Vanguard Life Strategy

takesyourchances

black_taxi wrote: »

standard life global smaller companies very high fees?

Hi Black Taxi, I just saw your post as was not on the forum for a few days. The Vanguard Small Cap is a good choice alright I think, I have been thinking about it for a while too for my SIPP. I opened the Standard Life Small Cap fund maybe 16 months or more ago, at the time HL did not have the Vanguard Small Cap on their listings so I opened this as I wanted Global Small Cap exposure.

The fees are higher though, I tend to not like to jump in and out of openings so I just kept this on and it rose quickly and then dropped recently, I would still like to hold it rather than sell out of it. I may look at the Vanguard Small Cap sometime in my SIPP though.

trickydicky14

masonic wrote: »

It would probably be more sensible to drip feed the money evenly over the remainder of the tax year if you want to avoid the possibility of buying at a market peak.


Thanks for your comments,
Tell me would it be even more sensible to drip feed money weekly could this be done or could it only be monthly.

bowlhead99

trickydicky14 wrote: »

masonic wrote: »

It would probably be more sensible to drip feed the money evenly over the remainder of the tax year if you want to avoid the possibility of buying at a market peak.

Thanks for your comments,
Tell me would it be even more sensible to drip feed money weekly could this be done or could it only be monthly.

There are about 250 working days in a year so if you are drip feeding you could break it into 250 chunks if you have enough for the minimum purchase in each transaction. Or you could break it into 50 chunks and do one a week. Or you could do 12 monthly chunks. Or 4 quarterly chunks. Or two chunks, today and 3 April 2015. Obviously you only have ~7 months left in the tax year rather than 12, but the principle is the same.

Of these options, monthly is the one that fits easiest with most platform's systems for investing in an automatic way via direct debit. Otherwise it would be a more manual process and may incur more dealing fees (if your platform charges transaction fees rather than flat annual or quarterly or monthly fees).

What each of those methods should get you, is an average purchase price which is closer to the average share price during the year. It also means that your money is, on average, only half invested during this year, resulting in lower potential dividends and gains.

So, your potential income and gains are limited (because some of the money is only invested for one month right at the end of the year), but your losses are perhaps limited because if there is a crash or a market decline, then some of your money might be buying in at a lower price than today.

The reason to invest your cash more slowly and stay more in cash for now, is if you expect the market to fall during the period and the average price available be lower than today's price. Of course it is perfectly possible that today is the lowest price it will be for the next 7 months. Or it is quite feasible that the price could be 100 this month, then 101 in September, 102 October, 103 November, 104 December, 105 January, 100 February and 95 March, in which case nearly all of your shares were bought at a higher price than is available today and only one purchase was made slightly cheaper.

If you are already planning on putting a chunk more money in next April (i.e. when you get your new allowance), and that is only half a year away, and you are also considering transferring in some maturing cash ISAs as they come up, you are already participating in a form of 'price averaging' over time; if the price is lower in those future periods when the other money becomes available, you will be buying in at the lower price and if it is higher you will be buying at the higher price.

So personally I would put most or all of my existing £5k spare money into the market now, with more to follow at those later points (i.e. April and the maturity dates in between), rather than slowly slowly dripping the £5k.

That assumes the money is genuinely 'spare' now and you can afford to commit it to a long term investment today. If you were more cautious, you have the choice of not committing all of it today, or simply choosing a lower risk / less volatile set of funds. After all, presumably you are choosing to buy S&S investments because you expect them to go up in the long term. It would seem strange to decide to choose to buy investments which you expect to go up over time, but then put off buying them because you expect them to go down over the next seven months and just slowly slowly drip into them.

To make that decision to put off buying them would imply some special knowledge of the markets going down in the next 7 months. Even if you are correct that there will be a market downturn, if we last 8 months before we have it, then all your money may have been invested at higher prices than today but you will have received fewer dividends (because of not having as much actually invested) and lost more money on paper than if you invested today.

As you can get 3-5% before tax in some cash products you might be happy missing out on dividends and only very gradually moving to S&S before the end of the tax year. It depends whether you really want to buy the S&S investments or are perhaps a reluctant investor who is only investing because he is annoyed that the returns on large cash lump sums are very low.

Drip feeding over 7 months or 30 weeks or whatever can help cautious people avoid a situation where they invest all £5000 today and it falls to £4000 tomorrow. However it does this by limiting upside and still doesn't stop the investments being worth £4000 by the end of the year or the end of next year. If your natural availability of maturing cash deposits and new ISA allowances creates an 'averaging' effect over the next year or so, I wouldn't try to create another artificial effect myself.

DoctorW

These two links summarise Bowlhead's (as usual, spot on) post.

https://pressroom.vanguard.com/content/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf

http://www.efficientfrontier.com/ef/997/dca.htm

black_taxi_2

who has lump sums,most hav to invest monthly

masonic

black_taxi wrote: »

who has lump sums,most hav to invest monthly

It's not that unusual for someone to come by a large lump sum that they want to invest, even those who normally invest a slice of their monthly income.

It is interesting that the conclusion drawn in the second piece of research is that drip feeding a lump sum over a short period offers a reasonable insurance proposition. I've recently transferred a maturing cash ISA into my S&S ISA and have been phasing investment of that money over the past couple of months (with the aim of being fully invested towards the end of this month). That is against a backdrop of also investing monthly from income. It is looking as though on this occasion I would have been marginally better off if I had invested the money all in one go (one investment fell 5% almost immediately after purchase, but recovered before I got a chance to invest my second instalment). However, I still see some value in taking this approach with a lump sum.

Carpi09

takesyourchances wrote: »

Hi Black Taxi, I just saw your post as was not on the forum for a few days. The Vanguard Small Cap is a good choice alright I think, I have been thinking about it for a while too for my SIPP. I opened the Standard Life Small Cap fund maybe 16 months or more ago, at the time HL did not have the Vanguard Small Cap on their listings so I opened this as I wanted Global Small Cap exposure.

The fees are higher though, I tend to not like to jump in and out of openings so I just kept this on and it rose quickly and then dropped recently, I would still like to hold it rather than sell out of it. I may look at the Vanguard Small Cap sometime in my SIPP though.

How are you getting on? Would be interesting to see how well you have progressed and to see where you are now?

pauljoecoe

Not wanting to trawl all the way through this long thread. I am just about to invest in a Lifestyle 60 via a S & S ISA. Charges wise where is the best place to go for this currently?

irm

pauljoecoe wrote: »

Not wanting to trawl all the way through this long thread. I am just about to invest in a Lifestyle 60 via a S & S ISA. Charges wise where is the best place to go for this currently?

If you're just starting out, then Charles Stanley Direct is a good choice. 0.25% annual charge.

pauljoecoe

irm wrote: »

If you're just starting out, then Charles Stanley Direct is a good choice. 0.25% annual charge.

thats was my thought - just wanted reassurance thanks.