Investment advice sought

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I’m looking to start making my money work a litter harder than it is currently. Although my initial plan was to select my own stocks and shares, I’ve come to the conclusion that investing in an equity fund is the best option, given my circumstances and amount of money I have to invest.

I’m looking at the Vanguard LifeStrategy (60 or 80%) as an option, although I assume these large, passive funds are much of a muchness and not worth doing any extensive research (feel free to correct me if I’m wrong).

My personal circumstances:

Single homeowner (Value of property £140k; mortgage £65k)
Savings £12k. I usually am able to add £200pm to this
Other debt: £25k on a debt management plan, contribution £40pm. All interest frozen.

I’m currently in the process of negotiating F&F settlement on my debts. Many of them are old accounts, and have thus far been unable to fulfil my CCA requests. I don’t anticipate settlement will account for more than half my savings, if that.

I therefore have two questions. Firstly, are there any alternative investments or funds I should consider?

Secondly, would I be better investing a smaller amount, followed up by regular monthly contributions (say, £1000 up front, followed by £300pm) in order to gradually siphon my savings into the fund. Or should I just move a larger amount of my savings straight away??
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  • DrSyn
    DrSyn Posts: 889 Forumite
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    edited 7 November 2016 at 6:29PM
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    The following questions have a bearing on what people would suggest.

    Is the £12000 your emergency fund?
    Do you have a job?
    Do you have a pension or are you contributing to one?
    What is the £12000 in now?


    Do your own research before investing.

    http://www.moneysavingexpert.com/banking/

    https://www.citizensadvice.org.uk/resources-and-tools/search-navigation-tools/Search/?q=investing

    http://monevator.com/this-former-hedge-fund-manager-reveals-how-you-can-invest-for-life-in-five-quick-videos/


    In you position if I was going to invest, I would drip feed it into the market regularly over time.

    My basic rules of investing are simple.

    Invest for 10 years or more.

    Have a well diversified investment portfolio.
    One example would be one that follows the FTSE World Index.

    If the are bonds in it, rebalance one or twice a year.

    Keep the charges to a minimum.

    Do not churn the portfolio.

    Wait & hope for the best.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    DrWatson1 wrote: »
    Although my initial plan was to select my own stocks and shares, I’ve come to the conclusion that investing in an equity fund is the best option, given my circumstances and amount of money I have to invest.
    Yes, there's no way you are going to efficiently get diversified coverage of the world's financial markets by buying shares in a few individual companies. A fund is the way to go .
    I’m looking at the Vanguard LifeStrategy (60 or 80%) as an option, although I assume these large, passive funds are much of a muchness and not worth doing any extensive research (feel free to correct me if I’m wrong).
    Not really true. I mean obviously there are differences between one manager's '60' and '80' fund. But different managers will have different portfolios and different choices of mix between countries and asset types and the way those ratios are rebalanced or re-weighted over time.

    For example on a large 'passive' multi - asset fund, people sometimes mention LifeStrategy, Blackrock Consensus and L&G multi-index in the same breath. Each provider might have a product that broadly meets your needs, if you are just looking for long term general growth and not worried about volatility or income levels too much, using passive funds as building blocks. But they go about it in different ways, and you shouldn't buy any product without researching what it does and why.
    I therefore have two questions. Firstly, are there any alternative investments or funds I should consider?
    To be honest there are loads of potential investments for all kinds of objectives and we don't really know yours. Doing some more research into investing rather than jumping straight to asking for recommended funds, will stand you in good stead.
    Secondly, would I be better investing a smaller amount, followed up by regular monthly contributions (say, £1000 up front, followed by £300pm) in order to gradually siphon my savings into the fund. Or should I just move a larger amount of my savings straight away??
    Assuming you have decided that you want all your money to be invested in the fund because you want the performance of what's in the fund rather than the performance of cash...

    ...then it makes sense to move your cash into the fund, rather than keeping the cash for ages while slowly buying little bits of the fund over time.

    As funds can decline in value significantly, you obviously shouldn't throw much cash into the fund until you know the debts are clear. And you should retain a good portion of your cash as cash, because presumably not having a decent pile of cash caused you to get the large unaffordable debts in the first place. The cash you keep as cash should be put into the highest-paying accounts you can find. Some of them are 3 or 5% with zero risk which is better than 5% with risk in the stock market.

    As a side note, you're unlikely to find a return from generalist investment funds that beats the return on borrowing lots of money and waiting until inflation and the lenders' frustration with you and the statute of limitations allows you to "settle up" for pennies on the pound while you still have loads of cash in a current account. :D

    I can see why you wouldn't want to pay the debts in full (as they are probably now largely owned by opportunistic groups who bought them off the original lenders at a fraction of their gross value), but some people would say that investing on the market with the money that you've taken from lenders and said you can't afford to pay them back, is morally abhorrent :)
  • DrWatson1
    DrWatson1 Posts: 130 Forumite
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    edited 7 November 2016 at 12:55PM
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    I wouldn't describe the £12k as an emergency fund, but obviously i'd like to keep around £5k in something I can get at relatively quickly. The money is currently in a building society account earning 0.75%pa.

    I'm a PhD student, earning around £15 a year, net of tax. I don't have a pension at the moment, however I'm planning to work as a lecturer once I've completed my thesis and their pension scheme is fairly generous.

