Simple guide to building the ultimate investment portfolio you won’t have to change for a decade

Over the past 40 years, I’ve learnt a lot about investing effectively. Some of the lessons have been financially painful ones – for example, selling at a loss investments I should never have bought in the first place.

However, I believe they have made me a better, shrewder investor. You learn from your mistakes.

Despite hitting my ‘senior’ years and having less time on my side (if you know what I mean), I’m now a more patient investor than I have ever been – and less inclined to be ‘greedy’: that is, seek quick profits or jump on the back of investment fads just as they are about to implode.

Back in the early 1990s, I won a journalism award and was given a prize that had to be invested in a Barclays investment fund.

Being young and brash – and annoyingly arrogant – I put the money in a high-risk Japanese warrants fund. I lost the lot – a salutary lesson.

Some may now accuse me of being a boring investor, but I’m happy to wear that badge.

I’m a ‘Steady Eddie’, content to accumulate investment gains from long-term investments (funds, not shares) that in the main deliver me a tidy mix of dividend income (dividend growth if I can find it) and capital return.

I’m not interested in buying individual shares such as the Nvidias and Metas of this world (easily bought through an investing platform) although I’m happy to have exposure to them via a diversified investment fund.

Provided the returns I earn from my investments are in excess of those that I can earn from cash, I’m a happy bunny – although I do have cash Isas that I use either for financial emergencies or to fund the stream of holidays booked by my travel-mad partner, Leonie.

Not being a trader, I like to hold at the core of my investment portfolio investment funds and stock market-listed investment trusts that I don’t have to micro-manage.

In other words, I can leave them alone to grow in value rather than constantly chop and change them. It’s a marriage made in heaven.

Nearly all of these investments are held in a tax-friendly wrapper such as a stocks and shares Isa or a self-invested personal pension.

And while I could take the income from them to help fund my day-to-day living, I prefer to reinvest the divis in yet more shares.

In my eyes, the compounding of dividend income is one of the wonders of the investment world. I urge you to embrace it.

So which funds out there are the ones you can trust to be robust enough to form the core of your investment wealth strategy for the next decade and beyond?

There are plenty, and you can find them by looking at the best fund lists provided by investing platforms such as AJ Bell, Hargreaves Lansdown and Interactive Investor.

You can also use some splendid comparative fund tools provided by the likes of the Association of Investment Companies and Trustnet to dig them out.

Key to identifying them is to look out for certain characteristics.

These include: a steady investment record, especially over the past five and ten years; low ongoing annual charges (ideally closer to 0.5 per cent than 1 per cent); a fund that is in growth mode in terms of assets under its wing (usually a reflection of good performance and strong investor demand); an income bent; and an investment team with a clear strategy as to how to extract returns from stock markets.

Here are my suggestions: my acclaimed portfolio ‘Steady Eddies’.

They are funds that I think are ideal bolthole investments that could act as the engine room of your investment portfolio for the foreseeable future.

Note that I say ‘could’ as opposed to ‘will’ because sometimes the very best looking funds do go off the rails (remember Woodford Equity Income, which imploded in spectacular fashion?).

It is up to you whether you want to complement some of these investment heavyweights with supporting ‘satellite’ investment funds that give you exposure to specific markets or investment themes you particularly like.

A core and satellite approach to investing makes great sense.

I have split my Steady Eddies into two camps: global and UK.

Given my liking for investment funds run by managers rather than robots, you may be somewhat surprised by a couple of my choices.

My top pick of global funds

Global investment funds should lie at the heart of any investment portfolio.

Although UK investors should always have a bias to the home stock market, especially given its assortment of dividend-friendly companies (the banks, energy companies and tobacco stocks), the London Stock Exchange is increasingly overshadowed by rival markets in the US and across the length and breadth of Asia.

Geographic diversification is one of the foundation stones of good portfolio management and you can get this via a global investment fund or investment trust.

I’ve gone for seven – although there are plenty of rival funds that have great merit.

The first choice is HSBC FTSE ALL-WORLD INDEX, which, by tracking the performance of the FTSE All-World Index, is a proxy for the performance of global stock markets.

This £7.3 billion fund ticks all the boxes: low annual charges (0.13 per cent), geographic diversification with the biggest slug of assets in the US (60 per cent), and exposure to all of the world’s biggest listed stocks (the likes of magnificent seven stocks Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla).

Over the past five discrete one-year investment periods, it has registered respective returns (rounded to the nearest 1 per cent) of 22 (year to August 20 this year), 12, 23, -3 and 7 per cent. Pretty respectable, equating to an overall five-year return of 74 per cent, according to Trustnet.Although its focus on big US technology stocks means the dividend is low at 1.3 per cent, it will ensure you don’t miss out on the tech story – buoyed by the boom in artificial intelligence (AI).

