180K Investment

jdw2000

MonroeM wrote: »

Right. I have ... invested in the Vanguard FTSE All World (VWRL)...

Interesting you came to the same conclusion as me, particularly when you didn't appear to be discussing VWRL earlier in the thread.

VWRL seems to tick the boxes for the inexperienced investor: passive and diversified.

VLS80 also appealed to me though and I couldn't decide. So I put 50% of my investment money into each.

jdw2000

Another thing newbies can take from this thread is that is you want to maximise your responses on this forum, post as a woman

In all seriousness, I don't blame the regulars. There is a continuous stream of newbies on the forum who ask the exact same questions everyday. I was one of them a couple of weeks ago. I'm sure there already is one/many, but a clearly-marked "investing for newbies" thread with all the start-up links would be a good idea for all concerned.

It does make you appreciate all the more the regular posters who go the extra mile to help newbies. Bowlhead in particular is excellent, and so are several others.


To save time when advising newbies, I don't think there'd be much wrong in simply advising "passive, worldwide, tracker funds". Because that's where most people end up having listened to the usual advice. Further, many people end up with VWRL or one of the VLS products. But having said that, I fully get why it's never a good idea to propose a particular product as if it fails (or doesn't perform as well as another product) then the investor needs to have made that choice themselves.

bowlhead99

jdw2000 wrote: »

To save time when advising newbies, I don't think there'd be much wrong in simply advising "passive, worldwide, tracker funds". Because that's where most people end up having listened to the usual advice. Further, many people end up with VWRL or one of the VLS products. But having said that, I fully get why it's never a good idea to propose a particular product as if it fails (or doesn't perform as well as another product) then the investor needs to have made that choice themselves.

Exactly, it's not a good idea to have standard "advice" of any sort (because of advice being a regulated activity and because nobody is "standard").

For example, you admit to being a newbie with a couple of weeks experience, but are happy to tell another newbie that you are not surprised that they chose VRWL because you did it yourself as it is diversified equity exposure with only 94% of its assets overseas and not likely to lose much more than 50% of its value in any given twelve month period, so it's probably just the ticket.

If the newbie has their smarts, they will question whether those factors are suitable for them (given they are unsuitable for the vast majority of UK investors), or they will question your credentials and ask about the technical construction of the fund and its likely volatility etc. However, many newbies do not have their smarts, so a standard sticky thread that says "most people here tend to buy something like VWRL, I suggest you just do that" could be incredibly dangerous and wealth-destroying. Which is the antithesis of MSE, IMHO.

jdw2000

bowlhead99 wrote: »

... VRWL ... not likely to lose much more than 50% of its value in any given twelve month period, so it's probably just the ticket.

That's surely a good thing!

bowlhead99

Not sure if you realised I was being sarcastic in my comment.

Yes it is a good thing that it probably won't lose more than 50%.

It's not a good thing for those who are uncomfortable losing 30% and would sell out in a panic once they had lost 35%, then stay in cash nursing their losses, miss the rebound, and never touch investing again because they had lost a third of their life savings following the ideas of a fellow newbie who was only using it for a few thousand with a different time horizon.

The majority of people are not comfortable losing 50% of their fund in a year. So, the fact that an exchange-traded fund ticks the box of "passive, diversified" does not make it magically suitable for their portfolio. It might be something that they use for a part of their portfolio, if they are capable of building the other parts of their portfolio to moderate the risk and volatility that they get from a raw index in the "international equities" asset class.

Perhaps for the OP of this particular thread, who has a large estate and the spoils of a successful business career, and presumably the head for finance that comes with running their own business, and is happy with higher risk investments, and does not need to access the money for a few decades: the fund could be ok for many tens of thousands of pounds of investment. For many others it could be inappropriate for only a few thousand pounds, if a few thousand is all they have as an "inexperienced investor".

BananaRepublic

MEM62 wrote: »

With that level of funds to invest you should be talking to an IFA - not listening to friends (no matter how well intentioned) or taking advice from forums.

I beg to differ. The OP needs to be aware that DIY investing can be a very enjoyable and profitable pastime, but they need to understand what they are doing, otherwise they could lose a lot of money, or alternatively not make as much as they could given a sensible investment strategy. Investing is not rocket science, but they do have a large sum, and many of use who learn about investing tend to start off with modest sums, such as £6,000 a year in my case.

Even if they do opt to take the advice of an IFA, they should find out what sort of fee is reasonable, and I would recommend reading up on investing as well. There are plenty of decent books about, the one by the YouInvest founder is probably as good as any despite its faults. Some people opt to take initial advice from an IFA, and then take over management of the funds themselves.

Regarding taking the advice of strangers on a forum, this one tends to have a lot of people with a decent knowledge of the basics, so if someone does post silly advice, it does get pooped on pretty quickly.

Note also that unless I am mistaken, an IFA will focus on funds rather than other investment classes such as property. It might make sense to move to a larger house, thereby investing some capital, or maybe even buy to let, although the changes in taxation have made BTL less appealing.

