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  • FIRST POST
    • Jimbo911
    • By Jimbo911 13th Jun 17, 3:15 PM
    • 21Posts
    • 3Thanks
    Jimbo911
    Defined Contribution Pension - Target Date Fund Investments
    • #1
    • 13th Jun 17, 3:15 PM
    Defined Contribution Pension - Target Date Fund Investments 13th Jun 17 at 3:15 PM
    I am aged 51 and contribute to a Defined Contribution pension. My monthly contributions are invested into a Target Date Fund. The aim is to get the most from my money and create a smoother journey for my investments as I head towards my planned retirement aged of 55.

    The Target Date fund invests in a range of different investment types that all have different levels of risk that are appropriate to my age. My fund is at a stage where as I approach my planned retirement age of 55, the mix of investments become more balanced and move towards a more cautious approach.

    I have attached a breakdown of my Target Date fund at the end of this post which shows my mix of investments.

    Considering the current economic climate and also the direction we think our economy is heading, I would be interested to hear your views on how you think each of these investments will perform over the next 4 years.

    The intention of this post is for me to make an informed decision to see if I wish to change my investment types or keep them as they are.


    MY INVESTMENTS


    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    Last edited by Jimbo911; 13-06-2017 at 4:56 PM.
Page 2
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:37 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    I'd stop thinking like that. You want to balance risk with potential return......the biggest pot possible would require you to go 100% equities, but you'd also have a high chance of losing money. So you should be looking to grow your pension fund consistently, balancing risk and return to maximize the probability that you'll have enough to fund your retirement.
    Originally posted by bostonerimus
    I have balanced my risk by using the suggested mix of investments in my target date fund of 2020 - 2022.

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:43 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    The fact that you have 35% in index linked gilts suggests that your Target Date fund has been designed with the assumption that you will be purchasing an annuity. Is that your intention? If so, have you considered the alternatives? If you are not purchasing an annuity you should review your investment strategy to align with how you plan to fund your retirement.
    Originally posted by coyrls
    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is
    concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible
    by the time I'm 55.

    As my pension provider does not offer drawdown, the investment mix in my current DC will have
    nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do
    is transfer the money out of my DC pot and put it into a drawdown that is provided by someone
    else.

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:44 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    The fact that you have 35% in index linked gilts suggests that your Target Date fund has been designed with the assumption that you will be purchasing an annuity. Is that your intention? If so, have you considered the alternatives? If you are not purchasing an annuity you should review your investment strategy to align with how you plan to fund your retirement.
    Originally posted by coyrls
    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is
    concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible
    by the time I'm 55.

    As my pension provider does not offer drawdown, the investment mix in my current DC will have
    nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do
    is transfer the money out of my DC pot and put it into a drawdown that is provided by someone
    else.

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:45 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    Target date funds work on the assumption that you need less risk as you approach retirement. If you are planning to take drawdown at 55 this is arguable since you may not be touching half the the money for 20 years, planty of time to justify a 100% equity portfolio.

    No-one knows which way our economy is going in the next 4 years and none knows how your funds are going to perform. That is why one holds a broad range of investments and hopefully most of the equity is invested overseas. A major fall in sterling may actually be to your benefit.

    I agree with bostonorius that your equity seems very low which will significantly reduce your potential return but as we dont know your circumstances we can only assume that your retirement plans have taken this into account .
    Originally posted by Linton
    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is
    concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible
    by the time I'm 55.

    As my pension provider does not offer drawdown, the investment mix in my current DC will have
    nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do
    is transfer the money out of my DC pot and put it into a drawdown that is provided by someone
    else.

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:46 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    These funds are aimed at people who intend to buy an annuity or fully encash the pension as a lump sum at retirement. So, does that description fit you?
    They are not suitable for those that intend to use drawdown.

    Nobody knows. Impossible to answer. You should invest appropriate for your risk level, your capacity for loss and your behaviour and knowledge. Not anyone elses.
    Originally posted by dunstonh


    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is
    concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible
    by the time I'm 55.

