Generally we are preaching to the converted as you, as an experienced investor, will have your own rules on how to diversify your portfolio. However, revisiting the basics can sometimes prove useful in uncertain times. We have been asked by some international investors who may not have easy access to ‘the basics’ to provide a little information on how some investors diversify their portfolios. As a UK-based company we have to follow native regulations, so we cannot offer advice, however, we have gathered together some information on how some of the world’s top investors invest and have made it available for you right here.

Assessing who is the best of the world’s investors may be subjective, so we have taken personal wealth and portfolio holdings as a guide to selection. We also checked out to see if there was anything they all had in common and generally they all had a plan and stuck to it. They knew what they wanted, set themselves milestones, were self-educated and took advantage of whatever tax breaks they could. We have gathered that information together in the following section called the Portfolio Basics for your convenience. 

The Portfolio Basics

Have a Goal

• A specific goal with any investment portfolio would be a specific target, such as ‘I want have £5m fund in, say, seven years’ and have a contingency plan in place just in case.
• Be realistic £5m may be achievable but is your timescale realistic from where you are now?
• Visualisation is an often overlooked key to success when things get tough – what is the fund purpose? Lifestyle improvement? Retirement? Bigger house? Faster cars? Get a picture over your desk or visit that beautiful home or car, sit in it, live it.

Have a Plan

• Having a goal with your portfolio will allow you to work backwards and make a plan of how you are going to get there
• Set milestones for each step of your plan so you can assess progress or not and break down into bite sized pieces
• What investment risks are you prepared to take or not to take? Set yourself some ground rules to start. Without rules you are likely to drift and be disappointed with your results.

Investing is not trading

• Chopping and changing investments like a trader can be costly – stick to your portfolio plan and keep fees to a minimum.
• Check your investment fund progress regularly but don’t invest in something you are not prepared to own.
• Stocks and shares are volatile short term but diversification will drive results over the long term so ensure the sector spread reflects your risk appetite.

Educate Yourself

• Never invest in something you don’t understand. Investing in yourself will always produce the best return – become an expert in your investment fund field whatever it takes.
• Diversification may be a key, however, do not over-diversify as this can dilute returns. 
• Do not follow the herd make your own decisions and stick by them you’re in this for the long haul.

Tax Breaks

• Each Country is different, however, check what tax breaks you may be able to get where you live and where you invest.
• Get a good accountant if you haven’t got one already for tax efficiency.

So let’s take a look at where some of the best investors and influencers in the world invest and see if we can learn from the masters. Remember, it’s always cheaper to learn from other people’s mistakes and all these masters have made mistakes and learned from them. Learning from the masters may just save you a lot of money.

Top Investor Portfolio Structure

Warren Buffet

Warren Buffet is one of the world’s wealthiest men and is regarded as an investment genius. His personal investment performance over 60 years is astonishing, turning $10,000 into an incredible personal wealth of $86bn. This assessment is based on his Q4 filing, as per the US SEC regulatory requirements.

It is no secret that Buffet loves insurance and banking as he owns some of the biggest banks and insurers in the world such as Bank of America, Amex and Wells Fargo. Buffet also likes securities such as Bonds. His wife’s long term portfolio is 90% Equities and 10% Bonds.

Information Technology is also a significant part of his portfolio at 25.96%, however, this is in Apple shares. Consumer goods and Transport at 17% and 4%, respectively, are the next biggest investments; followed by Communications, Healthcare, Energy, Industrial and Real Estate. The investment in real estate may look small, however, it was in fact a $377m investment in Store a Real Estate Investment Trust. Whilst people were backing away from this area in July 2017 Buffet jumped in with both feet, the potential reason? Over two thirds of the real estate was service-based such as cinemas, restaurants, bowling alleys, etc.  

On the face of it this may have seemed risky at the time, however, Buffet calculated correctly, as people continued to use the Real Estate services. Note, that Buffet invested via a Real Estate Investment Trust, so this gives him maximum security whilst allowing him to have reasonable liquidity when required. Direct investing into real estate is generally not regarded as a wise investment due to the lack of liquidity, however, investing via bonds and investment trusts accommodates for some more flexibility and liquidity.    

Denis Gartman

You may not have heard of Dennis Gartman, however, he is a multi-millionaire who has been a huge influencer to all the financial markets behind the scenes since 1987 when he started producing the Gartman Letter. The Gartman letter provided 24/7 financial breakdown of what happened in the previous 24 hours. The Gartman Letter was delivered each morning to traders worldwide.

Interestingly, in December 31^st 2019 he predicted that a ‘bear market’ was imminent and this would hit all portfolios worldwide. His reasoning was the ‘inexperience and lack of fear’ of the traders of the day and how they would cope with a recession.

