Investing newbie with questions...
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Not_Me_Officer wrote: »I guess i'm just wording a question very badly as to should you go for the cheaper option really since you can buy more units (since they're very similar)?
They aren't cheaper. They rise on a % basis. If you have £10k invested and it rises 10% it doesn't make any difference if that was 10,000 "cheap" units at £1 each now £1.10 or one "expensive" unit at £10,000 now worth £11,000.0 -
Thanks
The reason for investing in the LISA like so is because it was said here that I should at least open it so that once I turn 40 I would still have the option at the very least of contributing to it if I so wished
The more I thought about it the more I thought that was right.
So we just opened with the minimum of £100.
As I say we may never contribute to it again (all our money going into a pension)
Or we may at some point between now and 15/16 years time decide that we should - at least we'd now be able to if we're over 40 and with only £100 in there there'd be nothing wrong with putting money into a different fund (or same).0 -
Not_Me_Officer wrote: »
L&G: 154
Blackrock: 212
Vanguard: 18408
massive difference.
The thing is my £100 got me 0.5 unit with Vanguard & my wife's £100 got her 60something units with L&G.
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The unit price is a way of keeping score but irrelevant to performance.
Imagine you were running an investment fund valued at two million pounds. You might like to say there were ten thousand units available at £200 each. Or a hundred thousand units available at twenty pounds each. Or two million units available at a pound each.
If a punter comes along and says I would like to add my money to the pot, here is my £100, you would either say OK you get half a unit (if the units cost £200) or OK you get five units (if the units cost £20), or OK, here's your one hundred units (if the units cost a pound).
In all three cases what happens is the punter puts his £100 into the kitty and the fund manager then has £2,000,100 to spend on investments instead of £2,000,000. The fund manager will spend the money how he sees fit. If the overall assets of the fund doubles in value from £2,000,100 to £4,000,200 or halves to £1,000,050 - the punter's units will double in overall value to be worth a total of £200 or halve to be worth £50.
The maths is the same whether the punter owns 100 units out of 2,000,100 total units that are now in issue, or owns 5 out of 10,005 units in issue, or 0.5 units out of 1,000,000.5 units in issue. If the fund doubles the amount you invested doubles. If it goes up by 10% the amount you invested goes up by 10%.
So it doesn't matter if you buy units in a Vanguard fund that were priced at £100 on day one and moved forward from there over the course of six years, or units in a different fund that were priced at £1 on day one and moved forward from there over a completely different number of days. The performance you get is driven by how the fund performs.
It doesn't matter how many units you own because your total running costs don't increase just because one fund works with £100 units and another with £1 units or 1p units. You pay a fee to the manager for the overall value being managed for you (on a percentage basis) and you pay a fee to the platform for either the overall value on the platform (if a percentage-based platform) or the number of transactions you carry out (if a transaction fee based platform) or some combination (if the pricing structure is more 'hybrid').
So if you have invested the same amount of money and the running costs are the same and the total income and gains and losses are the same, the return will be the same, whether they have a unit price that allows your £100 to buy exactly 1 unit or 113.7839206 units.
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Obviously the two funds won't have the same performance because they are invested in different things so you and wife won't get the same returns. If your wife bought the L&G global 100 then she is only invested in 100 stocks around the developed world and so you could expect her returns to be more volatile than yours which are invested in thousands more companies across developed and emerging markets and have a higher weighting to the UK. But broadly you are both invested 100% in equities of large global companies and the exact overall long term returns are pot luck and the price per unit doesn't come into it.
With only £100 invested (plus government bonus, minus account closure or transfer-out costs) you won't be getting rich off it any time soon.0 -
The size of a fund unit held on a platform means nothing. Two funds holding the same investments, will rise or fall by the same % no matter whether the units are 10p or £100.0
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You know that embarrassing moment when you realise just how stupid your question was
Thanks. Reading the responses I now just think oh of course you idiot
Overthinking is my downfall I suppose as well as a concern of making a mistake.
And as said, I really don't think we'll be using the LISA but at least it's open so that the option is there. If we change our mind then we can use it. If we don't then it's only £100 (& the regular contribs would be in a pension).0 -
Two questions. The first one should be a quick one:
1) One of the benefits of a pension being that means tested benefits wont result in you losing it whereas you may be forced to dip into your ISA/S&S ISA/LISA.
So if you have your money in an ISA (be it S&S or LISA) and then fall on unfortunate times, let's say long term, could you just put all your ISA money into a pension?
And if there's limits to how much you can put in then let's say it's within that limit just for arguments sake.
Or would you face getting hit with hiding your assets (or whatever the correct term is)? And it would have had to have been in a pension for a certain timeframe first?
I know this could be over analysing the whole thing but i like to know totally what i'm looking at.
2) The Vanguard LifeStrategy 80 seems suitable for me. However that would be just 1 fund in my portfolio. I did wonder about the possibility of having a number of index tracker funds in place of the VLS80.
Does anyone here do this or is that really bad practice?
An index tracker fund focusing on say the US, the UK, Asia, UK bonds. I'm just picking out randoms for this question. That could be say 4 index tracker funds right there (just for the sake of this example).
And then from that decide on the asset allocation for each.
Is that a bad idea or do people do that?
I ask because i don't want to have tunnel vision going for the VLS80. I want to weigh up other possibilities before i put the money somewhere and that idea just came to me earlier. What would be the pros/negs of doing that rather than just lumping for the VLS80 for example?0 -
Not_Me_Officer wrote: »1) One of the benefits of a pension being that means tested benefits wont result in you losing it whereas you may be forced to dip into your ISA/S&S ISA/LISA.
