The FinanceFanatics Financial Freedom Portfolio

Hello and welcome to the FinanceFanatics investment portfolio

As the main contributor to FinanceFanatics, I think it’s important that you see exactly what I’m personally investing in, and this post will keep you updated on the current portfolio and give you some useful information about each investment. As investments get added and removed I’ll make sure the list of investments and the reasons for the changes are added here too.

This list has been a work in progress over several years as I’ve tried to refine which funds have the lowest fees whilst also providing good diversification. I’ve spent hours and hours researching the best stocks and funds and I think I’ve come up with a great combination of steady capital growth and experienced managers.

If you’re just starting out with investing then hopefully this selection will give you a good base to start researching your own portfolio. But if you’ve already started your investing journey then I’d love to hear your own opinions and suggestions. I fact, if you’ve got a portfolio of your own why not post a list of your investments in the comments section below and show the world your own wealth building ideas.

The Investments:

  • Scottish Mortgage Trust (SMT) – SMT remains a high-conviction choice for long-term global equity exposure. The investment approach followed here focuses on identifying high-growth companies and holding them for the very long-term to gain the benefit of compounded growth. These companies will often have been new entrants or disruptors into a region or industry which challenge the business model for the traditional companies. The portfolio turnover tends to be very low and the approach pays no heed to the benchmarks when making investments.
  • Henderson Smaller Companies (HSL) – HSL offers investors a growth-biased approach to investment in UK small and mid-sized companies. Despite the UK smaller companies bias, the portfolio derives around 52% of sales from overseas, due to the mid-cap bias. One of the portfolio’s largest holdings in NMC Health illustrates this point well. It provides medical services throughout the UAE, which has organic growth opportunities driven by supportive demographics. Another global story is Accesso, a provider of online/mobile ticketing and queue management services for leisure activities. The management team are active in the IPO market, recently participating in Motorpoint and Joules both of which are more domestically focused businesses.
  • Woodford Patient Capital (WPCT) – WPCT is managed by the UK fund superstar Neil Woodford. The trust aims to achieve long-term capital growth through investing in a diversified portfolio consisting predominantly of UK companies, both quoted and unquoted. There is a bias towards healthcare and biotechnology which provides good exposure to those sectors whilst the fee is currently a remarkably low 0.15%. The trust aims to deliver a return in excess of 10% p.a. over the longer term.
  • Murray International Trust (MYI) – MYI has a dual mandate: The aim of the company is to achieve a total return greater than its benchmark by investing predominantly in equities worldwide. Within this objective, the manager seeks to increase the company’s revenues in order to maintain an above-average dividend yield. An additional objective is the preservation of capital. While the trust has global exposure it’s heavily weighted towards emerging markets in Asia and Latin America which provides good geographic diversification to the FinanceFanatics portfolio.
  • Bankers Investment Trust (BNKR) – BNKR seeks to maximise returns for shareholders through a broadly diversified international portfolio, although it should be noted that the fund has a bias towards the UK. The trust aims to deliver capital growth in excess of the FTSE All-Share Index alongside regular dividend growth that exceeds the rise in the Retail Prices Index. The management board give each manager a specific income target for their portion of assets, which ensures that the portfolio produces reasonable dividend income. The board is extremely committed to maintaining and growing the dividend, and the fund has grown its dividend every year for the past 50 years.
  • Physical gold ETF (PHGP) – PHGP is designed to offer investors a simple, cost-efficient and secure way to access gold by providing a return equivalent to the movements in the gold spot price, less the management fee. PHGP is backed by physical allocated gold and only metal that conforms with the London Bullion Market Association’s rules can be accepted by the custodian. Each physical bar is segregated, individually identified and allocated. The ETF has low fees of 0.39% and provides excellent portfolio hedging for stock market movements.
  • Hansteen Holdings REIT (HSTN) – HSTN is a Real Estate Investment Trust. The Company is engaged in the investment, development, and management of industrial properties across the Netherlands, Germany, Belgium, France and the UK. The trust offers investors exposure to property in areas that would otherwise be difficult to gain access to. In addition to capital growth from the increasing value of these properties, there’s a very healthy rental return which contributes to a very reasonable 4.34% yield.
