Ask Money: should DIY investors simply copy model portfolios?

Money Observer columnist Richard Beddard responds to a question from an investor curious about his Share Sleuth portfolio and other Money Observer model portfolios.

November 6, 2018

Eye on the Sleuth

I write to ask how I could track the performance of your Share Sleuth portfolio over each of the past three calendar years – 2016, 2017 and 2018 (to date).

The reason I am interested in this is because I am a member of a small investor group of eight people who meet monthly. Each member of the group runs a ‘virtual portfolio’ to learn about investments. I would like to follow your Share Sleuth portfolio for the next 15 months and report its performance to our group.

This came about at our last meeting, when I remarked to the group that there are model portfolios offered by Money Observer, including the Share Sleuth portfolio. Would it not be sensible for amateur investors to simply ‘copy’ such model portfolios for our real investments, instead of picking our own stocks?
Malcolm Tyrrell, Leatherhead

Richard Beddard replies: Three years is a very short time to measure the performance of an investment portfolio. The official objective of the Share Sleuth portfolio is to beat the index over any five-year period, but I really think in terms of a 10-year horizon. If the portfolio performed poorly over a three-year period, I wouldn’t think I was doing anything wrong. The Share Sleuth column in November’s issue is actually on this subject.

I won’t comment on copying fund portfolios, as it is not my manor, but there are a number of pitfalls when copying share portfolios. You might, for example, buy a share I am about to sell. Your faith in the investor you are copying needs to be unshakeable (and justified), because he or she will perform poorly from time to time, so I can’t advise you to copy me or anyone else. My goal as a writer is more modest: to help people learn enough about company analysis to put their confidence in companies and to introduce them to companies that might make good long-term investments.

You can follow my Share Sleuth trades even though I can only recommend you do so as a learning experience. I report them all through the Share Sleuth column in Money Observer, although due to the time it takes to produce, print and dispatch a magazine, you are not receiving the information in real time.

I report them more punctually on Twitter. If you join Twitter or you are already a member, you can follow me here, although since I trade infrequently you will have to be patient, as most of my tweets are links to articles I have written or find interesting. You could also track the companies I favour in Money Observer’s Share Watch column – it’s on page 75 in November's issue.

Additionally, I don’t know if you have come across my Decision Engine articles on interactive investor? The Decision Engine ranks the companies I follow for investment. One thing you could do is set up a model portfolio of, say, the 10 most highly ranked shares and track the performance of that. You can find the Decision Engine articles here. Just don’t expect such a model portfolio to perform well over the next 15 months – it would be nice, but it is not guaranteed.

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