I am going to separate my investing into two parts, aggressive investing and long term dividend investing. I have made some great short term growth in stocks like Rockhopper and Afren. This aggressive investing has increased the pot of money used to invest in these companies buy over 800%. Increasing this pot of gold to say £10-20k investments these sort of investments will easily yield over £50k each.

These sorts of opportunities don’t come along often and thus the other part of the investment scene will be dividend investing. Dividend investing will be buying shares in companies that provide superior dividend payments (50% higher that the FTSE all share average) meaning that there should be a good average return of between 4.5-7%, far superior than a savings account in todays current climate.

My money is in the process of being moved into an investment position and I will be covering every purchase I make as well as following up on its progress.

Also this year, I need to concentrate on keeping my spending in check and using my accounting software to keep track of it all. I was pretty slack in this in the later half of 2010, mainly mobile purchases in cash were screwing the way I was tracking it.

How will you be investing your money this year?

Many of us split our portfolio into percentages, 80% Stock, 20% Cash and Bonds for example. The thing is, over time this percentage will change with profits and losses. You may find that your stock is doing really well but your cash and bonds are not. This may make your portfolio 90% stock and 10% cash and bonds. Clearly this is not what you set out to achieve.

Therefore, inline with No Debt Plan, make August ‘rebalance your portfolio’ month. If your stock is doing better than the rest sell some and rebalance your portfolio. Don’t forget if it has been a while since you rebalanced your portfolio you may want to adjust your percentages inline with your current age and level of risk.

My ISA currently consists of monthly contributions into M&G Optimal Income Class X, Jupiter Corporate Bonds and HL Multi-Manager Inc & Growth Portfolio. This month I am dropping contributions to the Jupiter Corporate Bonds and adding two new funds. Welcome to Aberdeen Emerging Markets and the INSYNERGY Odey Fund.

Aberdeen Emerging Markets

I’m investing in this fund due to it’s exposure to emerging markets, funnily enough! I wanted more exposure to emerging Asia and South & Central America, this fund provides exactly that. In my opinion investing in UK and US markets is pretty futile and the future for larger gains is in the emerging and growing economies of developing countries. Everything from agriculture to medicines are rapidly developing in these countries and its a good time to cash in on it. The fund is predominately held in International Equities which is in my preference.

Aberdeen Emerging Markets - Global Allocation

Aberdeen Emerging Markets - Asset Allocation

INSYNERGY Odey Fund

Bought purely because of the man at the helm…. Crispin Odey. There is nothing more to say on this fund, it is mainly UK invested which goes against my plans but I’ll swallow that pill to have Crispin managing some of my money.

INSYNERGY Odey Fund Global Allocation

INSYNERGY Odey Fund Allocations

What are you guys investing in? and why?

Analysing both of these investments the assets are located in the following ways:

Asset Allocation Q1 2010

This chart shows the aggressive nature of my current portfolio, I am currently happy to take higher risks for potentially higher returns. At the moment, my strategy is to adjust this every 5 years to increase the proportion of cash/bonds & guilts. These two categories can be further split down into the following fund sector allocations:

Fund Sector Allocation Q1 2010

A lot of my portfolio is allocated to specialist sectors; including agriculture and Indian and Russian funds. Whist this is potentially a dangerous balance these three funds alone are currently providing me over £3000 of profit. Hopefully in the coming months I am going to add an emerging markets fund to this portfolio to increase the specialist allocation. The bond allocations provide a more secure income providing some diversification to the overall portfolio. Drilling down into these asset allocations we can see in the following chart even clearer how they are distributed:

X-ray Asset Allocation Q1 2010

They are distributed globally as follows:

Global Distribution Q1 2010

In 2010 I am going to try and increase my contributions in ‘emerging asia’. I am also going to invest heavily in oil & gas production in New Zealand due to some personal beliefs in this area.

Drilling down into which sectors are involved the following bar chart shows where my money is allocated:

Sector Share Q1 2010

Heatlh care, technology and oil & gas will be my main investments this year. Oil and gas due to it’s up and coming rebound and through the recent lack of exploration, this should take off towards Q3/Q4 of 2010. Technology as I think this year will be a big year of 3D TVs, Blu-Ray and new computing devices ad screens combined with a recovering economy this sector should drive well this year. Health care I believe is always a good investor, when a bio-technology firm strikes big they strike very big so some good choices in this sector could really help my portfolio.

So, this is a brief over view. I will update monthly with how it is doing and half yearly with the asset allocations. What do you think? How does this differ to your portfolio’s? What would you recommend I change if anything?

Now it is savers that are expected to bail the country out, the very people that have not contributed to this problem are the very people that are now going to be penalised as they help bail out reckless borrowers and the incompetant government. In addition to this the higher band tax payers are also going to be penalised, not only will their savings income be reduced but they will also be taxed more.

The lower interest rates have not yet been truely relected in peoples savings accounts, indeed when they are, in my opinion they will not offer an effective investment. Indeed I think we will see these savings options being outstripped by the rate of inflation. It is therefore time to seek alternative investment opportunities.

