On the weekend of Sat 7th June/Sunday 8th June we made some changes to our portfolio. As you will see below, Fund A and Fund C had recently been underperforming. This prompted us to take some profits from Fund A (switch 50% of the fund into cash) and exit completely out of Fund C. We also found a couple of potential buying opportunities that excited us. These are Fund E and Fund F. We made a 13% allocation of our total portfolio in each of these two new funds. This left us with approximately 27% in cash. After the switch was complete and the trade is settled, our new portfolio looked something similar to this:
Which of our funds are in the money flow
Each month we like to make sure that the funds we own are acting right. In our opinion, as well as long-term performance being a key factor in fund selection, the short-term performance of a fund is very important once you own it. It’s vital because we’ve noticed that strong funds tend to get stronger and weak funds tend to get weaker.
On May 30th 2014, we took a good look at the returns of the four funds that we own, the returns of the FTSE 100 and returns of the NASDAQ Composite. This is what we discovered:
Two red flags
As you can see, when we conducted our performance analysis at the end of May, we noticed that our darling flagship fund – Fund A – and our new buy, Fund C – were both significantly underperforming over the last three months. This and various other reasons were what prompted us with our decision to switch 50% of Fund A into cash plus switch our entire holding in Fund C’ into cash.
Our outlook for 2014 and beyond
In the short-term, the market is proving difficult to read as it continues to send out both bullish and bearish messages. We’ve been saying for some time now that the indexes and our portfolio were long overdue a rest and at some point we are definitely going to experience a fairly substantial correction. The one we are in right now looks as if it’s almost over but this latest rally attempt could very easily fizzle out. This would result in the market rolling over and heading south again.
Even though portfolios can take a bit of a bath during a retracement we like correction periods because it helps remove the excess that gets built up. A fairly large pullback at some stage this year would be positive in our opinion because it would help flush out all the weak hands and assist the indexes in resetting.
One thing to expect this year is increased volatility. Beyond 2014, we believe we’ll continue to experience solid performance from the equity markets and this means that if you are a long-term investor like us, and have the courage to stay in the game, the future is looking bright.
Exceeding performance expectations
Our aim is to outperform the FTSE 100 and we are proud of our 23.1% 2013 return which some would say is impressive and even more so when compared to the FTSE 100’s 2013 return of 14.4%. As you can see on this bar chart, we’ve also delivered solid returns over the last 5 years and managed to make an average annual gain of 14.5% versus the FTSE’s 8.8%.
If we go back even further, since beginning investing back in 1997, we’ve outperformed the FTSE 100 by 60.2% which means we’ve beaten the main UK stock index on average by 2.4% per year.
This information is taken from The Big Picture, to download a sample copy please just click here.
As always, if you have any questions or thoughts on the points covered in this post, please leave a comment below or connect with us @ISACO_ on Twitter.
ISACO specialises in ISA and SIPP Investment and is the pioneer of ‘Shadow Investment’; an easy way to grow your ISA and SIPP at low cost. Together with our clients, we have an estimated £57 million actively invested in ISAs and pensions*. Clients like us because we have a great track record of ‘beating’ the FTSE 100**. Over the last 16 years, we’ve outperformed the Footsie by 60.2% and over the last 5 years, we’ve averaged 14.5% each year versus the FTSE 100’s 8.8%. You can find us at www.ISACO.co.uk.
What is Shadow Investment?
Picking the right fund for your ISA and SIPP is not exactly the easiest job in the world. And knowing 'when' to buy and 'when' to exit is even more difficult! Our ‘Shadow Investment’ Service is here to help. Our service allows you to look over our shoulder and buy the same funds that we are buying.
When we are thinking of buying a fund, we alert you so that you have the opportunity to buy it on the same day that we buy it. We also tell you about when we are planning to exit the fund. You control your investment account, not us. You can start small and invest as little or as much money as you like.
By knowing what we are buying, when we are buying and when we are exiting, throughout the year you can mirror our movements and in effect replicate our trades. This means you have the opportunity to benefit from exactly the same investment returns that we get. Our investment aims are 10–12% per year.
We are totally independent, fully transparent and FCA compliant. We’re warm, friendly and highly responsive and it’s a very personal service that gives you direct access to the Sutherland brothers; ISACO’s two founders.
Who are ISACO’s clients?
Clients who benefit most from our service have over £250,000 actively invested and the majority of them are wealthy retirees, business owners, self-employed professionals and corporate executives. We also have clients from the financial services sector, such as IFAs and wealth managers.
Do you have questions?
To have all your questions answered, call 0800 170 7750 or email us at: info@ISACO.co.uk.
*November 15th 2012: Internal estimation of total ISA and pension assets owned by ISACO Investment Team and ISACO premium clients.
**Long-term performance: December 31st 1997 - December 31st 2013 ISACO 91.3%, FTSE 100 31.1%. 5 year performance: December 31st 2008 - December 31st 2013. ISACO Investment performance verified by Independent Executives Ltd.