“There is always a bargain out there”, Gartman was famous for investing widely outside of stocks and shares. He argued that in a bear market when stocks and shares are falling there is value somewhere and his latest move into cautious holdings seen below reflect his concerns over the 2020 markets and include IT, Gold, Bonds, Commercial Real Estate, Cash, Energy, Financials.    

Ray Dalio

Here we have someone else who predicted the market crash this time in 2008. Ray Dalio is founder of Bridgewater Associates the largest hedge fund managers in the world according to Forbes. With a portfolio holding of $160bn Dalio has fought to make himself one of the top investors in the world. Starting out as a golf caddy he started his firm in 1974.

The All Weather portfolio was made internationally famous when Tony Robbins promoted the advice he was given by Dalio. The portfolio is made up of assets that will produce a decent performance through good and bad economic situations. However, just how well did the portfolio do? Well, it was famously back-tested by Robbins in his book and has been tested by others since. The results are quite impressive. Between 1984 and 2016 the fund averaged 12% annually and made money 85% of the time.

You would think at first sight that there would be a lot of drag on the portfolio with the bond influence, however, clearly this is not the case, longer-term.   

Interestingly, Dalio constructed this ‘All Weather Portfolio’ to better most ‘economic seasons’ as Dalio calls them on the basis these are the ‘seasons’ that affect all assets:

• A Growing economy.
• A Declining economy.
• Inflation – rising cost of services and goods.
• Deflation – falling cost of services and goods.

The portfolio is constructed to perform well in any economic situation so you should see a consistent decent return over time in ‘Bull’ and ‘Bear’ markets. You will not get the excessive growth coupled with stock volatility as the Bonds counteract that giving a little drag and stability to the momentum. The Bonds ensure a low risk portfolio of course and that should be born in mind when considering your own portfolio and your age and appetite for risk.

The Gold and Commodities segments counter act the inflationary elements when they occur, so you have a well balanced portfolio for ‘All Weathers’.

While the political and economic turmoil is an ongoing headache for those living in the UK, for
international investors with money to spend, the chaotic scenes in Westminster and weakened pound have only enhanced the attractiveness of UK property. Although Brexit deadlock has stalled progress in some sectors, international investment volumes in the UK property market continue to rise, highlighting the timeless appeal of this lucrative asset class.

Overseas Investment in UK property developments soars

In the aftermath of the 2016 EU referendum, international investment volumes in the UK property market surprised many and showed that despite the political uncertainty, the UK was set to remain a favourite destination for global capital.

Figures show that in the first half of 2017, the UK accounted for 14 percent of all the global
commercial property investment transactions, second only to the US. In the multifamily residential sector, investment volumes increased dramatically, up by more than 150 percent to a high of $7.6 billion in 2018. In central London, 79 percent of the real estate acquisitions were made by international investors. This growth is set to continue in 2019, with overall investments in UK commercial property predicted to be around £55 billion.

Why has UK property remained so attractive?

The fact that international confidence in UK real estate has remained so strong shows that overseas investors are looking past Brexit uncertainty and taking a long-term view.

The weakening pound that accompanied the UK’s decision to leave the EU has certainly played its part. With the value of the pound taking a downwards trajectory from June 2016, international buyers have found themselves with increasing buying power. Many investors have taken this opportunity to acquire UK property before the pound strengthens, which is likely to happen if/when a deal to leave the EU is done.

There’s also a limited supply of prime assets in key locations, such as the central London office market. This ongoing demand for quality assets in a tight market has persuaded many international investors to buy now rather than waiting to see what the outcome of Brexit will be.

Investors are looking beyond the capital

Although there’s been little change in the demand for UK property, investors have been rethinking their strategies. While London remains one of the favourite destinations for overseas property investors, stagnating prices and high demand have inspired many investors to explore opportunities in property markets beyond the capital.

Cities in the Northern Powerhouse, such as Liverpool, Manchester, Newcastle and Leeds, have all climbed the rankings to become property investment hotspots. Research from Ernst & Young has found that these cities have attracted some of the highest levels of foreign direct investment of any outside of London.

As a result of this foreign investment, property prices in many regions of northern England are among some of the fastest-growing in the country. In Manchester, house prices rose by nearly 9 percent in the 12 months to July 2018. That has attracted strong interest from foreign buyers, with buy-to-let enquiries from Chinese investors up by 255 percent in January 2018 when compared with the same month in 2017.