    As my pension provider does not offer drawdown, the investment mix in my current DC will have
    nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do
    is transfer the money out of my DC pot and put it into a drawdown that is provided by someone
    else.

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • dunstonh
    • By dunstonh 14th Jun 17, 12:47 PM
    • 88,375 Posts
    • 53,591 Thanks
    dunstonh
    The safe withdrawal rate models do not include fees. It's true that they will reduce when the value of a portfolio goes down so that it might not be 1:1......but minimizing them is still good practice. If the actual reduction for 1% fees is something like 0.5% that's still 15% of your income lost.
    Fees are a secondary concern. Not a primary one. Important but not the driver.

    The safe withdrawal rate model is a theoretical model based on assumptions. As are all models. The real world is different and does not work that way. You would certainly not reduce the income to 2.5% because of 1% charges.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • Jimbo911
    • By Jimbo911 14th Jun 17, 12:47 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    I think everyone is suggesting that (a) you probably shouldn't be in a target date system, because it probably doesn't fit your plans, and that 60% is very conservative for someone with 30+ investing years ahead of them, but not knowing your overall financial situation* and your approach to risk, no can can conclusively state that 60% is too high.

    It certainly would be too high for most, but then again there was a poster here recently who had a hugely conservative approach and who was essentially 100% in bonds, so there is no right answer.

    You have plenty of time to get educated, or you could take financial advice now.

    *so, you plan to start draw down at age 55 in 4 years time but that doesnt really mean anything by itself. Will you draw down 3% a year indefintely or 20% for 4-5 years as you bridge to other pensions? Do you need all that money to live on or is it a top up or or or ???
    Originally posted by AnotherJoe
    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is
    concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible
    by the time I'm 55.

    As my pension provider does not offer drawdown, the investment mix in my current DC will have
    nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do
    is transfer the money out of my DC pot and put it into a drawdown that is provided by someone
    else.

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    • bostonerimus
    • By bostonerimus 14th Jun 17, 12:49 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    Originally posted by Jimbo911
    This is a defensive allocation and not designed for growth. If you are doing drawdown you need to be thing on a 30 or 40 year time scale....not the next 4 years.
    Misanthrope in search of similar for mutual loathing
    • bostonerimus
    • By bostonerimus 14th Jun 17, 12:55 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    Fees are a secondary concern. Not a primary one. Important but not the driver.

    The safe withdrawal rate model is a theoretical model based on assumptions. As are all models. The real world is different and does not work that way. You would certainly not reduce the income to 2.5% because of 1% charges.
    Originally posted by dunstonh
    Yes, with 1% fees you should probably go from 3.5% to 3% withdrawal.
    I cannot agree with you about fees though. They should be a primary concern for every investor particularly in the UK where they can still be ridiculously high.

    Models are based on historical data and come with uncertainty baked in. So let's concentrate on the certainties like fees and expenses and do everything to minimize those fixed costs.
    Last edited by bostonerimus; 14-06-2017 at 12:58 PM.
    Misanthrope in search of similar for mutual loathing
    • dunstonh
    • By dunstonh 14th Jun 17, 1:04 PM
    • 88,375 Posts
    • 53,591 Thanks
    dunstonh
    Yes, with 1% fees you should probably go from 3.5% to 3% withdrawal.
    No you shouldnt. You would go with 3.5%. Or 4% or even 5%.

    I cannot agree with you about fees though. They should be a primary concern for every investor particularly in the UK where they can still be ridiculously high.
    In which case, everyone would be in savings accounts which are paying around 0.5% and have no explicit charges.

    Or perhaps I should tell the client that who got 39.5% over the last 3 years but had charges of 1.7% that he should have been in the fund that got 29.4% but cost 0.2% because charges are more important than the investment itself?

