First time funds investor: Vanguard or separate funds (etc)?

bigadaj

El_Selb wrote: »

My thinking is:

- 2K in Vanguard LS 80
- 1K in Schroder UK Growth IT
- 1K in MSCI World Index ETF

with Charles Stanley Direct

If anyone thinks this is fatally flawed, please let me know!

Could I do better re my world exposure portion?

With small sums, and whilst diversification is good generally, then vanguard lifestrategy does a pretty good job. Ok it doesn't have smaller companies, little in emerging markets, no commodities or property but a good spread on terms of geography and asset classes. I'd be tempted to put the full £4k in this and then look for side funds in the next couple of years to cover those areas mentioned previously.

pip895

The only issue I would have is that you have a relatively high risk/volatility mix there - the TN risk scores of that lot are 72/120/93 respectively. As you are looking at CSD and fund trading is free I wonder if you wouldn't be better off sticking with Funds. Is it really necessary to go for IT's & ETF's at this early stage in your investment career.

I know you have been steered towards passive rather than active funds but with the recent changes in charges much of their perceived advantage has been eroded. Many managed funds give you decent exposure whilst moderating the volatility. Perhaps stick with the vantage fund but add something like Marlborough Multi Cap Income (68) and perhaps even an Absolute Fund to give downside protection or an emerging market fund depending on your preferences.

brasso

El_Selb wrote: »

I think I need to sit down at the weekend and work out hypothetically what ETFs I'd buy (say 4), chose a broker I'd go with, then calculate/estimate the estimated returns less dealing fees of the Vanguard Vs the ETF route.

Good luck with that one!

I don't mean this unkindly but you seem to be overthinking this whole thing. You've been anxiously asking these questions in this and other threads for a while now. For 4K? It probably doesn't matter.

Your nervousness about the decision makes me think you might be the sort of investor who checks the progress of their funds 3 times a day, and who will be permanently tempted to change their minds -- which is not the idea of passive investment.

Decide what sort of investor you are. If passive, then make your safe-ish choices and be done with it. Check their progress every month or two.

If you have a more active mindset, and willing to take some more risk (and have the timescale to allow you to do that), then you probably would be more satisfied buying 3 or 4 individual 'value' shares or choosing one or two actively managed funds in sectors that you think might be going places.

Most of what you say points to the passive route. No one can tell you what to invest in. What seems like a good idea today may not be next month. That's how it goes.

El_Selb

Haha, for a bit of context, I overthink/analyse most purchasing decisions - trainers, bikes, books... With the biggest financial expenditure of my life, I'm only going to do the same. Appreciated in the multi-billion finance world, 4K is a grain of sand, but when it's all I've got and I haven't got any rich benefactors, I can't help but take my time over it. As soon as I've taken the plunge I'm sure I'll be off-and running and will leave the board in peace (actually - can't guarantee that!).

TCA

I would echo what brasso said. I'm not an experienced investor but would say if you're convinced by passive investing and are prepared to accept a market return, then opt for a single LifeStrategy fund. From the sounds of you (and this isn't a criticism), the more funds/ETFs you buy, the more "actively" you'll be checking everything. That's what I'm like. Fine if that's what you want but I certainly wouldn't think you'd gain much from mixing a global ETF with a LifeStrategy product.

I know where you're coming from though. I'm trying to decide on lump sum investments myself. I'm going 50/50 passive/active, but it's only the latter that's taking longer to decide upon. Having experimented with lots of individual Vanguard trackers for over a year, I'll be going the LifeStrategy route and removing my needless messing. You need to decide how hands on you want to be, but with £4k, my approach would be to invest and let be.

But don't listen to me. My spare cash is going into Emerging Markets and Asia Pacific ex Japan right now. LifeStrategy passive investment is a year away when some cash ISAs mature. But hey, that's the gamble.

westy22

El_Selb wrote: »

Haha, for a bit of context, I overthink/analyse most purchasing decisions - trainers, bikes, books... With the biggest financial expenditure of my life, I'm only going to do the same.

No problem with that - committed moneysaving has always involved research, comparison and effort.

bertpalmer

I would just go with the Vanguard for a year. It is only £4K so maybe H&L would make sense.

Certainly down the line when you have more experience and more money then look to invest in different areas.

I'd HIGHLY recommend picking up a copy of Tim Hales 'Smarter Investing' (even from the library!) which'll give you more information on how to make good investment decisions.

One of his points is knowing that it is very hard to beat the market. Invest passive, long term, low fees. Win.

nickohorny

Hi everyone,

good thread.. i am in this very same boat. First time investor, 30 years of age, and have a lump sum of 20,000 but looking to use 10,000 to invest with of that. The rest I want to keep for safety or future business ideas should I pursue anything!

However I am still going round in circles wondering what to do. I am leaning on funds over shares because I do not have much time to be in the market and just want to let the money grow. First time had this kind of money and so want to make sure not making mistakes.

I was thinking say a safer 6,000 spread out global fund, 2,000 with a small cap fund or emerging market fund, and maybe 2,000 for some shares I choose.

There just seems so many, not sure I am making myself a good strategy.

I cannot invest in SIPP because I am now living in Asia.

ozzage

Really if you want to do this properly, you would do some research and decide on an overall asset allocation that suits your needs and risk profile. You would then go and look for funds (trackers if you want to go passive) to help you create that asset allocation. With some more research you'd find some nice ones that you'd trust going forwards, and invest your £4K.

OTHERWISE, you could say "I want about 20% bond exposure and a good global spread" and buy something like the Vanguard LS 80% which takes the detail work away.

INSTEAD, you are heading towards some sort of half-way house where you combine the two approaches, and while it may work it's actually much more complicated! You should be working TO an asset allocation, NOT picking some funds and seeing what asset allocation you end up with. Have you calculated the asset allocations if you do your three-fund approach above? Is that really what meets your needs?

In your position I would just get the Vanguard and know you've got a reasonably well-balanced product which is going to automatically re-balance and almost certainly do better than most investors who try to be clever.

El_Selb

Hi all, just as a little follow up for those that offered me advice, and anyone trawling the forum in a similar boat as me...

About 3 weeks ago I ended up buying (through CSD):

1K of HSBC FTSE 250
3K of Vanguard Life 80

I then forgot everything I'd heard and read and bought £500 of an individual stock (IP Group) on the recommendation of a friend. I'd depositing the money into my dealing account to invest further in the FTSE 250 tracker, but whilst I was waiting for the funds to clear my head was turned (foolishly) by this stock. It was on a high when I bought it, but it's falling value since has done it's best to erode the value increase I've achieved through the tracker and fund. I'm fairly relaxed about this stock though and think long term if I hold onto it I should make a profit. Given my time again though, I'd just put it into the 250 tracker as originally planned.

I've checked the performance of all 3 of these far too much (as was predicted) through initial excitement but am getting better at leaving alone.

I am pleased with the FTSE 250 performance and a little less-so with the Vanguard Life 80.

Future plans: invest further in the 250 tracker and potentially after one in another territory. Or maybe something that could track the UK construction industry (if that's possible).

Anyway, if anyone is dithering at the moment like I was, I would say once you're happy you've done a fair amount of research (not comprehensive, as this could go on forever) take the plunge and learn as you go along, when it becomes very more real and clear once your cash is on the line.