Danger of SIPP & S&S ISA both with Vanguard LStrategy?

DoctorW

Afternoon all,

I'm 27 years old and have just opened my first SIPP scheme with BestInvest. I have an S&S ISA with HL. (I'm a real rookie and I like their pretty interface and charts! I'm aware they might not be the cheapest!)

My question to you cleverer folk is, in my S&S ISA I only have one fund invested; the Vanguard Lifestrategy 100% Equity Acc. At 27 my risk tolerance is pretty high, I'm in it for the serious long term, 20+ years, through the expected volatility etc. etc....now what would the smart/patient investor do when his SIPP opens, invest into the same fund as his ISA? Is there any additional risk involved in doing this, or provided you are happy with the fund and its risk level, why not plough the SIPP cash into the same fund?

Now I know might get a fairly straightforward answer from the experts, "no more of a risk than any other method" but just wanted to gather the thoughts of those much more experienced in this type of thing first.

Thanks a huge amount to any answerers! :beer:

gadgetmind

Given your age, and that you seem to understand volatility, that strategy looks OK to me.

Let's see whether you *really* understand when the next 30% drop comes!

DoctorW

Hahaha, thanks gadget. A very good point but I'll persevere....I may well turn to the bottle but I'll persevere.

Into the SIPP goes the VLS 100 then...here goes :undecided

dunstonh

VLS100 - make that 50% loss potential in 12 months. Better get a few bottles of Malt in.

bigadaj

So long as everything is kept liquid things should go well!

gadgetmind

When capital values drop 50%, everything sure feels liquid!

DoctorW

OK well thanks for your replies/jokes! I know the MSE people are generally good-hearted folk so given that no one has seriously advised me against it, I'm assuming that it's not a terrible plan.

Thanks again :beer:

dunstonh

As long as you have the capacity for loss for around 50% of the value and when that does happen (not if but when) you believe you will not panic and pull out. Saying you accept volatility is one thing. Sticking with that when it happens is different.

You are investing way above the risk profile and tolerance for loss of the average UK consumer. Experienced investors tend to move up the risk scale over time Inexperienced investors tend to start lower. Although many start too high without realising the risks they are taking. They are the ones you hear about slagging off investments saying they lost money and will never invest again. In their case, it wasnt the investments that was wrong. It was that they invested above their risk profile and lacked understanding.

gadgetmind

dunstonh wrote: »

You are investing way above the risk profile and tolerance for loss of the average UK consumer.

Perhaps, but this doesn't make it wrong. ISTR that Bernstein used to recommend some bonds even for younger investors, but moved away from this in later editions of "The Intelligent Asset Allocator".

There are also studies that suggest the best tactic is for an investor to use a heavy allocation to equities until very close to starting to need to draw on the investments. At this stage, they should derisk for a few years but then move back to a heavier equity allocation. This is to avoid the major risk, which is a large drop in equities values in the first few years after retirement.

coastline

investing monthly..

http://business.financialpost.com/2014/03/27/are-you-worried-about-a-stock-market-crash-heres-the-best-way-to-start-investing-right-now/

DoctorW

dunstonh - I accept I may be investing way above the risk appetite of the average UK investor but the checklist of decisions I made to arrive at the VLS 100 Equity (at least for the first 5 or so years) was simple enough.

Am I trying to beat the market? No
Am I in a steady job? Very, with approximately 2-3k/mth disposable income after tax and approx £40k slush fund in the business account in case of job loss
Is it diversified? Yes
Am I investing for the long-term? Yes, I doubt I will touch it until I'm 50 or so which is 20-odd years from now.
Am I keeping enough put aside in more liquid/cash accounts for rainy days, to avoid ANY temptation to need to pull money out of the fund early? Yes

And I suppose, most importantly, am I prepared to get less back than initially invested? Yes.

I'm prepared for the risk and refusing to believe in the magic of managed funds, fully aware that I do not know enough to choose individual shares or see the future, and merely hoping that the passive/low-cost style of investing as I grow old, will serve me OK enough in the end. I've spent a good half a year reading up on different types of retirement investing and as scary as it is to take the plunge, this seems about the best method a guy in my position can go for!

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gadgetmind - I had read many times over the "move to bonds as you near retirement" tactic, but yours was the first I'd seen regarding moving back into a heavier equity allocation after you've settled a few years into retirement. Will look to read up on that a bit more. Thanks

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coastline - thanks for the link. I've set up the monthly debit amount on HL and pretty much plan not to touch it (as best my lizard, dopamine-hunting, human brain will allow) for the next few years, come rises or falls.

Thanks again all :T