Of course, it doesn’t provide you with protection from any stiff correction in global stock markets that could result from the bursting of the AI bubble (some commentators have been predicting the pricking of this bubble for the past year). But then no equity fund will do that for you. Corrections are part and parcel of investing and you have to have the conviction (and courage) to keep investing when share prices are falling. Building investment wealth is a long-term project and rewards the patient investor.

Invest regularly if you’re worried about market timing. But I’d be surprised if over the next decade, this fund hadn’t enhanced your wealth.

To complement this index tracker, I would hold a number of long-established global funds run by respected investment teams.

I’ve chosen six, which fall into two categories.

The first category includes global investment trust titans ALLIANCE WITAN, BANKERS and F&C.

All three are big funds – ranging from £1.4 billion (Bankers) to £6.5 billion (F&C) – and have annual dividend growth records going back at least 55 years.

The three of them pay quarterly dividends.

Ongoing annual charges are also competitive with the highest (Bankers) still representing good investment value for money at 0.51 per cent.

The funds have solid five-year and ten-year investment records: key to qualifying as a ‘core’ investment. Over five years, the respective total returns for Alliance Witan, Bankers and F&C are 53, 44 and 67 per cent. Over the past decade, the equivalent figures are 189, 188 and 216 per cent.

All are managed slightly differently. Alliance Witan uses a collection of top fund managers from across the world to manage parcels of the trust’s assets.

The result is a fund that in terms of geographic exposure is wildly different to that of HSBC FTSE All-World Index (in other words, complementary rather than a duplicate).

In the case of Bankers, part of investment house Janus Henderson (JH), the managers parcel out the fund’s assets to investment teams at JH to run.

At F&C, part of global investment house Columbia Threadneedle, a similar strategy is adopted. F&C is the oldest investment trust in the country.

One of its defining characteristics is an 11 per cent exposure to private equity, which is both risky and potentially rewarding (in other words, hold on to your hat).

In my second category are investment funds ARTEMIS GLOBAL INCOME, M&G GLOBAL DIVIDEND and TEMPLETON EMERGING MARKETS.

The Artemis and M&G funds have an income bent – especially the M&G fund – and have exceptional fund managers at the helm (respectively Jacob de Tusch-Lec and Stuart Rhodes).

Over the past ten years, the funds have generated total returns of 263 and 183 per cent respectively. To put these numbers into perspective, the average global equity income fund has returned 141 per cent.

Both portfolios provide exposure to global stocks outside the magnificent seven (only Microsoft appears in the top ten holdings of the M&G fund). Respective total annual charges are 0.83 and 0.66 per cent (higher than our four previously mentioned global Steady Eddies). Income, hovering just above 2 per cent a year, is paid quarterly by M&G Global Dividend and semi-annually in the case of Artemis Global Income.

Templeton Emerging Markets is my slightly off-beam final global fund choice.

I see it as a complement to my other Steady Eddies as a result of a portfolio skewed towards Asian markets (South Korea, Taiwan and China) and some of the world’s most successful and relevant companies: the likes of computer chip maker TSMC and consumer electronics giant Samsung Electronics (maker of the Galaxy smartphone).

Over the past ten years, it has delivered total returns of 246 per cent. Total annual charges sneak under the 1 per cent bar (any higher and I would have excluded it) and its last annual dividend was worth 3.25p a share to investors. Its current share price is just under £3.20.

My top pick of UK funds

My final three Steady Eddies are funds that trawl the UK stock market for a mix of income and capital return.

As with my global picks, I’ve included an index-tracking fund – HSBC FTSE 100 INDEX – which tracks the performance of the FTSE 100: a great source of dividend income for investors and overall investment return.

Total annual charges are 0.1 per cent and, over the past ten years, the HSBC fund has generated total returns of 122 per cent.

My two other UK funds are actively managed: investment trust ABERDEEN EQUITY INCOME and JO HAMBRO UK EQUITY INCOME.

The Aberdeen fund, listed on the UK stock market, has 25 years of annual dividend growth under its belt. It recently absorbed the assets of Aberdeen trust Shires and is in growth mode. Its stand-out characteristic is a healthy dividend (close to 5 per cent) with payments made quarterly. It also gives investors exposure to stocks outside the FTSE 100. Total annual charges are 0.84 per cent.

JO Hambro UK Equity Income is a cracking fund run by a triumvirate of managers: Clive Beagles, James Lowen and Josh Herson.

Over the past ten years, it has generated an overall return of 146 per cent (against a peer group average of 95 per cent).

Dividends are paid quarterly – providing an annual income to investors of about 4.7 per cent – and total annual charges are reasonable at 0.73 per cent.

The £2 billion fund is one of the best UK equity income funds around – and Beagles is one of the most enthusiastic and passionate UK investors I have ever interviewed. I hope my Steady Eddies pique your interest. If you have some of your own Steady Eddies, do let me know: Jeff.prestridge@mailonsunday.co.uk