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  • FIRST POST
    • Not Me Officer
    • By Not Me Officer 28th May 17, 9:45 PM
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    Not Me Officer
    Investing newbie with questions...
    • #1
    • 28th May 17, 9:45 PM
    Investing newbie with questions... 28th May 17 at 9:45 PM
    On the back of recommendation here i bought the "DIY Simple Investing" book by John Edwards. So far so good and i'm finding it very helpful so big thanks for the recommendation.

    I've just got to the section where he discusses charges and the impact of charges and now i have questions. I will probably have questions later on as i work more through this book so you'll have to excuse me for bumping the thread from time to time.

    The book took me to http://monevator.com/compare-uk-cheapest-online-brokers/

    Before the read i had decided i was going to go with Hagreaves Lansdown. Their layout i thought was easy for a novice like me to understand. Well maybe not easy but easier. I felt more comfortable with that than the much mentioned Cavendish Online.

    So i go to that link and try to find a comparison for the two.

    I was surprised by the charges if i understood them right. I thought HL didn't charge to deal? Or was i just badly misinformed?



    My plan was to invest in a tracker of some description once i'd understood more and taken a closer look at what was available rather than a big list of funds. Just invest in a single simple tracker and then be done with. Maybe take a look in 1-2 years time. My contributions will be monthly.

    So firstly i see i'm going to be charged 0.45%. Looking around this seems on the higher side, correct, or not?
    I then notice the £11.95 charge. What is that exactly? £11.95 per purchase (so if i pay in £100 per month then it's really only £88.05? £11.95 per year? Is that even applicable to a tracker fund?)
    £1.50 for "regular investing". I'm guessing this is the one that is deducted from my monthly contributions, so that £100 is actually only £98.50?

    In comparison Cavendish Online are much much cheaper (if i've understood right), but is there any reason i should look at HL over Cavendish?

    Could someone please spare the time to go through the charges explanation with me?



    Don't worry, the charges is somewhere around halfway in the book, so i made it that far with only 1 question
Page 2
    • Audaxer
    • By Audaxer 7th Jun 17, 11:06 PM
    • 655 Posts
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    Audaxer
    We may well never put anything else into it between now and hitting 50 but we just opened it so it's open.
    Originally posted by Not Me Officer
    Can't think why you would be interested in investing like you are, and then maybe not invest more than £100 until you hit 50 in 16 years time?
    The thing is my £100 got me 0.5 unit with Vanguard & my wife's £100 got her 60something units with L&G.

    So when things rise and fall will my wife's account/pot/balance/value (insert correct term here) rise and fall much sharper than mine?
    I don't think it matters at all comparing the actual unit price of different funds - if both funds rise 10% over the year, you'll both have £110.
    • AnotherJoe
    • By AnotherJoe 7th Jun 17, 11:56 PM
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    AnotherJoe
    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)?
    Originally posted by Not Me Officer
    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.
    • Not Me Officer
    • By Not Me Officer 8th Jun 17, 6:59 AM
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    Not Me Officer
    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).
    • bowlhead99
    • By bowlhead99 8th Jun 17, 8:14 AM
    • 6,999 Posts
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    bowlhead99

    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.
    Originally posted by Not Me Officer
    Copypaste from something I have written before:
    -
    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.

    -
    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.
    • Linton
    • By Linton 8th Jun 17, 8:44 AM
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    Linton
    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.
    • Not Me Officer
    • By Not Me Officer 8th Jun 17, 11:05 AM
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    Not Me Officer
    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).
    • Not Me Officer
    • By Not Me Officer 8th Jun 17, 11:05 PM
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    Not Me Officer
    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?
    • bowlhead99
    • By bowlhead99 9th Jun 17, 7:28 AM
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    bowlhead99
    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.
    Originally posted by Not Me Officer
    If someone assessing your need for means-tested benefits wants to treat you as if you still have the assets that you have spent or given away, saying you have deliberately deprived yourself of the assets in order to qualify for a benefit, it is on them to prove it.

    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?
    It would depend on the amounts involved. For a few tens of thousands it is not likely to be worthwhile to use a portfolio of ten plus funds covering all the major areas and constantly need to rebalance them to a target allocation, unless that target allocation was really substantially different from what you would get on a similar risk multi-asset fund.

    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.
    Yes, but in picking out those randoms, you have missed e.g. Europe, emerging markets, the variety of different UK bonds that people might want to hold such as government short-dated bonds, long-dated bonds, index linked bonds, investment grade corporate bonds, high yield corporate bonds, and all international bonds, then direct commercial property, UK small-cap equity etc. It's not easy to cover them sensibly with just 4 funds, especially if those funds are trackers rather than managed.

