simple passive investment - is this OK?

vouch0r

Hi all,

im looking to step into S&S, and looking at creating a simple S&S isa with charles stanley with a vanguard 60% acc, they charge 0.25 so quite a decent rate.

plan is to:

deposit 10% of my cash savings approx £3k now, with regular monthly £200/£250 deposits.

i just would like to confirm if this is a good starting plan. i will be holding for a good 7-10 years.

InvestInPoker

With no other info it seems fine to me, nice one.

edinburgher

It's a well diversified fund with enough equities to capture a proportion of growth, but with enough bonds to smooth out troughs (and peaks).

This and the 80% version are our two core holdings, we achieve 70% equities this way.

richyg

Personally I think you are good to go with that. Lots of people dont like bonds at the moment as an interest rate rise would adversely affect them in the medium term. However with an autobalancing fundit may sheild you from selling low in a panic as that type of fund wont suffer from such large valuation swings as having 100% equity fund and a separate bond/cash ISA/P2P lending fund which is another approach. You could add funds as a core / satelite approach going forward if you wanted more small cap/far east / emerging etc.

There are a lot worse initial starts to investing than that approach

Wentthedaywell?

Voucher, I am spookily in exactly the same position, with exactly the same plan! I can't decide the platform, though I will probably go for CS too. Why did you choose them above Cavendish, TD etc?

krish123

i think this is a good plan and is exactly what i have done myself.

this will act as my core holding and in the future as others have said you can add satelite funds around it where the VS is light on e.g emerging markets.

im a believer in passive investments, im happy in taking the market return as opposed to active investment where on empirical evidence rarely do they beat the market consistently.

my platform is also charles stanley and the annual charge is fairly low.

Tammy2

I've recently set up a S&S ISA through Cavendish. First dd payment comes out next week.

It was all set to be just one fund, VLS40%. But I had a change of heart yesterday and got on the phone to fidelity and swapped it to VLS80%. Yes, it was quite a change of heart! Lol

Hoping to add a couple more funds in the near future. Need to read up more first though. (Thinking emerging markets and commercial property. But I'm clueless tbh. Back to the reading!)

Ryan_Futuristics

Just to play devil's advocate ...

Passive investing's good if you think the global economy's likely to keep growing

However ...
- Many economists and commentators don't think this is a certainty ... With ageing developed world demographics, and structural problems in many of our largest economies, long-term economic stagnation is now a realistic possibility ... For growth, many investors are looking towards specific regions (such as India) with favourable demographics and rapid social development see economies still in transition from emerging to developed

Buying cheap is the only consistent predictor of returns

However ...
- As governments have tried to pull the developed world out of economic stagnation, $trillions have effectively been pumped into the global economy in the form of Quantitative Easing ... In the process, asset prices (specifically global equities, property and bonds) have become very expensive

U.S. equities (which make up a large chunk of the Vanguard Lifestrategy funds) are the most expensive they've been relative to the rest of the world in over 30 years ... Typically at these valuations they've returned only 0.5% over the next 15 years ... Bonds could be even poorer performers, as yields are historically low, and if and when interest rates increase, the long-term bonds you're holding will become worth less and less

More worryingly, current equity prices paint a picture of growth in the US and UK ... However falling oil demand, low bond yields, food banks and questionable employment statistics paint a very different picture ... Today's valuations (in the US especially) may be completely out of line with macroeconomic reality

THIS is not an environment I'd be walking into with my eyes closed ... Passive strategies are popular right now because they've had a strong couple of years while QE's brought the tide up across the broad, and managers have been overly cautious ...

My advice would be: avoid bonds, buy at reasonable value, aim for a 4% dividend (as this is where 75% of compounded long-term growth in the markets has come from), underweight US, Asia is where the growth is, look to alternative income assets such as P2P lending

Aged

Loving this thread, well done for starting it vouchOr! I recently decided that I should set up a S&S ISA and I did a lot of reading up but was afraid to take the plunge. Finding out how others get started is very helpful. I usually find that the best way to learn about things is to get on and do them but obviously mistakes have to be kept to a minimum where our life savings are involved

collingbone614

The Vanguard LifeStrategy, Blackrock Consensus and Legal & General Multi-Index funds allow you to take a "broad brush stroke" approach to investing - because you just fire the money in and let the pre-set allocation take its course - which I personally like. I do see a lot of people who later alter the allocations by putting other funds on the side. I think if people intend to do this then it may be worth going the full-hog and buying the big constituent parts individually right from the start.