I believe the best place to invest at this point in time is in fixed interest coporae bonds & gilts. They lock you in at a decent and fixed rate of interest and currently are very well priced, though as more people jump on the bandwagon this will change as prices will be pushed up. This rise in price however, will be a good increase in investment if you are already aboard. For those of you in the UK the best place to house these investments is within your stocks & shares ISA’s and your SIPP’s. This tax free haven combined with the fixed interest will make coporate bonds and & guilts one of the best investments in 2009.

Probably the best way to make a significant return over time is to invest in the stock market. In the UK an investment of £10,000 in 1977 would be worth £62,680 (at Bank of England Base Rate) via regular cash savings accounts but £621,411 had that money been invested in stocks and shares. Clearly something so attractive is also very risky. For me to retire at 45 I have had to take the risky route, though I confess I am far from an expert. As such I am not investing in individual stocks but funds (Mutual Funds in the USA?).

These allow me to pick where my cash is invested, but then allow a professional fund manager to manage that particular portfolio. For example, given the increasingly westernised diet of China, India and other developing nations and the relatively poor yields due to adverse weather, I realised the potential for massive growth in the agriculture business. As such I invested in Sarasin Agrisar Fund. Whilst currently taking a dip it did yield some results before the latest economic downturn, it’s a specialist investment and I am in it for the long term but I see great potential in it.

Given the current economic situation it is probably quite easy to understand why people panic and start to move their investments around, this could actually be doing you more harm than good. Have you ever thought that if your investments are in managed funds that this economic downturn could actually benefit you?  Here are some tips to improve your investment performance.

Automatic Contribution

The obvious point from this is that you should be saving a regular amount each month as its a quick and easy way to build wealth. However, there is an added bonuses to contributing regularly with an investment:

• Spreading risk. Instead of investing £10,000 (or $) in one single lump why not invest it over 10 months at £1000 a month? This will help lower the risk to the volatility of fund prices.
• Bagging a bargain. I may be wrong, as I stated I am not an expert however at least here in the UK I see no way that a particular fund I am invested in goes belly up. All are significantly widely invested to weather the storm, plus there is an expert managing them. The major plus in this storm however is that my £320 a month didn’t buy me half as many fund units as it does now and with my brokers reckoning that when the markets do return and they level out that my potential gain could be as much as 30%, I think I maybe quids in!

Automatic Reinvestment

Works simply on the principles of compound interest. Currently my broker has been instructed to automatically reinvest any dividend pay outs back into my investments which should make my final payout more fruitful. 

Asset Allocation

It is important to take stock (No pun intended) of your portfolio at least once a year. The traditional advice is to look at your exposure to various markets, decide on what your optimal portfolio is, based on the risk your willing to take and the markets performance and allocate accordingly. Sounds easy right? 

Well actually if your playing with funds like me it can actually be quite hard. Looking at the breakdown of these funds on a 3 monthly basis I was noticing that the fund managers were varying the geographical diversification of my investments quite heavily. For example my Neptune Russia and Greater Russia Fund whilst on the surface would indicate investments in Russia has actually only 78.37% invested there at the time of writing. My advice is to therefore not look at the funds on a macro level but the bigger picture of their fund type, UK Equities, Specialist etc and allocate in that manner. In the current situation I would also advise on looking at your portfolio maybe every 3 months with changes (If needed) every 6-12months.

Lower Your Expenses

Actually my last point covers this one pretty much fully. Many people panic when they see a fund or stock price drop, why are these people investing if they can’t take a loss? Don’t move things around to much it costs you money! The stock market always has and always will be a long term investment. Buy low and sell high is possible but not a game you should be playing with anything but a small amount of play money. For investing in your future you should be looking at investing for 5-10 years minimum. Other tips to lowering your costs:

• Scrutinize annual charges. Currently, on my self invested pension plan (SIPP) I am paying 0% on cash and 0.5% on all investments + VAT up to a maximum of £200 + VAT per annum. 
• Fund dealing costs. This is free for me and a major bonus which also makes moving my portfolio around easy and attractive to do.
• Fund initial charges. These can be a bit of a sting so look out for them. 
• Fund annual charges. This is separate to my broker and is charged by the fund themselves. It’s the fee to the managers for, well, managing! I tend to think that cheaper is not always best here.
• You can also seek to choose passively managed funds over actively managed ones to save a pound or dollar or too.

Tax Savings

Here in the UK there are many ways (Unbelievably) of keeping your cash and investments from the taxman. This section is probably best separated into UK and US parts. 

- UK

• You can invest upto £7,200 in a stocks and shares ISA. This is a tax free wrapper, use it!
• SIPPs provide basic rate tax relief, for example, invest £8,000 and the government will top it up by £2,000 to make your total investment £10,000.
• It gets better, if your a higher rate tax payer you can claim this back via your tax return meaning if you invest £6,000 your investment will turn into £10,000.

In summary, if your close to retirement (5 years or under) you may well want to think about moving your investment around or pulling it out into cash depending on how much you have already lost. If your over 5 years to retirement hold still and ride it out, my predication is that things should start to correct themselves in the early half of 2009.

Do any of you have any other ways to improve investment performance both in bad times and in good? Or have I got any information wrong in my post, i’d love your feedback and comments.