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S&S review
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Bean123
Posts: 49 Forumite
Hi All
I'm just reviewing where I'm at with my finances, and have some thoughts about the S&S side of things (I've posted about cash side of things in the banking forum).
I've got the following elements to consider:
£2K in Vanguard Lifestrategy 80% Acc, with Charles Stanley Direct - edit in an ISA
£6K in L&G Index UK Tracker (R) Acc, with L&G - edit in an ISA
£3600 in F Dir cash regular saver due to mature in 3-4 weeks
£7500 in NS&I cash ISA @ 1.5%
£48K in F Dir cash ISA @ 2%
I'm happy to leave the L&G S&S ISA tracker where it is. Ditto the F Dir cash ISA.
I'm thinking of transferring the money from the F Dir regular saver and the NS&I cash ISA to the Vanguard Lifestrategy, which would make it worth approximately £13K at present values.
Higher rate taxpayer (just) and pension sorted out (civil service).
Does this first step make sense?
Secondly, is CSD the best provider for the Vanguard funds? I'm presently paying about 40p / month charges with a value of £2K. I don't know if that's reasonable but it seems a lot to the untutored eye.
Would swapping provider be a good idea? I don't think there's an exit fee from CSD but I'm not up to speed on charging structures elsewhere for a fund of this relatively low value.
I'm just reviewing where I'm at with my finances, and have some thoughts about the S&S side of things (I've posted about cash side of things in the banking forum).
I've got the following elements to consider:
£2K in Vanguard Lifestrategy 80% Acc, with Charles Stanley Direct - edit in an ISA
£6K in L&G Index UK Tracker (R) Acc, with L&G - edit in an ISA
£3600 in F Dir cash regular saver due to mature in 3-4 weeks
£7500 in NS&I cash ISA @ 1.5%
£48K in F Dir cash ISA @ 2%
I'm happy to leave the L&G S&S ISA tracker where it is. Ditto the F Dir cash ISA.
I'm thinking of transferring the money from the F Dir regular saver and the NS&I cash ISA to the Vanguard Lifestrategy, which would make it worth approximately £13K at present values.
Higher rate taxpayer (just) and pension sorted out (civil service).
Does this first step make sense?
Secondly, is CSD the best provider for the Vanguard funds? I'm presently paying about 40p / month charges with a value of £2K. I don't know if that's reasonable but it seems a lot to the untutored eye.
Would swapping provider be a good idea? I don't think there's an exit fee from CSD but I'm not up to speed on charging structures elsewhere for a fund of this relatively low value.
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Comments
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Looks reasonable, as long as you've noted that you'll end up with a lot less UK bias than you have currently. Presumably you are planning to stay invested for 10+ years and have the intestinal fortitude to cope if your S&S ISA halves in value during a market crash somewhere along the way. I would suggest transferring the money and then investing it over several months to spread your risk.
After adding that money, I think you'll still be below the limit where a flat fee will save you money, but if you keep investing it will ultimately make sense to transfer to a flat fee. I believe CSD has the lowest percentage platform fee, so for now I'd stay put.0 -
You don't say whether the vanguard fund is in an isa, if not then you'll pay additional tax on the dividend but then that would go for any non isa or pension funds or cash interest come to that.
Not sure why you think the charges are expensive, don't think the guys at Csd are filling themselves with bolly on your fiver a year. As Masonic says you are currently getting pretty much as cheap as you can get, once you get to a few tens of thousands then fixed fee providers like iii or iWeb start to become cheaper.
Is the first direct sum for a house deposit as that's a big lump of money earning relatively little?
Also I'd ditch the l and g fund as it doesn't add anything and either add to the vanguard fund or add some side flavours such as smaller companies, emerging markets etc0 -
Thanks, masonic, I've got 15-20 years to retirement, probably.
Will look at drip feeding it. What would be the best practical way of doing that, do you think? Can I do repeated partial transfers from cash ISAs to the S&S ISA (all the deposits are previous tax years)? What would the procedure be?0 -
You don't say whether the vanguard fund is in an isa, if not then you'll pay additional tax on the dividend but then that would go for any non isa or pension funds or cash interest come to that.
Not sure why you think the charges are expensive, don't think the guys at Csd are filling themselves with bolly on your fiver a year. As Masonic says you are currently getting pretty much as cheap as you can get, once you get to a few tens of thousands then fixed fee providers like iii or iWeb start to become cheaper.
Is the first direct sum for a house deposit as that's a big lump of money earning relatively little?
Also I'd ditch the l and g fund as it doesn't add anything and either add to the vanguard fund or add some side flavours such as smaller companies, emerging markets etc
Thanks for your comments. Yes, the Vanguard is in an ISA; now edited to say so.
I think the charges took me by surprise, that's all - when I first opened it, there were no monthly charges, so the introduction of them made it look as though I was being charged more. I've got nothing to compare it with (no overt charges direct with L&G); as you've said that CSD remains among the most competitive charging structures for what I've got, then I'm happy to hear so
I'm pretty risk averse so although I recognise that my cash ISA is losing out to inflation, to me that is less of a risk than putting a higher proportion of that cushion into the S&S. I'm happy to take the risk with future investments into the S&S ISA with that cash cushion remaining.
