Sipp Advice

MPN

ex-pat_scot wrote: »

Agree. VLS80 "is" the strategy, not "part of" the strategy.
If you hold VLS80 and other bits and pieces, then that's not what a LS investment is for.
Similarly, you could DIY it a bit and do 80% VWRL and 20% global bond (don't know which one, but I'm sure you could find a Vanguard or equivalent one).

Or could you just do VWRL or VLS100. I believe one of the main differences between these two is that the VWRL has a better geographical balance for the UK allocation at around 6.5% whereas the VLS100 (and other VLS funds) has a high UK allocation of about 25%!

ex-pat_scot

MPN wrote: »

Or could you just do VWRL or VLS100. I believe one of the main differences between these two is that the VWRL has a better geographical balance for the UK allocation at around 6.5% whereas the VLS100 (and other VLS funds) has a high UK allocation of about 25%!

I'm strictly a VWRL man myself. The OCF of 0.25% is slightly on the high side, compared to the cheapest FTSE ETF ones, but my heart and pocket are definitely in the global rather than UK market.




If I were in decumulation, I might look at the VHYL instead, or something similar that provides a natural divi yield of roughly 4% (I've not looked to closely at that approach yet, as I am 7.5 years away from having to change tack).

MPN

ex-pat_scot wrote: »

I'm strictly a VWRL man myself. The OCF of 0.25% is slightly on the high side, compared to the cheapest FTSE ETF ones, but my heart and pocket are definitely in the global rather than UK market.

Yes, I tend to agree with you about VWRL specifically because of the pecrentage of UK allocation in the VLS funds and also because I don't feel the need to invest in bonds over the long term.

I did also look at a couple of L&G funds (L&G Global Equty Index and the L&G International Index Trust (no UK in this one at all) but decided to go with VWRL in the end.

Frufru23

Help me out here, what does VWRL stand for... actually, after a quick break to google, I've got it

So, I see it's an ETF.... I'm sure it is super, but I think I'm just going to second guess myself if I start to consider this as another option. I assume (it seems to) do the same job as my Fidelity World Tracker?

Since i have a large percentage of my Portfolio in the VLS, I think I'd like to have another provider for the World Tracker.... spread things out a bit?

Currently, there's a decent chunk with the L&G US tracker too....

Spreading things out a bit made me wonder whether there's any benefit in regards to protection? Could anyone enlighten me?

bowlhead99

Frufru23 wrote: »

Help me out here, what does VWRL stand for... actually, after a quick break to google, I've got it

So, I see it's an ETF.... I'm sure it is super, but I think I'm just going to second guess myself if I start to consider this as another option. I assume (it seems to) do the same job as my Fidelity World Tracker?

Yes, it does a similar job. It covers the 'all world' index which includes emerging markets like China, India, Brazil, Russia, South Africa, Mexico, Thailand etc, whereas your Fidelity one is only concentrating on the developed world.

So, it's a better measure of the available investible global stockmarkets than a developed-world only index such as the one from fidelity. The 10% or so allocated to those markets will likely perform a little differently than the average of the developed world, for better or worse, from period to period.

You seem to be handling this by buying a developed world tracker that excludes the emerging markets for 31% of your portfolio and then buying a separate emerging markets tracker which excludes the developed markets for 3.5% of your portfolio, so that overall you have 10% of that ~35% of your portfolio, in emerging markets. Similar result, more effort.

Since i have a large percentage of my Portfolio in the VLS, I think I'd like to have another provider for the World Tracker.... spread things out a bit?

You haven't given us any convincing rationale why you would try to invest a third of your money in a fund-of-funds which generally invests globally in equities with a slice going to a variety of different bond types... and then another third investing just in global equities... and then almost another third exclusively in US equities which is already the highest component of the rest of your portfolio.

So, as you don't have a particular plan, and you are mixing and matching the idea of a global allocation put together by a professional investment team, with a global index purely size-weighted, and then adding in your own choice of single-country index to change the weightings even further... It probably doesn't matter who you buy the next fund off, or whether it includes or excludes emerging markets. You don't have a particularly coherent plan now, and won't have one when you're finished either.

As Dunstonh said in post #2, you are just making it up as you go along, so you'll get a somewhat random result due to "taking a keen interest in all things financial" and endlessly wanting to tweak and fiddle.