    How would you explain to the people that have been drawing 5% a year for the last 20 years whilst paying charges of around 1.5% pa that they should have been paying less and drawing less?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • bostonerimus
    • By bostonerimus 14th Jun 17, 1:31 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    No you shouldnt. You would go with 3.5%. Or 4% or even 5%.
    Originally posted by dunstonh
    If you can promise better than market returns then I agree......I would not plan on better than market returns though


    In which case, everyone would be in savings accounts which are paying around 0.5% and have no explicit charges.
    While a savings account is good for short term cash, it would not be sensible for money that you want to grow over decades. Its sensible to take more risk with that money, but not sensible to pay large fees when investing that money.

    Or perhaps I should tell the client that who got 39.5% over the last 3 years but had charges of 1.7% that he should have been in the fund that got 29.4% but cost 0.2% because charges are more important than the investment itself?

    How would you explain to the people that have been drawing 5% a year for the last 20 years whilst paying charges of around 1.5% pa that they should have been paying less and drawing less?
    This is the argument about whether fees are worth it. In some instances and for some people they are worth it.....your example is very attractive, but will you give a counter example where the client did poorly. Would you advise a client to start drawdown at 5% with 1.5% in fees? That sounds scary to me.

    I'm just a single example of how keeping fees down and indexing has worked out well in the last 30 years. I've averaged 8% annual return without breaking a sweat. Of course I don't know if the next 30 years will work out the same way, but I won't be paying more than I have to to find out so I'll stick with 0.1% fees.

    Obviously, there are market scenarios where more than 3.5% or 4% can be withdrawn. The 4% rule emerges from all combinations of all historical markets with a success probability criteria. 5% for 20 years is possible in many scenarios, but not in others.

    Simply put I feel that the guaranteed savings of keeping fees low is better than the advertised benefits of higher fees. I do not expect you to agree.
    Last edited by bostonerimus; 14-06-2017 at 1:54 PM.
    Misanthrope in search of similar for mutual loathing
    • Linton
    • By Linton 14th Jun 17, 2:00 PM
    • 7,976 Posts
    • 7,787 Thanks
    Linton
    ......

    Perhaps I should pose the question as "Is my current Investment mix good for building a large
    pot in 4 years-time, which is ready to transfer away from my current pension provider to a
    drawdown provider?"


    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
    Originally posted by Jimbo911
    I think you are looking at things the wrong way. If you plan to draw down, from a financial point of view, nothing much special will happen in 4 years time. There is no reason to have your portfolio investment allocation very different in 3 years time to what it will be in 5 or was 10 years ago. You dont need to maximise your pot size with retirement as a deadline. Retirement is just a point on a multi-decade journey.

    The only way you are certain to have a large pot in 4 years time is to have a large pot now. 4 years is too short a time for a change in investment strategy to make a major change in your wealth wthout running a significant risk that you will have less at retirement than you have now.

    Whether your current strategy is appropriate for the needs really depends on how much income you need in retirement. If you are invested mainly and sensibly in equities it is reasonable to plan to drawdown annually on average somewhere between perhaps 3.5% and 5.5% of your initial pot, inflation adjusted, without running out of money before you die. The % would depending on your flexibility to take lower income when economic conditions are bad and your money management skills.

    But you are invested mainly in bonds rather than equities, so your safe drawdown will be very much less. If say 2% is sufficent to meet your needs then there is perhaps no need to be less cautious. However most of us arent that wealthy, or perhaps that frugal, so would want a higher % in equities.
    • dunstonh
    • By dunstonh 14th Jun 17, 2:10 PM
    • 88,375 Posts
    • 53,591 Thanks
    dunstonh
    If you can promise better than market returns then I agree
    There are no promises with investments. I cannot promise that higher charges will result in higher returns and you cannot promise that lower charges will result in higher returns. They will be what they will be.

    Would you advise a client to start drawdown at 5% with 1.5% in fees? That sounds scary to me.
    If the risk profile was appropriate and circumstances required it then yes. That is not scary though. I prefer to use 3.5% and will add increased emphasis on risk warnings and loss potential when it goes above that.

