My Old Investment Portfolio

My old stocks and shares portfolio was an unorganised collection of funds that I’d purchased over the past couple of years with no strategy. This was after an older reorganisation of an even less organised, higher-fee collection of funds.

The gain/loss column looks good, but the market has risen across the board and I’d have probably made a similar gain by just picking international funds at random or sticking with a single large tracker like the Vanguard LifeStrategy. My largest risers were the emerging market funds: India and Latin America (lucky timing), while the UK saw the least growth.

This is a very high risk portfolio, all stocks with a high proportion in emerging markets. If you are retiring soon or may need the money others may suggest a higher proportion in bonds and less in volatile emerging markets.

Why change anything? All of these funds have ongoing fund charges from 0.1% to 1%+. There’s also an ongoing platform charge from TD Direct Investing of 0.3%. If I reorganise I can reduce total ongoing fees+charges to ~0.25% a year by buying ETFs. It depends on your Stocks and Shares broker, for me TD Direct Investing have the 0.3% platform fee for funds but it’s free to hold shares/ETFs. If I changed broker perhaps I could reduce fees, but I’d read about long delays transferring and thought it could end up costing more to be out of the market for the time it takes to transfer than a few £12.50 trading fees.

Shortlisting ETF’s

I used the Morningstar ETF Selector tool (free within TD Direct Investing) to order all ETF’s by ongoing charge from low to high. The lowest fee ETFs started at just 0.05% (for the HSBC Euro Stoxx 50).  Then I went though the ETFs looking for anything that caught my eye to add to a shortlist, for example:

• Vanguard S&P 500 (VUSA) with 0.07% fee.
• HSBC FTSE 100 (HUKX) with 0.07% fee
• SPDR S&P US Healthcare Select (SXLV) with 0.15% fee.
• HSBC MSCI World (HMWO) with 0.15% fee.
• iShares MSCI World (SWDA) with 0.2% fee

Around the 0.22% fee mark I came across some interesting Vanguard ETFs:

• Vanguard global liquidity factor (VLIQ) with 0.22% fee
• Vanguard global minimum volatility (VMVL) with 0.22% fee
• Vanguard global momentum factor (VMOM) with 0.22% fee
• Vanguard global value factor (VVAL) with 0.22% fee

These are managed ETFs and not simple trackers. If you’re interested to read more about them the best links I can find are here (monevator) or here (citywire), and of course the fund factsheets themselves. Aside from VMVL, one thing I like about these Vanguard funds is the maximum holding that I can see in any of them is around 0.5%. It puts me off some of the low cost trackers when I see the likes of Apple and Microsoft with large allocations, often around 2% but sometimes up to 4.5% just for Apple. The minimum volatility tracker (VMVL) appears to have dollar hedging intended to reduce volatility for a US audience so I will avoid that one.

Finally I added to the shortlist:

• Vanguard FTSE All-World (VWRL) with 0.25% fee
• Amundi MSCI World Low Carbon (LWCG) with 0.25% fee
• Vanguard FTSE Developed World (VEVE) with 0.25% fee

Of these the Amundi Low Carbon looks really interesting. The index brochure says “The index addresses two dimensions of carbon exposure – carbon emissions and fossil fuel reserves – providing clients with an effective tool for limiting the exposure of their portfolios to carbon risk.” They exclude the top 20% of companies that have the highest carbon emissions, and those with the largest fossil fuel reserves. The historic performance is very similar to the standard MCSE World, but comes with the bonus of knowing your investment has a target 50% lower carbon footprint.

Before buying, I’ll need to confirm that the ETF’s can be held in my ISA, and to compare the buy/sell spreads.

Selling My Existing Holding

I sold everything on a Monday night. Its quite slow to buy/sell and I wanted to do it over a single working week to reduce the time the money was not working. To make an order within TD Direct Investing you go:

Then to sell you filled in the details, click ‘preview order’ then confirm the order:

When you buy and sell you can either do it in units of the fund, or a simple cash amount. Normally it makes sense to buy/sell in cash amounts but here I was trying to sell all of the fund, right down to the 4th decimal point.

Making a First Purchase

My old fund holdings had all been sold on the Tuesday but the ‘Settlement Dates’, when I actually get the money into my account, were all on the following Friday or Monday.

I liked the idea of the low carbon world fund (LWCG), but when I went to trial a buy order, the buy/sell spread was 0.42%! This compared to a spread of:

• 0.14% on the HSBC MSCI World (HMWO)
• 0.11% on the iShares MSCI World (SWDA)
• 0.18% on the Vanguard FTSE All-World (VWRL)
• 0.16% on the Vanguard global value factor (VVAL)

These spreads fluctuate and were correct at the time I calculated them. I view the buy/sell spread as an additional cost. A spread of 0.42% is £42 per £10,000: more than the actual £12.50 transaction charges. I calculate the spread by (offer price – bid price)/ bid price * 100%, highlighted with burnt red in this screenshot:

Scratching out the high spread low carbon emissions world tracker I was down to 4 favourites:

• HSBC MSCI World (HMWO) – lowest annual charges (0.15%)
• iShares MSCI World (SWDA) – lowest bid/offer spread (0.11%)
• Vanguard FTSE All-World (VWRL) – highest bid/offer spread (0.18%), highest annual charges (0.25%), but has a wider spread of holdings than the other two cheaper world ETFs
• Vanguard global value factor (VVAL) – not a simple world tracker but a managed ETF that targets value stocks

Buying the New ETFs

 

As the funds had not completely cleared on the Friday I left buying until Monday. After a weekend to let the 4 favourites sit in the back of my head, I decided to go just for one: the HSBC MSCI World which had the lowest charges, with about 10% apart from that which I’d left in my existing India fund. I had been thinking to buy some of the Vanguard Lifestrategy 100 just to benchmark it, but decided against it as I could just as easily look up the historic prices of the accumulator.

I also invested in the Nutmeg Stocks and Shares ISA to get the cashback offer. At the time of investing, Quidco* had a better offer than TopCashback*. The cashback via these sites seems to fluctuate between £150 and £200 for a £5,001 one year investment with Nutmeg.

The weekend to forget about it and consider fresh on Monday really helped.

 

*Any links with a star are affiliate links where I would receive a commission