A Blue-Chip Starter Portfolio

I think as a 'starter' it would be terrific. Interesting way to look at it, diversified, sensible sort of companies. It would appeal to me. I dont know about ARM, it 's interesting how your selection throws up that 'wildcard'. Maybe If I really were starting out with a tiny core holding, to get a feel for things, I might buy equal amount of all of them, just for the elegance of it. Say £1k of each, I mean that ordinary beginners sort of scale (1 year's ISA money). I dont know enough about the finances and prospects of ARM to know how they justfy the price for any larger investment.

Isquirrel2

Have faith. Keep buying steadily, at suitable intervals.

There's a good chance that FTSE is skidding along the bottom right now.

The portfolio listed in the article above looks pretty solid, although, like the author; I fret about over-paying for ARM's pricey shares.

Buy for income - then you have something to show during the downturns!
Apart from ARM & RR, good-ish income portfolio if you add some fixed-interest.

One problem with this approach is that the sectors are broad and individual companies within it can be quite different. In theory you should buy extra company's according to the risk reduction they add and thus hold wildly different companies. However there are quite a lot of practical problems with this approach. But using sectors is also a rather blunt approach. Weighting can be done by any factor; P/E, Dividends even absolute share price!

mcecaro

We buy shares for what the dividend is likely to be next year, not for what has already been paid.
Vodafone paid 8.9p in the last year.

The future is awkward to judge because their Verizon joint-venture will pay a generous dividend soon and it will be passed on to Vodafone shareholders in addition to the regular dividend.
However, there has been recent mention that Verizon is not guaranteeing that Vodafone will receive a dividend from the joint venture every year, so it becomes more awkward to estimate what shareholders will get in the future.
Regardless of Verizon joint venture payouts, Vodafone should be able to pay at least the same amount as last year and probably slightly raise it.

I would work on the assumption of the last-year dividend of 8.9p, plus an upward adjustment for inflation (say about 6%). Anything more from other sources is a welcome bonus.
That would put the underlying dividend at roughly:

2011: 9.4p
2012: 10.0p
2013: 10.6p

Can anyone tell me why the above has separated into three blocks. It's happened before, even though it was fine when I pressed the "post" button.

ARM is a 100 member because of its market capitalisation. If you are to invest across all sectors, that is one of the very few larger UK quoted technology companies and the only one that makes the FTSE 100. A tracker would therefore include it. For value investors, many would baulk at its yield. But it is a growth stock. Now accepted as a preferred supplier by several of the world's top technology hardware manufacturers worldwide it really does have a superb chance of significant further growth. Its yield is likely to be forever stunted by the company's constant need for new product R&D spending.

My comments on the ready made portfolio are restricted to the fact that it would be a good starter portfolio but individual investors may wish to examine the options in some of the more heavily populated sectors. For instance, I would be more likely to go for Astrazeneca than GSM, BP than Shell. There really is so little to choose between either of the pairs, or more correctly such a strong case could be made for either part of them, it's just about down to personal preference. I'd be spoilt for choice in the industrials but I don't think I'd be going for RR right now.

Len38, it's a function of this board's text editor playing up a little. It happens often with such editors, almost randomly it would seem. The paragraphs as you saw them were split at the line breaks you saw when typing as well as at the default character breaks. The editor insertions (the ones you type) should have their breaks overwritten to that of the displayed page layout but that bit failed. Hope that makes sense.

Floorlord
My limited brain function hasn't a clue what you're talking about, but thanks for your reply. I'm content to know it wasn't my fault. According to my daughter it usually is!

Floorland
Thanks again!

It looks very sensible to me as a starter portfolio with an equal 10% in each. I think it might then be a good idea to diversify a bit against company specific risk rather than industry specific risk. Thus I would consider moving towards 5% each in GSK & AZN, VOD & BT, RDSB & BP.

Not a bad time to be a starter at all.

Personally, I'd steer away from financials at the moment. I also think ARM's price is a bit bloated and Billiton will be cheaper.

Absent these and you have a very blunt low-beta pseudo-FTSE tracker ex-fin, tech and miners.

Where there is a viable choice among the blue chips, I'd suggest holding sector pairs - eg GSK/AZN, BATS/IMT - subject to good entry points, of course, rather than picking one of each. Perhaps the best beginner tactic is to pick one and watchlist its competitors for a while.