So if you have your money in an ISA (be it S&S or LISA) and then fall on unfortunate times, let's say long term, could you just put all your ISA money into a pension?
And if there's limits to how much you can put in then let's say it's within that limit just for arguments sake.
Or would you face getting hit with hiding your assets (or whatever the correct term is)? And it would have had to have been in a pension for a certain timeframe first?
I know this could be over analysing the whole thing but i like to know totally what i'm looking at.
An example would be did you deliberately give cash away to your kids when you knew you may need care and support; was the reason to get rid of the capital (or income source) something that can reasonably be seen as being driven by avoiding charges or obtaining benefits as a significant factor or only reason.
Putting money into a pension for yourself is not something explicitly mentioned in the official examples of things that can constitute 'disposing of your capital', but other examples given include putting money into a trust that can't be revoked, or not actually giving assets away converting them into another form that isn't taken into account in the calculations (e.g. personal possessions). It could perhaps be argued that stuffing money into a pension of which you are the beneficiary but which evades the calculation is something analagous to one of those.
Certainly when making pension contributions out of ordinary income levels it would be difficult to prove that dodging a means test was the significant or only reason for you to make the pension contribution. Pension contributions are sensible things for people to do as we all need money in retirement and tax relief is given when you make them. But a practical issue is that if you have, say, £50k of ISAs and earn £20k in a year before becoming unemployed, you will not be able to put more than £20k gross into your pension (£16k net cost) leaving you still with £34k of ISAs.2) The Vanguard LifeStrategy 80 seems suitable for me. However that would be just 1 fund in my portfolio. I did wonder about the possibility of having a number of index tracker funds in place of the VLS80.
Does anyone here do this or is that really bad practice?
And if it was really substantially different from the professional allocation in one of the 'off the shelf' mixed asset funds, you'd have to ask yourself how it is that you know better than the pros.An index tracker fund focusing on say the US, the UK, Asia, UK bonds. I'm just picking out randoms for this question. That could be say 4 index tracker funds right there (just for the sake of this example).
And then from that decide on the asset allocation for each.
When you try to build something that you think is going to be 'better', it is going to be complex to do that, and after your have done the initial research and built it, it is going to be effort to maintain with further research and buying and selling to keep to your ongoing targets whatever they may be.I ask because i don't want to have tunnel vision going for the VLS80. I want to weigh up other possibilities before i put the money somewhere and that idea just came to me earlier. What would be the pros/negs of doing that rather than just lumping for the VLS80 for example?
For people with massive pots of money, being able to cut down the costs by a fraction of a percent by managing the underlying indexes directly, could also make a difference - though saving 0.1% on £100k is only £100 and will be obscured by the difference in returns between asset mix.
You would have to ask yourself (a) whether you can be bothered to construct and maintain something yourself ; (b) whether you are competent to construct and maintain something yourself ; (c) whether constructing and maintaining something yourself is going to produce a significantly different enough result from that of the best mixed-asset fund you would have otherwise chosen, to go through the hassle and risk of (a) and (b), which is perhaps unlikely to be the case when you only have £7500 to invest and ekeing out an extra 0.1% return over the year is not even a tenner.
Certainly the risk of (b) could be significant when you are an inexperienced investor who has only just found out the difference between ISA, LISA and pension - and does not have much insight into global markets or macroeconomics, and things like bond yield curves, relative merits of different markets etc, other than knowing that historic levels of returns over the last 30 years and the average volatility of different asset classes may not prevail going forward. Via a modest management fee for a multi-asset fund you can employ someone else to have technology and resource to handle that stuff for you (for better or worse).0 -
Not_Me_Officer wrote: »An index tracker fund focusing on say the US, the UK, Asia, UK bonds. I'm just picking out randoms for this question. That could be say 4 index tracker funds right there (just for the sake of this example).
And then from that decide on the asset allocation for each.
Is that a bad idea or do people do that?
The two arent mutually exclusive.
The answer could well be (and I'm sure is) yes, it may be a bad idea (depending on your random selections) and yes, people do that0 -
Not_Me_Officer wrote: »2) The Vanguard LifeStrategy 80 seems suitable for me. However that would be just 1 fund in my portfolio. I did wonder about the possibility of having a number of index tracker funds in place of the VLS80.
Does anyone here do this or is that really bad practice?
An index tracker fund focusing on say the US, the UK, Asia, UK bonds. I'm just picking out randoms for this question. That could be say 4 index tracker funds right there (just for the sake of this example).
And then from that decide on the asset allocation for each.
In your example you are suggesting using multiple trackers for different geographies, I cant see much justification for that. On what basis do you decide that say Japan needs a different allocation than a tracker would give? If you you have expert knowledge on the Japanese economy it may make sense, but I guess you dont. One justification could be that you consider the very high USA allocations in trackers somewhat of a risk, but its messy to solve that by buying separate funds for everything except the USA.
If you want to invest globally predominantly in the largest multinational companies then in my view you should go for a global tracker. VLS100 isnt a global tracker as it makes its own management decision on the allocation between countries. Interestingly it has consistently underperformed real global trackers like HSBC FTSE World Index fund.
However I believe it is justifiable for larger portfolios to hold separate funds, trackers or otherwise, on other criteria such as company size, industry sector or the style and skills of a fund manager.0 -
Thanks for the feedback to all of you. As ever you've all been great with the responses.
Just a note though - when I listed 4 it was purely for an example only. I could listed every single different type of index tracker known to man, however many there are, 10, 15, 100, 1000 etc but at that time of night I didn't fancy typing out every single possibility and thought that listing only 4 would get the point of my question across.
That was all0
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