What will a financial adviser do for me?

JohnRo

Jon_W wrote: »

Hopefully not but you just NEVER know what is going to happen!

Which is why you never commit money not intended for long term investment, whatever happens. Unless you're gambling on a favourable short term outcome.

At the least, imho, you ought to have fully utilised your PSA in 'high' interest deposit accounts, then realistically you have a pool of cash available for all eventualities.

After that you can invest in relatively high risk investments like the higher equity level VLS offerings without losing sleep, assuming you're able to cope with the volatility.

The alternative is to feed the investment money into your chosen investment vehicle as an ongoing periodic contribution so that the risk is loaded towards the back end of the investment horizon, it'll possibly help to mitigate losses in the short term but will almost certainly stifle gains long term.

Ah, I didn't know there were dividends I thought the VLS were accumulatory.

Each variant of the VLS range has both ACC and INC versions, so you choose the appropriate one depending on your requirement for income.

Jon_W

AnotherJoe wrote: »

Sorry I was talking generically, you are correct no dividends from VLS. I was thinking you'd be more diversified than one fund and some of those investments would provide an income stream. But that was a bad assumption.

I wouldn't say it's moving more to cash, its (and I horribly oversimplify) the idea that you have your investments and your cash, let's say 2 years worth . Each six months or so you look at your investments. If they rose top up your cash to the 2 year (or whatever) mark otherwise let them grow. if they didn't rise, keep spending from the cash buffer.

There are lots of papers around and no agreement on how big the cash buffer should be how gradually you should top it up after it's gone down, and so on, and no agreement at all about what's best .

But before you retire you don't need that 2 or 3 year cash buffer so you'd only build that just before retirement.

Within the investments you have your mix of equities (probably as funds) and bonds and also dividend paying equities/funds. Bonds seem to be falling out of favour at the moment for reasons you mention.

My approach is a mixture of everything except bonds maybe that's right maybe it isn't I don't know only hindsight will tell. To me bonds just look like poorly performing equities and I think the consensus is shifting to a view that In a crash bonds will dip along with equities.

FWIW I'm not as much in favour of VLS as others as 25% UK seems to high to me but then again
I wonder if many of the "UK" equities in it are companies like BP and Vodafone (e.g. top of the footsie) which arguably aren't that U.K. focussed anyway ?

No Joe, I will try to avoid income funds as I want all the reinvesting to be taken care of as I am too stupid to do it!

Gotcha on the cash: equities then as I age simply, keep a sum in mind, use the investments to top it up if/when needed.

Be interesting to know how (say) VLS80 is comprised, but this is as far as we can get: https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ACFDT&univ=O&pageType=portfoliobreakdown

What would a UK market cap weighting be? About 2-3%?

dunstonh

Be interesting to know how (say) VLS80 is comprised,

That is a problem with fund of funds. However, if you built a portfolio using the single sector funds to the same ratio as the last snapshot, you would see the underlying assets of each fund. However, most do not particularly care. Multi-asset funds are used to keep things simple. Not to be micromanaged to the level that you are looking at the.

bowlhead99

Jon_W wrote: »

Be interesting to know how (say) VLS80 is comprised, but this is as far as we can get: https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ACFDT&univ=O&pageType=portfoliobreakdown

I haven't clicked the link (although it's a decent site) but if you go to vanguard UK's own website you can get the latest factsheet for their Lifestrategy 80 fund, which gives an overall summary of what it holds, and listing the fund names of the other Vanguard equity or bond funds into which it invests. Each of those funds into which it invests has in turn their own factsheet on the vanguard site, as well as a prospectus.

So as Dunstonh suggests, you can dig into more detail if you like, to work out the holdings as of the last month end. That can be part of your research. But it's a snapshot at a point in time and may change over time within the overall investment strategy they operate.

What would a UK market cap weighting be? About 2-3%?

A bit more than that. The market capitalisation of world equity markets (looking at what is in "free float" and some minimum level of liquidity) which make up the major indexes would amount to $40 trillion plus, with the London stock exchange probably about 6%.

It would be a little less if you counted all the shares that are not in free float (e.g there are companies or share classes on the Shanghai or Shenzhen stock exchanges that can only bought by local Chinese investors).

So, 6% is a reasonable rule of thumb for UK's share of world listed equities (though it will move with the markets and was higher before our currency devalued compared to a basket of other world currencies over the last year). However, only the most aggressive UK investors would be happy following that logic and putting 94% of the equity part of their investment overseas by following an all-world tracker.

Vanguard's lifestrategy product line has 25% of its equities listed in the UK - although as Joe mentions, its UK holdings are weighted to the largest multinational companies in the UK FTSE index which gives a lot of non-UK assets and revenue streams from those businesses.

If you bought the "80% equities" version of the lifestrategy fund I]not that I'm recommending for or against, plenty of multi-asset funds are available and there's always the expensive IFA options[/I, then basically 25% (a quarter) of the 80% equities would come from the UK index, which works out at 20% of the overall fund.