    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?
    The positives are being able to build something carefully tailored for your personal needs, accounting for asset classes which you might consider under-represented in VLS; and vary the percentages in different asset classes as the economy changes and the volatility of those asset classes changes - Vanguard is static mix of equities vs bonds, though other risk-targeted multi asset funds based on indexes (such as L&G multi-index) are not.

    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).
    Last edited by bowlhead99; 09-06-2017 at 7:41 AM.
    • AnotherJoe
    • By AnotherJoe 9th Jun 17, 9:19 AM
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    • 8,290 Thanks
    AnotherJoe
    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?
    Originally posted by Not Me Officer
    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 that
    • Linton
    • By Linton 9th Jun 17, 10:52 AM
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    • 8,611 Thanks
    Linton
    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.
    Originally posted by Not Me Officer
    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.
    • Not Me Officer
    • By Not Me Officer 9th Jun 17, 2:16 PM
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    Not Me Officer
    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 all
    • coyrls
    • By coyrls 9th Jun 17, 2:45 PM
    • 922 Posts
    • 967 Thanks
    coyrls
    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 all
    Originally posted by Not Me Officer
    Regardless of the number, the question is how would you decide which indexes to invest in and how much to invest in each of the indexes that you choose?
    • AnotherJoe
    • By AnotherJoe 9th Jun 17, 6:04 PM
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    AnotherJoe
    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 all
    Originally posted by Not Me Officer
    I'm sure everyone realised that, I think the point is, on what basis would you choose those allocations of X out of those Y possibilities?

    If you dont have a basis on which to do that, then buy a ready made one. If you do have a basis, fair enough.
    • Not Me Officer
    • By Not Me Officer 9th Jun 17, 7:59 PM
    • 280 Posts
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    Not Me Officer
    How do any of you base your decisions on where to place your money?
    • TheShape
    • By TheShape 9th Jun 17, 8:34 PM
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    • 920 Thanks
    TheShape
    How do any of you base your decisions on where to place your money?
    Originally posted by Not Me Officer
    As a novice investor myself I spend a decent amount of time looking at options, reading posts, asking questions here. At some point I thought I'd settled on fund X only for someone perhaps to say 'that's very high in UK equities, are you ok with that?' so I'd settle on fund Y and someone might say 'ah, so you want a certain percentage of your investments in bonds' and so on to fund Z.

    At some point I needed to make a decision. I thought that some sort of mixed multi asset fund was probably right rather than lots of different funds that I'd need to manage and rebalance. VLS 100 probably fit the bill as did Blackrock Consensus 100 or HSBC Global Strategy Dynamic. I couldn't decided so what I've now got and am happy with is all three of the above with contributions split three ways. Their performance over the last few years and indeed the few months I've had them have actually been quite similar.

    With approx £13k currently in my S&S ISA I won't be making any kind of sophisticated investment decisions anytime soon. I spend far more time currently managing my p2p investments.
    • Not Me Officer
    • By Not Me Officer 9th Jun 17, 8:53 PM
    • 280 Posts
    • 49 Thanks
    Not Me Officer
    As a novice investor myself I spend a decent amount of time looking at options, reading posts, asking questions here. At some point I thought I'd settled on fund X only for someone perhaps to say 'that's very high in UK equities, are you ok with that?' so I'd settle on fund Y and someone might say 'ah, so you want a certain percentage of your investments in bonds' and so on to fund Z.

    At some point I needed to make a decision. I thought that some sort of mixed multi asset fund was probably right rather than lots of different funds that I'd need to manage and rebalance. VLS 100 probably fit the bill as did Blackrock Consensus 100 or HSBC Global Strategy Dynamic. I couldn't decided so what I've now got and am happy with is all three of the above with contributions split three ways. Their performance over the last few years and indeed the few months I've had them have actually been quite similar.

    With approx £13k currently in my S&S ISA I won't be making any kind of sophisticated investment decisions anytime soon. I spend far more time currently managing my p2p investments.
    Originally posted by TheShape
    Pretty much the same boat then really.

    I've bought a few books, read a lot on here and asked a lot on here, been linked to other websites so on & so forth.

    From this i learned more about index trackers & passive investing & more about a bit of diversity. From that i thought yeah that ticks the boxes i need ticking.

    Then i read some more on here and Joe Bloggs will put up a portfolio or Plain Jane will ask about a fund and it seems every single time that people/someone will come and say that's a bit this way or that way, are you sure about that which to the unsure just casts doubt.

