My Current Low Charge Portfolio – November 2009

As this is the first My Current Low Charge Portfolio let me explain what I will be presenting monthly. I will present 2 charts. The first is My Current Low Charge Portfolio and the second is a Desired Low Charge Portfolio. The Desired is calculated using a number of criteria which will be explained over time but it will vary when Equity Market prices or earnings increase or decrease in price. Additionally it will change as I age.

Over time I will explain each of my asset classes in more detail.

Current UK Retail Prices Index: -0.78%
Current Annual Charges: 0.59%
Current Expected Annual Return after Inflation: 4.24%

Current Return Year To Date: 21.5%

How close am I to retirement: 39.7%

First Post – The 5 W’s

As this is the first post I thought I would give a little introduction as to what motivated me to start this blog looking at my own personal Retirement Investing. This is best done using the 5 W’s.

Who:
As my profile suggests I am a mid 30’s average Joe who became disillusioned with the Financial Sector in 2007.

What:
My investment strategy is really simple. The principles are:
- invest across a number of different asset classes
- buy whatever asset class has been performing the worst
- reduce exposure to whatever asset class has been performing the best
- minimise the fees that I pay
- minimise the taxes I pay by using tax wrappers where possible
- never invest in anything I don’t understand (so no CDO’s or MBS’s)

When:
I will try and write regularly however this is not my day job which keeps me extremely busy. I will attempt to cover four main topics regularly:
- my current Portfolio including expected average return after inflation and the current average fees
- a more detailed description of what I am investing in and my methodology for Portfolio Allocation
- describe whenever I make a buy or sell decision
- anything I am currently finding interesting in the financial markets

Where:
I currently live in the United Kingdom and so I will in due course use words like Pension’s and ISA’s as the blog develops. My investments will however be in many countries throughout the world so people from all countries should hopefully find it interesting.

Why:
I was looking for a Financial Planner in 2007 and whenever I made my first contact I came across a massive behemoth of a building in a prime location that must have cost millions, a lovely foyer and people in very smart suits. I am sure these guys/girls add real value and help many people achieve their goals. However for some reason I could only think that it would be me paying for all of this.
At about the same time I came across a book title called “Where are the Customer Yachts” by Fred Schwed. This had me thinking even more.

When I started looking at possible investment opportunities the fees and charges just leapt out at me. To demonstrate this have a look at the table below which demonstrates how fees and charges can affect your portfolio over time. I have assumed that inflation is 2% and the return including inflation is 6%. The fund on the left I have called My Low Charge Portfolio. I never buy any investments that have an initial charge and I am always looking to choose the best investment for the least annual charge in this case 0.59%. I chose this figure as it is my current annual charge on my total portfolio. The fund on the right is fictitious but is not unlike some Balanced Funds you can buy. It has initial charges of 4% and an annual charge of 1.5%. Over a 20 year investment period the difference is astronomical. My Low Charge Portfolio is 24% large than the Balanced Portfolio. This has been achieved doing nothing more than minimising charges.