180K Investment

StellaN

MPN wrote: »

There is nothing right or wrong about mixing passive with active funds it's a personal choice.

I am personally swaying towards my equity portfolio in a passive tracker and the balance of my asset allocation in active bonds and then a passive tracker property fund so a real mix?

It has been pointed out on numerous occasions that asset allocation is the priority so a balance of the right funds or trackers is imperative but who knows if we choose the right way?

jdw2000

StellaN wrote: »

It has been pointed out on numerous occasions that asset allocation is the priority so a balance of the right funds or trackers is imperative but who knows if we choose the right way?

I'm new here, so don't take my advice.

But...


Have you done a risk appetite test on yourself? That will tell you what you need to know.

If you are prone to have a heart attack if your money dips, then go 80% bonds and 20% equities. If you love a gamble and don't mind logging onto your account one day and seeing that your portfolio has lost half it's value overnight, then go 80% or 100% equities and keep bonds to a minimum.

It's down to your own risk appetite. Nobody can make that decision for you. And nobody else will be there when one day a crash happens and you log in the next morning and find your share value is halved. Can you handle that? If not, then play it safe/r.

JohnRo

There is no 'right' way, it all depends what you're trying to achieve, how you've chosen to go about it and whether you're sleeping at night as a result.

bigadaj

The other thing to consider is whether it's worth holding bonds at all right now. They have performed well recently, but there is an element of what goes up must come down and its negative yields then it can actually cost you money, probably safer to stay in cash.

You can of course go up the risk curve with bonds for better returns, so instead of holding gilts, treasuries, bunds etc look at corporate bonds of a riskier nature, but that rather negates the point of holding bonds in the first place.

The idea that binds are safe is pretty dangerous right now, negative returns in both capital and income are built into many bond issues currently and people need to be wary, with many unhappy people at getting less out than they put in, even if the losses would be less than equities, or no worse when taking relative risk levels into account.

jdw2000

bowlhead99 wrote: »

Well, personally I would prefer a non-accumulating fund if held outside the ISA because the money flows are visible rather than being internal so they are a good reminder that there's been a distribution event, and I can control what I reinvest into what.

However, the flip side to that is that once I have created a tax recordkeeping headache for myself, I'd prefer to only look at it once a year.

For example, even using Inc versions, if they are funds you have added to over the course of the year then you're still going to need to examine the dividend vouchers to determine how much of the payment is dividend versus equalisation. And if you sell a bunch of Acc funds now to buy Inc equivalents (rather than have the relevant underlying fund manager arrange a conversion), then you are just generating another round of CGT calculations for all those disposals; and you'll still need to check the accumulated distributions, for the periods you held them.

So if you are going to do some disposals near the end of the tax year anyway as part of shifting more assets into ISA or pension, you might as well deal with it then, unless you are desperate to start getting into all this stuff now. If you only have a small number of Inc funds it will not be a big deal. I was just disputing the idea that you 'won't have much to think about', because these things can be complex if you are doing them for the first time. But as you're dealing with a year in which you've held unwrapped Acc funds at some point, you are already going to be dealing with those issues anyway and won't necessarily eliminate that by doing a sell of all your Acc assets.

It just comes down to that old chestnut, 'personal choice' again
:beer:

So anyway, I did switch from acc to inc a month ago for the reasons discussed.

Just wondering what you think about S&S ISAs in this regard. Should they be inc or acc? I am in the process right now of switching my ISA to TD, so I will be choosing my investment in the next week or two.

bowlhead99

jdw2000 wrote: »

So anyway, I did switch from acc to inc a month ago for the reasons discussed.

Just wondering what you think about S&S ISAs in this regard. Should they be inc or acc? I am in the process right now of switching my ISA to TD, so I will be choosing my investment in the next week or two.

In an ISA you have absolutely zero tax recordkeeping to do. So, there is no advantage in getting dividends just to see them and help you out with the maths, because there's no maths.

If you had a large and broad portfolio of inc funds and the dividends were substantial, you could use the received dividends from them - along with periodic new cash contributions month by month - to help rebalance your portfolio throughout the year. However, it sounds like you are just going to be using a multi asset fund rather than multiple funds, and you are not gong to be making ongoing contributions anyway, just one lump at the beginning of the tax year. So there is very little advantage in receiving quarterly or semiannual drips of money that you have to manually redeploy.

So in your shoes I would probably just go Acc in the ISA.

In your position the only reason for wanting scraps of income from time to time arriving in your ISA is because you will have some platform fees to settle. But the size of those fees will be pretty nominal, so if the natural yield of the portfolio is say 1.8%, and the fees payable are only 0.3%, then you have 1.5% doing nothing by the time you get to next April and want to look at your account again. It's not much on a £30-40k portfolio but seems a bit of a waste. An option to reduce the waste, if you invest in two funds, is have one set to inc and one set to acc. Then the arriving dividends are halved and less cash sitting around but more than enough for fees.

It would be neater to just go all ACC and invest 99.5% of your assets and simply leave a bit of cash back to cover fees. Or better still, pay the fees outside the isa via direct debit if TD support that on ISAs, I can't remember if they do.

darkidoe

StellaN wrote: »

It has been pointed out on numerous occasions that asset allocation is the priority so a balance of the right funds or trackers is imperative but who knows if we choose the right way?

There's never a right way. At the end of the day I think it's all random dots on a chart, around the average.

It's a journey of self-discovery and as you go along, you learn about the asset and learn about your own mentality along the way! Because its a rocky journey it is always important to secure your own immediate future with emergency cash fund and to buffer any shocks to the system. I think there must be a trait or character that is common to most investors being risk takers...