The Handbook portfolio

The Investment Trusts Handbook model portfolio was created for the first edition of the handbook in 2017 and is designed to illustrate how a well-diversified portfolio of investment trusts can deliver steady medium risk returns over the medium to longer term. The initial seed capital was £100,000 invested on 1 January 2017. An updated value for the portfolio has been included in all recent editions of the handbook. 

The guidelines for choosing the components of the portfolio were that the trusts should all be ones that I have owned myself, have experienced managers who mostly own a significant stake in the trust they manage, are deemed to be among the best in class and are ones that I would in principle be happy to own for the long term. The idea was to keep changes apart from rebalancing to a minimum unless there was a compelling reason to do otherwise, recognising that excessive turnover is typically self-defeating. Income received as dividends has been invested back into the portfolio.

In practice seven of the original ten holdings are still in the portfolio today. The number of holdings has however crept up to 12 as I have over the course of the last four years taken the opportunity of dividend income received and external events to eject three trusts on various grounds and reinvest that income in some new holdings (including Smithson, Hipgnosis Songs and Edinburgh Worldwide). The total value of the portfolio as at 9th December 2020, the date that this website page was created, was £169,883.

The current list of holdings and their value is shown in this table. 2020 has produced a modest positive return, with the total value edging up from £158,000 a year ago to just under £170,000 today.

Updates and more regular commentary on the model portfolio will be one of the elements offered to subscribers to the Money Makers circle, a premium service costing just under £100 a year, which will be going live shortly.

Winterfloods model portfolio

For those interested in the Winterfloods model portfolio here is a summary of how its component trusts performed in the course of 2020. Note how performance is measured both against a comparator index and against each trust’s sector peer group. Because some sectors are dominated by very large trusts, if those trusts perform very well it can make some of their peers appear to have performed poorly even though in practice they comfortably outperformed their benchmark index. Scottish Mortgage’s extraordinary performance during 2020 (when its share price rose by more than 100 per cent) is a good case in point. Note that the Winterfloods team have made several changes to the portfolio in its latest review (January 2021) so not all these trusts remain in their model portfolio.

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ITHB cover 2021

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Jonathan Davis

Jonathan Davis

Founder and Editor

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