Sipp Advice

Frufru23

Hi, New to the forum as I'd like to try and get a little bit of advice in regards to Sipp funds.

Around a year ago I moved my combined pension funds in to a Sipp with Charles Stanley Direct. I initially started with around 64k and invested in Life Strategy 60 and Lifestrategy 80. I did this after a little bit of research, but in fairness I was (and still am) a complete novice.

Over the last year or so, I seem to have read article after article and forum after forum and made many "mistakes along the way...... I've held and sold various funds and am now in a situation whereby my Sipp is worth around 80K. I have a monthly DDM going in of £240 plus the tax rebate.

I've decided that I want to keep fund costs low and want to focus more on trackers as appose to actively managed.

My holding is currently:
Lifestrategy 100 - 16.5k
LifeStrategy 80 - 17k
L&G US Tracker - 22k
Fidelity Index World - 9k
Cash (I've just sold Fundsmith Equity & Axa Fram Smaller Companies) -12k
I also have a few stocks which total nearly 4k

I realise that the US tracker seems crazy since all of my funds are pretty much doing the same thing, however, this is the one that has risen the most over the time....

I'm 41 and plan to increase contributions in a couple of years time. I have no other pension.

I also have a S&S ISA which pretty much replicates my sipp and holds around 15k currently. I plan to start adding around £500-£1,000 per month to this.

If I was starting from scratch I'd most likely put the lot in the fidelity tracker with a possible small amount in to a bond tracker.

Question is, do i leave it all as it is and just invest new money in to the world tracker or do i make some changes.

I'd like to ask, what am I missing, I fear the answer is a lot !!!! But, very much open to feedback.

Thanks in advance

dunstonh

My holding is currently:
Lifestrategy 100 - 16.5k
LifeStrategy 80 - 17k
L&G US Tracker - 22k
Fidelity Index World - 9k
Cash (I've just sold Fundsmith Equity & Axa Fram Smaller Companies) -12k
I also have a few stocks which total nearly 4k

Why the mixture of multi-asset and single sector funds?
What investment model are you trying to follow or is it just random hit and hope?

I realise that the US tracker seems crazy since all of my funds are pretty much doing the same thing, however, this is the one that has risen the most over the time....

It would have done in a period of growth and currency fluctuation. It will also be the one that goes down the most when a crash comes along. It is higher risk than the multi-asset funds.

Question is, do i leave it all as it is and just invest new money in to the world tracker or do i make some changes.

There appears to be no structure. So, assuming your allocations are largely made up as you go along then your returns are going to be all over the place. You may get lucky. You may not. There is a lot of randomness involved.

I fear the answer is a lot !!

At least you are asking the questions. So, don't fear the answers. I wouldnt invest how you have. It is poor DIY and it will likely hit your returns in the long term. You need to decide what level of knowledge you really have and whether you have the skills, knowledge and ability to research, review and run a portfolio and likely do it better than a fund manager or fund house or to use multi-asset funds and let the fund house get on with doing their job.

Frufru23

dunstonh wrote: »

Why the mixture of multi-asset and single sector funds?
What investment model are you trying to follow or is it just random hit and hope?

I initially liked the idea of the Lifestrategy funds as I felt I could just invest and leave it alone without worrying too much. As time went on I started to get interested and read articles. As they say, a little bit of information can be dangerous and then I got carried away and bought in to all sorts of funds, all of which have now been sold apart from these.

It would have done in a period of growth and currency fluctuation. It will also be the one that goes down the most when a crash comes along. It is higher risk than the multi-asset funds.



There appears to be no structure. So, assuming your allocations are largely made up as you go along then your returns are going to be all over the place. You may get lucky. You may not. There is a lot of randomness involved.

Definitely random with little or no structure, hence me asking for some advice


At least you are asking the questions. So, don't fear the answers. I wouldnt invest how you have. It is poor DIY and it will likely hit your returns in the long term. You need to decide what level of knowledge you really have and whether you have the skills, knowledge and ability to research, review and run a portfolio and likely do it better than a fund manager or fund house or to use multi-asset funds and let the fund house get on with doing their job.

