Diversifying Your Portfolio
Chris Rose
Crown Cycling Circle Investment Club
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Agenda
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Introduction
Consider the true aims of an investment club
The need to diversify
The advantages of an investment club
Alternative investment opportunities
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Exchange Traded Funds and Commodoties
Fine Wine
Gold
Property
Others
Getting started making alternative investments
Summary
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Introduction
• It doesn’t just have to be about stocks !
• Always lots of reasons NOT do to
something
– fear of the unknown
INVESTMENT CLUB NATIONAL CONFERENCE 2007
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Aims of Our Investment Club
• Make money
• Learn
• Have Fun !
……………………BUT IN WHAT ORDER ?
INVESTMENT CLUB NATIONAL CONFERENCE 2007
The Need to Diversify
Portfolio Asset Allocation
Bonds
Stock
Property
Commodities
Cash
Balance your portfolio according to your risk
profile …… but keep it interesting !
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Why Diversify Within an
Investment Club
• Spread risk of club portfolio
• Broaden the spectrum of investments to
improve retention and interest
• Produces great learning opportunities
• Explore the unknown
– Leverage knowledge and experience of members
– Curb over enthusiastic and irrational decisions
• Make Money !
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Alternative Investment
Opportunities
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Exchange Traded Funds / Commodities
Gold
Property
Fine Wine
……………others
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Exchange Traded Funds (ETFs)
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What is an ETF / ETC
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Reducing risk
Accessing opportunities
Low administration costs
High Liquidity
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Examples of ETF’s
• UK property : iShares FTSE UK Property
Fund (IUKP)
• China : iShares Xinhua China 25 (FXC) up
120% in Sept 06 – Sept 07
• Brazil : Up 95% in last 12 months
www.ishares.co.uk
www.etfsecurities.com
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Investing in Fine Wine
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Investing in Fine Wine
Why wine ?
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Depreciating asset
Established market
The model is well understood
Fun doing the research
You can drink it !
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Investing in Fine Wine
How it works
• Initial Finite supply
• Growing demand
• Later a dwindling supply
…All leading to an increase in the value
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Investing in Fine Wine
Picking a good vintage
• Broker recommendation
• Robert Parker Score 95%
http://www.erobertparker.com/
• Wine Spectator Magasine
• Online research – www.decanter.com
INVESTMENT CLUB NATIONAL CONFERENCE 2007
First Growth 1990 Vintage
Parker Score
10 year %
increase
Mouton
Rothschild
87
278
Lafite
92
355
Haut Brion
96
725
Latour
96
725
Margaux
100
769
Source : Morgan Aston Ford
INVESTMENT CLUB NATIONAL CONFERENCE 2007
First Growth 1990 Vintage
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Investing in Fine Wine
Practical issues
• Find a good broker
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Storage
Market reports
Low Commission
Proactive
I use Morgan Aston Ford : http://www.mafltd.dircon.co.uk/
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Gold
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Gold is a commodity and traditional
home for our money in times of
trouble, easy to track and highly liquid.
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Gold Chart
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Accessing the Gold
Krugerands under the bed of every member !
• Gold Coin – Sovereign or Krugerand
• Gold Bullion
• Mining eg HOCHSCHILD MINING PLC
(HOC)
• ETF – Gold Bullion Securities (GBF)
• Superb online tutorials
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Gold Bullion
• Bullion • “Good Delivery” bars
• Physical possession
• Part or whole bars
• Online – eg www.bullionvault.com
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Property
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UK property vs Overseas property
Location location location !
Controlling the passion
The structure of the club and ownership
Poor liquidity
Long terms costs of ownership
Use ETF ?
INVESTMENT CLUB NATIONAL CONFERENCE 2007
…………..Others
• Commodities
http://www.etfsecurities.com
• Venture Capital Trusts
• Film
• Land
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Be Brave !
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Where to Start
• Consider the asset allocation of the club
• What type of alternative investment
inspires you
• Detailed research into an investment
– Club structures
– Goals
– Exit strategy
• Invest and Monitor
INVESTMENT CLUB NATIONAL CONFERENCE 2007
Summary
• Stocks and shares are not the only form of
investment opportunity open to investment
clubs.
• You will gain from the learning experience, you
will have a lot of fun, and it may even make a
profit !
Health warning : All investments may go DOWN as
well as up and these ideas are no exception
i.e. don’t blame me !
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Challenge for WMS 2008
Make at least one alternative investment.
INVESTMENT CLUB NATIONAL CONFERENCE 2007