MonroeM

bowlhead99 wrote: »

A couple of observations (sorry if it appears critical):

Back in post 17 you mentioned that you were happy with quite a high risk profile, so would go quite high on the equities, maybe 80:20 equities vs non equities.

Linton pointed out that a decent way of getting exposure both geographically and across asset classes (e.g. not just a split globally of the equities, but holding things other than equities, like different types of bonds and property, in other words multiple asset classes)... was to find just find one or two good multi-asset funds and stick it all in that, rather than try to build something yourself out of specialist funds.

You asked if the Royal London Sustainability one was a multi asset fund, and were told it was. It has a few themes, one of them being a tilt to an "ethical" stance, with equities in companies that have decent approaches to ESG, and the other targeted themes being technology, healthcare and infrastructure. All sound like they are useful in a portfolio held for next few decades. But basically, the high level characterisation of the fund is global, and multi-asset.

As of end of October factsheet, it had 27% in UK equity, 56% global equity (i.e. 83% equity of which a third was in your home country), and about 15% bonds, 2% cash. So compared to your target of 80% equity it was a little high, but not far off.

Unless I'm missing something, all of your remaining funds that you're keeping until you've finished reviewing them are 100% equity, and the thing you bought to replace the recent stuff you sold is also 100% equity. So of your £120k which you thought could perhaps be invested 80:20 equities to non equities (£96k:£24k), you have sold the one thing that fulfilled the brief of being a global portfolio with some non-equities in it, and your shares allocation is now sitting at £120k:£000k.

This seems a strange move to make. I'm not saying the RL World Sustainable fund was something that you should build your whole portfolio around -because it is seeking particular characteristics in its investees, just like (e.g.) the Fundsmith fund is seeking certain characteristics, and it is good to have a mix. But the £3-£4k of non-equities as part of your £20k in RL, was the only thing stopping you having 100% equities across the whole portfolio. So now you've dumped it, you've got 100% equities and will get quite a different result from the result of an 80: 20 blend.

So, that's observation one: dumping a multi asset fund to get an equity-only fund seems contrary to the Grand Plan, whatever the plan turns out to be once you've researched more.

Observation two is on your comment that you will "see how it goes" in your ISA before starting on your SIPP.

An economic cycle is a decade or so. That is how long it will take to properly monitor and evaluate what happened when you invested the £120k using your personalised made up asset allocation (currently 100% equity but under review) and fund selection (currently under review) and your ability to keep the components of your portfolio in some sort of balance as they get battered around at the whim of Mr Market.

So, after you've done that for a decade, maybe after seeing the results of how your choices pay out over the full peaks and troughs of an economic cycle, you might have the confidence to move your present pension arrangement into a SIPP and more actively monitor that too. That seems quite a long time to wait.

Yet starting it after only, say, 6 months or a couple of years of ISA-managing experience basically tells you nothing about any "skill" you have in constructing a portfolio. I mean it can highlight if you are very bad at it, like you get a terrible unacceptable result because your research had been grossly inadequate. But a really good result, could just be down to luck, because a year or two is no basis to evaluate anything, it's just fund prices going on a random walk, and any bad selections might just "get away with it" for a couple of years. You may feel you thoroughly understand the markets and how to interpret the risk and volatility of different asset classes to build a bulletproof portfolio, and then it turns out you didn't know what you didn't know, and the following year the emperor is shown to have no pants on.

As such, the short term returns aren't a good yardstick of success.

Maybe what you mean is you'll use this isa as a general learning experience to see if you at least get comfortable with the basic concepts you researched and enjoy evaluating financial stuff. It is not rocket science after all and if you have the time on your hands, why not?

I am curious what the existing pension is invested in. As you were only a small owner managed company and you didn't hitherto have a lot of interest in managing your own portfolio, it might be a very basic scheme with few investment options and relatively high fees, but there are bound to be some choices within it and you may not have chosen something that gives you the sort of risk you currently want. So you can certainly look at that without going the whole hog and deciding you need to stick it in a SIPP.

SIPPs offer tens of thousands of choices right down to individual shares and limitless combinations of those choices. Having choice is popular when DIYing but if you are only going to pick a few funds anyway there are plenty of low fee personal pension choices, either advised or solo.

I'm loathe to bring up IFAs again because I know you want to have a crack at it yourself. But if you are having a go at the ISA for a few years first, might make sense to have someone else look at your existing pension arrangements as a separate project in the background, rather than leaving the pension money to stagnate in something less in tune with your needs.

And if you truly are pretty wealthy with other property and assets in the background and relatively cavalier attitude to risk, there might be all manner of tax efficient investments you could be making - using up your dividend allowance, capital gains exemptions, pension allowances, more exotic stuff like VCTs, etc etc. An independent professional can probably guide you through that stuff far more effectively than a bunch of people on a forum.

Anyway, good luck with your investing journey.

I must admit to being a bit taken aback by the manner and level of criticism but its fair enough if you feel I deserve it.

As I mentioned in my last post I do thank you all for your time and opinions in this thread I have most certainly taken into account and really appreciated the input and advice from Linton and AnotherJoe.

