Author: Administrator

Happy ISA investment !

We are in the dying days of the ISA season and people are frantically putting money into new accounts before the deadline.
In search of higher returns than from a cash ISA, some people are turning to “stock & share” ISAs but wondering what to invest in within it…

The common answer brandied around for long-term investment success is “diversification”!

Diversification is achieved by choosing a mix of different kinds of investments. The goal of diversification is not necessarily to boost performance (it won’t ensure gains or guarantee against losses) but more to target a level of risk (based on your goals, time horizon, and tolerance for volatility) and to try and optimise returns for that level of risk.

To build a diversified portfolio, you should look for investments (stocks, bonds, cash, or others) whose returns have not historically moved in the same direction and to the same degree. This way, even if a portion of your portfolio is declining, the rest of your portfolio is more likely to be growing, or at least not declining as much. The most common way of investing is to invest in funds (or investment trusts, see my previous post) rather than individual stocks. A fund invests based on the philosophy and remit of its fund manager, who makes the decisions and manages the investments for you. The added advantage is that each fund is classified by investment category, for easy identification. The following broad fund categories are available:

Growth: Aim is for the fund price to increase because the underlying value of the company stocks held has grown so that in time the fund can be sold at a profit. Return: High, Risk: High.

Income: Aim is for the fund to provide investors with earnings from the dividends of the companies into which the fund is invested. Adding the value of these dividends to the slow growing fund value provides the profit. Return: High, Risk: Medium.

Fixed: Aim is for the fund to provide a reliable stream of income (like above) but from bonds, which are fixed term loans issued by companies and governments looking to raise money. Return: Low, Risk: Medium.

Mixed: Aim is for the fund to invest in a mixture of stocks and bonds, usually in a 80%/20% or 60%/40% mandated ratio. Return: Medium, Risk: Medium.

Total Return: A fund that tries to make positive returns over the medium-to-long-term and provide some growth when stock markets rise, as well as some shelter in falling markets. It invests in shares, bonds, cash, commodities and currencies and may use techniques like shorting and hedging. Return: Low,          Risk: Medium.

Real Estate: A fund that invests in properties, usually commercial, or in companies that own, operate or finance income-producing real estate. Return: Medium, Risk: Low.

Cash / Short term debt: A fund that invests in cash or easy access short term debts, similar in some ways to a direct access savings account. Return: Low, Risk: Low.

A diversified portfolio consists of buying funds in each one of these categories so as to constitute your own “blend” of risk and return. My evaluation above for each category is a “stereotype” view and, like in everything, there is a wide variance within categories. In the end, it often depends on the Manager’s vision and ability.

To illustrate the benefits of a diversified approach, if we consider the performance of 3 hypothetical portfolios: a diversified portfolio of 70% stocks, 25% bonds, and 5% cash; an all-stock portfolio; and an all-cash portfolio. The diversified portfolio would lose less than an all-stock portfolio in a stock market downturn, and while it would trail in the subsequent recovery, it would easily outpace cash and would capture much of the market’s gains.

As can be seen, a diversified approach helps to manage risk, while maintaining exposure to market growth. I will explore how to diversify and some of the subtleties in a follow up post.

Cotes de porc aux lentilles

From “The Encyclopedia of French Cooking” by Elisabeth Scotto

Difficulty: Easy

Serves: 4-6

Prep time: 45 minutes

Cooking time: 60 minutes

Ingredients

  • 6 pork loins (or chops)
  • 6 small pork sausages
  • 450 g (1 lb/ 2.25 cups) of Puy lentils, already pre-soaked and cooked
  • 2 onions
  • 4 large carrots
  • 4 fresh sage leaves (or ground sage)
  • 600 ml (1 pint / 20  oz/ 2.5 cups) of chicken stock

Special Equipment

  • Large frying pan
  • Casserole dish

Preparation

  • Peel the onions and chop in small pieces
  • Peel the carrots and dice/slice them
  • Chop the fresh sage leaves into small pieces

