S&S Isa Mix

ONOFF

Brief personal backgound:
37 year old with family
Home value £150k Mortgage free
Other Property £50k Mortgage free
Cash Savings £35k low interest savings accounts
Pension - None
Partner pension - None

We have spent the last 10 years reducing our debt burden and now want to build some wealth for retirement. We will keep 20K in easy access savings accounts as an emergency fund.

S&S ISA has been opened with 15k transferred in. More funds will be added monthly come the start of the new tax year - £1600 per month. The S&S asset allocation we have choosen is 55% Shares 22% bonds 20% cash and 3% property. New money will balance the portfolio.

Shares
HSBC FTSE All World Index C Inc (35% allocation)
Fidelity Index World W (35% allocation)
L&G Global Emerging Mkts Idx I Acc (20% allocation)
AXA Framlington Health Z Acc (10% allocation)

Bonds/Gilts
Allianz Gilt Yield I Inc (25% allocation)
Royal London Idx Linked M Inc (25% allocation)
BlackRock Idx Lnkd Gilt Trckr D Acc (25% alloaction)
BlackRock Corp BdTrk D Acc (25% allocation)

Property
BlackRock Gbl PrpSecEqTrk D Acc (100% allocation) when pot gets larger I will look to other fund options.

Now for the questions :rotfl:

1) Have we too many funds for such a small portfolio
2) Are we properly diversified across markets / sectors
3) How volatile is our share allocation
4) My understanding of bonds/gilts is quite low. Are the bond funds we have picked low or high risk. I want my bonds to act as a buffer in a stock market crash ie low risk
5) Are we keeping too much cash as a proportion of the overall ISA.... the plan is to use this cash to re-balance the portfolio if a crash occurs.

dunstonh

1) Have we too many funds for such a small portfolio

Yes. 9 funds for a bespoke asset allocated portfolio is not unusual. Where a global catchall fund is used, then more like 4-5 is closer the mark. However, you tend to see that on larger portfolios of £50k-£100k plus. Not £15k. 3% of £15k is just £450.

2) Are we properly diversified across markets / sectors

There are no rules but your spread seems to be a bit random. Multiple global funds and then breaking that allocation with two high risk specialist funds which have overlap with the global funds.
Your bond allocation is heavy in gilts at a time most models have lowered their gilt allocations and you appear to have no high yield bonds at a time most have increased their high yield/global high yield allocations.
Your property is not physical property but property share. This increases the risk and the fund should really be in the specialist equity sector.

3) How volatile is our share allocation

Not far off as high as you can get it with retail funds. 50% loss potential in 12 months.

4) My understanding of bonds/gilts is quite low. Are the bond funds we have picked low or high risk. I want my bonds to act as a buffer in a stock market crash ie low risk

Low volatility but lacking potential in this stage of the cycle.

5) Are we keeping too much cash as a proportion of the overall ISA.... the plan is to use this cash to re-balance the portfolio if a crash occurs.

We dont know your risk profile, objectives, timescales, knowledge, behaviour or capacity for loss. You could be holding too much for some people and too little for others. This is a personal thing.

You are over complicating it for the size of the investment and your allocations dont appear that structured. i.e. you have picked the figures rather than a statistical model.

AnotherJoe

If you've got cash elsewhere why keep it in the portfolio where it will earn zero interest? Either regard your emergency cash as your cash, or put it into higher interest accounts and top up funds in a crash if you have the bottle

I'd dump the bonds completely

3% property not worth the effort. Bump it up with money from cash and bonds.
I see no harm in betting on two or three longer term sectors alongside more generic global portfolios, healthcare and property are my two "bets" outside of generic global funds*.

Its often said, though I haven't got such a fund, that one for smaller companies is worth diversifying into as these arent covered in global funds which are all bigger businesses.

Although currently your portfolio is relatively small in 2 years time it will be at £50k or so, so if you just bumped up your existing equities and property (and personally EM seems high to me, perhaps split it with a smaller co's fund ) you wouldn't have that many funds in total for £50k

* And a few direct company shares that the regulars here frown upon but that's another story

AlanP_2

Why no pension for either of you?

have you opted out of employers schemes, or self-employed, or employer not offering one yet?

ONOFF

Thank you for taking the time to respond and offer your opinion

dunstonh wrote: »

Yes. 9 funds for a bespoke asset allocated portfolio is not unusual. Where a global catchall fund is used, then more like 4-5 is closer the mark. However, you tend to see that on larger portfolios of £50k-£100k plus. Not £15k. 3% of £15k is just £450.