  • iShares Corporate Bonds ETF (SLXX) – This exchange-traded fund is a compelling option to invest in the market of GBP-denominated corporate bonds. The ETF tracks an index that focuses on the larger and more liquid bond issuers. These enjoy a comparatively higher pricing power in the market, which caps yield potential relative to indexes tapping into less-liquid areas of the market. However, by the same token, it is likely to offer a lower-risk profile. GBP-denominated corporate bonds tend to have much longer maturities than their euro-denominated counterparts. 
  • Finsbury Growth & Income (FGT) – FGT benefits from the stewardship of a seasoned and talented UK equity manager who has demonstrated a consistent approach. The fund managers’ process is differentiated and has proved successful over a number of market cycles. He looks for unique and high-quality companies that offer a high and sustainable return on equity and are also cash-generative. The result is a concentrated portfolio with clear biases relative to peers and the FTSE All-Share Index. Turnover is low, reflecting the managers’ long-term approach and his buy-and-hold style. He only sells out if he no longer considers a company to be good quality.
  • City Of London Investment Trust (CTY) – CTY is a long running UK focused Investment Trust which is notable for its low fee of only 0.42%. The prudent and measured approach to portfolio management has resulted in outperformance over most time frames. Since 1991, the fund has returned an annualised 9.3%, some 80 basis points more than the FTSE All-Share and around 190 basis points ahead of the peer group over this period. The fund has quite a low active share score and historical tracking error, suggesting outperformance has been generated through incremental value increases, rather than by sudden price jumps. The focus on well-managed companies with a commitment to their dividends has also enabled the fund to increase its dividend over the last 50 years.
  • Witan Investment Trust (WTAN) – WTAN is a very solid choice for investors seeking core global equity exposure. Unusually, the trust uses a multi-manager approach and the key criteria are that each manager must be able to add value to the portfolio through stock-picking and sticking to their investment style. Style drift is closely monitored and deviations challenged. Underperformance is not on its own a reason for changing managers, but an inconsistent investment approach will flag up. 
  • Fidelity Global Smaller Companies Investment Trust (FCS) – FCS is a very solid choice for investors seeking broad exposure to global smaller companies. The investment approach is sensible, established and well executed. The manager is well versed with the UK smaller companies space over many years, but makes use of pooled investment vehicles for the more specialist and volatile areas (Asia, Emerging Markets and Japan) whilst US and European stocks are selected in-house. The fund has a distinct bias to the UK when compared with its peers; however, that hasn’t detracted from investor returns over the short, medium and longer term. The manager believes that UK smaller companies offer investors access to a variety of sectors, global earnings and good quality companies within a framework of solid corporate governance.
  • RIT Capital Partners (RCP) – RCP aims to deliver long-term capital growth while preserving shareholders capital. The trust invests without the constraints of formal benchmarks so that it can deliver increases in capital value in excess of the relevant indices over time. The Trust invests in a widely diversified, international portfolio across a range of asset classes, both quoted and unquoted. RCP invests in unquoted holdings where they offer the prospects for particularly good returns and in specialist funds where they offer specific technical skills or specialist investment expertise.
  • Personal Assets Investment Trust (PNL) – PNL is a strong offering for investors seeking capital preservation and long-term growth. The managers’ process is focused on the long-term. He dislikes companies that destroy capital, and he often buys stocks that are unloved, with a longer-term mind-set than many peers. Returns on the fund have been strong, other than the disappointing year in 2013 which was mainly attributable to both the portfolio’s gold holding, with the metal having its worst annual period in 30 years, and high cash balance. Both were held for capital preservation. Performance rebounded in 2014 and 2015, and the long-term record remains strong both. Moreover, the risk profile shows lower volatility, reflecting the absence of gearing as well as the capital-preservation focus.

Investment information was sourced from Morningstar UK.

FinanceFanatics

Personal finance blogger who’s fanatical about financial freedom, investing and making money in the UK

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