Yesterday afternoon you said you should really have just stuck with one simple allocation from the start and be done with it. The whole lot in one global multi-assert fund. Sound advice, but you're not doing it.

A bit later, yesterday evening you said you were generally won over by the idea of having a global equity allocation driven by a low cost tracker and then a bond allocation. So, you could do that. The multi-asset fund package mentioned in the paragraph above also clearly matches that objective (and does the rebalancing for you), or alternatively you could buy the components manually. Again, sound advice, but you're not doing it.

So here we are the next day and you are keeping your US fund (on the basis that it just went up a lot, and you liked that) even though you don't want it and are not going to buy more of it... and you are keeping your global multi asset fund because that's one way you could run a portfolio... and you are keeping your global equities tracker because that's another way you could run a portfolio.... but now you are wondering if the firm providing the global equities tracker should be the same person or a different person from whoever provides your multi-asset fund and whomever provides your specialist US-only tracker.

The answer is, it's a confused mess with no great structure - so however you do the rest of it, it'll probably still be a confused mess with no great structure. The better thing to do is just sell everything and then buy back a portfolio that fits a strategy, then give it chance to meet its objective over an economic cycle or two, and then evaluate whether it still meets your needs.

If you are feeling a bit reckless or fanciful and can't help yourself from fiddling and tweaking every time you hear a soundbite on an investment blog or on the news, it might make sense from a self-preservation perspective to have your SIPP be much more "set and forget"with ONE strategy, while maybe you set aside £10k in your ISA to have some self-select, change-mind-on-a-whim type fun.

Frufru23

bowlhead99 wrote: »

Yes, it does a similar job. It covers the 'all world' index which includes emerging markets like China, India, Brazil, Russia, South Africa, Mexico, Thailand etc, whereas your Fidelity one is only concentrating on the developed world.

So, it's a better measure of the available investible global stockmarkets than a developed-world only index such as the one from fidelity. The 10% or so allocated to those markets will likely perform a little differently than the average of the developed world, for better or worse, from period to period.

You seem to be handling this by buying a developed world tracker that excludes the emerging markets for 31% of your portfolio and then buying a separate emerging markets tracker which excludes the developed markets for 3.5% of your portfolio, so that overall you have 10% of that ~35% of your portfolio, in emerging markets. Similar result, more effort.

Agreed, although the effort was minimal, I just clicked to select a few funds and hit buy... The reason for doing it separately is that I'm already invested in the Fidelity fund and have been for some time. I wanted to avoid having to sell this and buying an alternative.

bowlhead99 wrote: »

You haven't given us any convincing rationale why you would try to invest a third of your money in a fund-of-funds which generally invests globally in equities with a slice going to a variety of different bond types... and then another third investing just in global equities... and then almost another third exclusively in US equities which is already the highest component of the rest of your portfolio.

So, as you don't have a particular plan, and you are mixing and matching the idea of a global allocation put together by a professional investment team, with a global index purely size-weighted, and then adding in your own choice of single-country index to change the weightings even further... It probably doesn't matter who you buy the next fund off, or whether it includes or excludes emerging markets. You don't have a particularly coherent plan now, and won't have one when you're finished either.

I bought in to the L&G tracker a couple of months after I opened the Sipp, so have had it running for some time. It's had it's ups and downs, but yes - at the moment it's doing well. I'm optimistic that the fund will continue to grow in the short term and since it's currently the best performing fund in my sipp, it seems crazy to just sell it. I do realise that this wont continue, hence my comments that I do not plan to contribute further but plan to build up the LS80 and World tracker with future contributions.

bowlhead99 wrote: »

As Dunstonh said in post #2, you are just making it up as you go along, so you'll get a somewhat random result due to "taking a keen interest in all things financial" and endlessly wanting to tweak and fiddle.

Agreed, though I did also point this out myself in the opening post...

bowlhead99 wrote: »

Yesterday afternoon you said you should really have just stuck with one simple allocation from the start and be done with it. The whole lot in one global multi-assert fund. Sound advice, but you're not doing it.

