S&S ISA Savings Plan?

Melv

I have £19K in a cash isa and am considering transferring £7K into S&S ISAs (leaving £12K for emergencies). I already dripfeed £80 pm into the Vanguard Lifestrategy 80% Equity Accumulator fund and am happy to take the risk on this as I'm not planning on touching it for 10+ years. I'm thinking of splitting the £7K across this and a couple of funds such as the CF Woodford Equity Income (Acc) and a lower risk option (perhaps another Vanguard). In addition to the £7K lump sum, I can save around £200pm, which I'd divide among the different funds in the wrapper.

Does this sounds like a reasonable plan - bearing in mind that none of my future savings will be going into cash? I'm a basic rate taxpayer and pay into a LGPS pension so don't need to up savings at the moment. I have a fairly large mortgage, but will be overpaying this as well as investing.

masonic

Supposing that your remaining £12k emergency fund is large enough to cover any conceivable emergencies, then there wouldn't be any need to build any more cash savings, so investing the whole £200pm would make sense.

Bear in mind that the Vanguard fund already has some exposure to UK equities, which the Woodford fund will increase, but you may want to have a larger UK bias to your investments, in which case you should be able to strike the desired balance.

If you are looking for a lower risk fund that complements the two you have picked out, you might want to consider Blackrock Global Property tracker, which while not low risk per se, would give you some further diversification and would tend to reduce the volatility of your portfolio overall.

Melv

Thanks for the tip. I will look into the Blackrock fund. I'm still a novice so am still striving to understand the various options.

dunstonh

I'm thinking of splitting the £7K across this and a couple of funds such as the CF Woodford Equity Income (Acc) and a lower risk option (perhaps another Vanguard).

The VLS funds are multi-asset and built to match a certain asset allocation and risk profile. By adding in single sector funds, that will break the asset allocation and change the risk profile. It also means you are moving more into management decisions. So, why do you think your asset allocation will be better than Vanguards?

Melv

Thanks - I see your point and no, I definitely don't think I can do better! However, I only want to put a proportion of my savings into high risk funds - 35% for instance. Am I better investing the remaining 65% in a lower risk Vanguard Lifestrategy fund (40-60%) or similar within the S&S ISA wrapper?

dunstonh

However, I only want to put a proportion of my savings into high risk funds - 35% for instance.

And VLS has a percentage towards the higher risk.

Am I better investing the remaining 65% in a lower risk Vanguard Lifestrategy fund (40-60%) or similar within the S&S ISA wrapper?

No. You only need 1 VLS fund. mixing and matching the VLS funds achieves nothing.

jamesd

What the VLS funds do is pick particular classes of assets then use global market size to allocate the money around the world. It's very far from certain that it is not better to use different allocations, and that can be achieved by using a VLS fund for a core investment and adding other funds to shift the overall balance in a preferred direction.

Risk has many aspects to it. The most commonly mentioned one is really volatility, the routine up and down movements of investments. Bonds are traditionally low risk, really low volatility. But there's a problem at the moment: bond prices are at around record high levels and there's good reason to expect a gradual drop of 30% plus over the next five to ten years, though still with the chance of more gains. Even while falling 30% they would be low "risk" because the ups and downs would be lower than shares. But maybe you would not agree that buying into a 30% drop is what you mean buy low risk.

The VLS funds are quite a good idea but I don't think that now is a good time to be buying the ones with higher bond percentages. Better to use a global tracker and say commercial property and strategic bond funds to have more control over how much goes into bonds. You can also consider using global trackers that don't have market cap weighting that puts around 55% of the money into the US with its rather high share prices compared to much of the world. Nothing wrong with the US, it's just that historically higher price/earnings rations lead to lower investment returns, so it's not looking like the ideal time to have a high weighting to the place.

Melv

Thank you for such a detailed reply - this is very useful. I'm going to do more research before I commit to transferring to a S&S ISA. There are so many options out there - I can understand why people become confused!

Zippeh

jamesd wrote: »

What the VLS funds do is pick particular classes of assets then use global market size to allocate the money around the world. It's very far from certain that it is not better to use different allocations, and that can be achieved by using a VLS fund for a core investment and adding other funds to shift the overall balance in a preferred direction.

Risk has many aspects to it. The most commonly mentioned one is really volatility, the routine up and down movements of investments. Bonds are traditionally low risk, really low volatility. But there's a problem at the moment: bond prices are at around record high levels and there's good reason to expect a gradual drop of 30% plus over the next five to ten years, though still with the chance of more gains. Even while falling 30% they would be low "risk" because the ups and downs would be lower than shares. But maybe you would not agree that buying into a 30% drop is what you mean buy low risk.

The VLS funds are quite a good idea but I don't think that now is a good time to be buying the ones with higher bond percentages. Better to use a global tracker and say commercial property and strategic bond funds to have more control over how much goes into bonds. You can also consider using global trackers that don't have market cap weighting that puts around 55% of the money into the US with its rather high share prices compared to much of the world. Nothing wrong with the US, it's just that historically higher price/earnings rations lead to lower investment returns, so it's not looking like the ideal time to have a high weighting to the place.

Could you give an example of the global tracker, commercial or strategic bond funds?

jamesd

Melv wrote: »

Thank you for such a detailed reply - this is very useful. I'm going to do more research before I commit to transferring to a S&S ISA. There are so many options out there - I can understand why people become confused!

Yes, there area lot of options. One thing you should do is get started, with something. That's because there is nothing for learning quite like having your own money at stake and living through a 10% or 20% or 40% drop to find out what you can handle, before the amounts get really big.

Zippeh wrote: »

Could you give an example of the global tracker, commercial or strategic bond funds?

global tracker: Vanguard developed world (doesn't include emerging markets though)
commercial property: Aviva property, L&G Property, don't take either as a recommendation, I just picked two examples.
strategic bond: Invesco Perpetual Monthly Income Plus

Skwizz

The bulk of my ISA investment has been with Sanlam Wealth Management (formerly Principle) White List.
I think anyone looking at its' make up would classify it as a lower risk strategy (if such a thing exists).
I have been in it since 2004, seeing an average increase in value of 8.4% p.a. over that period.

This tax year I took an ISA with a different provider (H&L) and put the lot into Standard Life UK Equity Unconstrained (I believe Woodford did better).
This has risen 8% so far since June, though I would have been more if I'd followed my usual strategy and waited until the end of Summer.