ISA S&S Investment choice

Supernova

Hi,

I have up to £80K in Cash ISAs and H&L S&S held as cash.

I've not really been that comfortable in choosing my own portfolio and so sought advice.

I came out as a moderate risk and the current choice advised for a 3-5 year+ investment is:

1 [FONT=&quot]Citi 80% protected dynamic allocation fund - switched between 'cash' and Black Rock's advised portfolio with 80% fund protection at the highest price. Apparently this is not eligible for a free ISA transfer, initial is 3%, AMF 1.25% minimum £10K.

or

2. [/FONT][FONT=&quot]Balanced Growth and Income Portfolio[/FONT]

30% Corporate Bonds M&G Corporate Bond
17% UK Equities M&G Recovery
13% US Equities Threadneedle American
11% EU Equities Black Rock European Dynamic
10% High Yield and Emerging Markets Debt Threadneedle High Yield Bond
9% Emerging Markets Equities Aberdeen Emerging Markets
6% Satellite Investments (Gold etc.) JPM Natural Resources
4% Japanese Equities Schroder Japan Alpha Plus

[FONT=&quot]0% Initial charge as an ISA transfer, average AMF about 1.5%


I know people can't give precise advice but wondered if that all sounded reasonable. I'm a bit wary about putting a large lump sum in all at once, given the financial state of the world etc.

I still have enough savings as an emergency fund, adequate pension provision and £30K+ endowment to mature on a UK average-priced property in September.

The idea is to supplement pension provision in my mid to late 50s.

Cheers for any comments

[/FONT]

Robert99

I don't believe I can comment on the individual portfolio but I would look at 2 things

- asset allocation and therefore the risk
the simple way I have been told to look at this is the % of equities in a portfolio and the 20/40/60/80% rule. 20% equities is lower risk, 80% equities is lots of risk and 100% equities is a bit silly. It looks like the second portfolio you have listed there is quite high risk at 60% so worth looking closely at whether this matches

- cost
I would try to get the total cost of investing down and be worth checking what the TERs of both portfolios (not just the AMC). You should be able to get this in the 1.3-1.5 range but if you not careful you will be suddenly in the 2+ range. Worth asking for the TER numbers

I am not a fan of any product that has an initial charge so I couldn't get excited about the Citi product

Oleg

[FONT=&quot]I invest money in the Necker Anlagen Fund not so long , but so far I am very happy, It’s safe, profits accrued in time, without any delay, the money are output quickly, usually during the day. Advise. [/FONT]
[FONT=&quot]

[/FONT]

Supernova

Robert99 wrote: »

I don't believe I can comment on the individual portfolio but I would look at 2 things

- asset allocation and therefore the risk
the simple way I have been told to look at this is the % of equities in a portfolio and the 20/40/60/80% rule. 20% equities is lower risk, 80% equities is lots of risk and 100% equities is a bit silly. It looks like the second portfolio you have listed there is quite high risk at 60% so worth looking closely at whether this matches

- cost
I would try to get the total cost of investing down and be worth checking what the TERs of both portfolios (not just the AMC). You should be able to get this in the 1.3-1.5 range but if you not careful you will be suddenly in the 2+ range. Worth asking for the TER numbers

I am not a fan of any product that has an initial charge so I couldn't get excited about the Citi product

Thanks Robert, exactly the sort of general pointers I was looking for

I'm surprised that the Citi 80 is subject to the 3% initial fee on an ISA transfer and the other portfolio is not. Can they pick and choose which funds are subject to that and not?

Thanks!

Robert99

The Initial Charge has been a mainstay of the fund industry for many years now with a large amount of it going as commission to the advisers who sell the product. The fund manager sets it and the broker can elect to rebate the commission and/or negotiate better terms with the fund group. However, it is largely now on the way out so I was was surprised to read about the Citi 80 (worth checking out the Morningstar info on the fund here especially comparison against the benchmark.

I can't work out where you got your portfolio from but it looks like there is thought it there. Worth looking at some of the portfolios/multi-asset funds out there

1. Passive
These are cheap and follow the markets but they should take decisions on the asset allocation for you so you should benefit on some investment thinking but not pay through the nose
- Vanguard Lifestrategy
- TCFInvestment funds

2. Active
This _should_ all follow an asset allocation model selecting the best funds for each sector but making sure that the funds work together
Hargreaves Lansdown portfolios. A little basic though
rplan portfolios
Bestinvest portfolios

However you invest worth asking for some of the commission back on the on-going charges (trail rebate/loyalty bonus etc). You should be able to get back 0.25% on the active portfolios - not bad when you consider the current global growth prospects.

Good luck!

jamesd

Supernova wrote: »

30% Corporate Bonds M&G Corporate Bond

This is something of a concern at the moment. There's a bubble in the price of high quality corporate bonds similar to the one in high quality government bonds. A flight to safety has pushed up prices and you can see it in the chart of capital growth of this fund.

Corporate bonds usually do reduce volatility but now doesn't look like a good time to be buying them, more to be selling them to rebalance into assets with lowered prices.

So I suggest instead using a combination of cash, Invesco Perpetual Income and perhaps some lower percentage of this fund, instead of 30% in just this fund.

TheSandman

Just a small comment...

How is the performance of the Threadneedle US fund?

I only ask because the S&P 500 is typically a very hard market to outperform, there are only a handful who cant beat it.

Supernova

Thanks for the additional suggestions everyone.

I'll mull those over.

Cheers

Supernova

The answer I got about the Corporate Bonds is that the fund covers over 300 companies and they are not overpriced.

On the 60% stocks content I waas told that it covers selected large companies who are all doing well like oil co.s, Apple, Microsoft etc.

I haven't got thye TER yet.

Thanks

EdGasket

If you don't mind doing a little bit of homework and then choosing your own investments, you'd save a lot of money by using a self-select S&S ISA from e.g. TD Waterhouse, Sippdeal, x-o, and then buying Exchange Traded Funds (ETF's) such is iShares or DB Xtrackers. You could then put say 80% in an index-linked gilt fund and 20% in a share index tracker fund either FTSE or Dow Jones, whatever you fancy. The charges on ETFs are typically 0.25 to 0.5% compared to at least 1% upwards on the funds you mention.

Supernova

Thanks Ed.

That's the trouble - finding time to do a bit of homework. Once I start doing that I'll end up doing nothing.

Just wondering if that's better than paying slightly over the odds? With the ISA transfer at least I'm not paying initial charges

Cheers