My level of knowledge is minimal. More than the average Jo possibly, but in some ways, I think thats a bad thing as I'd probably be better to just pick a fund and leave it alone. Currently I'm looking every day, watching the markets and second guessing myself. I don't have the time to do this and I think I'd be better to just make some sensible decisions and get on with my day job!
I most definitely do not think for one minute that I can do a better job than a fund manager! I'm just trying to find my way

It seems I should do some kind of "rebalancing"!

I'm open to risk, it's a Sipp after all and I wont need to access the money for 20+ years.

I guess I should have a slightly more cautious view with my Sipp - whilst I intend for it to be long term, you never know whats around the corner and maybe one day I'll need to access the money.

Frufru23

dunstonh wrote: »

Why the mixture of multi-asset and single sector funds?
What investment model are you trying to follow or is it just random hit and hope?


It would have done in a period of growth and currency fluctuation. It will also be the one that goes down the most when a crash comes along. It is higher risk than the multi-asset funds.



There appears to be no structure. So, assuming your allocations are largely made up as you go along then your returns are going to be all over the place. You may get lucky. You may not. There is a lot of randomness involved.



At least you are asking the questions. So, don't fear the answers. I wouldnt invest how you have. It is poor DIY and it will likely hit your returns in the long term. You need to decide what level of knowledge you really have and whether you have the skills, knowledge and ability to research, review and run a portfolio and likely do it better than a fund manager or fund house or to use multi-asset funds and let the fund house get on with doing their job.

Thank you for taking the time to give me your feedback.... I've added responses on my other post...

dunstonh

I initially liked the idea of the Lifestrategy funds as I felt I could just invest and leave it alone without worrying too much. As time went on I started to get interested and read articles. As they say, a little bit of information can be dangerous and then I got carried away and bought in to all sorts of funds, all of which have now been sold apart from these.

At least you recognise that. Often that is a hard first step to get to.

Currently I'm looking every day, watching the markets and second guessing myself. I don't have the time to do this and I think I'd be better to just make some sensible decisions and get on with my day job!

You shouldnt invest and forget but equally you should micromanage and look at values like that. People that look at their values frequently tend to be the ones that panic when the drops happen (not if but when as they will come).

It seems I should do some kind of "rebalancing"!

Yes. If you use single sector funds then you should rebalance. However, that assumes you have a structure/model that is being followed. If you have a random selection and rebalance to a random selection then it doesnt really serve any purpose.

I'm open to risk, it's a Sipp after all and I wont need to access the money for 20+ years.

I guess I should have a slightly more cautious view with my Sipp - whilst I intend for it to be long term, you never know whats around the corner and maybe one day I'll need to access the money.

Time dilutes the risk. As odes making regular contributions. However, if you are checking values daily and get nervous on small drops then you should make sure the holdings are more cautious.

LULULU1

When you draw a SIPP I believe you can take 25% tax free. I assume this is all you can take tax free and if you want to take out any more a year later you would pay the appropriate tax rate.

Is that right ??

Frufru23

Would it seem reasonable to aim to have:
50% of portfolio in Lifestrategy 80
40% in Fidelity World Index
10% in Bonds

Thus, looking to sell the L&G US Tracker and Lifestrategy 100 with the proceeds to create the balance above?

ex-pat_scot

You recognise that a little knowledge can be dangerous! Excellent. Good start.
You also seem to have a rough handle on geographical /markets diversification. Also good.
You have also recognised that tinkering / dealing is not terribly clever. Also good.