    The biggest risk for someone new to drawdown is not whether they take 3.5%, 4% or even 5%. It is whether they have the discipline to not take adhoc withdrawals at a level greater than is sustainable. e..g deciding that their fund has gone up 10k so they can draw that 10k out and it will have no impact on the draw rate over the long term. Forgetting that ups and downs need to average out and you cant just draw when its up without consequence.

    Simply put I feel that the guaranteed savings of keeping fees low is better than the advertised benefits of higher fees. I do not expect you to agree.
    It isnt that I disagree. Despite what it appears, I do agree with a lot of what you say. It is just on certain things or the degree of conviction you have. That fund of 1.7% charges I use with gritted teeth. I really dont like using it but it does the job in the right scenario. I also tend to use it with multi-asset passives on part of the money as well to give some balance of both worlds.

    Additionally, you include adviser charges as something to avoid. If someone can DIY well then they can save money there. If they DIY badly then it can be far more costly. I have had countless people come to me after trying DIY investing that went wrong. Also, I have significant numbers of clients who could DIY well if they wanted but they value their time more than the cost. I pay a decorator and a gardener because they can both do it better than me and I don't have the time.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • AnotherJoe
    • By AnotherJoe 14th Jun 17, 4:03 PM
    • 6,912 Posts
    • 7,356 Thanks
    AnotherJoe
    All I'm trying to do is use my existing pension fund (which is fairly cautious as far as risk is concerned - Investments detailed at the end) as a vehicle to build as big of a pot as possible by the time I'm 55.

    As said, far too simplistic. Why arent you already 100% in equities? - because of your attitude to risk !

    As my pension provider does not offer drawdown, the investment mix in my current DC will have nothing to do with my drawdown (except hopefully build a decent sized pot). At 55 I want to do is transfer the money out of my DC pot and put it into a drawdown that is provided by someone else.
    Originally posted by Jimbo911
    Then you should answer the question as to how long this draw down pot is expected to last.
    If you expect to draw down the whole amount for 5 years before other pensions kick in, thats one thing.
    If its meant to last until you are in your dotage, that's another.
    If its meant to provide top up funds to provide for holidays and discretionary spending whilst your day to day expenses are covered, that's another.
    If its your sole or main source of income for 5 years - 12 years - ?? years thats another.
    If you will panic every time it drops 5% that's another.
    If it will be a catastrophe if the market crashes 6 months before you plan to retire thats another,
    If it will be an annoyance but you could work on a few years until you've built up a buffer, another.
    Etc etc.

    Thats why i advised working with an IFA to provide some context to your overall financial position to guide your decisions.
    • Jimbo911
    • By Jimbo911 14th Jun 17, 4:09 PM
    • 21 Posts
    • 3 Thanks
    Jimbo911
    I do have the option to switch to this portfolio of investments in my current DC Plan. Any thoughts?

    UK Equities, 7.7%
    Global Developed Market Equities, 30.4%
    Global Multi-Factor Equities, 6.7%
    Global Small-Cap Equities, 4.2%
    Emerging Market Equities, 6.8%
    Global Property, 7.1%
    Commodities, 3.0%
    Global Corporate Bonds, 14.9%
    UK Corporate Bonds, 2.9%
    Gilts, 3.2%
    Index-Linked Gilts, 13.2%
    Cash, 0.0%
    • bostonerimus
    • By bostonerimus 14th Jun 17, 4:40 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    I do have the option to switch to this portfolio of investments in my current DC Plan. Any thoughts?

