Portfolio ideas for a new investor

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Hi all,

I've recently taken my first investing steps and need some advice and feedback.

33 years old
Pension value to date: 6000
Fixed rate ISA 1: 15,000 (matures JAN 17)
CASH ISA 2: 21,000
Stocks and Shares ISA: 3700

The money in my Stocks and shares ISA came from an old Cash ISA which I decided to transfer to a S&S and play around with, until I get the hang of investing.

1. I intend to transfer my 15000 cash ISA when it expires in January, into the S&S ISA..
2. I intend to keep my 21,000 ISA as cash for a rainy day
3. Will be paying between £500-1000 a month into the S&S
4. Moderate to High risk tolerance as I invest for the long term.
5. The plan is to build up ISAs and start using them in about 10-15 years time when kids go to UNI, get married etc.
6. The pension will be MY retirement income in around 25 years time

Questions:
1. Is the following allocation/diversification of my 3700 S&S good enough?

40% UK equities (2/3 All companies, 1/3 Smaller companies)
43% Int'l equities
12% Corporate bonds
5% Cash/property/others

Region exposure:
47% UK
30% US (Tracker fund)
9% EUROPE (excl UK)
4% Emerging ASIA
10% Other countries such as Japan, Australia, S. America etc

The above is in 8 equity funds and 2 corporate bond funds.
Do you think that's too many funds for such a small sum?

2. I'm thinking of transferring my 15000 ISA before it matures in January. I will lose 180 days worth of interest which amounts to roughly £137. Do I stand to overcome this loss and possibly gain more if I transfer my money to the S&S ISA now?

Thanks!
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  • slowpoke_rodriguez
    slowpoke_rodriguez Posts: 307 Forumite
    edited 16 July 2016 at 7:39AM
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    amark16 wrote: »


    2. I'm thinking of transferring my 15000 ISA before it matures in January. I will lose 180 days worth of interest which amounts to roughly £137. Do I stand to overcome this loss and possibly gain more if I transfer my money to the S&S ISA now?

    Thanks!

    You could easily make up this loss in a day, but then you could lose it in a day too.
    I would transfer this ISA to S&S, pronto, as you have the other ISA in cash, and look to gradually transfer all your ISA allowance to S&S, but keep a cash balance in higher interest current accounts.
  • mark13
    mark13 Posts: 367 Forumite
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    Why not transfer some of you Cash ISA to S&S Isa. Should you need the cash then you can always withdraw from your fixed rate ISA.
    If you don't need to use it , then when it matures in Jan, you have the interest and this can then be your cash ISA rainy day money.
    Win Dec 2009 - In the Night Garden DVD : Nov 2010 - Paultons Park Tickets :
  • amark16
    amark16 Posts: 15 Forumite
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    Both very good ideas, the only problem with transfering the cash isa is that it's in my wife's name and the s&s isa in my name so dont think a direct transfer is possible. But I will progably withdraw some cash from the cash ISA and put into the s&s.
    I will probably transfer early the 15000 despite the lost of interest as slowpoke suggested. As you say there is always the chance of losing money instead of gaining but I believe there are some good bargains around at the moment to be taken advantage of, especially for someone who is just now beginning to invest.

    Any comments on the fund diversification?
    Another point I am not sure about is, should I invest my pension in roughly the same funds as my S&S ISA, to avoid overdiversifying?
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    edited 16 July 2016 at 9:45AM
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    Questions:
    1. Is the following allocation/diversification of my 3700 S&S good enough?

    40% UK equities (2/3 All companies, 1/3 Smaller companies)
    43% Int'l equities
    12% Corporate bonds
    5% Cash/property/others

    Region exposure:
    47% UK
    30% US (Tracker fund)
    9% EUROPE (excl UK)
    4% Emerging ASIA
    10% Other countries such as Japan, Australia, S. America etc

    The above is in 8 equity funds and 2 corporate bond funds.
    Do you think that's too many funds for such a small sum?
    =======


    Far far too many for £3700. As in 9 too many :D

    I'd just put it all in a VanguardLS100 (at your age) or similar, maybe an 80 if you want some bonds but at your age I'd go all in you have time on your side.

