Please critique my first investment plan

vietnamsavings

Hi everyone

This is our first real attempt at saving/investing and we would appreciate some advice.

We live in Vietnam, we will be here for at least 5 more years. Each month we have $3000 to put away. We are both 30 and have 2 young children, we want to start putting money away that wont be needed for 10-15 years for both the children's future and money for ourselves for when we retire. We have no pensions.

My Plan

$1000 per month into savings - If I save in Vietnamese Dong which we get paid in, we can save with HSBC and get 10% savings rate although I am not sure of the implications of keeping a lot of money in a currency that is not that stable.

$1000 per month into Vanguard Life Strategy 80% equities

$500 per month into Fidelity South East Asia Fund

$500 per month into Jupiter Japan Income Fund

Is this a good solid plan to ensure growth in 10-15 years? We have never saved before (other than gold Krugerrands we own which we plan on keeping for 10-20 years)

Thanks in advance.

bowlhead99

In terms of overall split I would say 90% of your investments into equities, if being drip fed over 5 years and not needed for 15, is absolutely fine.

For the non equities component that's getting $200 a month through the lifestrategy, some would recommend a managed strategic bond fund, or other asset classes such as real estate, rather than the simple gilts/corporate bond tracker. However it is possible to overthink things and the sums are not huge relative to the rest of the portfolio, so seems OK.

For the equities, you haven't said where you intend to be in 5-10 years after your 5 year minimum stint in Vietnam is over. If Japan, I could understand why you'd be putting a quarter of your investments into it on top of the allocation it already gets through the Lifestrategy. If not Japan, I wonder why you're so heavy in it. I presume it can't be because of stellar long term average returns there in the past 10-20 years... and hope you haven't been suckered in by recent rapid rises in the indexes over the last couple of years as the currency has devalued. My Japan exposure has done well in the last 6 months or so, but the 1-year index chart is not indicative of typical growth that could be expected over next 15 years.

Also I wonder why 25% SE Asia vs a more general emerging markets fund - is this simply sentimentality because you're currently there, or perhaps an intention to be living there in 15 years, or a genuine belief it will outperform China, India, Latin America, Russia, Africa etc?

If it were me, beyond the $1000 in the lifestrategy fund, I would add a global smaller companies fund and a general global emerging markets fund to satisfy my appetite for higher volatility, long term growth; and only then would I consider region- or country-specific funds, unless it was the region I expected to be in when the investments matured in 10-15 years.

Obviously while I say "if it were me", I don't mean that's exactly my portfolio - mine is quite different - but it's impossible and reckless to try to give someone a tailored investment plan over an anonymous internet forum. But I'll leave you with those general pointers.

Also one final thought, if your Vietnam employer is paying you in USD and you don't have UK ties (you might be an American who stumbled across this forum, for all I know), you could consider the US equivalent of the lifestrategy fund which won't require you to lose on the FX rate to raise the sterling to buy from Vanguard UK. But if you're a British expat in Asia without any US links, it would likely be more trouble than it's worth to invest in US mutual funds. Good luck!

Linton

I agree with bowlhead that your strategy is fine for long term investment. But I question your allocation of higher risk funds. In my view you should have a wider range with a smaller % in each - diversity is essential with such funds. There are of course other geographies. But also there could be more diversity in company size. The Vanguard fund as a collection of trackers will focus on large companies. Small companies are higher volatility ("risk") but have in general performed better. There are also global funds specialising in particular industrial sectors such as technology, energy or finance.

Totton

The Vanguard fund is 48% in the UK, I think that's a slight concern but that does come down to around 24% invested in the UK once you factor the other two funds in. I like the idea of focusing on just two other funds but you'll need to actively manage them so as to ensure they remain good choices. Also excellent is the decision to save so much per month, you can always move lump sums into the investments if the savings become too high for you.

Borrowedtune

Re: Fidelity SEA - I wouldnt mind some discussion of this fund as it's one I currently hold but have some concerns about.

Is this the place to do it (as its mentioned in the OP) or should it have its own thread ?

brasso

Borrowedtune wrote: »

Re: Fidelity SEA - I wouldnt mind some discussion of this fund as it's one I currently hold but have some concerns about.

Is this the place to do it (as its mentioned in the OP) or should it have its own thread ?

I would start a new thread. Not so much to do with etiquette, but you will attract more of your target audience (those who hold or are thinking about) the fund, if you mention it in the title. Most of them will miss it in this current thread.

dunstonh

Personally, I am not impressed with the allocation.

You use a portfolio fund to give you asset allocation in the major sectors (and the Vanguard 80% is the only one that does that of the lifestrategy funds). You then go and break the asset allocation by going massively overboard on Japan and Asia.

The risk level as such is very high. Especially for a first time investor and way above the average UK consumer (doesnt mean its wrong as risk as about capacity for loss as well as understanding whether you are in for a rollercoaster or a wavy line).

Anyway, why do you think your sector allocation heavily weighted in Japan and Asia is better than Vanguards (or any of the other models that have massive amounts of money spent on them)?

ColdIron

While keeping some ready cash in local currency makes sense, Dong has obvious problems. It might be worth asking HSBC if you can have a Thai baht account. Just as useful as Dong and Dollars IIRC, just athought