I said "should have" as in, in hindsight, rather than stating I will immediately sell everything today and start again.

bowlhead99 wrote: »

A bit later, yesterday evening you said you were generally won over by the idea of having a global equity allocation driven by a low cost tracker and then a bond allocation. So, you could do that. The multi-asset fund package mentioned in the paragraph above also clearly matches that objective (and does the rebalancing for you), or alternatively you could buy the components manually. Again, sound advice, but you're not doing it.

Yes, it does - however, I'm already invested in to the other funds. As an aside, the L&G US tracker and Fidelity world tracker both have lower management fees which is attractive. They've also performed well/better over the last 4 years compared to the LS80. (or even the LS100 if we're going to compare funds with 0% bond allocation), so I don't really think that a 50/50 approach/aim (baring in mind that I will not be contributing further to the L&G US) is so controversial or utterly insane....

bowlhead99 wrote: »

So here we are the next day and you are keeping your US fund (on the basis that it just went up a lot, and you liked that) even though you don't want it and are not going to buy more of it... and you are keeping your global multi asset fund because that's one way you could run a portfolio... and you are keeping your global equities tracker because that's another way you could run a portfolio.... but now you are wondering if the firm providing the global equities tracker should be the same person or a different person from whoever provides your multi-asset fund and whomever provides your specialist US-only tracker.

As mentioned, the L&G US fund has been part of the Sipp for some time, since its currently performing well then it doesn't make sense to just sell it. Of course, should things change, it will be easy enough to sell it and redistribute the proceeds to the other funds. The fees are also very low on this fund. I don't see the upside to just selling it all now..

bowlhead99 wrote: »

The answer is, it's a confused mess with no great structure - so however you do the rest of it, it'll probably still be a confused mess with no great structure. The better thing to do is just sell everything and then buy back a portfolio that fits a strategy, then give it chance to meet its objective over an economic cycle or two, and then evaluate whether it still meets your needs.

Maybe, but I wouldnt have thought that selling everything and starting again was not the best advice to give... as we know, a couple of days out of the market can have a big impact.

bowlhead99 wrote: »

If you are feeling a bit reckless or fanciful and can't help yourself from fiddling and tweaking every time you hear a soundbite on an investment blog or on the news, it might make sense from a self-preservation perspective to have your SIPP be much more "set and forget"with ONE strategy, while maybe you set aside £10k in your ISA to have some self-select, change-mind-on-a-whim type fun.

Possibly a slight exaggeration, but I take your point. Thank you

I truly appreciate that people take the time to comment and provide feedback to peoples threads/questions, however I do think that there seems to be a genuine enjoyment gained from ripping in to people who are perhaps not as versed in this area as appose to actually providing something that is positive and helpful.

bowlhead99

Frufru23 wrote: »

I bought in to the L&G tracker a couple of months after I opened the Sipp, so have had it running for some time. It's had it's ups and downs, but yes - at the moment it's doing well. I'm optimistic that the fund will continue to grow in the short term and since it's currently the best performing fund in my sipp, it seems crazy to just sell it.

Most traditional portfolio models would have you sell the things that have just performed the best, to buy more of the things that have not just performed the best. Known as rebalancing. Otherwise, you end up stuck with relatively large allocations to things that have gone up to a peak and are not rationally expected to continue with that outperformance out into the future. So, it is not crazy to sell it.

What you are looking at is a period where USA did very well compared to other world markets, particularly for a UK investor with a one time massive devaluation of sterling. You already have USA exposure as the majority component of the world index tracker and the lifestrategy. So, if you like the USA and have short term optimism based on recent performance, don't worry, because you have exposure to that market in spades in your 'balanced portfolio'.

To then have a whole extra slice of USA-only exposure on the side, is not very rational unless you want to take a real big punt on it. As I suggested, no real need to take any real big punts in your pension on which your retirement depends. You could do that in a 'fun money' component of your ISA.

I do realise that this wont continue, hence my comments that I do not plan to contribute further but plan to build up the LS80 and World tracker with future contributions.

As you know there is no reason for it to continue, you can comfortably exit it and build up the other more globally balanced components instantly without needing to wait for future contributions to bring the much-needed diversification

I said "should have" as in, in hindsight, rather than stating I will immediately sell everything today and start again.

If you had originally done that (build a balanced portfolio from the start) then maybe we wouldn't be having this conversation as you wouldn't have a clumsy portfolio.