    UK Equities, 7.7%
    Global Developed Market Equities, 30.4%
    Global Multi-Factor Equities, 6.7%
    Global Small-Cap Equities, 4.2%
    Emerging Market Equities, 6.8%
    Global Property, 7.1%
    Commodities, 3.0%
    Global Corporate Bonds, 14.9%
    UK Corporate Bonds, 2.9%
    Gilts, 3.2%
    Index-Linked Gilts, 13.2%
    Cash, 0.0%
    Originally posted by Jimbo911
    This is a more growth oriented allocation. From the discussion I think you should be able to figure out if that's appropriate for you. Doing this sort of planning needs to be holistic, it can't be done in isolation from the rest of your finances or requirements.
    Misanthrope in search of similar for mutual loathing
    • AnotherJoe
    • By AnotherJoe 14th Jun 17, 5:25 PM
    • 6,912 Posts
    • 7,356 Thanks
    AnotherJoe
    This is a more growth oriented allocation. From the discussion I think you should be able to figure out if that's appropriate for you. Doing this sort of planning needs to be holistic, it can't be done in isolation from the rest of your finances or requirements.
    Originally posted by bostonerimus
    ^^^^^^^^^^^ this
    • bostonerimus
    • By bostonerimus 14th Jun 17, 5:55 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    Additionally, you include adviser charges as something to avoid. If someone can DIY well then they can save money there. If they DIY badly then it can be far more costly. I have had countless people come to me after trying DIY investing that went wrong. Also, I have significant numbers of clients who could DIY well if they wanted but they value their time more than the cost. I pay a decorator and a gardener because they can both do it better than me and I don't have the time.
    Originally posted by dunstonh
    There are certainly times when advice is necessary and some people will always want to use an adviser. But I think most people can easily DIY and they don't need to do anything very complicated to succeed; in fact getting too complicated is why people often fail. Investing does not need to be complicated or take much effort, even rebalancing is taken care of in multi-asset funds. Take Mr Mcawber's spending advice, and then save in a bank account and invest in a low cost multi-asset fund. Job done.......most of the time.
    Last edited by bostonerimus; 14-06-2017 at 5:57 PM.
    Misanthrope in search of similar for mutual loathing
    • Linton
    • By Linton 14th Jun 17, 6:16 PM
    • 7,976 Posts
    • 7,787 Thanks
    Linton
    There are certainly times when advice is necessary and some people will always want to use an adviser. But I think most people can easily DIY and they don't need to do anything very complicated to succeed; in fact getting too complicated is why people often fail. Investing does not need to be complicated or take much effort, even rebalancing is taken care of in multi-asset funds. Take Mr Mcawber's spending advice, and then save in a bank account and invest in a low cost multi-asset fund. Job done.......most of the time.
    Originally posted by bostonerimus
    I would agree that for inexperienced small investors with an accumulating portfolio sensible formulaic self investing is fine. If they get in wrong it wont destroy their lives. And hopefully by the time their pot has increased to a life changing size they will have the experience to manage it safely.

    This isnt true for inexperienced people acquiring amounts of money in quantities that really matter especially if their future well-being depends on prudent withdrawal of funds. For such people I think it is dangerous to imply that all investing problems can be solved by buying a VLSxxx fund.

    Somewhere, dependent on the individual, between the two extremes there is a balance.
    • bostonerimus
    • By bostonerimus 14th Jun 17, 7:32 PM
    • 514 Posts
    • 252 Thanks
    bostonerimus
    This isnt true for inexperienced people acquiring amounts of money in quantities that really matter especially if their future well-being depends on prudent withdrawal of funds. For such people I think it is dangerous to imply that all investing problems can be solved by buying a VLSxxx fund.

    Somewhere, dependent on the individual, between the two extremes there is a balance.
    Originally posted by Linton
    That 's why I wrote "Job done......most of the time". People should definitely educate themselves before they start investing, unfortunately too many people are intimidated by the UK's investing environment and culture. If they start with a VLSxx type fund they won't go far wrong and they can tweak the portfolio as required. Drawdown does need some particular knowledge/skills/courage to do it correctly, but that isn't rocket science either.

    My investing approach is simple and uses index funds and has carried me from $0 in 1987 into the mid 7 figures....but as I have considerable taxable assets tax planning is now a big deal.....This isn't as important in the UK where money can be wrapped in an ISA. My taxable assets are all in tax efficient index funds that don't pay a lot out in dividends.
    Last edited by bostonerimus; 15-06-2017 at 12:17 AM.
    Misanthrope in search of similar for mutual loathing
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