Forum Archive Index - July 2001

["Grant Keymer" <grant@jenlogix.co.nz>]

Hi Mark,

 

I have sizeable holdings in Anglo & Overseas Investment Trust (dual-listed on LSE & NZSE).

Which trusts do you have holdings in?

 

With this kind of investment vehicle, I think it's essential to take a long-term view.

 

I started investing in AOT in late September 2000, and have added to my holdings at opportune times since then.  Overall, my investment is 6% below break-even, but I could have done a LOT worse by putting money into various managed funds that are heavily into NASDAQ-listed stocks, or indeed by putting money into other investment trusts such as Finsbury Technology etc.

 

The other thing to take into account is the movement of our dollar against the GBP.

If our dollar stages a comeback, the value of your holdings in NZ$ terms will reduce.

However, that prospect is looking increasingly unlikely as the year progresses.

 

For the past few months, the Euro, GBP, AU$ and NZ$ have been moving more-or-less in concert, so I don't see too much risk there.  If some event was to happen that caused the GBP to decouple from the Euro block, then things could change.  However, even in that scenario, keep in mind that most UK-listed investment trusts have global holdings, so to some degree, you are insulated from the full extent of movements in any one currency.

 

This is the beauty of diversification!

I for one don't have time to follow countless companies which are worth investing in on the various bourses around the world.  So I am happy to let a fund manager do it for me, especially one such as AOT which only charges 0.35% managment fee.  This is more than covered by dividends from the various holdings of the trust, so you still get a small dividend as well.

 

Maybe I am preaching to the converted here, but I say HANG IN THERE at least with your European Trust.

 

The worst is over, you will no doubt see some further volatility this year, but I would be surprised if the Dow sets any new lows this year.  It has already recovered significantly since April.  As for the NASDAQ, that's another story, but I also doubt that it will go below the 1638 set in April.

 

For the Nikkei:  All bets are off there.

A few weeks ago, some commentators were picking a recovery, but it has slumped further.

The whole of Asia is just too volatile and unpredictable for my liking.

AOT has small holdings in Japan, but nothing else in Asia.

 

Have you compared the performance of the various Investment Trusts on Trustnet?

 

There is also a passive fund called the Spyder Fund that models itself on the S&P 500.  On this basis, you should always equal the performance of the S&P 500, which over the last 10 years, is the best-performing index around the world.  Whether it will be so for the next 10 years is anybody's guess.  But you could never lose by investing in this fund.  Other more actively-managed funds may outperform it in the next 10 years, it's hard to say.  But during the last 10 years, few have.

 

Work on a 10-year timeframe and see how they all stack up.

I suggest you disregard the 1-year and 3-year returns because many commentators believe the 98-99 technology boom distorted figures on most markets.  Such exceptional returns are unlikely to be achieved again for some time, if ever (well for much of our lifetimes at least).

 

The beauty of this kinds of fund is that it frees you from the constant monitoring required by direct investments.  Indeed, you could check your holdings just once a year, from your tropical island hideaway, and make the decision whether to stay in that fund, or change to another one.  Because of their diversification, these funds offer truly RELAXED investing.  The returns may not be as high as those achieved by someone actively trading the markets, BUT they will never tank overnight either.

 

I, for one, plan to move much of my portfolio into this kind of investment vehicle over time, as our dollar hopefully grows a little stronger.  It pays to do it on a drip-feed basis so you aren't committed to buying all your foreign currency at any particular exchange rate.

 

Well, I've rambled on long enough, but I hope I've managed to encourage you a little  :)

 

Cheers
 
Grant Keymer
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