A few thoughts on the way forward:
- rebalancing is OK if you have a clear investment strategy, and your returns (from at least 12 mnths) have thrown your mix out of kilter. You don't yet have a clear investment strategy; you haven't given one enough time to wash through with inv returns.
- read. Lots. Monevator.
- understand the impact that fees/costs have on your portfolio. Use that insight to motivate yourself to learn more and minimise costs
- have a think about whether you believe you (or others) can really beat the market regularly. If so, then look at articles on Active & Passive investing and Efficient Market Hypothesis.
- you will hopefully end up with the view that you can't beat the market, but you can "buy the market" with trackers.
- you will also hopefully realise that "the market" is the global index, rather than individual countries or regions.
- whether you end up in a world tracker, or in a Lifestyle product, is ultimately your choice (but a similar approach really - one is just a bit more manual).
- you ought to really be "in" the market if you believe the above - ie minimal cash holdings except to cover costs. (in accumulation phase; different for decumulation)
- if you feel you need to rebalance, you can do that by diverting future contributions to the underweight asset classes, rather than selling & buying

dunstonh

Would it seem reasonable to aim to have:
50% of portfolio in Lifestrategy 80
40% in Fidelity World Index
10% in Bonds

Thus, looking to sell the L&G US Tracker and Lifestrategy 100 with the proceeds to create the balance above?

How does the volatility level of that spread compare to just the VLS80? How does the combined return compare to just the VLS80?
What bonds? Is that gilts, strategic, high yield, standard, global, global high yield?

Frufru23

ex-pat_scot wrote: »

You recognise that a little knowledge can be dangerous! Excellent. Good start.
You also seem to have a rough handle on geographical /markets diversification. Also good.
You have also recognised that tinkering / dealing is not terribly clever. Also good.


A few thoughts on the way forward:
- rebalancing is OK if you have a clear investment strategy, and your returns (from at least 12 mnths) have thrown your mix out of kilter. You don't yet have a clear investment strategy; you haven't given one enough time to wash through with inv returns.
- read. Lots. Monevator.
- understand the impact that fees/costs have on your portfolio. Use that insight to motivate yourself to learn more and minimise costs
- have a think about whether you believe you (or others) can really beat the market regularly. If so, then look at articles on Active & Passive investing and Efficient Market Hypothesis.
- you will hopefully end up with the view that you can't beat the market, but you can "buy the market" with trackers.
- you will also hopefully realise that "the market" is the global index, rather than individual countries or regions.
- whether you end up in a world tracker, or in a Lifestyle product, is ultimately your choice (but a similar approach really - one is just a bit more manual).
- you ought to really be "in" the market if you believe the above - ie minimal cash holdings except to cover costs. (in accumulation phase; different for decumulation)
- if you feel you need to rebalance, you can do that by diverting future contributions to the underweight asset classes, rather than selling & buying

Thank you for taking the time to comment/feedback.....very much appreciated

Frufru23

dunstonh wrote: »

How does the volatility level of that spread compare to just the VLS80? How does the combined return compare to just the VLS80?
What bonds? Is that gilts, strategic, high yield, standard, global, global high yield?

I realise it's most likely very similar/the same..... my thoughts are; I already hold a considerable amount in LS80 - I don't particularly want to sell it.
At the same time, I can see that the management fees on the world tracker are less than those on the LS80.
Bonds - thats a whole new area for me to look at. For the time being, my only bond holding will be within the LS80 as the minimal knowledge I've gleaned currently from my research is that bonds are not particularly a good buy at the moment... I'm prepared to be told otherwise!

My current reasoning is:
L&G US Tracker - 28% current allocation. Plan to hold and not add further funds. May sell some down the line
LS80 - plan to increase holding to 35%
Fidelity World Tracker - plan to increase holding to 31%
Blackrock Emerging Markets Tracker - plan to purchase equivalent to 3.5%
Stocks - currently hold 2.5%, this will be distributed between LS80 & Fidelity World in near future
Everything else will be sold to fund the above.

I plan to replicate the same formula minus the Emerging Markets in my S&S ISA (holdings aren't high enough to warrant buying Emerging Markets currently otherwise my holding will be at a higher percentage than I would prefer).

I will continue to hold approx 10k-15k in a Cash ISA for the foreseeable as a safety net.

I do also have a B2L property which we've had for almost 2 years. Ticks over nicely currently. Current plan is that this would help to fund pension later, but will reassess as time goes by.

Night time reading..... Bonds!!