Picking investments for fun and profit.

The London Stock Exchange currently has over 2100 companies listed for trade; NYSE over 2800; Nasdaq over 3300. That's a lot to choose from. Given that investments (and a bunch of hare-brained schemes) are where we're looking to make our living, I thought it would be interesting to walk through how we make selections and build up our portfolio to give you some insight into the method behind the madness,

Let's start with the high level, how is our portfolio structured. I've seen people super organised, carving their portfolios up into logical groups, or ensuring that each of their setups has great diversity. Nothing quite so extravagent on our part I'm afraid. We have used Hargreaves Lansdown for most of our investments for a long time (efficient service; good website and apps; etc), and with them we have the following setup:

We have a few other bits and bobs scattered around (smaller pensions that aren't worth transferring mainly), but this is the majority of our empire, and so we'll focus there.

Investing Strategy

Strategy might be too strong a term, but generally we focus most of our investments into funds. My general philosophy on life is that if someone does something for a living, they're likely to be better at it than me, so let them do it, and focus on the areas where you can really make a difference. This doesn't always work out (and I don't always heed my own advice), but on the whole it's served me well so far. So for most of our investments, we diversify across a bunch of specialist high-performing funds. Now every good financial adviser (and even most bad ones) will quote you the time-honoured phrase 'past performance is not indicative of future results'. They're right, just because someone did well predicting market movements last year, doesn't mean they have any kind of insight this year. My personal opinion though, people who consistently get it right have a better shot at continuing to get it right and read the markets moving forward. Again, not bullet proof, but if the fund manager has a good track record and their selections are well diversified (albeit in a particular sector), then they've got a reasonable chance of continued success. We make our selections based on our overall confidence in the sector or geography, combined with a view of the past performance of the fund and fund manager (moreso the latter).

We currently have investments in the following funds:

As you can see it's pretty diversified. Geographically we have interests in US, UK, China, Japan, Emerging and Global Markets. From a sector perspective we have tech (unsurprisngly our most supported sector), biotech, healthcare, and general equities in the bag. Overall we favour more 'riskier' funds, but hedge slightly with more general index trackers and balanced funds in a few areas.

The funds are serving us well, with multi percentage point growth this year.

We dabble in a few stocks, although our success here tends to be much more limited (i.e. we're no stock pickers), but it keeps things interesting and helps us diversify a little more. Often we'll look at these for dividend payments as much as for the short and mid-term growth potential that the funds offer. We currently have investments in the following stocks:

From a performance perspective, the housebuilders are doing well at the moment (and traditionally have very high dividend yields). Lazard is struggling a little, and LSC have bombed since we took a stake in them (but we're hopeful of a small turnaround before we exit).

Overall, we're pretty happy with our mix of funds and stocks, and with upwards of £200k invested between pensions, ISAs and directly we're more than happy with our current average return which sits north of 15% per annum. Long may that continue.