Generally, if you identify faults, inadequacies or bits of poor judgement, or you have just generally ended up by something through circumstance rather than rational planning... there are two things you can do. You can ask yourself: if I was all in cash today, what would I buy? Or you can say, ah well, can't be helped, I will soldier on with what I have and hope it comes good, maybe I will gradually look to fix it over the next few years with new contributions to the things that actually make sense to hold.

The latter is a poor way to address issues that come up.

It is like someone who inherits a bunch of shares from an elderly relative and are sitting there with £100k of newfound wealth of which £95k is in Tesco as the old fella used to work there.

A rational person who has never had much money before says OK, at the moment it's a pile of shares, but call it £100k of cash, how do I build a balanced portfolio with £100k.

Another less-savvy person in the same situation says OK, I can see these shares have gone up by 33% in the last 6 months, I like the idea of that sort of return and supermarkets are a type of business that always makes money, so I will keep them as it is and see how it goes. With 95% of my assets in this one chain of one type of shop in one country in the world out of 50,000 opportunities. What do you mean it is dumb? How dare you criticise my choice, your way won't necessarily be any better, you can't see the future.

Your attitude is like the second type of person in that example, which by exaggerating I hope to make clear that they are not acting wisely. I say this not as an 'enjoy ripping into newbies' thing, but we do get people who come along with the second type of attitude originally, and benefit from some gentle ribbing, "stand back and see the big picture / wake up and smell the coffee".

Yes, it does - however, I'm already invested in to the other funds. As an aside, the L&G US tracker and Fidelity world tracker both have lower management fees which is attractive.

Ignoring the US one which is a very cheap index to track as a single country specialist index, but not designed to hold other than with a collection of other country specialist index funds, and you have said you are not going to keep as a large part of your portfolio long term anyway...

You are looking at a difference in fees on the developed world tracker versus the packaged fund-of-funds, of 0.1%. In preferring to save that pretty nominal amount of money in fees, you have gone single asset-class (no bonds), you have bought a fund that's missing emerging markets requiring you to buy another one and rebalance manually, and you've restricted your allocation to your home market to whatever it is on a world market-capitalisation table rather than something that recognises the fact that you live in the UK and will have a relatively larger proportion of your future expenditures driven by the UK economy, compared to the average world citizen. IMHO that's not a great tradeoff to save 0.1%, and the annual differences in return will be greater than the 0.1%.

They've also performed well/better over the last 4 years compared to the LS80. (or even the LS100 if we're going to compare funds with 0% bond allocation), so I don't really think that a 50/50 approach/aim (baring in mind that I will not be contributing further to the L&G US) is so controversial or utterly insane....

They performed better in that particular 4-year period because they had a greater weighting to the US and less in the UK, which worked out well in a period where the US outperformed the UK. You can call it a lucky guess.

You are right, if you are flummoxed between two different global allocation strategies, you could split the difference and do both. I guess it is one way to go if you don't want to make a judgement on why one set of logic is more compelling than the other and whether to have 20% in a variety of bonds or 0% in bonds. Still, you mentioned being something like 35% VLS to 35% to simple index to 30% US. So, even stopping the contributions to the US one, it is going to take a very large amount of future contributions to get to something that looks like the "50/50/0" allocation that you think is sensible.

As mentioned, the L&G US fund has been part of the Sipp for some time, since its currently performing well then it doesn't make sense to just sell it. Of course, should things change, it will be easy enough to sell it and redistribute the proceeds to the other funds.

Addressed above really so I won't repeat, but it does make sense to sell it. Everything else is performing well too.

The fees are also very low on this fund. I don't see the upside to just selling it all now..

When you look at a decade or so and write down a ranking list of which industry sector, asset class or geographic region performed best or worse each year, you generally find that the differences between top and bottom are on average something like 30%+. So the difference between the 'middle of the road' option of investing to a broad diversification strategy, and investing just in the US, can easily be 10,15,20%. In that context, 0.1% or 0.2% of saved fees by gambling on that one sector for that third of your portfolio is neither here nor there in terms of the damage it can do (or the success if you get particularly lucky). Picking a single sector instead of a diversified multi asset fund to save 0.1 or 0.2% is silly.