The plan was to pick the funds that will be used for long term passive investing 15-20 years. As the pot grows I do not want to be spending large amounts of time deciding which funds to add to the portfolio rather just which need re-balanced

There are no rules but your spread seems to be a bit random. Multiple global funds and then breaking that allocation with two high risk specialist funds which have overlap with the global funds.
Your bond allocation is heavy in gilts at a time most models have lowered their gilt allocations and you appear to have no high yield bonds at a time most have increased their high yield/global high yield allocations.
Your property is not physical property but property share. This increases the risk and the fund should really be in the specialist equity sector.


Not far off as high as you can get it with retail funds. 50% loss potential in 12 months.
Which is why I want my bonds/Gilts to act as low risk buffers


Low volatility but lacking potential in this stage of the cycle.
As per Tim Hales book I want my bonds/Gilts to act as low risk buffers, he does not recommend high yield bonds


We dont know your risk profile, objectives, timescales, knowledge, behaviour or capacity for loss. You could be holding too much for some people and too little for others. This is a personal thing. I am quite cautious and so is my wife, we want a simple low risk long term strategy. We both want to retire in our late 50's

You are over complicating it for the size of the investment and your allocations dont appear that structured. i.e. you have picked the figures rather than a statistical model.

dunstonh

The plan was to pick the funds that will be used for long term passive investing 15-20 years. As the pot grows I do not want to be spending large amounts of time deciding which funds to add to the portfolio rather just which need re-balanced

Your selection of funds does not reflect that objective. A bespoke portfolio of single sector funds needs work. Especially when you introduce specialist funds (of which you have three).

Which is why I want my bonds/Gilts to act as low risk buffers

Other ways are to adjust your equity holdings to reduce the volatility there. i.e. use less specialist equity funds with 80% loss potential and use more conventional sectors with 40%-50% loss potential.

As per Tim Hales book I want my bonds/Gilts to act as low risk buffers, he does not recommend high yield bonds

You should not be restricted by the limitations of a book seller.

I am quite cautious and so is my wife, we want a simple low risk long term strategy. We both want to retire in our late 50's

Your portfolio does not appear to reflect that objective. 58% equity of which almost 41% is the highest risk you can get with unit trust/oeics with poor diversification in the bonds leaves you at the medium/high end of the scale.

AnotherJoe

AlanP wrote: »

Why no pension for either of you?

have you opted out of employers schemes, or self-employed, or employer not offering one yet?

My bad, I missed that, agreed, needs an explanation.

dunstonh

adindas wrote: »

In early April I will have about cash Isa of about 25k which comes from my Regular Isa for this tax year subscription and few from my previous Isa subscription. I will need to divert this money as by that time it will be earning a pittance less than 1%
As far as I am aware, I have subscribed to all of the best easy access current account, RS paying 2%+. Also I have put smack amount in th p&p lending and currently have no interest to increase it.

I do not need access to the money for at least 5 years, So imo my best option is to divert it to S&S ISA. I am considering subscribing to VLS 80 S&S ISA. Is there any better option than this??

I think I will put a lump sum of 25k is a better option than drip feeding it, as earning less than 1% interest simply not good enough to keep up with inflation. Am I right??

I do not need any financial advice, fancy platform, etc. I am looking into the most cost effective S&S ISA platform to buy VLS 80 for about 25K investment. I have read somewhere about iWeb £5 per transaction and no admin/ management fee. Is there any better option than this ??

Thank you very much for your time.

Probably better to ask on your own thread rather than a hijack of an active thread belonging to someone else on an unrelated subject. Copy and paste your post into a new thread and it can be answered there.

TheTracker

Frankly, it doesn't look too bad to me. Except for a weird decision to throw your hat in the ring with a health fund (do you know something everyone else doesn't?), and an over conservative decision to spread allocations across fund providers, and 20% in EM is at the upper end of most people's comfort zone. And you don't have enough in the pot to bother with complexity and might as well have a simpler portfolio until 50-100k. Ok so that's quite a list of issues.

A "simple long term strategy" IS to have a roughly 60:40 portfolio: equities being a broad based developed world tracker, with some EM and maybe some small or value tilt; a set of bonds that span gilts, index linked bonds, and maybe some corporate bonds; a smattering of property; some emergency cash. That's essentially what you've strived for. I'd ignore the outlier IFA's distaste for Tim Hale. But until you have more money, maybe a simple portfolio of VWRL+VGOV or VLS60 will act as useful shallow waters until you see you react to turbulence.

dunstonh

I'd ignore the outlier IFA's distaste for Tim Hale

I'd be more inclined to ignore Tim Hale on the asset allocation giving that focus on index linked gilts at a time when they are so out of favour and are really only offering downside protection with little or no upside. The most logical option on the current value is a multi-asset fund. Not single sector funds trying where you try and be the fund manager.

ONOFF

AnotherJoe wrote: »

My bad, I missed that, agreed, needs an explanation.

We do not have pensions because surplus cash was used to pay of property debt. My wife works part time in a low wage job and I do not have a work place pension although that will change later this year.