Another please critique

ThomTomato

Hi all,

I'll hold my hands up and admit I'm a novice but very willing to learn.

I have £10k In a cash ISA and am comfortable to keep it at that as rainy day funds until rates get better. I've got £31k in my current pension 'pot' and adding to it at a rate of 26% in total (my conts plus employers).
I've currently got 50% equity in my house (circa 40k) but looking to upsize in the next 48 months (first house) .
Long term, I'm hoping for a comfortable retirement short - medium term a bigger house in a nicer place. I'm 32 and earn £49k per annum.

Sorry if that's too much info.

So to the crux..
I transfered some money from a HSBC managed S&S ISA to HL and invested as so...

£1k AXA managed balanced
£1k first state global emerging market leaders
£1k investco perpetual global smaller companies
£500 investco perpetual UK smaller companies
£1k Unicorn UK income
£1k rotork shares

I'm then adding £150 PM into each of HSBC FTSE 250 tracker and HSBC all share (again through HL). Student loan ends soon so thinking of drip feeding another £150 PM into Japan, Latin America and bonds.

At the end of each tax year I get a bonus and plan to fill up any spare allowance into my cash ISA.

Thoughts?

ThomTomato

Typo, I'm 34 but I'm hoping that doesn't make a difference. Any advise welcome

Stingy_3000

Well done.

One thing with the stock market: do not invest any money you will need in the next five years.

You say you plan to buy a house in the next 2 years. Make sure you keep as cash the money you will need for the deposit, fees, moving and potential work on the house.

Otherwise, if you have invested the money and the stock market drops, you will have to delay your plans until it recovers which could take several years!

bigadaj

OP if I were you I would be tempted by the vanguard funds to build up a decent sum. Hl charges would mean that its more efficient to invest in a sat 80% vanguard lifestyle fund, you want to achieve diversification but using so many small sums in funds looks complicated. Once the vanguard has say ten grand in to then lok for diversification, though as above, if moving and saving a deposit in the next year or two most would recommend to keep this in cash.

bowlhead99

Firstly, Stingy's comment is spot on. If your goal is house deposit (whether FTB or upsizing or whatever), don't rely on stock market funds to build the deposit, if you need to cash it in any time soon. People may define 'soon' as 2 years, 4 years, 5 years, but 8+ years is probably a better timescale for building up funds to be able to properly ride out a crash and/or recover from one.

If you look at the 4.5k already invested (ignoring the Rotork as I'm sure you have your own reason to have 15-20% in this one company and then 80% split across hundreds of companies...)

You have a third in smaller companies. You have about a quarter in Emerging. You have a quarter dedicated to the UK equity income sector in a fund that has doubled over 5 years and is probably up 150-200% in the four years since the bottom of 2009's crash. All of these would seem to have quite a bit of risk looking forward. I certainly wouldn't ignore those markets for a long term view, when supplemented by several more asset classes and regions, but it doesn't seem the best solution to saving up a house deposit. The only thing with any kind of balance is the well-named AXA balanced fund which has quite a bit of largecap UK stuff but also UK and overseas bonds and international exposure.

Looking at the geographical split, you're over 40% in the UK (the IP, Unicorn and half the AXA) which, if prices didn't change and you added 3600 in HSBC trackers over the year, will end up at 70% UK. Again, not particularly balanced.

And I agree with bigadaj's comment that buying two HSBC trackers at HL - and paying a pound a month each on the holdings which going from £0-1800 this year will have an average balance of only £900 each - is inefficient, as the £12 platform fee on a £900 holding is 1.33% per year. Clearly you would have a much broader spread of risk if your drip-fed purchases were in 1x Vanguard Lifestrategy not 2x HSBC UK - but I believe the platform fee is £2pm on that fund so the overall drag on performance is the same.

If the medium term 4 year goal is trying to save for a house upgrade, I'd suggest you should forget about putting the 150pm student loan money into latin american equities, or a Japan fund - the Nikkei index has gone up an unprecedented 6000 points (65%!) in only 6 months and although a chunk of that headline gain is offset by the fact the yen is suddenly now cheap as chips to buy, the outlook for the next few years is surely uncertain. The only vaguely sensible thing to do, given the goal of liquidity in 4 years, and your equities-heavy portfolio, is buying bonds rather than equities. And to be honest, the current yields, are not going to be significantly better than your cash options, when you consider the potential risk from the current super-high prices.

It is difficult to know what to suggest given the current state of the markets. I quite like the idea of being heavier than average in global smaller companies and emerging markets over UK & US over the next 5 years. And you might like a gamble, as I do, so who am I to tell you that you should not be so heavy in equities?

But IMHO you should be trying to diversify and de-risk rather than buying up more UK indexes, and in terms of what you currently have - lower equity exposure in favour of cash, bonds, real estate or funds/investment trusts with a strategy of capital preservation, or funds seeking absolute returns year on year (over outstanding returns in equity bull market returns) would seem to be the order of the day.

bigadaj

The other thing to consider is what is your pension invested in, you mention a pot so we presume this is defined contribution.

Are you looking for further savings to go into your house move, or will your current equity suffice? Key here could be the interest rates any equity or deposit can gain, so there is an argument fro ensuring your mortgage doesn't exceed 75% ltv, though obviously research this and will vary when you do move.

Your current investments are almost a distraction, as they only constitute a couple of months of your salary. I'd go for a lifestyle fund initially as stated earlier and there are cheaper options than hl.

Your main focus though should be on the pension, as this has several times going into it in comparison to your isa contribution. I would be looking to go fairly high risk with this if you have the opportunity, going overweight in equities, and patticulalry emerging markets, Asia etc

Totton

Hi ThomTomato,
That's a high risk portfolio imho which is likely to do very well in a strong market. I don't really see the point in putting £1k into the managed balanced fund when such a high amount has gone into the smaller co's stuff etc, I doubt the low % in the managed balanced fund will have much impact on the other holdings. It's not a portfolio for me but then I'm a lot older and don't have as much time as you :-)

Best of luck,
Mickey

ThomTomato

Thanks all and sorry for the late response.

I do not know how to multiple quote on my phone, but I've given a lot of thoughts to all your comments.

I've decided to halt the drip feeding from next month (will cancel the DD tomorrow) and plow it into my Cash ISA, but leave what I have in place already. I'll revisit once I've bought my new house and look into Vanguard Life funds.
FYI, my new home will be my second. Reading through, I didn't word it very well, when I put '(first house)' I was explaining that although I have a good LTV at the moment, I don't have large equity as my first house is a starter house.

Re my DC pension, whilst the %contribution is high, 20% (company 17%, me 3%) is a 'credit account' that guarantees to grow by inflation and not reduce but it also doesn't grow much either. The rest (company 3%, me 3%) goes into investments. There aren't a lot to choose from... just a 'life fund' and a handful of Blackrock funds.
I've not yet contributed any AVCs, but this is an option.

We have an new option to change our pension to full investments, but only receive 10%from employer. I chose to stick this year, but can change next Spring if I want.

Again thanks all, it's been good to see other people's insights and thoughts.

racing_blue

ThomTomato wrote: »

Thoughts?

a few questions come to mind which might help

1. In today's money terms, at what price/value do you see your ultimate house?
2. In today's money terms, what will be your ideal pension pot?
3. For how long do you plan to work?
4. Any curveballs? (eg. plan to give £100k to the donkey home)

You may not be able to answer these, in which case I guess you need a more flexible strategy. On the other hand, if you can answer them, it might be possible to construct a more rigid plan.