Maybe, but I wouldnt have thought that selling everything and starting again was not the best advice to give... as we know, a couple of days out of the market can have a big impact.

If expected annual return from equities is, say, 5%, then the lost return for being out of the market one business day (to know what your disposal proceeds will be, to then be allowed to place an order to buy that much of the new fund), will be 5% / 250 business days a year, = 0.02% of the value involved.

So the expected loss is a sum of money which is pretty irrelevant. The actual practical loss could of course be half a percent or more of the money involved because markets can be volatile. But it could just as easily be a half a percent gain, which is why it averages to basically nothing. Anyway, when the difference between top performing market and bottom performing market is >20% a year, you generally shouldn't put off making changes to a portfolio for ages to 'see how it goes' in fear of a potential loss of 0.5% if you get unlucky with what day of the week you pick.

I truly appreciate that people take the time to comment and provide feedback to peoples threads/questions, however I do think that there seems to be a genuine enjoyment gained from ripping in to people who are perhaps not as versed in this area as appose to actually providing something that is positive and helpful.

While it is admittedly a good ego-massager to sit back and pretend we are all so super experienced and great at investing with all the answers at our fingertips and all these newbies are doing it wrong, hahaha look at their mistakes and take the mickey... I don't think that most of the 'old hands' here try to give replies that are not positive and helpful.

Different people have different communication styles but if you get a frank appraisal of your situation on this site, you just need to take it as constructive criticism, rather than criticism for criticism's sake. Sometimes people suspect that what they have is not perfect, but come here for validation and to be told they are doing a good job. It can be beneficial to have someone respond frankly by ripping apart what you have rather than cushion it up with feathers and a pretty pink bow.

I mean, if I said it was great you are looking at your portfolio carefully, you might like to make it better but anything is better than nothing, well done for even having a portfolio, and don't worry, some people like crazy conviction-driven portfolios which just happen by accident of circumstance and because one thing led to another, so just keep on truckin' and you'll get there in the end... luv and hugz... you might not get the message about what genuine improvements could (imho) be made.


(now you've seen the smiley at the end, you can go back and read it in a friendly non-critical voice, but I wasn't going to put smileys in every paragraph to indicate my tone was friendly rather than hyper-critical, as I would have come off like some grinning imbecile...).

Frufru23

Bowlhead, thank you so much for your last post. I appreciate the time and effort that have you gone to coming back to me on all of those points.

You've spoken a lot of sense and what you have said rings true completely. Truth is, I really would be better to sell everything apart from the LS80 and then put the proceeds in to that fund. As well as giving me diversification and an asset split that I think makes sense for me at the moment, it will save me from constantly looking to see if I've made the right decision. I can also do as I've suggested and just set up a monthly fund contribution.

As time continues, (and I get older) I can move funds to say the LS60 and so on.......

I suppose because I was second guessing myself over a time where funds have been rising it was easy to be attracted by those funds that seemed to be showing higher increases... along with the fact that I think for a mad moment, I actually thought that I had half a clue as to what I was doing!

I shall now spend the time going forwards working to actually have some money to invest in to my pension rather than wasting that time constantly checking, second guessing and making a mess of it!

Thanks again, much appreciated, and the smiley face!

Frufru23

Little update... Instructed for the L&G US tracker to be sold yesterday, received funds today and have already instructed to invest the whole lot in to the LS80. LS100 sale was instructed a few days ago and again funds received today, so have reinvested in to LS100.

It will ultimately leave me with a split of 75% LS80 and 25% Fidelity World tracker in my Sipp, ISA and JISA's. I do plan on also moving the Fidelity tracker funds in to the LS80 too, but will most likely instruct next week once everything has gone through with these transactions.

It'll be strange to step back and leave it "to do its thing" , but I feel like a weight has been lifted from my shoulders.

Thank you for all of the feedback, as painful as it was to receive some of it, at least it made me step back and really think about what i was trying to achieve. Thank you.

bowlhead99

Think of it as running a warehouse business.

One way, you decide a strategy, rent a building from Charles Stanley, employ a management board from Vanguard or elsewhere to carry out your strategy, and let time do the heavy lifting.

Other way, you get to be warehouse worker, shift supervisor, health and safety officer, customer relationship manager, supply chain director, etc etc.

Which option is better, when you already have a day job?