    And i doubt myself a lot

    But like you say there comes a time you need to just make a decision.

    I also like the look of the VLS100 and i think it'd be fine at my age of 34 but i just wonder if that's a bit beyond my risk level. Maybe it is, maybe it isn't. I'm not sure i want to find out so on that note i was looking at the VLS80 as a more acceptable balance (for me).

    Out of interest the 3 you mentioned, i haven't looked at them so don't know myself but are they not very similar? So if so then wouldn't people say what's the point in investing in all 3 if one is suitable to you? Or do they all offer you something different?
    • economic
    • By economic 9th Jun 17, 10:12 PM
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    economic
    im 34 and ive been investing since 2012. mainly started out with single stocks but have now built a portfolio to include tracker funds and managed funds/trusts.

    my rough split is as follows:

    tracker funds - 60%
    single stocks - 20%
    managed funds/trusts - 20%

    i am also overweight US stocks by quite a bit - i think 60% of my total exposure is in US stocks and i like it this way for now.
    • AnotherJoe
    • By AnotherJoe 9th Jun 17, 11:01 PM
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    • 8,290 Thanks
    AnotherJoe
    How do any of you base your decisions on where to place your money?
    Originally posted by Not Me Officer
    Great question.possibly like many mine is a mix of historical accident and a gradual attempt more recently to to tidy it up and get some order.

    I built up over many years and only in the last two or three have I started to add structure, remove pointless smaller investments, and make my long term bets - decrease UK investments, add income producing investments as well as growth, add a few specialist areas I think will do better than the average, move from shares into funds.

    And the risk level I feel I can take take is a factor of the buffer I feel I have to ride out long term down periods plus what I can tolerate naturally. Mrs AJ would have kittens if she saw how this lot have changed up and down over the years, I've made and lost substantial sums which if I was starting again I wouldn't do so much in individual shares.
    Last edited by AnotherJoe; 09-06-2017 at 11:06 PM.
    • TheShape
    • By TheShape 9th Jun 17, 11:13 PM
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    TheShape
    Pretty much the same boat then really.

    I've bought a few books, read a lot on here and asked a lot on here, been linked to other websites so on & so forth.

    From this i learned more about index trackers & passive investing & more about a bit of diversity. From that i thought yeah that ticks the boxes i need ticking.

    Then i read some more on here and Joe Bloggs will put up a portfolio or Plain Jane will ask about a fund and it seems every single time that people/someone will come and say that's a bit this way or that way, are you sure about that which to the unsure just casts doubt.

    And i doubt myself a lot

    But like you say there comes a time you need to just make a decision.

    I also like the look of the VLS100 and i think it'd be fine at my age of 34 but i just wonder if that's a bit beyond my risk level. Maybe it is, maybe it isn't. I'm not sure i want to find out so on that note i was looking at the VLS80 as a more acceptable balance (for me).

    Out of interest the 3 you mentioned, i haven't looked at them so don't know myself but are they not very similar? So if so then wouldn't people say what's the point in investing in all 3 if one is suitable to you? Or do they all offer you something different?
    Originally posted by Not Me Officer
    The funds do have similarities as well as differences. They all have high proportions of equities but at different levels and invested in geographical areas at differing levels. The VLS100, for example, has a much higher amount of UK Equities than both the other funds. Some people might be of the opinion that this is not what they want so will choose a fund with different levels of UK equities.

    I could have kept things simply by choosing one fund (I have a SIPP with only VLS100 in it) but decided that as each of them seemed suitable on their own then there did not seem to be any real downside in having all three given that the platform I am using is not charging any more for holding three funds rather than one.
    • Not Me Officer
    • By Not Me Officer 11th Jun 17, 1:20 AM
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    Not Me Officer
    add income producing investments
    Originally posted by AnotherJoe
    I've wondered this but haven't yet asked.

    I don't know your personal situation. I don't know what stage you're at in your retirement journey - whether you're early 20s or 60s or beyond.

    But the income/accumulation thing.

    I read recently from Dunstonh he goes for income where possible as they are 'cleaner' (what that means i don't know).

    When i googled a definition of the both then with my lack of understanding i don't know how an income fund could be better than an accumulation for someone who is trying to build their pot.
    I want my pot to get as big as it can as quick as it can and come retirement day that's when i'll access it, so i can't see any benefit of having an income fund until that day.

    But like i said i'm not an expert in this field so maybe there's a reason to have income rather than accumulation now?
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