Cooking

  • Step 1
  • Sprinkle the pork loins/chops with the chopped sage leaves and add salt and pepper to taste
  • Fry over brisk heat in a pan, 5 minutes each side or until brown
  • Remove pork loins/chops and set aside
  • Step 2
  • Add the pork loin/chops to the casserole dish
  • Add the lentils on top
  • Pour the stock in
  • Bring to the boil, then lower the heat and cover
  • Cook gently for 1 hour or until the chops are tender

Presentation

  • Remove the loins/chops and sausages from the casserole
  • Arrange around the edge of a warm plate
  • Add the lentils and sausage
  • Serve with some greens ( Brussels sprouts for example) on the side

The pork will be ever so tender !

Goes well with… a 2014 Woodstock “Deep Sands” 
Shiraz Cabernet Sauvignon  from the McLaren Vale region of South Australia

Hidden OZ gem

Lots of things can be said about Marks & Spencer, and their food hall is definitely good, but what about their wine offering? I must admit to not being a regular, but then the other day, my better half spotted this bottle and bought one to try.

Well, let me tell you it is absolutely lovely ! It’s dry and tastes of passion fruit and melon. It’s not as fresh and zesty as a Sauvignon Blanc but that’s the point: it is a different grape and a different taste. It is a richer and more luscious taste, a lesser known grape that people should discover.

But it’s a grape I know very well and loved when I was living in Australia. So I wanted to know more about this wine. I had a good look at the label and was simply stunned by the small print I discovered in the bottom corner !


From my favorite Hunter Valley Winery: Tyrrell’s !!

I just love Tyrrell’s products and I always try and visit their winery whenever I am back in OZ. Their wines are superb examples of Hunter Valley whites and reds. I even brought back an example from my last visit: their best Semillon: a Vat 1. They keep and develop for a long time. This is one of their premium wines and unfortunately its price reflects this.

But the best news is that there is 30% off at the moment on M&S wines, so the M&S Hunter Valley Semillon is only £8.66 a bottle. You can sample a Tyrrell’s Semillon on a budget !

So hurry up because we bought the last 6 bottles at our local store. Enjoy !

The white wine diet

An interesting article by Martin Moran published in the Sunday Times on 6 January 2018, explaining that rather than going to the gym, you should switch from drinking beer to drinking wine… or something like that !

Trusty Investments ?

Most people are familiar with investment “funds” but when asked about investment “trusts”, they usually think of setting up a trust fund for rich kids… Wrong! Investment Trusts are a bit of a hidden secret, even if they have been around for over 150 years. Let me explain:

Unit Trust Funds

When we talk abound buying a “fund” we generally refer to a Unit Trust fund which is a financial vehicle that holds individual shares or bonds or other assets. The fund manager decides what and when to buy or sell in the portfolio, so you don’t have to manage the underlying assets.

The fund unit value is determined daily after the close of financial markets by accumulating the fair value of securities owned by the fund less expenses and dividing by the number of units issued by the fund.
When you buy shares in a Unit Trust fund, the fund manager puts your money together with money from other investors and uses it to invest in the fund’s underlying assets. You own a share of the overall Unit Trust.

If the value of the underlying assets in the fund rises, the value of your units or shares will rise. Similarly, if the value of the underlying assets of the fund falls, the value of your units or shares falls. The overall fund size will grow and shrink as investors buy or sell. When more investors want to buy units than sell, the fund manager can issue more units of this fund to meet demand. If there are more sellers than buyers, then he’ll sell underlying assets and cancel units. This means the value of a fund’s units always reflect the value of its underlying assets.