I.e. instead of buying Vanguard LifeStrategy, buy a UK index, a developed-world index, a global bond fund, an emerging market fund, etc. The advantage to this approach is that you get the opportunity to bring costs down. Not by a huge amount, but keeping costs low is one of the fundamental cornerstones behind the passive approach. I worked out that by buying individual funds someone could be paying a total OCF of 0.18% instead of the LS' 0.24%. Included in the 0.18% you could also get a global smaller companies index and a global property securities tracker.

For 0.18% on HL someone could get:

Equities allocation - total 100%

L&G UK All Share - 15% (0.06 OCF)
Vanguard Developed World Ex-UK - 50% (0.15 OCF)
Fidelity Emerging Markets Index - 15% (0.23 OCF)
Blackrock Global Property Securities - 10% (0.23 OCF)
Vanguard Global Smaller Companies - 10% (0.38 OCF)

Bonds allocation - total 100%

Vanguard Global Bond Index - 50% (0.15 OCF)
L&G Global Inflation-Linked Bond Index - 50% (0.17 OCF)

If you have 80% of portfolio as equities = 0.1436
And 20% of portfolio as bonds = 0.032
Total ongoing charge = 0.1756



Feel free to check maths - I'm not sure whether I've done this right or not. And I know that there are cheaper places than HL.. just using their figures to demonstrate this.

I am a bit frightened of selling my LS fund in order to make the jump into individual funds, in case I somehow end up loosing money somehow.. Plus if I went into these individual funds I'd loose some of the stuff that is in the LS.. there are various small bits and pieces of funds in there which look like they are there for a reason. So I may just end up sticking with my LS 80, which is at just shy of +7% over the past 10 months since I started making payments into it.

TheTracker

omnirife wrote: »

The Vanguard LifeStrategy, Blackrock Consensus and Legal & General Multi-Index funds allow you to take a "broad brush stroke" approach to investing - because you just fire the money in and let the pre-set allocation take its course - which I personally like. I do see a lot of people who later alter the allocations by putting other funds on the side. I think if people intend to do this then it may be worth going the full-hog and buying the big constituent parts individually right from the start.

I.e. instead of buying Vanguard LifeStrategy, buy a UK index, a developed-world index, a global bond fund, an emerging market fund, etc. The advantage to this approach is that you get the opportunity to bring costs down. Not by a huge amount, but keeping costs low is one of the fundamental cornerstones behind the passive approach. I worked out that by buying individual funds someone could be paying a total OCF of 0.18% instead of the LS' 0.24%. Included in the 0.18% you could also get a global smaller companies index and a global property securities tracker.

For 0.18% on HL someone could get:

Equities allocation - total 100%

L&G UK All Share - 15% (0.06 OCF)
Vanguard Developed World Ex-UK - 50% (0.15 OCF)
Fidelity Emerging Markets Index - 15% (0.23 OCF)
Blackrock Global Property Securities - 10% (0.23 OCF)
Vanguard Global Smaller Companies - 10% (0.38 OCF)

Bonds allocation - total 100%

Vanguard Global Bond Index - 50% (0.15 OCF)
L&G Global Inflation-Linked Bond Index - 50% (0.17 OCF)

If you have 80% of portfolio as equities = 0.1436
And 20% of portfolio as bonds = 0.032
Total ongoing charge = 0.1756



Feel free to check maths - I'm not sure whether I've done this right or not. And I know that there are cheaper places than HL.. just using their figures to demonstrate this.

I am a bit frightened of selling my LS fund in order to make the jump into individual funds, in case I somehow end up loosing money somehow.. Plus if I went into these individual funds I'd loose some of the stuff that is in the LS.. there are various small bits and pieces of funds in there which look like they are there for a reason. So I may just end up sticking with my LS 80, which is at just shy of +7% over the past 10 months since I started making payments into it.

The OCF is lower but there are usually additional trading fees, including those for rebalancing, that usually equalise the actual total fees, but this depends on trading fees and trading frequency. I personally hold no VLS and use my own portfolio of trackers. It all gets quite complicated when you place into various tax-status buckets (SIPP, isa, retained profits of an owned LtdCo, and tax exposed) and its better to distribute the funds in accordance with the tax they incur and your income needs rather than buy a life fund everywhere, eg I place Small Cap in an ISA rather than tax exposed vehicles.