Opportunities for foreign investors to diversify

The northern cities are providing foreign investors with an opportunity to diversify their portfolios. New developments are springing up to cater for the growing demand in property. These cities are also home to large student populations, giving investors the opportunity to enter the lucrative student-let market. Purpose-Built Student Accommodation (PBSA) has become highly sought-after by foreign investors, with overseas investors accounting for 55 percent of all transactions in 2018.

Prices in these cities also tend to be lower than those in London, while rental yields and capital
appreciation is expected to be stronger. This is backed by a trend of large regeneration projects and investment in transport and infrastructure. These are just a few of the factors luring overseas buyers away from the traditional property investment hotbeds in the south.

The Timeless Appeal of UK property

The international investment volumes we’re seeing during a period of such political uncertainty show that, in the long-term, UK property has a lasting appeal. It offers a promising indication of what investors can expect after Brexit and highlights exactly why UK property is such an attractive investment class.

High-Yield UK Property Investments

At Wealthmans, we offer a range of alternative UK property investment opportunities that are
available immediately. Property bonds and loan notes can provide greater returns than buy-to-let investments without the hassle of managing and maintaining the property. These types of investments are not available to retail investors. In order to qualify as a suitable investor you must be either a high net-worth individual or a sophisticated investor. Suitably qualified investors must first register on our registration page. You will them be granted access to our Investor Lounge.

For almost 20 years, buy-to-let was the investment of choice for many Brits. This coincided with the great British property boom, which saw buy-to-let investors earning average returns of £14,987 by 2016 for each £1,000 they invested in 1996. However, now the lure of traditional bricks and mortar investment is wearing off.

A crackdown started by George Osborne has seen successive governments throw barriers in the way of landlords to make it more difficult to enter the market and make attractive returns. This attack on property investors started in 2016, with the introduction of the 3 percent stamp duty surcharge on second homes. Then came the phased reduction of the tax relief landlords could claim on buy-to-let mortgage interest payments.

But the assault has not stopped there. Landlords are soon to be hit by changes to their capital gains tax relief, and from April 2020, they will lose their £40,000 lettings exemption unless they live at the property themselves. Given these strong headwinds, it’s perhaps not surprising that investors are turning away from buy-to-let in their droves.

Property remains an attractive investment proposition

Although buy-to-let has lost much of its lustre over the last few years, UK property continues to represent an attractive investment. Despite the political turmoil caused by Brexit, London continues to be a magnet for foreign investment, while the cities of Liverpool, Manchester, Newcastle and Leeds have all risen up the rankings to become property investment hotspots.
If only there was some way for investors to be able to tap into the lucrative UK property market
without having to face the government’s backlash against buy-to-let…

Why property bonds are an increasingly popular alternative

A property bond is an investment in the development of a property as opposed to a completed building. In simple terms, the property bond can be seen as a loan from an investor to a developer to help them meet the costs of the development. In return for this loan, investors receive a fixed annual rate of interest or a net capital gain at the end of the investment.

Any type of investment comes with a number of risks. For example, a buy-to-let investor may not be able to find a tenant for a prolonged period, interest rates could rise or the property market could crash. However, property bonds are generally seen as one of the safest forms of investment. That’s because they are usually secured against a physical asset with a value. If the developer were to go bust or fail to meet the terms of the loan agreement, the investor can legally reclaim the value of their investment from that asset.

Perhaps the greatest benefit of a property bond is that it allows you to invest in the property market without having to deal with the day-to-day hassle of managing a property portfolio. Rather than having to worry about maintenance issues, finding a suitable tenant and making insurance and tax payments, you simply invest your money and receive your returns.

Property bonds are three times more profitable than buy-to-let

New research by a London-based investment firm has revealed that individuals could receive almost three times the return by investing in property bonds rather than buy-to-let. It compared the purchase price, operating cost and return of a buy-to-let property with a property bond investment opportunity. To ensure a fair assessment, it looked at historical data associated with an average buy-to-let property in Yorkshire and a two-year property bond loan note with a Yorkshire-based developer, Empire Property Holdings.

It found that the buy-to-let property provided a return of 4.6 percent per annum, assuming a 100
percent occupancy rate. In contrast, the property bond delivered a return of 27.2 percent over two years at a rate of just over 13% per annum. The result is a clear difference of more than 8 percent a year.

Find Attractive Investment Options at Wealthmans

Property bonds enable investors to benefit from the profitability of the property sector without the downsides of property ownership. At Wealthmans, we are renowned for introducing well-researched, high-yield investment opportunities to clients in and out of the UK. These types of investments are only available to suitably qualified investors such as high net-worth individuals or sophisticated investors. If you are interested in finding-out more information on the investments we offer, please first register as a suitably qualified investor on our registration page to get access to the Investor Lounge.