    Indeed although I shouldn't really give advice as I'm a tinkerer and have day traded and still switch around and buy and sell individual shares on short timescales sometimes, not just funds, (for example just bought a bunch of stuff after the ludicrously overdone Brexit sell off), if i knew then (at your age) what I knew now (nearly 2x your age) I'd put about 80%-90% in one or two ultra low cost global tracker type funds and let it accumulate and mess about with the other 10-20%, if I still wanted to play the markets. That can come when you move your £15k cash ISA into shares which I agree you might as well do now.

    As for your proposed diversification, I think its overly UK biased. I know there's an argument that currency risk means you should have a preponderance in your country, but OTOH a global tracker will by definition shift to where the money is and if the UK is doing badly then you'll gain and if its doing well then more will shift into the UK anyway. Look at it this way if you have nearly half in the UK, you are missing out on much of the new industries. You dont have Apple ,Google, Facebook, Nintendo, many biotech and pharma companies etc. These are the industries of the future.

    The other thing I'd add to a global tracker is property as I'm pretty sure things like Vanguard dont include that. Maybe some do. But if not I'd have 10-15% in property. Probably global again.

    What you are trying to do with your proposed allocation is build your own LS80. It will be more expensive and biased in the wrong way (IMO) to the UK.
  • amark16
    amark16 Posts: 15 Forumite
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    AnotherJoe wrote: »


    What you are trying to do with your proposed allocation is build your own LS80. It will be more expensive and biased in the wrong way (IMO) to the UK.

    The main reason I decided to take a more active role in managing my money is because my company pension is invested in a lifestyle tracker fund with a 1% fee, which many of my colleagues consider as generally underperforming. So the general advice was to move to a SIPP and build a more diversified and promising portfolio.

    I'm not arguing in favor of my strategy, and forgive me if I sound naive. But even if I invest a small sum such 3700 (mind you I will soon add 15k to this) to 2 funds or 10 funds, if the average fees are relatively low, as in well below 1%, and there are no fund dealing fees, why is the portfolio expensive? I mean, why should small sums be invested in fewer funds?

    I also understand your point in being overly UK biased. My intention is to have around 25% of my portfolio in a US index tracker fund which invests in companies as the ones you suggested (Apple, Amazon, Google etc).

    I should also point out that I've selected my funds based on the Hargreaves Lansdown Wealth 150 and 150+ list which are supposedly the best performing and promising funds in their sector AND with also very low fees, and all the funds have 4-5 star Morningstar ratings (performed well in the past) as well as Silver or Gold Morningstar analyst ratings (expected to perform well in the future).

    What I may do is scrap one or both of my bond funds.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    amark16 wrote: »
    The main reason I decided to take a more active role in managing my money is because my company pension is invested in a lifestyle tracker fund with a 1% fee, which many of my colleagues consider as generally underperforming. So the general advice was to move to a SIPP and build a more diversified and promising portfolio.

    I'm not arguing in favor of my strategy, and forgive me if I sound naive. But even if I invest a small sum such 3700 (mind you I will soon add 15k to this) to 2 funds or 10 funds, if the average fees are relatively low, as in well below 1%, and there are no fund dealing fees, why is the portfolio expensive? I mean, why should small sums be invested in fewer funds?

    I also understand your point in being overly UK biased. My intention is to have around 25% of my portfolio in a US index tracker fund which invests in companies as the ones you suggested (Apple, Amazon, Google etc).

    I should also point out that I've selected my funds based on the Hargreaves Lansdown Wealth 150 and 150+ list which are supposedly the best performing and promising funds in their sector AND with also very low fees, and all the funds have 4-5 star Morningstar ratings (performed well in the past) as well as Silver or Gold Morningstar analyst ratings (expected to perform well in the future).

    What I may do is scrap one or both of my bond funds.

    Ah, maybe you work for the same company I do with a rubbish selection of funds :D
    So I appreciate where you're coming from, my SIPP looks scary risky :eek: but then add in my company pension which is like a dull grey boat anchor :D

    I think the issue is twofold.
    1 The buying and selling cost for a very small amount of each being out of proportion with the amount (though fair enough if there is no dealing fee which I didnt appreciate).
    2 The actual very small amount in each one. On average you've got £370 in each. If one of those even doubles triples, its not going to change your world.

