Which fund would you choose? Why?

skillboy

I guess the next step is to find a fund supermarket to buy the funds from.

Would you generally just choose one such as HL or Best Invest etc and then use the same company to buy several funds such as the two mentioned above? Or it is worth shopping around for each fund you intend to buy to see who offers the best deal in terms of initial fees etc?

dunstonh

I woudlnt chose either as 100% into either one is above my risk profile. Are you sure its not above yours?

One of the most common mistakes a new investor makes is to invest above their risk profile. On a monthly contribution in the early years, it doesn't really matter but once the fund gets above £10k, the levels of volatility become more noticeable and the impact of say a 40-50% loss more visual. How would you act if your pot fell by half in a couple of years time?

ChopperST

A_Flock_Of_Sheep wrote: »

Where does the 4% equity for each year of your investing timescale come from. Never heard that before. All blurb I have read says five years minimum. But you can invest for as long or short as you choose.

A lot of Royal Mail investors invested only for a few weeks in a single share. Very very risky???

Tim Hale suggests it as a variation to the 100 - your age rule of thumb for shorter timescales.

Its also discussed in the Monevator slow and steady portfolio - http://monevator.com/passive-investing-model-portfolio/

Linton

A_Flock_Of_Sheep wrote: »

Where does the 4% equity for each year of your investing timescale come from. Never heard that before. All blurb I have read says five years minimum. But you can invest for as long or short as you choose.

A lot of Royal Mail investors invested only for a few weeks in a single share. Very very risky???

These are just rules of thumb to put you in the right frame of mind. Your attitude to risk and the downside if you dont meet the deadline will modify things.

So for the Royal Mail example people realised they were taking a punt with a relatively small amount of money, and presumably in most cases if it hadnt worked out in the short term they would have delayed selling. So not particularly risky.

But if for example you were getting married and planning to buy a house in a years time, putting all your savings into one share in the hope of being able to afford something really nice would be highly risky.

On the 5 years thing - it isnt saying you go wild if the period is 6 years. In any case after one year you are within 5 years.

bigadaj

ChopperST wrote: »

No point investing in both as you would significant overlap.

Also on a 15 year timescale 100% equity would be relatively high risk.

As a very general rule of thumb own 4% equities for each year of your investing timescale with the rest in high quality bonds / guilts and rebalancing every year.

So you should be looking at a 60 / 40 split.

If your timescale is 15 years exactly then I'd go for the lifestrategy 60 if its 20 years go for the 80.

Would you really go 40% bonds and gilts at the moment?

bigadaj

dunstonh wrote: »

I woudlnt chose either as 100% into either one is above my risk profile. Are you sure its not above yours?

One of the most common mistakes a new investor makes is to invest above their risk profile. On a monthly contribution in the early years, it doesn't really matter but once the fund gets above £10k, the levels of volatility become more noticeable and the impact of say a 40-50% loss more visual. How would you act if your pot fell by half in a couple of years time?

Fair point syou raise but for even a novice investor then drip feeding does have the effect of mitigating some of the extreme effects of a stock market crash. Also at Least with the lifestrategy fund we are spreading risk as far as possible in terms of equities, though I understand there is a uk bias and obviously us shares are high and account for a large proportion of world equity.

bigadaj

skillboy wrote: »

I guess the next step is to find a fund supermarket to buy the funds from.

Would you generally just choose one such as HL or Best Invest etc and then use the same company to buy several funds such as the two mentioned above? Or it is worth shopping around for each fund you intend to buy to see who offers the best deal in terms of initial fees etc?

You can use compare fund platforms .com to look at what charges might be. I've used charles stanley direct for this years isa allowance, they carry vanguard funds which my other platform doesn't, and the website is good and costs reasonable. Probably worth considering what you may be doing over the next few years as well. As would be a pain to set up small pots ona vere all different platforms, I started a second platform to increase range of investment and as a back up as the sums become larger.

RetiredInThailand

I've had IShares FTSE 250 trackers ETFs (MIDD) for years and they have done well. I also had quite a lot of the accumulating HSBC FTSE 250 tracker fund mentioned until the recent shake-up of charges which meant that my broker started charging me 0.3% pa to hold them. So I dumped them and bought more MIDDs with the proceeds as my broker charges me nothing to hold those.

ChopperST

bigadaj wrote: »

Would you really go 40% bonds and gilts at the moment?

Would welcome your thoughts on the alternative as a smoother within a well diversified portfolio?

bigadaj

ChopperST wrote: »

Would welcome your thoughts on the alternative as a smoother within a well diversified portfolio?

Mine currently cash as whilst there is inflation risk I'm happier with that than a combination of potential capital loss or inflexibility and or in accessibility. I have a small sum in property, and it is a problem currently with equities primarily being the only game in town. With a younger person with a long timescale and no anticipated need for accessing then I'd be nearly 100% equities now even though markets are high in many developed markets.

There's obviously the option of going up the risk scale in terms of bond quality but that rather negates the point of bonds as a smoothing mechanism.