SIPP for my neices (age 15 & 20)

carter91

I have been contributing to a SIPP for my neices (age 15 & 20) for 3-4 years, and intend to continue contributing £3,600 (after tax refund) for the foreseeable future.
Currently they hold 2 global investment trusts. The first was Scottish Mortgage. When my contributions reached c£10K, I switched to Bankers IT.
I don't know if (in future) my neices will take an informed interest in investing, or whether they will be content to leave the investments in the SIPP as they stand. So, I want to pick investments that will provide reasonable (and secure) returns over the next 40-50 yrs.
What would be your investment choices?

I intend to hold about 5 funds in total. My next choice will be a UK Index tracker - probably Vanguard. (I want to minimise charges, as over 40+ years I think will be vital to getting a decent return).

I'm considering a portfolio which might include such choices as 2 global IT's; a UK tracker; possibly an established (and flagship) UK IT (City of London?, Temple Bar?, Perpetual I & G?); possibly a World Index tracker or Vanguard Lifestyle fund; possibly an Emerging Markets fund.

Your thoughts would be appreciated.

Drp8713

I think you have chosen well. My Investment Trust portfolio is almost exactly as you have suggested, two well diversified Global IT's with a few additional trusts to top up underweight areas or arears want to be overweight in.

I chose Scottish Mortgage for my son's trust fund and Bankers is my core holding.

I also hold 4 more trusts to cover global equities, I went for Foreign & Colonial to diversify from Bankers, but you have already done that with Scottish Mortgage.

For a bit of UK bias i chose Finsbury Growth & Income and to top up the slightly underweight Emerging Markets i chose Genesis Emerging Markets.

The final one for me was F&C Global Smaller Companies to get global small co exposure which should pay off over thr long term. It is well diversified and has a good track record, however it does hold other collective invesments as well as direct holdings which will stack up the charges. However, it is still cheaper for a small investor than the dealing charges would be to get the same global exposure yourself.

bowlhead99

carter91 wrote: »

I'm considering a portfolio which might include such choices as 2 global IT's; a UK tracker; possibly an established (and flagship) UK IT (City of London?, Temple Bar?, Perpetual I & G?); possibly a World Index tracker or Vanguard Lifestyle fund; possibly an Emerging Markets fund.

It's curious that you want to invest in a UK tracker:

"I want to minimise charges, as over 40+ years I think will be vital to getting a decent return"

...but for the majority of your holdings you want to use flagship UK and global focussed actively managed investment trusts - presumably:

"I want to maximise the quality and potential of the underlying companies acquired at the optimal price, as over 40+ years I think will be vital to getting a decent return"

You are considering using a tracker for general UK largecap exposure and perhaps even a Lifestrategy fund for general international-including-UK largecap exposure? How will you decide what proportion of your holdings will be this broad generalist exposure and what will be the actively managed specialist 'stockpicking' exposure? If 'generalist, cheap' is a major goal then why not sell the existing ITs and buy the trackers, only adding specialist funds when the portfolio gets bigger? Or if the specialist IT stuff is supposed to give a boost in returns or quality/volatility, why ever buy any trackers at all?

There are obviously various ways to skin a cat and there is no right answer how best to grow your assets over 40-60 years. Probably 95%+ equities makes sense - almost not worthwhile looking at the 'solid' investment trusts that have wealth preservation at their core, because the size of your annual contribution into new equities is at the moment a quarter of the overall NAV and you are easily able to benefit from buying cheap markets if there is a crash in the next few years.

Probably in future years when you have more holdings you would look to do more rebalancing. If you don't think your neices will take any interest in doing that, and they will risk letting one specialist sector grow to be 75% of the total pot and see it all come crashing down, use fewer holdings where rebalancing is simpler.

For the long term, I would agree with Drp8713 to look beyond the most mainstream trusts and trackers that invest in famous solid largecaps; consider a high allocation to emerging markets, frontier markets, private equity, smaller companies etc, given you have a long time horizon in which to take risks. But of course there are arguments for flagship trusts with a proven record in developed markets, and if you want to 'set and forget' for 50 years, avoid trends that could blow hot and cold.