    I understand the moral argument about my debts, however all the debts have now been sold onto "opportunistic groups who bought them off the original lenders at a fraction of their gross value", so I have no moral tugs of my heart strings trying to force settlement for the lowest price I can possibly leverage :)
  • dunstonh
    dunstonh Posts: 116,628 Forumite
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    I’m looking at the Vanguard LifeStrategy (60 or 80%) as an option, although I assume these large, passive funds are much of a muchness and not worth doing any extensive research (feel free to correct me if I’m wrong).

    You are wrong.
    VLS is return focused. L&G is risk targetted.
    VLS has rigid allocations. L&G has active allocations.
    VLS has no property. L&G has property.

    That is just the comparison between two of the many available.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • DrWatson1
    DrWatson1 Posts: 130 Forumite
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    edited 7 November 2016 at 1:19PM
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    bowlhead99 wrote: »
    Some of them are 3 or 5% with zero risk which is better than 5% with risk in the stock market.

    I assume you're talking about high-interest current accounts? I guess it could be worth squirrelling away the instant access cash I don't invest in a couple of these.
    dunstonh wrote: »
    You are wrong.
    VLS is return focused. L&G is risk targetted.
    VLS has rigid allocations. L&G has active allocations.
    VLS has no property. L&G has property.

    That is just the comparison between two of the many available.

    I appreciate there are many available, and therein lies the problem. For a lay investor, how do you possibly find time to compare them all, beyond simple indices such as active or passive management, fees, etc?

    And with the larger passive funds I've been looking at, are they all not highly-correlated in their performance??
  • dunstonh
    dunstonh Posts: 116,628 Forumite
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    For a lay investor, how do you possibly find time to compare them all, beyond simple indices such as active or passive management, fees, etc?

    Your choice is the same with anything you do in life. You either pay someone to do it for you or you DIY. If you DIY, then you either decide to do it properly and give it the time and effort or you rush it and hope for the best noting that if you get it wrong, it could be a costly error.
    And with the larger passive funds I've been looking at, are they all not highly-correlated in their performance??

    No. For example, L&G too a hit over VLS after Brexit vote because property lost value following that. VLS didnt have property. So, it didnt suffer that hit. In another period, property may be the only area that goes up. So, VLS would underperform L&G. The equity weightings will differ and the types of fixed interest securities will differ and this will lead to a deviation of returns.

    Whilst the underlying investments are passives, these are all effectively active passives as the asset allocations and rebalancing are management decisions. So, they are going to vary over time.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • DrWatson1
    DrWatson1 Posts: 130 Forumite
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    edited 7 November 2016 at 1:48PM
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    dunstonh wrote: »
    Your choice is the same with anything you do in life. You either pay someone to do it for you or you DIY. If you DIY, then you either decide to do it properly and give it the time and effort or you rush it and hope for the best noting that if you get it wrong, it could be a costly error..

    I've been reading a few economics books, and am also currently reading "The Intelligent Investor". I'm naturally interested in the mechanics of how things work, however there has to be a cut-off in how much time it is worth allocating to (what at this point is) a fairly modest investment, and for me it's about finding that balance.

    Ben Graham did make me chuckle with his assertion that doctors make poor investors. They are smart enough to undertake the responsibility, but don't have enough time to research thoroughly enough. So it is with doctoral students :)

    I don't suppose there any good journal articles or otherwise respectable authors offering a guide for fund investment?
  • dunstonh
    dunstonh Posts: 116,628 Forumite
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    If you are going to use multi-asset funds then that takes a lot of the work away from you. In that case, it is just selecting an investment style that you like that matches your risk profile, capacity for loss, knowledge and behaviour.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • JohnRo
    JohnRo Posts: 2,887 Forumite
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    DrWatson1 wrote: »
    I don't suppose there any good journal articles or otherwise respectable authors offering a guide for fund investment?

    If you're looking for the lazy option then a single 'passive' fund sounds the way to go. You won't go far wrong with any of the global multi asset funds.

    What you need to consider is your own behaviour if things start to go against you and everyone else in a big way. Could you stomach a 50% drop in valuation for example.

    It's easy to say yes when things are bouncing around by plus or minus 5 or 10 percent but think about that carefully because when it happens it might well unnerve you and a sale at that point guarantees the loss.

    If you haven't already then check out http://monevator.com/
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • DrWatson1
    DrWatson1 Posts: 130 Forumite
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    JohnRo wrote: »
    What you need to consider is your own behaviour if things start to go against you and everyone else in a big way. Could you stomach a 50% drop in valuation for example.

    I think having been in debt, and all the associated stress that brings, it's made me a little more blase about money and mental health. I have £12k today but if I had £6k tomorrow I wouldn't really worry about it. I wouldn't want to lose much more than that though!

    Anyway, the point i'm making is money doesn't make you happy, and as long as i have a little security if an unexpected bill comes in then I can be mildly speculative with the rest. In addition, I'm effectively losing money every day by getting such a poor return on savings compared to inflation, and however you chose to increase your returns, it's hard to do so without increasing variance.
    JohnRo wrote: »
    If you haven't already then check out http://monevator.com/

    Thanks - I'd already stuck a grand here during the summer to take advantage of this offer linked on the homepage. I'll earn more in one year of that offer than off the £11k I have stuck in the building society ^^

    http://monevator.com/ratesetter-high-interest-offer/
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