Regarding The Royal London multi-asset fund, you are quite right that I did mention that perhaps an 80/20 split would suit my risk profile. The reason I sold this fund was I decided that I wanted to keep my overall UK exposure in my investments to around 7%. That is why I ruled out the VLS80 fund because I believe the UK exposure is about 24% and in the case of the Royal London 27%. I am indeed 100% equity at the moment and I'm not particularly worried about this bearing in mind my investments are long term. However, when I start to look at my global active funds I would be looking to divert some of these funds into property and bonds and if I can't find the right multi-asset fund then I can always buy separate passive or active funds to suit my requirements so that eventually my portfolio will have roughly an 80/20 balance.

I do take your point regarding my pension and I will give this a lot more thought and consideration as there have been many posts in this thread that continue to recommend I seek advice from an IFA so perhaps that's the route for me to go down? Who knows at this point its very early days.

I do feel there was no need for some of your comments such as 'you were only a small owner managed company' and 'if you truly are pretty wealthy'. I don't mind critcism at all and even welcome it but I think comments such as this are a bit personal, quite hurtful and completely unnecessary!

jdw2000

MonroeM wrote: »

I must admit to being a bit taken aback by the manner and level of criticism but its fair enough if you feel I deserve it.

I do feel there was no need for some of your comments such as 'you were only a small owner managed company' and 'if you truly are pretty wealthy'. I don't mind critcism at all and even welcome it but I think comments such as this are a bit personal, quite hurtful and completely unnecessary!

Righty ho.

JohnRo

MonroeM wrote: »

...I know I will need to do a lot of research, reading etc but I firmly believe that nobody looks after your money better than yourself? I don't want to make unnecessary mistakes so I will take my time and listen to lots of opinions such as on this forum etc. I know I cannot take every opinion on here as gospel and need to make my own mind up on what's right for me but it is very interesting hearing other people's points of view.

In my opinion DIY is very much about understanding yourself and your own attitudes to 'money' and more importantly your own behaviour in the face valuation volatility both positive and much more importantly, negative.

That's something a good IFA will focus on because it matters a great deal.

From a technical POV a diverse global equity investment strategy is not a difficult proposition for anyone with a basic level of cognizance and is quite sufficient for most people providing the risks associated with the potential rewards are accepted.

What you need to avoid imho is thinking that there's a lucrative secret to investing that can only be discovered by endlessly reading investment books, market analysis, chart divining and studying the latest news which will then unlock the ability to pick epic winners. If there is any secret at all with long term diversified collective investment it's approximately the opposite of that.

If you really must, then it can be made as complex as you want but there's no guarantee anything that you or anyone else chooses will prove to be the better option.

The essence of successful, long term, broad market based investing is understanding that valuations will rise and fall, that you're not gambling for a quick profit and that losses are virtual and temporary unless you sell. In terms of collective investment valuations, they will generally sort themselves out eventually, if you allow them to.

Good luck.

BananaRepublic

JohnRo wrote: »

In my opinion DIY is very much about understanding yourself and your own attitudes to 'money' and more importantly your own behaviour in the face valuation volatility both positive and much more importantly, negative.

Someone who successfully ran a company should have a level head and have a long term outlook. One good way to fail as an investor is to panic when investments go south. I suspect this is what you are aluding to. Anyone with decades of experiences of investing will be used to investments dropping by a huge amount, and then waiting for a few years for them to recover.

So I guess one criterion which I think has not been mentioned is timescale. Stock market investing is all about time, 5 years is often stated as the minimum realistic timescale.

JohnRo wrote: »

That's something a good IFA will focus on because it matters a great deal.

From a technical POV a diverse global equity investment strategy is not a difficult proposition for anyone with a basic level of cognizance and is quite sufficient for most people providing the risks associated with the potential rewards are accepted.

What you need to avoid imho is thinking that there's a lucrative secret to investing that can only be discovered by endlessly reading investment books, market analysis, chart divining and studying the latest news which will then unlock the ability to pick epic winners. If there is any secret at all with long term diversified collective investment it's approximately the opposite of that.

There are many styles of investing, the one I and many others prefer is to diversify over sectors and funds, and to invest for the long term. Both points reduce risk. As you say, for this style there are no magic rules, no secrets, no clever tricks. Oh, maybe there is one. "Beware of shiny suited financial types.". And no that is not an attack on IFAs.

To be honest investing is not rocket science, there are some basic rules, such as do not buy high and sell low. Yes that might sound obvious, but you'd be surprised how many have a go investors do just that. They buy when the market is rising, and financial types are telling us the market is booming, then they sell when the market drops 30%.

JohnRo wrote: »

If you really must, then it can be made as complex as you want but there's no guarantee anything that you or anyone else chooses will prove to be the better option.

The essence of successful, long term, broad market based investing is understanding that valuations will rise and fall, that you're not gambling for a quick profit and that losses are virtual and temporary unless you sell. In terms of collective investment valuations, they will generally sort themselves out eventually, if you allow them to.

Good luck.

Quite!