Investment advice - (duh)

DoctorW

Hi all,

Looking for a bit of (fairly) broad advice at the moment. Fairly new to investing and every decision still scares the living cr*p out of me.

I've been self employed for a couple of years now and am lucky enough to have around 2-3k/mth disposable income after tax. Have a very long time horizon and a large tolerance for volatility/risk, with bits in other places that I can draw on in case of emergencies so it really is locked away for the long term - "time in the market not timing the market" and all that.

Thanks to reading up on this website and the good advice of Bowlhead & others I've finally stopped sweating it & set up an S&S with Hargreaves Lansdown and my SIPP with BestInvest.

The current view of them is as follows, with comments below;

S&S ISA - Currently got around £4k in Vanguard Lifestrategy 100 (Acc)

Thoughts - will probably continue investing 100% of my ISA allowance into the VLS100 for the first year while I find my feet, before transferring to a cheaper platform. It seems diversified enough and risky enough for my situation.

SIPP - Currently nothing (first £450/mth contribution goes into account in a few days)

This is the one I'm looking for most advice on. I understand that I should avoid Shares using this SIPP? as even if I wanted to drip a relatively small amount into some good dividend paying companies I'd be paying £7.50 a time, even using the monthly saving option (which I think is pretty p*ss poor!) with BI so I suppose i'll be concentrating almost exclusively on trackers/funds etc.

I was originally thinking, keep it simple and choose the VLS100 for my SIPP too, (and still may do this) but wanted more experienced folks' advice on how best to add, and the upsides & downsides of doing so, Emerging Markets/and Small Cap (probably Global)/Value type exposure to my SIPP/overall portfolio.

I have recently read research about Emerging Market indexes and their performance (with signif increased volatility) over long periods and so would seem suitable for a SIPP with 30 years remaining on it, but as I said before, every decision makes me nervous (and i'm just a nervous person in general) so I come to this forum for a bit of guidance/validation!!

I know this is kind of asking too broad of a question, but I'm open to all suggestions. I'm trying to balance an appetite for a fairly high level of a risk and a long time horizon with passive simplicity and low cost wherever possible and it pretty much terrifies me.

One final thing - in the next few months i'll probably open an investment account - I know half the battle in this game is setting up your investment types in the most efficient wrappers and many platforms have zero on-going fee for shares/investment trusts etc. when held in that account. What is the most efficient type of investment to hold in a share dealing account and how do you ladies/gents work it? (another broad Q i know!)

Thanks a lot, apologies for the waffle

D

Totton

There will be lots of differing opinions on this, my own current take is that I use Investment Trusts through Hargreaves Lansdown where their fees are £45 max per year in the ISA and £0 in the Fund & Share account. I still have the dealing cost and stamp duty but I don't deal much so the few quiz I could save with another broker isn't a concern. If I were to use funds then my fees would be a lot higher, I used to hold the VLS funds also, typically 65% as my core holding would be in the VLS 80 but with the fee changes recently introduced the option was to move from HL or opt for IT's, my preference was to stay with HL but many folk opted to leave for pastures cheaper.

If interested in IT's you could always take a look at the likes of RIT Capital Partners, Scottish Mortgage, Law Debenture, Brunner and Caledonia etc if wanting to start with a Global Generalist, RIT and Caledonia can hold quite a bit of unquoted stuff to add some spice although RIT of late hasn't been too hot. A good site for these is the AIC at http://www.theaic.co.uk

Your use of passive funds should serve you well though, perhaps stick with the VLS 100 and edge down as you near retirement. I imagine you opted for VLA after a fair bit of research, unless something has changed then perhaps that's the right place for your money now.

HTH,
Mickey

DoctorW

Just logging on to say thanks for your reply Totton, have bookmarked the AIC page for when it's not almost midnight, have had a click around and looks a good comparison tool. Still makes me bawk a little bit looking at the ongoing charges/performance fees I have to admit!

Is there such thing as a passive investment trust? I have seen references to passive-process OEICs or a mix of both passive & active strategies where they will change the asset allocation to weight it in areas they believe will outperform. Jeez I imagine i'm going to struggle even longer just to make a decision on what to do with an investment account, nevermind what i'm going to do with the SIPP....

Anyway, I will most likely keep on with the VLS100 as it does line up with my risk appetite for the next 3-5 years. But I will move the S&S ISA i have with HL to somewhere cheaper in the 2nd year but potentially keep the Investment Account with them for any trusts I decide to go with as you said, they have no fees on that apart from the stamp duty/dealing cost.

Hopefully a few others will chime in with their opinions tomorrow - thanks again.

AlwaysLearnin

With £2-3k p/m spare, unless you have tiny outgoings then it's a fair assumption you're a higher tax rate payer. Does the £450 p/m you're starting to contribute take you out of the 40% band? If not, then increasing pension contributions to get you down to basic rate at least has a compelling case (especially if you have no provision to date!). You'll find lots of useful information over on the pension board.

Have you found the excellent Monevator site yet:

http://monevator.com/

Concentrates on passive, with lots of useful articles for people starting out.

Broadly your approach of initially using diversified funds while you find your feet is pretty sensible. Don't be too scared about not getting absolutely everything right at the start as it all changes anyway, e.g. markets, platforms charges etc, so you'll need to tweak things as you go. Nobody knows for certain what's going to happen in the future, whatever they say. Plus, we all make some mistakes!

I notice you have an interesting contradiction in that you say you have a [very] high risk tolerance, but you also say you're "a nervous person in general". I just highlight as it can be be a common mistake, especially for beginners, to over estimate risk tolerance...

masonic

DoctorW wrote: »

Is there such thing as a passive investment trust? I have seen references to passive-process OEICs or a mix of both passive & active strategies where they will change the asset allocation to weight it in areas they believe will outperform.

I believe there is one passive investment trust (a UK one IIRC), but this is conventionally the realm of exchange traded funds (ETFs). These would fall within HL's £45 cap on fees. Vanguard have a selection of these they run alongside their OEICs. For example is VWRL, their All World Index ETF, which is similar to LifeStrategy 100%, although does not have a UK bias and is perhaps not quite as diversified. ETFs from iShares are also worth a look if you want something more specific. Perhaps not worth worrying about for now, but something to consider for the future if you want to stick with HL.

kidmugsy

masonic wrote: »

I believe there is one passive investment trust (a UK one IIRC)

You're probably thinking of the Aberdeen UK tracker which isn't (or wasn't when last I looked) an aic member. It sounds quite attractive to me - a wide range of holdings, modest charges, and a modestly attractive discount.

It would presumably go well in Aberdeen's own investment scheme, which is dead cheap. Scroll down to p43.
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats30Jun14.pdf

You could diversify its UK focus by suitable choice of SIPP and ISA investments.

DoctorW

AlwaysLearnin wrote: »

I notice you have an interesting contradiction in that you say you have a [very] high risk tolerance, but you also say you're "a nervous person in general". I just highlight as it can be be a common mistake, especially for beginners, to over estimate risk tolerance...

Fair comment AL, but maybe nervous wasn't the best, but slightly obsessive-compulsive about checking every last iota of a decision and struggling to press that 'confirm button'. I do realise how over-used OCD is as a claim these days so wanted to avoid that :S haha. Definitely doesn't mean that once the money is invested i'll panic & sell up when it inevitably drops by some huge percentage over the next decades.

Thanks for all replies. If anyone has any advice/pointers for adding Global Small Cap or Emerging Markets exposure to a SIPP in the most effective way it would also be appreciated. I think the AIC site and further help on here in a few months will be enough to choose a good Investment trust.

D