's say you have €300/month to invest. Let's just look assume you contribute for one year.

With Rabo (from a post above) you pay 0.75% entry fee = €27 for one year's contributions. You also pay 1.5% pa = €54pa for every year (compounded) thereafter.

With TDW, you pay 12 x €15 = €180 to invest and say 0.5% = €18 every year (compounded)

If you save all your money and then buy an ETF in one hit, your charge is €20 up front to buy and €18/year

I think investing small sums in ETF's is not ideal but depending on the length of time you intend to keep it for, they are worth considering.


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## ashambles (22 Feb 2013)

> If you save all your money and then buy an ETF in one hit, your charge is €20 up front to buy and €18/year


That will tend to not work out, you’d be buying at a price at the end of a 12 month period, not the average price of the previous 12 months. The end price only needs to be a couple per cent higher than the average price for the 12 months to cost more than the savings made by consolidating the entry fees. 

There are significant advantages to regular investing over lump sum investing. 

It’s interesting that despite criticism of both the fund choice and service provider, that no one yet has provided an alternative. If you invest through Rabo you can invest 100 euro weekly at 75 cents a go, can any broker available to Irish residents beat that?

I wonder does Rabo 0.75% simply sound more expensive than it is? A broker can advertise having a flat charge of 12-20 euro and some people don’t realize that for modest investments the 0.75% will be much cheaper.


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## 3CC (22 Feb 2013)

It's true that investing at the end of the year in a lump sum has it's disadvantages although interest earned in a savings account in the meantime would partially offset these.

The length of the investment term is important here. A 1.5% AMC compounded over 10 years is 16% where as 0.5% comes to 5%. There have been many posts here in AAM suggesting that AMC's understate actual costs by 0.5% or more. If this is true, the cost of fund with an AMC of 1.5% is say 2% compounded = 22%

So a Rabo fund is likely to cost somewhere from 16% to 22% while an ETF will cost ~5%.

The figures for a longer investment term favour ETF's more stongly.

Also, assuming disposal is carried out as a lump sum, the disposal charge for the ETF will be much lower.

So to summarise:

Up front costs: Rabo is better for small regular investments
Ongoing costs: ETF's win hands down 
Exit costs: ETF's win hands down 

I think that ETF's are a very viable alternative to RABO funds when you look at overall costs and not just up front costs.


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## Basicilly09 (24 Feb 2013)

Thanks all, i've done some basic calculations based on a 2% charge for rabo funds and a min EUR 15 charge for ETFs. Given a 6% gain pa for a 300 per month investment after charges the ETF would return 2539 and the funds would return 3317. 

Based on these it seems that Rabo funds would be more suitable for regular investing for the money i'm thinking? is there anything i'm missing here such as the tax implications which i'm not really sure about?


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## Rory Gillen (6 Mar 2013)

If you are a starter investor the following might be information overload, but you'll know yourself.

My own preferred fund choice is Investment Trusts (in the US they are referred to as Closed-end funds). They are funds quoted on the stock exchange and you buy & sell them just like a share. I do like ETFs but often good quality investment trusts can trade at a discount to the fund value (discount to net asset value) and that can improve returns 'if' the discount narrows.

Two good examples currently are HG Capital and British Empire Securities. The former is a top class private equity fund with a strong track record of growth and excellent investment discipline across the cycle. The latter is a global equity fund with an emphasis towards value investing and a long-term track record of above average growth. Both are trading on 10% discounts to reported NAV (net asset value). When they are fully back in vogue, the discount will narrow to zero providing a modest but useful return boost. Both are covered in detail on my own website.


Rory Gillen
Founder
GillenMarkets.com


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## ronaldo (10 Mar 2013)

Also, check out Interactive Brokers.

You can lodge euros through an Irish bank and maintain a balance in multiple currencies.

Their charges are 4 euro for European trades, 6 pounds for UK trades and 1 dollar for US trades.

There is a minimum monthly commission of $10 (assumming you hold at lease $2,000 worth of shares or ETF's).

If you pick *two *ETF's traded on the European market, you could do two trades a month giving a total commission of €96 for the year (one trade per month doesn't work out much cheaper due to the minimum monthly commission).

I've had an account with them for years. I have UK bank accounts, Irish bank accounts and an Australian bank account that I can lodge money to and from. The exchange rates for foreign currencies are unbeatable too - just in case you decide to venture into US shares in the future.


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## Basicilly09 (11 Mar 2013)

After some analysis it seems that i would pay a min of 15% fees to use ETFs due to the small amounts i will be investing. For this reason it looks as though funds are more suitable for my portfolio. 

I've gone with a quarterly investment in addition to an initial lump some evenly spread between the following funds 

BNP Paribas Plan Target Click Fund 2020 Acc
Robeco Chinese Equities
Henderson Horizon Global Properties Equities
Merrion Growth FundTop Pick
RobecoSAM Smart Energy Fund
Templeton Global Total Return A Acc EUR

Thanks to all for your inciteful comments which have been very useful. I'll let you know how the portfolio is going at the yearly review next march,

best of luck


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## Rory Gillen (25 Mar 2013)

If you are intent on investing regularly, then perhaps wait until you have accumulated at least €1,000 on each occassion. Then invest and the trading costs should be low enough in relation to your investment so that they don't impair the likely returns, particularly with the online stockbrokers like TD Waterhouse, FXCM Securities and even Davy.

Your expectation of return at 6-10% is a little wide. In the past, at the average values of about 13x earnings, equities in the larger developed markets have delivered 5% per annum over inflation. Today, inflation is circa 2-3% and markets, bar the US, look to be valued along long-term norms suggesting annual returns from here on a 5-10 year view of circa 6-8% before costs. Of course, the businessc cycle is alive and well and will deliver negative returns at times along the way. Your regular investing plan should allow you ride through the inevitable next downturn.


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## Boyd (12 Jan 2015)

It's been almost two years now..... Any update from the OP as to how things are going?


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