Investment Trusts /vs/ Unit Trusts

Investment Trusts (IT) are a bit different from Unit Trusts (UT). Perhaps the biggest difference with Investment Trusts is in their structure. Unit Trusts are ‘open-ended’ meaning that units can be created or cancelled to match investor demand. UT tend to become bigger (or smaller) to match investors demand and forces managers to find assets to buy/sell. Investment Trusts are ‘closed-ended’ meaning that they have raised a fixed amount of cash and put a fixed number of shares in circulation. If more people want to buy some of these IT shares, they are quoted on the stock market and the share price will go up during the day like with any other listed company. Conversely if people want to sell.

Because we know what the Investment Trust is invested in, the Net Asset Value (NAV) of the Investment Trust can be worked out and compared to its share price. If it is below, then the shares are trading “at a premium” to its NAV, if it is above, then the shares are “at a discount to the NAV”. Obviously, it is always preferable to try and buy with a discount, but popular shares seldom are in this position. It’s all to do with investor sentiments about the future performance of the shares and therefore the future value of the shares.

So, in my humble untrained amateur opinion, the big advantage of an Investment Trusts (IT) over a Unit Trust (UT) is that when sentiment is low and/or people want/need to get their money out and sell, it affects the share price of an IT but not its underlying portfolio. Contrary to a UT manager who must sell assets at a bad time in a “fire sale” to cancel units, the IT manager does not have to sell anything in his portfolio, the IT shares just trade lower at below NAV. This means that if/when sentiments/market goes back up, the whole intact IT portfolio (and therefore the manager’s strategy) can benefits in-full from this change in underlying valuation.

Other differences

Another difference, which can be both good and bad, is the fact that an Investment Trust manager can borrow money to invest (whereas UT managers usually cannot). This is called gearing. If everything goes well, it can enhance the gains, but it can also increase the losses. So you should always check in the prospectus the amount of gearing allowed in each IT.

Lastly, an IT manager can hold back up to 15% of the income their investments generate each year and put it in “Reserve”. This means that in bad times, they can use this Reserve to make up for any shortfall in order to consistently pay a regular or growing dividend. This is ideal when this dividend is used by pensioners. Using this opportunity, some Investment Trusts have been paying increasing dividends for over 40 years!

Conclusion

While there is a lot of advertising and many articles written about Unit Trusts, Investment Trusts seem to be more “under the radar” and used by people “in the know”. I believe that the advantage they hold if markets become depressed (which is likely to happen sooner rather than later) is a good reason to consider holding some in a diversified portfolio.

There is also some evidence that the average IT performs better than the average UT in the long run (over a 10-year horizon). This because managers can take a long-term view (not forced to sell or overbuy as seen above). This is also because the board of the IT acts in shareholders’ best interests and can hold the fund manager to account and even replace him. However, if you look at a shorter period, say one to five years, investment trusts are less likely to beat unit trusts.

The most important thing though is not the type of vehicle you use to invest, but the UT or IT manager’s ability to outperform the market… As always, before you invest, make sure that you also check the charges specific to that UT or IT and the underlying risk associated with the assets held as well as the investment philosophy, time horizon and track-record of the manager.

Gremolata fish with tartare sauce

From “Fresh Start” by Tom Kerridge

Difficulty: Easy

Serves: 4

Prep time: 32 minutes

Cooking time: 8 minutes

Ingredients

  • 4 skinless (preferably) plaice fillets, 180g (6 oz) each
  • 100g (3.5 oz) sourdough bread
  • 1 large free-range egg
  • 1 unwaxed lemon
  • 6 tbsp flatleaf parsley
  • 4 tbsp reduced fat mayonnaise
  • 4 tbsp Greek-style yoghurt (0% fat)
  • 2 tbsp cornichons
  • 2 tbsp baby capers
  • Olive oil

Special Equipment

  • Baking tray
  • Small food processor
  • Small pan

Preparation

  • Step 1 – Boiled egg
  • Hard-boil the egg

K’s tip: by putting the egg in a pan with cold water, heating the pan to boil and boiling for 5 minutes, you avoid the cold egg (coming from the fridge) splitting open if plunged in hot water