    I would have spent £3700 on one fund, then £3700 on the next fund as more money comes in, and so on.

    There is one benefit of putting it in all those funds, it lets you have a play with a relatively trivial amount of money in the stock market and get a feel for it.

    My suggestion, given what you've said and that you want to be adventurous with this, is go 50/50 with the new money, put half into one low cost well performing tracker like Vanguard and then top up what you've got or if theres something you want sell one and buy it, and play with that.
  • amark16
    amark16 Posts: 15 Forumite
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    Should you diversify ALL your money collectively, i.e. invest ISAs as well as SIPPS in the same funds or diversify each pot individually (given that ISA savings will be needed in the next 10-15 years and pension in the next 25). Am I overdiversifying if I treat them as two separate pots?

    My thought is that the should probably share the same core funds and maybe be a bit more adventurous with pension as it is a more long-term investment.
    Would this make sense or anybody have any other thoughts?
  • bigadaj
    bigadaj Posts: 11,531 Forumite
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    amark16 wrote: »
    The main reason I decided to take a more active role in managing my money is because my company pension is invested in a lifestyle tracker fund with a 1% fee, which many of my colleagues consider as generally underperforming. So the general advice was to move to a SIPP and build a more diversified and promising portfolio.

    I'm not arguing in favor of my strategy, and forgive me if I sound naive. But even if I invest a small sum such 3700 (mind you I will soon add 15k to this) to 2 funds or 10 funds, if the average fees are relatively low, as in well below 1%, and there are no fund dealing fees, why is the portfolio expensive? I mean, why should small sums be invested in fewer funds?

    I also understand your point in being overly UK biased. My intention is to have around 25% of my portfolio in a US index tracker fund which invests in companies as the ones you suggested (Apple, Amazon, Google etc).

    I should also point out that I've selected my funds based on the Hargreaves Lansdown Wealth 150 and 150+ list which are supposedly the best performing and promising funds in their sector AND with also very low fees, and all the funds have 4-5 star Morningstar ratings (performed well in the past) as well as Silver or Gold Morningstar analyst ratings (expected to perform well in the future).

    What I may do is scrap one or both of my bond funds.

    HLs recommended funds were always recommended on the basis that they paid HL the highest commission so I'd be careful, which funds have you chosen?

    Morningstar is probably less biased but still either historic peformance or future guesswork.

    They are also a fairly expensive platform, not too much extra costs on the sums you're talking about but potentially hundreds per year when the portfolio grows in the future.
  • amark16
    amark16 Posts: 15 Forumite
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    This is what the portfolio looks like now.
    I will probably consolidate it down to 7 funds as will reduce bond funds to one, maybe sell Lindsell Global because it only offers Income Units, and get rid of Black Rock Gold.

    Stock name % Weight Sector
    1 Lindsell Train UK Equity Class D Accumulation Shares 16.7% UK All Companies
    2 Legal & General US Index Trust C 16.5% North America
    3 Threadneedle UK Equity Income Class Z 14.5% UK Equity Income
    4 Lindsell Train Global Equity Class D 8.6% Global
    5 JPMorgan Emerging Markets Class B 8.5% Global Emerging Markets
    6 Old Mutual Global Investors (Onshore) UK Smaller Companies Class R 8.3% UK Smaller Companies
    7 BlackRock Gold & General Class DI 8.2% Specialist
    8 M&G Strategic Corporate Bond Class I 6.3% £ Corporate Bond
    9 Rathbone Unit Trust Management Global Opportunities I Class 6.3% Global
    10 Artemis Strategic Bond Class QI 6.2% £ Strategic Bond
  • DiggerUK
    DiggerUK Posts: 4,992 Forumite
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    ".....I've recently taken my first investing steps and need some advice and feedback............4. Moderate to High risk tolerance as I invest for the long term.........6. The pension will be MY retirement income in around 25 years time....."

    On that basis, why no exposure to gold, physical or ETF.
    UK legal tender coins are CGT free coming out, and VAT free going in.
    Paper gold can be put in a SIPP or ISA, classed as gold that 'you cannot take pride in possession of'..._
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