Long Term Investment Strategy

billchecker1

I must say this forum is very informative. I have learnt much by reading what people are doing and have done. Having spent the last year reading and dabbling in a few share investments. I am after thoughts on my plans for my portfolio. I know there are many on here who have far more knowledge than I do.

In brief my wife and I have decent public sector pensions. I will have ten years final salary and the rest in a career average scheme. I estimate it to be around 55%-60% of my final salary. My wife has around 6 years in the LGPS. I have 26 years to go before I get my full pension and 21 years before Im allowed to get an reduced pension at 55.

The purpose of my second “pension” is to either allow me more options towards the end of my career and/or to increase my quality of living at the appropriate time.

I have no big expenditure coming up, except for a new car which I will purchase in 2016. I am saving for this and expect the remaining loan to be the same price as I am paying in savings now, so no change in my monthly costs.

I have been paying £200 into X-O stocks and shares ISA and have been buying individual shares. On reflection this probably wasn’t the best course of action due to high costs with such a low amount and the lack of diversification (I currently hold only 5 companies). However this is currently up 20% so not too bad, although I think this has been flattered by the prevailing bull market.

My intention is therefore to continue saving £200 pm but instead invest in the Vanguard FTSE and S+P ETFs every four months (investments of £800 per time). My hope is, over time to build a portfolio of 50% indices and 50% individual shares allowing a 10% tolerance on either side.

Now I accept this is probably a higher risk than most would want however I am happy with due to having a long time frame and the fact that we have good defined benefits pensions. I am happy to be 100% equities, certainly for the first 20 years and look to switch into income funds/bonds in the last 5 years or so

I know people will say that £200 is low, however with work, our total pension contributions are 10% of our gross salary. Also am going to increase it by at least inflation every year and will aim to put most of my pay increases as well.

I don’t have cash savings, I do put in £10 a month to a rainy day fund but essentially if I have any problems my intention would be get a 0% card.

Also on top of this I get overtime (between £50 -£400) which I separate into three, S+S, Car Fund and Mortgage.

Has anyone got any thoughts on my strategy?

kidmugsy

billchecker1 wrote: »

I don’t have cash savings, I do put in £10 a month to a rainy day fund but essentially if I have any problems my intention would be get a 0% card.

I hope you're teasing us. £10 per month. It's enough to keep someone in liquorice twists I suppose, but "rainy day"?

And can you really be confident that there will still be 0% cards when you want one?

Linton

Agree with Kidmugsy. Saving for the future should be taken seriously if you are going to do it at all. Suggest you plan for a second hand car and use the extra money to build up a real rainy day fund. What happens if either or both of you lose your jobs?

Savings_Dave

From my different point of view it does seems a little backwards...you have no cash savings and only contribute £10 a month to rainy day - while investing in stocks and shares when any gains can be easily wiped out.

Before taking out any investments (high risk) you should have sufficient cash savings (low risk) even if interest rates are currently rock bottom! Usually 3-6 months wages is a good start. Perhaps invest less and save some cash instead into a cash ISA each month? Is the saved car loan money in a decent high interest current account earning ~3%?

I'm 34 with currently 66% cash, 31% investments (89% equities/11% bonds) and 3% physical assets. Over the next seven-ten years I will move to a 40% cash 60% investment situation. At least you have pensions - I've had to go down the SIPP route.

Wilkins

You need to get an emergency fund in place first. Put all you savings into that for a few months. Meanwhile, learn what you can about investing.

You may find it better to find a low cost scheme for regular fund purchase rather than doing lump sums every so often. And, of course, do what you can within an ISA wrapper. Overall, I think your strategy is sound.

Probably, low cost passive investing via ETFs will return as good results as any strategy (and don't forget to diversify internationally), but buying individual shares is definitely more interesting. However, this is only likely to be rewarding is you have the time and interest to do the necessary research.

brasso

Did you mean literally a "new" car as in zero mileage? Or just a new purchase of a used car?

I really like my car, which I bought brand new in 2008, but it was probably the worst financial decision I ever made as of course the value plunges the moment you take delivery of it. Depending on the model, you can buy a near-new car at a huge discount on the new price and it will still feel like a new car.

billchecker1

I do accept that increasing this fund is important and may increase this. It is one area of weakness in my finances.