Then the non-equities part of the fund (i.e. the part of the "80% equities" fund that isn't equities) there will also be some UK exposure and some non-UK exposure. In the non-equity part of a portfolio people are often happy to have significant UK exposure (such as property, government bonds or UK corporate bonds paying fixed interest) because it's supposed to be a more stable and less volatile component of the returns. Though some overseas component should also be held to provide diversification - different parts of the world experience different things at different times.

But again within non-equities, just as within equities, different individuals and different fund manager groups build portfolios in different ways because different people have different opinions.

badger09

Jon_W wrote: »

Be interesting to know how (say) VLS80 is comprised, but this is as far as we can get: https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=ACFDT&univ=O&pageType=portfoliobreakdown

What would a UK market cap weighting be? About 2-3%?

Allow me

https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9244&assetCode=BALANCED##overview

AnotherJoe

Jon_W wrote: »

No Joe, I will try to avoid income funds as I want all the reinvesting to be taken care of as I am too stupid to do it!

Gotcha on the cash: equities then as I age simply, keep a sum in mind, use the investments to top it up if/when needed.

?

I was thinking of income funds as you move into retirement so you don't have to sell funds to provide income. Again, people take different views, some are happy to sell acc funds to provide income on the grounds that acc funds may rise more than funds aImed at providing an income.

I'll be doing a bit of both.

Eco_Miser

Speaking as an early retiree ...

Jon_W wrote: »

What was the thinking behind moving more to cash as opposed to moving more towards bonds as one ages? Is that just because of the awful real yields on bonds at the moment, or something else?

It's so you can spend it!
When you're relying on your investments to live on, you don't want to be selling shares (or units) every month (especially if there are transaction fees) whatever the state of the market. So you have a year or two (or more) of spending (plus your emergency fund) in cash in the highest interest easy access accounts you can find. This is topped up by dividends and/or selling when the price is high.
Personally, I changed investments mainly into funds aimed at producing an income, and haven't needed to draw on the capital. In fact, since my State pension kicked in, I've been able to add to my investments - for my old age, I suppose.:)

MrLeek

bowlhead99 wrote: »

So as Dunstonh suggests, you can dig into more detail if you like, to work out the holdings as of the last month end. That can be part of your research. But it's a snapshot at a point in time and may change over time within the overall investment strategy they operate

How do you do that? I managed to do something like this a few months ago (when I started my own research looking at a particular tracker fund) and I was able to extract out a text file of all the constituent parts of the tracker ready for import into Excel. I just need to remember what I did now! :rotfl:

Naturally it's a list that will change over time, but it seems like a prudent thing to do before starting to invest (and perhaps on a semi-regular basis therefore just to make sure your choice of funds are doing what you expect?)

coyrls

MrLeek wrote: »

How do you do that? I managed to do something like this a few months ago (when I started my own research looking at a particular tracker fund) and I was able to extract out a text file of all the constituent parts of the tracker ready for import into Excel. I just need to remember what I did now! :rotfl:

Naturally it's a list that will change over time, but it seems like a prudent thing to do before starting to invest (and perhaps on a semi-regular basis therefore just to make sure your choice of funds are doing what you expect?)

If a tracker fund is doing its job, it is tracking an index; you don't need an in-depth analysis of the holdings of the tracker fund, just an understanding of the make up of the index and you can find that out by investigating the index.

bowlhead99

MrLeek wrote: »

How do you do that? I managed to do something like this a few months ago (when I started my own research looking at a particular tracker fund) and I was able to extract out a text file of all the constituent parts of the tracker ready for import into Excel. I just need to remember what I did now! :rotfl:

Well, the lifestrategy is just a collection of vanguard trackers and their factsheet says what trackers they hold, adding up to 100%.

So for example let's say you were putting in £10,000 into the VLS80 product and you looked at the percentages and worked out that the UK piece of their portfolio is made up of £1810 of a FTSE UK All-Share index fund and £190 of a FTSE100 index fund for £2000 total.

You could look at the factsheets for those indexes (either Vanguard's factsheet for those two exact funds, or just going to the FTSE website and getting the factsheet for the underlying indexes which the vanguard products are trying their best to track) and then you would know how your £1810 was split and how your £190 was split by industry, number of holdings, average company size etc. And all that £2000 total is UK listed.

And then you could look at the other holdings like the £190 in Pacific ex-Japan and work out the splits for that in terms of industry and also in terms of country. And you could do likewise for the £1930 in the FTSE developed world ex-UK tracker and the £1960 US index and the £620 in FTSE developed Europe ex-UK and the £570 in MSCI emerging markets index ex and then add them all up and see what you got.

Or there are tools that can do it for you, like Morningstar's X-ray.

If you wanted to look at individual company level, you could go to an ETF provider like iShares and get a spreadsheet data dump of an index fund they run, e.g. FTSE All share, and see roughly what percentage of your £1810 is in Shell vs Halfords vs Dairy Crest etc etc.

Obviously all that detail is irrelevant to OP who does not need to know or care how many pennies he is investing in a specific dairy products business when he has decided to adopt a fund-of-tracker-funds approach to his global allocations.