Funds or Trackers?

Gadfium · 25 February 2013 at 11:49PM

I've got my 6 months cash "rainy day" cash sorted out, with £10k sitting in a Santander 3.3% ISA. My pension is (semi) sorted.

I have another £5K sitting in a HL S&S ISA, in M&G Strategic Corporate Bond. My 2012/13 ISA allowance is maxed out. I hold a chunk of shares in my employer (Sharesaves and SIP) and am reasonably happy to leave them there.

Next FY I will probably stick another £5K into cash and want to invest the remaining ISA allowance. I'm looking for long-term gains (but not so long as I want to invest in a SIPP). I am a reasonably cautious person, so very high-risk is not for me. Any thoughts on the Vantage Lifestrategy, or should I consider a tracker (FTSE250?). Would you invest in trackers when the (UK) stock market is so high?

Linton · 26 February 2013 at 12:10AM

The Vanguard Life Strategy funds contain a collection of trackers designed to give a broad global coverage. This diversification makes them more suitable than single market trackers for a small investor as it provides protection from major falls in particular parts of the world. The downside is however that you will only get an average, mid range return. But a cautious investor cannot expect any better than this.

There are a range of VLS funds with names of the form VLS xx%, where xx is the % of equity (shares) in the fund, the rest being invested in bonds. The higher the % of equity in general the higher the return but the higher the volatility.

Gadfium · 26 February 2013 at 10:07AM

Thanks Linton.
I'm not a knowledgeable investor and am looking for a more "fire and forget" solution....something that can sit there for a few years with not that much poking and prodding.

Linton · 26 February 2013 at 10:09AM

Gadfium wrote: »

Thanks Linton.
I'm not a knowledgeable investor and am looking for a more "fire and forget" solution....something that can sit there for a few years with not that much poking and prodding.

Then the VLS funds are what you want - they will do any poking and prodding required on your behalf.

Gadfium · 26 February 2013 at 10:22AM

Thanks again.
I've got my other S&S with HL. If I am correct then they now charge £24 per annum per fund if I use them next FY which is turning me off using them for a VLS. Any recommendations?

If I go down the VLS route then I'm conscious that the markets look toppy at the mo. I presume that drip feeding in £1k at a time (or thereabouts) would limit any "damage"? Or would the diversified nature of the VLS protect against a "top of the curve" market?

N1AK · 26 February 2013 at 10:46AM

Linton covered it nicely. I've chosen to invest in a collection of Index funds because it keeps the fees low and doesn't require me to actively manage my investment or estimate the quality of the fund management. VLS will effectively do the same thing but without you even needing to select which indexes you will invest in.

jingleberry · 26 February 2013 at 10:50AM

For amounts less than £10K, the cheapest platform I've found is Charles Stanley - they charge 0.25% pa so on £5K thats £12.50pa (levied pro rata every 6 months). Once your investment grows to exceed £10K Hargreaves Landsdown becomes cheaper because their £24pa is fixed (unless they choose to increase it of course!). I'm about to take the plunge with VLS and if anyone has come across a cheaper option I'd love to hear about it.
Yes drip feeding witrh smooth out short term volatility but the downside of course is that you are not in the market for the part of your investment that has yet to be fed. Thats OK if you can get an acceptable return on cash in the meantime

Gadfium · 26 February 2013 at 9:37PM

Thanks Jingleberry. I think that I am pretty much decided on the VLS 80% Acc. I will probably reconsider splitting next years ISA allowance and will probably fully invest £11K in the S&S. Assuming that the charging structure stays the same, then there's not that much difference in fees.

Funds or Trackers?

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