  • Step 2 – Gremolata
  • Wash lemon and then peel skin of a whole lemon
  • Remove crust from sourdough bread slices
  • Break bread in small pieces
  • Place bread in food processor and pulse to small crumbs
  • Add 2 tbsp of chopped parsley
  • Add the lemon skins
  • Pulse together with bread in food processor to fine crumbs
  • Place into bowl and set aside
  • Step 3 – Tartare Sauce
  • Place mayonnaise and yoghurt into a bowl
  • Peel the hard boiled egg, chop in small pieces and add
  • Add drained and washed cornichons, finely chopped
  • Add drained and washed cappers
  • Add 2 tbsp flatleaf parsley, finely chopped
  • Season with a little black pepper
  • Stir with a spoon until well mixed

Cooking

  • Turn the oven to the grill setting
  • Put plates in bottom of oven to warm up
  • Oil a baking tray (use olive oil)
  • Place the plaice fillets on the tray (skin down if there is skin)
  • Paint some olive oil on the fish
  • Season with salt and pepper
  • Cover fish with an even layer of Gremolata crumb
  • Grill on top shelf of oven for 5-8 minutes or until Gremolata crumb is crispy and the fish is cooked
  • Keep an eye on it to make sure the topping does not burn

Presentation

  • Use heated plates
  • Display the fish fillets with the tartare sauce to the side
  • Serve with baked potato wedges and green beans

The star of the show in my view is the home-made tartare sauce

Watch out for “my”(!) baked potato wedges recipe coming soon…

Pity Party

Highlighting music videos was not on the cards for this blog, but family is family, so I could not resits promoting the fact that my niece has just released her first single from her first EP album.

After graduating from the Berklee College of Music, she is currently based in Los Angeles.

http://www.ibynoe.com/

And, since January 24 is supposed to be the “most depressing day of the year”, please enjoy a small “Pity Party” to celebrate !


All the best of luck to her.

Listen to her on Spotify

Too old for the job ?

Keeping your prized possessions for good is something I have a tendency to do instead of enjoying them in the moment. So if you are a hoarder, then listen up !

While in general all wines tend to get better and smoother with age in the bottle, it does not mean that you can keep them forever. There is an optimum cellaring period.

Three factors come into play:

  • The storage conditions: it needs to be dark, not too hot or cold, with no wild temperature swings, a good level of moisture and above all no vibrations !
  • The quality: better quality wines and/or wines from a better year will tend to do better and live longer than others
  • The type of wine: the country, area and grapes used, but funnily enough, above all the colour !!

All things being equal, in descending order of longevity, we find: red wines, white wines and sparkling wines. Champagne in particular does retain its sparkle for long.

As a rule of thumb, 10 years should be considered a maximum to keep a bottle of good champagne. Lesser quality champagne will start to “madeirise”: become darker and start tasting sweeter like Madeira wine after a few years of bad cellaring and also lose some of their fine bubbles.

It becomes a question of statistics, the longer you leave it, the worst your chances are. This is why you see people opening an old case of red wine bottles and getting 4 fabulous bottles and 8 bottles of poor vinegar !

So it was with apprehension that we opened this bottle of 2002 vintage champagne recently, after 16 years in the bottle. I was lucky and it was excellent but it could have easily been otherwise.

The moral of the story is: drink you champagne early before it becomes too old and unreliable !

First Post

Welcome to Dominique’s Site. This is early 2019 and I decided to blog and gather a huge following from displaying many insightful witty metaphysical  posts… well that sounds good for the ones that don’t know me.

Anyway this is a start and you can all read about how this came about in the “About this site” section.

My idea is to offer a variety of topics for consumption as I find inspiration and time to post. Discovering how to get this WordPress based site up and going has been great fun and not overly complicated, but it definitely needed a few free vacation days and nights to setup from scratch on my own hosting platform and overcome a few hurdles. I will blog about this experience also.

Look forward to posting a lot more interesting stuff soon

Dominique