Foundation Portfolios

With so many different funds available, assembling the research and insight to achieve the right balance of risk, income and growth from a fund portfolio can be a daunting task. To make it easier, we have created what we call our ‘Foundation Portfolios’ which simply feature a range of funds reflecting different investment outlooks.

What are your investment goals?

Income

Income

Growth

Growth

Income & Growth

Income & Growth

Investors seeking income usually require high but sustainable cash flow to help fund their living expenses or lifestyle, commonly in retirement. A combination of bonds and dividend-paying equities are usually chosen to form the core of an income portfolio with other assets classes such as property added for diversification. Typically income investing should involve a lower level of risk as investors require regular, predictable cash payments from their portfolio alongside relative stability of capital; though there will need to be a trade-off between generating sufficient income and taking an appropriate level of risk.

Growth investing means targeting assets that are expected to increase in value over time, with the end objective being growth of capital while keeping to a chosen level of risk. However, growth investors are not necessarily looking for capital appreciation alone but are interested in maximising overall returns. Therefore all types of asset can be considered including income-producing ones. A growth investor is more likely to be willing to consider higher risk areas of the market such as smaller companies or emerging markets to maximise the long term potential of their portfolio, though at the expense of greater volatility.

Investors seeking a combination of income and growth understand that maximising income from a portfolio at outset can have a detrimental impact on overall returns in the longer term. By utilising assets that might grow their income stream over time, rather than those that have a high starting income, investors hope to generate higher overall returns and the scope for cash flow that rises over time, albeit starting from a lower base. Such a strategy is likely to favour equities over bonds, and more economically sensitive areas over defensive ones, far more than a pure income strategy. Therefore capital is likely to fluctuate to a greater extent.

Select a risk level

Income

Cautious

Growth

Balanced

Income & Growth

Adventurous

Cautious investors should be looking at 'safer' places for a significant proportion of their money, such as cash and bonds, but they should also consider some exposure to more aggressive investments in the knowledge that in the longer term being too cautious may mean their money does not keep up with increases in the cost of living. A typical cautious portfolio therefore aims for modest returns but with reduced risk in order to limit falls in value.

A balanced approach means being willing to tolerate some fluctuations in short-term valuations in order to achieve better long-term returns, typically controlling risk through holding a broad spread of investments. If one area or fund does badly others could make up for it, so when constructing a balanced portfolio it is important to consider which assets are correlated (i.e. move up and down in tandem) and which can offer diversification from each other.

Taking an adventurous approach means aiming to maximise returns by focusing on more volatile, but potentially more lucrative, assets. Significant short term volatility is an inevitable consequence of this level of risk so a long time horizon and a commitment to stay invested are essential. Equities are likely to make up the bulk of any portfolio, but even adventurous investors should hold a wide spread of investments so they are not overly reliant on one area.

Review your portfolio

    Fund OCF/TER Yield

    If you are unsure of the suitability of your investment please seek professional financial advice. Investors should be aware that past performance is not a guide to the future and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested.

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      If you are unsure of the suitability of your investment please seek professional financial advice. Investors should be aware that past performance is not a guide to the future and that the price of shares and other investments, and the income derived from them, may fall as well as rise and the amount realised may be less than the original sum invested.

      How we Select Funds and Portfolios

      Charles Stanley's research department specialises in providing comprehensive and continuous coverage of a wide range of UK-listed companies, investment trusts and other investment produces.

      Philosophy

      Screening

      Analysis

      Foundation Fundlist

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      Compass icon

      Philosophy

      We believe detailed research can identify skilful active fund managers capable of adding value over the longer term. We are patient, willing to consider all styles of investing, and mindful of that at times, and in certain asset classes active management does not offer value for money versus passive funds. The funds we choose are run by talented investors using rigorously applied investment processes.

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      Screening

      • Our universe is Open-Ended funds (unit trusts and OEICs) that are dealt on a daily basis and investment trusts.
      • Are specially designed screen to generate new ideas does not reveal the name of the fund – only its characteristics – in order to ensure we have no bias.
      • We monitor each fund we are interested in as part of our sector-based monthly research cycle.
      • Fund performance, style, risk and income are all considered alongside other issues such as inflows/outflows and any capacity constraints.
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      Analysis

      • We conduct around 300 face-to-face fund manager meetings a year.
      • In-depth stock-by-stock performance analysis is undertaken before and after meetings.
      • Comparison with peers, or passive alternatives.
      • We wish to ensure our chosen funds excel in our three “P’s”: People, Process and Performance.
      • We continually appraise risk, style, sustainability and governance, fees and operations.
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      People

      • How experienced is the team or individual running the fund?
      • Is the size and quality of the team appropriate for the fund? How does it compare with its competitors?
      • Is there high turnover of staff running the fund – and if so, why?
      • How is the fund manager incentivised? Are client interests aligned with fund manager incentives?
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      Philosophy & Process

      • What does the manager believe drives asset price returns?
      • Is the process repeatable, sustainable and applied consistently? What would make us change our mind?
      • Does the manager have identifiable ‘skill’?
      • What makes the approach better than those used by its competitors?
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      Performance, Risk & Style

      • Is historic performance due to manager skill or exposure to a particular bias or style?
      • Can it be earned at lower cost via a passive fund? Does active management work in this asset class?
      • How does the manager think about and control risk in the fund? Is this approach appropriate?
      • Can this fund perform well in the future? What will be the biggest impediment to its future success?
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      ESG & Operations

      • Are ESG factors embedded in the investment process, or simply a box ticking exercise?
      • Does this fund justify its fee level – and why?
      • How liquid is the fund? Is it capacity constrained?
      • If a closed-ended fund, how is it using their features for the benefit of shareholders?
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      Foundation Fundlist

      • Foundation Fundlist – 60 to 70 high quality, best idea open ended funds and investment Trusts.
      • A range of passive alternatives chosen for transparency and cost.
      • A low turnover, focused list of our best ideas for owning and asset class “through the cycle”.
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      Our Team
      Rob and the Collectives Research Team are responsible for the Foundation Fundlist and Foundation Portfolios, with the Team undertaking active fund research for the firm. Rob has 15 years’ experience in Financial Services joining Charles Stanley from Hargreaves Lansdown in 2013 where he worked as a financial adviser and an investment analyst specialising in funds and collective investments.

      Rob Morgan

      Senior Analyst:
      Rob Morgan