I don't know enough to start investing in side / smaller funds; out of interest why would you suggest transferring the L&G to the Vanguard?0 -
The l and g fund isn't the best fund, it's relatively expensive for a uk tracker, also because they don't state the charges doesn't mean they aren't already there.
Main reason though is that the vanguard fund has a heavier uk weighting than is justified by actual market value, presumably because people, are uk based and want that. However adding in a pure uk tracker means that this weighting increases significantly, and also isn't automatically rebalanced as part of the lifestrategy so it basically takes away from teh point of having the lifestrategy.
Personally I'd either add it to the vanguard fund or put some or all into areas that aren't covered but which might offer more opportunity for growth in future, which is why I mentioned smaller companies or emerging markets.0 -
Will look at drip feeding it. What would be the best practical way of doing that, do you think? Can I do repeated partial transfers from cash ISAs to the S&S ISA (all the deposits are previous tax years)? What would the procedure be?0
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I think you'll need to transfer it in one go and then take the hit of holding cash in your CSD account for a few months while you gradually increase your VLS holding. I wouldn't try to use partial transfers as this is likely to be a big headache.
Didn't think of that option, I can get my head round that (I was slightly concerned about the headache which would have been caused by lots of partial transfers ... :eek: )0 -
The l and g fund isn't the best fund, it's relatively expensive for a uk tracker, also because they don't state the charges doesn't mean they aren't already there.
Main reason though is that the vanguard fund has a heavier uk weighting than is justified by actual market value, presumably because people, are uk based and want that. However adding in a pure uk tracker means that this weighting increases significantly, and also isn't automatically rebalanced as part of the lifestrategy so it basically takes away from teh point of having the lifestrategy.
Personally I'd either add it to the vanguard fund or put some or all into areas that aren't covered but which might offer more opportunity for growth in future, which is why I mentioned smaller companies or emerging markets.
Thanks for explaining that in more detail. I see what you mean. Basically I'm ending up disproportionately invested in UK funds.
The Vanguard charges on CSD are 0.29% TER plus 0.25% platform fee; does that mean an annual charge (whether taken monthly or annually) of 0.54%?
The L&G (R) Index fund with L&G is 0.56% annual charge, I believe.
Yield on Vanguard 80% (which I know has only been open 3 years) is stated on CSD to be 1.31%; the L&G yield on the UK tracker is 3.2%.
Is the Vanguard performing as well as would be expected; should I look for something different?
What suggestions might you make that I look into re. diversifying beyond the Vanguard - bearing in mind relatively low risk attitude within the S&S field? Where would I look for smaller or emerging markets?0 -
Ok, you're comparing apples with oranges a bit here.
The vanguard fund combines a range of equity and bonds funds across the world and then rebalances them for you, theoretically saving costs in doing so.
The l and g tracker is a bog standard uk index tracker, not held on a platform so less easy to see and manage, and buy or sell if needs be. Uk index trackers can be bought for 0.1% or so, so if you want to keep that investment you can get down to 0.35% ish if you buy on a platform.
Do you want yield or do you want diversification and growth?
The uk market yields more than most stockmarkets in the world, so can be a useful base for dividends. However if thats what you want then why not go for an income fund, vanguard do a uk equity income passive fund and there are a range of managed funds, including Neil woodfords new venture. Similarly vanguard do a global smaller companies fund and an emerging market fund which you could utilise. Many people believe specialist areas are those in which managers can outperform, but cheap trackers haven't been available for long in many of these areas so the jury is still out in my opinion.
Apologies if this just adds to confusion but review your decisions and argue what your priorities are and then invest, if you're on a platform you can always amend or invest more later to amend your focus, investing itself is a learning experience after all.0 -
Thanks for explaining that in more detail. I see what you mean. Basically I'm ending up disproportionately invested in UK funds.
You are starting out with about 80% UK / 20% Global. It's often quoted that over 70% of the earnings of FTSE100 companies are generated abroad, so some believe that they get significant exposure to foreign markets without investing in them explicitly.
What you proposed above would take you quite close to a 50:50 split between UK and Global equities, which is something some people aim for.
Vanguard set their allocation to the UK at just over 25% in VLS, which is still disproportionate, since by market value it should be under 10%. Very few people in the UK would be happy to hold 90% of their equity portfolio in non-UK listed companies.
So what proportion of your portfolio should be UK is usually a matter of personal taste.The Vanguard charges on CSD are 0.29% TER plus 0.25% platform fee; does that mean an annual charge (whether taken monthly or annually) of 0.54%?
The L&G (R) Index fund with L&G is 0.56% annual charge, I believe.Yield on Vanguard 80% (which I know has only been open 3 years) is stated on CSD to be 1.31%; the L&G yield on the UK tracker is 3.2%.
Is the Vanguard performing as well as would be expected; should I look for something different?0
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