I know it's not always certain but both our jobs are relatively secure.

I can't (at the moment anyway) be made redundant.

My wife could although they are recruiting more staff in her line of work at the moment so certainly for the time being I could be as certain as anyone ever could be that we have secure income.

I have had many cards over the years and see no reason why I should be refused. However if this were to happen then I could at worst either get a cheap loan or sell some of my shares. Like I say I don't see it happening.

billchecker1

Brasso. I haven't actually decided on the car yet. All I know is that my current car is getting a little old now and can see needing a change in a few years. I have picked 2016 as a date as it will then be 14 years old and by then I will have had three pay rises.

Of course something could go wrong Tomorow and it goes back to my earlier issue of cash savings. I am helped by the fact that I walk to work at the moment and use the car on weekends in the main. The mileage stays low. Of I have to move my workplace then my risk in this area may increase.

I should also add that my wife and I have just moved into a new house. This has been fully refurbished. We had saved money for some things we needed and as a result we have a new washing machine and drive freezer. Some of the things which traditionally would cause a problem with breaking down etc.

Annisele

billchecker1 wrote: »

I have had many cards over the years and see no reason why I should be refused.

It might not be about you; it's possible that credit card providers will stop offering 0% deals completely.

On the "I can't be made redundant" issue, remember that however secure your job is you still have the risk of being run over by a bus and killed or injured. Secure jobs do often come along with decent sick pay and benefits, but do check!

In any case I think £10 a month into cash (on your salary levels) is likely to be pointless. Either you already have enough cash savings, in which case don't bother with the £10, or you don't - in which case you should build that up first.

If you think your existing share portfolio is too risky because it isn't diversified enough, and it's recently risen, that sounds to me like it might be a good time to sell and get some diversification benefits.

jimjames

Savings_Dave wrote: »

From my different point of view it does seems a little backwards...you have no cash savings and only contribute £10 a month to rainy day - while investing in stocks and shares when any gains can be easily wiped out.

Before taking out any investments (high risk) you should have sufficient cash savings (low risk) even if interest rates are currently rock bottom! Usually 3-6 months wages is a good start. Perhaps invest less and save some cash instead into a cash ISA each month? Is the saved car loan money in a decent high interest current account earning ~3%?

I'm 34 with currently 66% cash, 31% investments (89% equities/11% bonds) and 3% physical assets. Over the next seven-ten years I will move to a 40% cash 60% investment situation. At least you have pensions - I've had to go down the SIPP route.

It really depends on your attitude to risk and how secure you consider your position to be.

I'm 10 years older than you but have about 95% of my money in investments and very little cash. I have overpayments I can get from mortgage but I also have credit cards I can use in an emergency. I can't see any point in a cash ISA at present and have not used one for over 10 years. With current rates a bank account pays far higher.

Maybe it is risky but I've had this cash/investment profile for most of the last 15 years so what billchecker is suggesting isn't totally unusual. When I've needed cash I've sold investments and it's worked ok for me.

billchecker1

Annisele wrote: »

It might not be about you; it's possible that credit card providers will stop offering 0% deals completely.

On the "I can't be made redundant" issue, remember that however secure your job is you still have the risk of being run over by a bus and killed or injured. Secure jobs do often come along with decent sick pay and benefits, but do check!

In any case I think £10 a month into cash (on your salary levels) is likely to be pointless. Either you already have enough cash savings, in which case don't bother with the £10, or you don't - in which case you should build that up first.

If you think your existing share portfolio is too risky because it isn't diversified enough, and it's recently risen, that sounds to me like it might be a good time to sell and get some diversification benefits.

Thanks. Yes I am covered for life/sick insurance through both my work and a separate scheme. My wife is as well.

I actually didn't know I was covered until I had to check for my mortgage application last year but the dear and sick benefits are generous. Although I hope they are never used!

In terms of cash. Yes I accept I need some more and may well get that upto a value hat I am happy with. I only have a couple of hundred at the moment.

In terms if risk. I was simply stating that holding just five companies I believe is risky. My plan is to hold these but also have the tracker alongside it.