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  • FIRST POST
    • Jeems
    • By Jeems 30th Nov 17, 5:04 AM
    • 182Posts
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    Jeems
    Which fund for retired parent?
    • #1
    • 30th Nov 17, 5:04 AM
    Which fund for retired parent? 30th Nov 17 at 5:04 AM
    My mother is in her early 60's and relatively healthy for her age. She is retired, mortgage free and is pretty comfortable financially with no debt and just the usual expenses.

    She has a small 5 figure sum she's happy to invest. She is pretty conservative and she's wanting a passive global tracker. The only ideas I had were really only VLS40/60 or Target Retirement 2015. Could anyone recommend any alternatives? I've been reading that some are staying away from bonds due to interest rates going up etc, is going for something like 60% bonds actually a good idea? She is not expecting fireworks and see's bonds as the "safe" option.

    Many thanks!
Page 1
    • bowlhead99
    • By bowlhead99 30th Nov 17, 8:31 AM
    • 6,981 Posts
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    bowlhead99
    • #2
    • 30th Nov 17, 8:31 AM
    • #2
    • 30th Nov 17, 8:31 AM
    You say she is "wanting a passive global tracker":

    a) what does she want to passivelly track globally? Equities, bonds, coal mining companies, real estate investment trusts?

    b) if she knows what she wants, why doesn't she just go and get it? Or why doesn't she ask about it here?

    Is it perhaps that you told her that the best thing for the next 40 years of her life is some sort of passive global tracker, and she trusts you? Yet you only have a couple of ideas about what products actually exist that might fill your own brief?

    Or is it that she is a sophisticated and well-read investor who has defined her objectives (in terms of goals and needs) and independently formed the conclusion that a tracker is going to best meet those objectives? What other types of fund or portfolios of funds did she consider before forming her conclusion and why did she reject them? That may help us understand her mindset and narrow down the options.

    see's bonds as the "safe" option.
    I've been reading that some are staying away from bonds due to interest rates going up etc
    The thing about investment-grade corporate bonds and gilts is that they don't crash 50% in value when the equity markets crash 50% in value.
    • Audaxer
    • By Audaxer 30th Nov 17, 8:55 AM
    • 628 Posts
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    Audaxer
    • #3
    • 30th Nov 17, 8:55 AM
    • #3
    • 30th Nov 17, 8:55 AM
    Alternatives could be one of the HSBC Global Strategy range - the Balanced version has about 63% equities - or one of the L&G Multi Index range of funds. Both these range of funds are diversified globally, low cost and mostly passive. The difference is that both these ranges have allocations that are managed to endeavour to keep to risk levels, whereas VLS have fixed allocations that are automatically rebalanced to keep the same percentages in the various indexes. I am retired and have recently invested in both VLS and HSBC Global Strategy funds.
    • LHW99
    • By LHW99 30th Nov 17, 9:34 AM
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    LHW99
    • #4
    • 30th Nov 17, 9:34 AM
    • #4
    • 30th Nov 17, 9:34 AM
    Not sure that one of the Target Retirement funds would be sensible, as my understanding is that these gradually transfer the holdings over to cash in preparation for buying an annuity.
    If she wants to use the fund for drawdown for an unspecified number of years then one of the VLS / HSBC GS / L&G MI suggestions would probably be closer to what is wanted.
    • Keep pedalling
    • By Keep pedalling 30th Nov 17, 9:43 AM
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    Keep pedalling
    • #5
    • 30th Nov 17, 9:43 AM
    • #5
    • 30th Nov 17, 9:43 AM
    My mother is in her early 60's and relatively healthy for her age.

    Many thanks!
    Originally posted by Jeems
    What do you mean for her age! Most of us 60 something’s still think of our selves as young
    • pip895
    • By pip895 30th Nov 17, 10:44 AM
    • 445 Posts
    • 253 Thanks
    pip895
    • #6
    • 30th Nov 17, 10:44 AM
    • #6
    • 30th Nov 17, 10:44 AM
    Have you considered going for a fund like M&G Optimal income for the "Bond part" of the portfolio - it might prove a better place to be, in the case of generally rising bond yields. You could still go passive on the equity part.
    Last edited by pip895; 30-11-2017 at 10:46 AM. Reason: typo
    • Linton
    • By Linton 30th Nov 17, 11:26 AM
    • 8,594 Posts
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    Linton
    • #7
    • 30th Nov 17, 11:26 AM
    • #7
    • 30th Nov 17, 11:26 AM
    What is her attitude to risk? What % fall could she stomach over 1 week/month/year?

    Why is she investing? Long term growth? If so how long term? What level of growth would minimally satisfy her - none? inflation? significant real growth? Does she want income? If so what %?

    Without some idea as to the answers to these sort of questions it is impossible for her, you or us, to come up with appropriate suggestions. Just saying you want a passive global tracker is tackling the problem from the wrong end.
    • xylophone
    • By xylophone 30th Nov 17, 11:41 AM
    • 23,611 Posts
    • 13,748 Thanks
    xylophone
    • #8
    • 30th Nov 17, 11:41 AM
    • #8
    • 30th Nov 17, 11:41 AM
    How much is she looking to invest?

    Does she want to take an income?

    Had she thought of paying £2880 per tax year into a pension to receive the tax relief of £720 and continuing to do this up to age 75?
    • BLB53
    • By BLB53 30th Nov 17, 11:49 AM
    • 1,169 Posts
    • 960 Thanks
    BLB53
    • #9
    • 30th Nov 17, 11:49 AM
    • #9
    • 30th Nov 17, 11:49 AM
    Not sure that one of the Target Retirement funds would be sensible, as my understanding is that these gradually transfer the holdings over to cash in preparation for buying an annuity.
    No, this is not correct.

    But responding to the OP...yes something like VLS 40 or 60 would be a good choice - well diversified, auto rebalanced, low cost - an ideal fire-and-forget type of investment. I am retired and hold the VLS 60 as a core holding and can recommend.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • dunstonh
    • By dunstonh 30th Nov 17, 12:22 PM
    • 89,840 Posts
    • 56,490 Thanks
    dunstonh
    She is pretty conservative and she's wanting a passive global tracker.
    A passive global tracker is very high risk. Not consistent with being conservative.

    I've been reading that some are staying away from bonds due to interest rates going up etc, is going for something like 60% bonds actually a good idea?
    You dont use bonds to make the most money. You use bonds to reduce the volatility. (keeping that simplistic for the purpose of this discussion thread).

    She is not expecting fireworks and see's bonds as the "safe" option.
    On a typical 1-10 scale you can get bonds/bond funds in virtually all risk profiles. Just because it is called "bond" does not give a fixed level of risk.

    The only ideas I had were really only VLS40/60 or Target Retirement 2015.
    How would Target retirement funds fit the objective?
    VLS60 or even VLS40 are not appropriate for someone referring to themselves as conservative and none of these things are high risk global trackers.

    I think before any more solutions are looked at, she needs to nail down her risk profile, consider her capacity for loss and then look at investing within her knowledge and understanding to meet the required objectives.
    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 an Independent Financial Adviser local to you.
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