Is this a sensible portfolio?

MrAcrux

Hello everybody,

My first post here, all feedback welcome (+ve or -ve).

About my self:
I am 32 years old, engineer by profession. I am married and I have just found out that we are expecting our first child in about 8 months :j Currently out of work due to oil market crash (Working part time at the moment in retail). Hoping the market picks up next year and I can get back to work. I use to be self employed and most probably will be same once the market picks up. Once the market picks up I will start earning at least £100k / year. Before the oil crash I averaged £200k/yr before tax between 2012 - 2015.

Horizon - 30+ years (Wont need money out of this until I retire.

Risk profile - Happy to take risk. At this stage I can live with loosing most of my investment as it is only a portion of my assets. Surely there will be some sleepless nights but I will get over it eventually. Of course thats what I think, will have to wait and find out when the market crashes.

Pension - Don't have any as I was self employed. But I intend to start a SIPP once I get back to work hopefully next year.

Assets -
Own a house worth approx. £550k with an equity circa £150k+ with 23 years left on mortgage.
Fixed ISA - £15240 (Matures 2018 feb)
Sant 123 - 21k
Moneything - 5k
Saving Stream - 100k (I know its a lot of exposure but I am comfortable with the diversification I have at the moment and I am in the process of bringing this considerably down. Will take out 15k for this years SS ISA and probably another £40k ish in cash in the event the market doesn't pick up next year. My monthly expenses are around £3k a month. I earn £1k at the moment + earn £800 (P2P after tax), so use £1200 every month from savings.

Now my portfolio:

After doing a lot of research on this forum and web in general I have come to the conclusion for the 3 funds to start with:

1. VLS 100% - 80% (Core)
2. Blackrock global property index D - 10%
3. Vanguard global small cap index - 10%

I have opened a S&S ISA with Charles Stanley and started buying these funds. Currently £2300 invested and plan to feed monthly £1600 for the rest of the tax year as per above allocation. So at the end I will have circa £12k in VLS and £1500 ea in other two.

I don't intend to add any bonds for few years as I want the maximum possible growth and I appreciate it comes at a cost if the market crashed. But I firmly believe that I will sit tight and hold through the crisis, if any.

Does this portfolio looks ok to you guys? Is this diversified enough? I dont want to spend too much time managing and rebalancing, hence passive index trackers. I would appreciate some feedback and if I should add or subtract anything to cover all aspects of the global stock markets.

Next year I will use full ISA allocation of 20k and in 2018 when the fixed ISA matures it will be moved into S&S ISA as well along with that year's ISA allowance. I will move to a fixed fee platform after two years when the portfolio will be £35k.

I have tried to give as much info as I can but if I have missed anything please feel free to ask.

Thanks,
MrAcrux

greenglide

You have said you have been "self employed" and you will be again. Are you really self employed (a sole trader or similar paying class 2 and class 4 NI) or do you trade under a limited company?

If you have a limited company the company can (should) pay employers pension contributions which will avoids tax on dividends.

Being self employed is no excuse for not having a pension, especially if your income was high as you would get tax relief at the highest rate.

coyrls

At the end of the tax year you will have less than 9% of your savings/investments (excluding your house) in your S&S ISA, so its performance is not going to have a big effect on your wealth. Personally I'd look to diversify from P2P. I wouldn't worry about timing putting money into your ISA & SIPP for a 30 year horizon, I would say the sooner the better.

ChopperST

For a fire and forget portfolio it looks good. I like to rebalance quarterly and therefore hold the Vaguard Dev World Equity ex UK fund alongside the Vanguard UK All Share Index, Emerging Markets and Small Cap funds to feel like I'm at least doing something (I appreciate this has an element of market timing etc.) I also like the Blackrock property tracker as a bit of a diversifier.

The only comment I'd make is to remember to lifestyle your funds as your retirement date comes closer, you could continue to use your P2P for this or a traditional bond fund or step down the Lifestrategy funds for ease.

Good luck with the job hunt too!

micawber2

This is my one stop shop for portfolio evaluation. It is US orientated but good enough to demonstrate the best diversification strategies.


As a Newbie I am not allowd to post the link. But Google portfoliocharts

benten69

greenglide wrote: »

You have said you have been "self employed" and you will be again. Are you really self employed (a sole trader or similar paying class 2 and class 4 NI) or do you trade under a limited company?

"Self empoloyed" in the oil market earning approx £200k a year = a contractor. He will be his own 1-man LTD company, and the larger oil companies will contract in his services for lets say £700 a day or there abouts for as long as they need him.

AndyT678

So right now you have cash c. £35 (25%) and P2P c. £105k (75%).

Your proposal for year one is to move this to cash c. £76k (55%), P2P £50k (35%) and S&S £15k (10%).

Then in year 2 you want to move more to S&S; let's say another £15k from P2P to get cash 55%, P2P 25% and S&S 20%.

Then in year 3 you want to move the cash ISA to S&S along with another say £15k from P2P. That will get you to cash 40%, P2P 15% and S&S 45%.

Obviously the numbers are going to be a little bit out because things will change in value and annual ISA limits will increase but it just doesn't make sense to me as a process.

If you want an asset allocation that has 45% equities, 40% cash and 15% P2P then just do that now. Why wait 3 years to get there? Is that it then? Do you stabilise at that point and rebalance periodically or does it change more?

