What would you guys recommend for long term, passive investment?

blizeH

A few replies to my posts in the HL fees thread have got me re-considering my entire setup.

With HL I currently have:

S&S ISA: Vanguard Lifestrategy 100% Accumulation
Fund account: Cazenove UK Smaller Companies, Unicorn Income, Aberdeen Asian Smaller Companies and Marlbrough Micro Cap

Despite having some risky funds, my main goal is basically to have a fund (or ETF?!) that I can simply add to and pretty much not have to worry about. It's my understanding that the Vanguard accounts are the best for this, and due to my age and risk tolerance I went for the 100% account.

Is this the best option for a diversified, passive and hassle free fund? I'm actually thinking of ditching the others, even though they've done very well for me (far better than the Vanguard tbh).

I'm also very aware now (since the HL fee thing has been bought to my attention) that by shopping around you can really cut the fees which in the long run will have a huge impact, which has got me considering the ETFs too.

I'm at a bit of a loss and would be very grateful for any advice Thank you

ChopperST

I suppose a bit more detail about your;

Goals
Investment Timescale
Attitude to Risk
Mortgage? If so what APR?
Tax Status

Are going to be the questions that are going to be asked.

blizeH

Thanks Chopper, sorry for being vague above.

My goals are to simply help with retirement, I already have a work pension but would love to retire earlier than that if possible.

For the timescales... I'm 28 at the moment, I guess a slightly realistic target would be to use these in my 50s (so 20 to 30 years) but if I'm lucky I may need to rely on it a little sooner.

I have no problem with risk (this is a good and bad thing I guess, but mostly bad!)

I do have a mortgage (just increased it to buy a BTL property as well) but it's only at 2.49% at present

I fall into the 20% tax bracket, I'm not close to hitting the next tax bracket either, but I do like the idea of an accumulation fund which afaik isn't possible with an ETF? ie you always get the dividend income rather than it being re-invested.

Thank you

ChopperST

blizeH wrote: »

Thanks Chopper, sorry for being vague above.

My goals are to simply help with retirement, I already have a work pension but would love to retire earlier than that if possible.

For the timescales... I'm 28 at the moment, I guess a slightly realistic target would be to use these in my 50s (so 20 to 30 years) but if I'm lucky I may need to rely on it a little sooner.

I have no problem with risk (this is a good and bad thing I guess, but mostly bad!)

I do have a mortgage (just increased it to buy a BTL property as well) but it's only at 2.49% at present

I fall into the 20% tax bracket, I'm not close to hitting the next tax bracket either, but I do like the idea of an accumulation fund which afaik isn't possible with an ETF? ie you always get the dividend income rather than it being re-invested.

Thank you

So we'll assume a 22 year timescale, as a rule of thumb that would be a 88% equity / 12% bond split rebalancing @ 4% per year on your birthday for ease.

Your current mortgage is a decent rate and your are happy to take risk so I wouldn't consider paying that off early at that percentage, I'd re-evaluate when your rate rises and over 22 years there's a good chance your investments will beat your mortgage rate.

Even though you are a basic rate tax payer now if you are considering accumulating over 22 years then I'd consider wrapping your contributions up in an ISA to future proof as you only hold funds there is no charge so its a no brainer.

As for what to invest in I'm very much a passive man so I can't recommend an active strategy. As you are happy to take capital risk I would probably consider the vanguard life strategy 80% and hold some active funds alongside to satisfy your risk appetite, probably some form of emerging market fund that trackers find hard to reach...

GL

blizeH

Thank you Chopper, that bond/equity balance sounds pretty much spot on, and I like the idea of re-balancing each year as I get closer to my retirement target age (though it's a shame there's no fund that auto adjusts like the Vanguard funds do in America!) and I am definitely trying to get everything I can into an ISA.

VLS 80% is what I had until recently but I think as you said, with the current bond ratio I require maybe it's worth considering again in the near future.

jimjames

blizeH wrote: »

VLS 80% is what I had until recently but I think as you said, with the current bond ratio I require maybe it's worth considering again in the near future.

Just for info you don't necessarily require any specific bond ratio - it is entirely down to you and your risk profile. I'm in my 40s and by that should have a higher allocation of bonds but actually it is around 1% currently.

pip895

You are quite overweight in UK smaller companies in your current allocation - however they are doing very well at the moment and although they are considered high risk they seem less sensitive to talk of tapering than the likes of the Vanguard 100 fund. I personally wouldn't be in a hurry to ditch them - or at least not all of them.

Vanguard 100% has quite a chunk of US equity, in Vanguard 80% some of that is replaced with UK guilt's & bonds - I think I would prefer to put a bit more Europe in the mix - looks less overvalued at the moment and I would also prefer to avoid the guilt's. This doesn't matter so much if you are drip feeding in over a long period but if you are transferring existing investments it would concern me.

Costs are not everything, the Vanguard funds are no safer than your SC funds, it would be quite easy to see a scenario where you could loose more than 10 years worth of "cost savings" in a couple of months just through swapping into them at the wrong time.

atush

Have you considered a Global tracker (Class C accumulation)?

Linton

If you have no views on whether any particular geography or sector will perform better than any other and no wish to become involved in investing beyond paying your monthly contribution I see no reason to go for anything other than 100% into a global equity tracker.

If you were to get interested at some time in the future you may wish to research what this tracker is actually invested in and modify things to meet your preferences but there is plenty of time for that.

As regards the 100%, you are talking about 20-30 years and drip feeding which much reduces the risks so I dont think bonds will improve the portfolio. You should only need to reduce the equity % when you believe you are within say 10 years of needing the money.

With a quick look I couldnt find anything with lower charges than VLS100. The nearest was Schroder QEP Global Core.

socrates

Interesting read - thanks

Totton

I'd also consider the VLS 100 although the highest equity ration one I have held has been the 80%. I would also remember that chasing lower fees should not be without having regard to performance. Funds such as VLS are not tracking your chosen global index in the sense that they are portfolios comprising disparate Vanguard trackers. The mix of trackers is a call on global markets by Vanguard so I would pay attention to the performance side of things as well as the cost.