If we are to see a near-term rally, the forthcoming earnings round will be crucial for steadying market nerves.

90% of a cracking portfiolio there but drop ARM for reasons already aired.

So what instead:-

First choice: Pearson

Second choice: Carnival

Third choice: Weir or IMI.

The third choice Weir or IMI can be volatile but current volatility is favouring buyers.

I hold all shares mentioned.

P103

Len38
Thank you very much.
I will look into them.
Isquirrel2

This is an interesting idea and quite similar to my strategy (i am a novice investor with a limited understanding of financial markets, economics, and financial products etc). Having invested in funds and trackers (and had an unpleasant commodity spreadbetting experience), i decided to start investing in specific equities. The only problem with this idea is that you do need a certain amount of money to invest to make it make sense from a cost perspective. I would say minimum £1000 per trade, otherwise you are looking at a cost (including stamp duty) of over 1.5% per purchase.

As a new investor i am naturally drawn to the blue chips. However where my startegy differs slightly from that suggested, is that i like the idea of investing in the bigger companies that have experienced recent or are facing problems, difficulties etc (in a similar strategy to the M&G recovery fund run by Tom Dobell). Whilst i accept this may be a slightly higher risk strategy, i also believe it offers higher rewards and as a young investor i have time on my side and no doubt this strategy will change over time.

As a few examples i hold BP (Macondo blow out) instead of Shell, Astrazeneca (generic patent cliff issues) instead of GSK, RBS and Lloyds (no need to specify the problems these companies face) instead of HSBC. I also hold Aviva, Tesco plus a couple of non blue chips Cookson Group and Dignity (my favourite share, but probably the only non-value investment in the portfolio).

It may appear that i am not particularly well diversified, but this is because i only started investing in April and am investing the same amount each month in one share (other than RBS / Lloyds where i split my monthly investment as i could not decide which was the better/worse share). Thus i am effectively dollar cost averaging which has proved beneficial in this falling market. However i do not intend to hold more than 15 shares and once i hold this many i will start to weight the portfolio a little more by topping up on the companies that i prefer and are reasonable priced.

I'd be interested to know what more experienced investors like yourselves think of my strategy? Also is it bad form to go into such depth about your holdings? If so i apologise.

Thanks

I have most of these shares in my portfolio and they have performed well even in the current environment (total returns including dividends). I exclude BAT (a nod to ethical investing), prefer Rio Tinto to BHP billiton and exclude ARM for the same reason as the author. I agree that a careful selection of say 10-20 FTSE 100 shares can beat the index - BUT, you can also come a cropper, if like me, at some time you were heavily into BANKS! - and who has a crystal ball to predict the next disaster area?

I've tinkered with this kind of thing lately as a newish investor and have some thoughts.
A starter portfolio is more about learning what's going on.
If you go for the mega caps you seem to broadly track the index anyway due to weighting. The difference between this and a tracker at this stage is probably no more than a friday night out. This makes it all less scary.
As a starter portfolio, you can skew it a bit with a couple of months savings. A new purchase or pound cost average your worst buy.
I find myself using certain filling stations and buying lucozade not coke. This adds to the interest.
As the lump gets bigger your investment decisions matter more, as you can't just earn yourself out of a hole. By this stage you should have an idea whats going on. This may stop you being stiffed by the industry.

Hey,

Amazing board, I've been reading for a while now. This is frankly, the ONLY place I ffeel I can ask so I hope this isn't too annoying for you all - In short I've been looking at investing in a portfolio (Start with stocks n shares isa up to 10k i think) but have no idea where to start or how. This kind of post is EXACTLY what I need so thank you - I've been reviewing various funds and trackers with a couple of providers, however I'm interested in npicking a couple of funds (for diversification) and also a couple of private 'shares' that I'd hold for many many years but would be risky now (say lloyds for example)

At the end of the day, I'm looking at keeping it in there for 5-10 years ideally. However, the bottom line is the market is going down everywhere all the time. Why are people still investing money on say a monthly basis? I understand that you're buying with the view that profits would be garnered in however many years, but what do you actaully gain by buying now? Why not just wait until it's an obviously safer economy first? I guess I'm missing the point lol..

Sorry for any ignorance or misinformation provided on my part, I'm trying! Basically, any good information for investing my 10k would be amazingly welcomed! Thank you

Sorry about thr typo I meant "By" not "Buy"