Totton

Simple portfolio for a higher risk strategy although in such a situation I would just dump 100% into the VLS fund.

simonfitba

Totton wrote: »

Simple portfolio for a higher risk strategy although in such a situation I would just dump 100% into the VLS fund.

Nope. You need the property and small cap. That's what's missing in VLS 100%. Perhaps even a slug of Vanguard Emerging Markets too.

MrAcrux

You have said you have been "self employed" and you will be again. Are you really self employed (a sole trader or similar paying class 2 and class 4 NI) or do you trade under a limited company?

If you have a limited company the company can (should) pay employers pension contributions which will avoids tax on dividends.

Being self employed is no excuse for not having a pension, especially if your income was high as you would get tax relief at the highest rate.

As @benten69 has said I was working as a contractor for BP via my limited co. I agree that it's not an excuse for not having a pension but let's just say I had a lot of time on my hands after my contract finished and that made me think about things that I never thought about before or you may call it a 'light bulb' moment.

At the end of the tax year you will have less than 9% of your savings/investments (excluding your house) in your S&S ISA, so its performance is not going to have a big effect on your wealth. Personally I'd look to diversify from P2P. I wouldn't worry about timing putting money into your ISA & SIPP for a 30 year horizon, I would say the sooner the better.

I appreciate it's not going to be a huge amount but it's a start to long process and I don't want it to start with wrong funds. I intend to use my 100% ISA allowance every year, so hopefully in about 4-5 years I will have a £100k S&S portfolio.

For a fire and forget portfolio it looks good. I like to rebalance quarterly and therefore hold the Vaguard Dev World Equity ex UK fund alongside the Vanguard UK All Share Index, Emerging Markets and Small Cap funds to feel like I'm at least doing something (I appreciate this has an element of market timing etc.) I also like the Blackrock property tracker as a bit of a diversifier.

The only comment I'd make is to remember to lifestyle your funds as your retirement date comes closer, you could continue to use your P2P for this or a traditional bond fund or step down the Lifestrategy funds for ease.

Good luck with the job hunt too!

thanks, I hope I find something soon. And as I said I would like to not spend much time managing the portfolio, but I am happy to look at things at the start of the financial year and see what I need to do in for that particular year. I am sure once I have a significant amount invested then the interest will come as well.

This is my one stop shop for portfolio evaluation. It is US orientated but good enough to demonstrate the best diversification strategies.


As a Newbie I am not allowd to post the link. But Google portfoliocharts

thanks I will have a look at that.

"Self empoloyed" in the oil market earning approx £200k a year = a contractor. He will be his own 1-man LTD company, and the larger oil companies will contract in his services for lets say £700 a day or there abouts for as long as they need him.

you are spot on mate. I was contracted to BP looking after their north sea assets. I spend a lot of time offshore which helps, as the client pays offshore allowance on top of normal day rate.

So right now you have cash c. £35 (25%) and P2P c. £105k (75%).

Your proposal for year one is to move this to cash c. £76k (55%), P2P £50k (35%) and S&S £15k (10%).

Then in year 2 you want to move more to S&S; let's say another £15k from P2P to get cash 55%, P2P 25% and S&S 20%.

Then in year 3 you want to move the cash ISA to S&S along with another say £15k from P2P. That will get you to cash 40%, P2P 15% and S&S 45%.

Obviously the numbers are going to be a little bit out because things will change in value and annual ISA limits will increase but it just doesn't make sense to me as a process.

If you want an asset allocation that has 45% equities, 40% cash and 15% P2P then just do that now. Why wait 3 years to get there? Is that it then? Do you stabilise at that point and rebalance periodically or does it change more?

thanks for your reply. I closed my ltd co once my contract finished with BP to utilise entrepreneur relief and took all monies out. I needed to park that fund somewhere as it was doing nothing in my current account, so looked around I put £15240 in fixed ISA and the rest in P2P until I figure out S & S ISA. Now as I have figured out what I need to do, I will be moving money from P2P to S&S ISA but I can only move £15240 this year and £20k next year and so on and so forth.

I don't count £15k in cash ISA as cash as I wouldn't like to take it out of the wrapper and loose the tax benefit. So currently I have 27k cash. (21k + 6k I have sold some loans on SS today). The reason for keeping extra cash for next year is that no body knows if the oil prices will recover next year, so worse case scenario I will still be working in my current job and P2P income would have reduced a lot, hence I would be using more from my cash reserve. Plus I have to pay circa 11k capital gains tax in Jan 2017.


Right now I am quite happy with the asset allocation I have and the real question I am asking is if the 3 funds I have selected for long term retirement are the right ones. Should I add any more satellites? Or just use these 3 for this year and revisit in next year and see if anything needs changing and so on and so forth every year.

Once again thank you all for your replies, appreciated.

MrAcrux

MrAcrux

“
Simple portfolio for a higher risk strategy although in such a situation I would just dump 100% into the VLS fund.

“Originally posted by Totton
”Nope. You need the property and small cap. That's what's missing in VLS 100%. Perhaps even a slug of Vanguard Emerging Markets too.

that's correct hence I added property and small cap with VLS 100% as satellites. VLS has got around 7% emerging markets in it.