Should we Invest in only one fund?

grey_gym_sock

Glen_Clark wrote: »

You might like to keep borrowing forever, but your creditors might not keep lending you more money forever.

you can if you're the currency issuer, as the UK is. government debt is never supposed to be paid off. it's essential for the economy to function. and it has no real cost.

household debt, OTOH, is a problem. it remains nearly as high as it was in 2007. the interest on that debt - essentially, interest which is paid by the 99% to the 1% - is 1 of the factors - in addition to stagnant wages - increasing inequality.

the current account deficit is also a real problem.

enthusiasticsaver

bostonerimus wrote: »

How much of your income needs is covered by state pension and other final salary pensions?

Being in Vanguard LS60 you are diversified and paying low fees which is good. Adding an expensive actively managed fund for "income" is not what I would do. I would take a total return approach to income generation and Vanguard LS60 is a good vehicle for that.

Our essential expenditure is 100% covered by our occupational pensions (or will be by the time I retire at the end of this year). They will also cover the majority of our discretionary income but we want to have an annual buffer of £5k which will come from our cash reserves.

We have been pleased with the Vanguard LS60 but I have £90k in there (husband has £50k) and I am concerned this is too much to have in one fund - even though it is a fund of funds. I am just a little concerned it is all our eggs in the same basket.

There are a few active funds I am looking at or I could go for a fund similar to the Vanguard like the Legal and General multi asset or Blackrock Consensus. Still mulling it over. Thanks for advice and I note that an active fund will have higher fees so whether performance is any better I don't know.

enthusiasticsaver

grey_gym_sock wrote: »

you can if you're the currency issuer, as the UK is. government debt is never supposed to be paid off. it's essential for the economy to function. and it has no real cost.

household debt, OTOH, is a problem. it remains nearly as high as it was in 2007. the interest on that debt - essentially, interest which is paid by the 99% to the 1% - is 1 of the factors - in addition to stagnant wages - increasing inequality.

the current account deficit is also a real problem.

Debt on government interest still has to be paid though. From our taxes. I agree that household debt is still an issue. No one has to take out credit cards or loans though. It is a financial choice.

grey_gym_sock

enthusiasticsaver wrote: »

We have been pleased with the Vanguard LS60 but I have £90k in there (husband has £50k) and I am concerned this is too much to have in one fund - even though it is a fund of funds. I am just a little concerned it is all our eggs in the same basket.

There are a few active funds I am looking at or I could go for a fund similar to the Vanguard like the Legal and General multi asset or Blackrock Consensus. Still mulling it over. Thanks for advice and I note that an active fund will have higher fees so whether performance is any better I don't know.

that sounds like a reason to add another multi-asset fund. if it's mainly about wanting a bit more diversity of fund managers.

grey_gym_sock

enthusiasticsaver wrote: »

Debt on government interest still has to be paid though. From our taxes.

no, it doesn't come from taxes at all.

the interest is rolled up (added to the debt), but the size of the debt, relative to the size of the economy, doesn't grow, provided that the interest rate on government debt is less than nominal growth (meaning: inflation + real growth) in the economy.

currently, the interest on government debt is actually less than inflation. which hasn't always been the case. but it is almost always less than inflation + real economic growth.

therefore public debt has no real cost.

(except when it's done as PFI, of course.)

I agree that household debt is still an issue. No one has to take out credit cards or loans though. It is a financial choice.

there are individual choices, but those choices also have macroeconomic effects. such as depressed consumer spending, due to a big debt overhang. we need to think about what to do about that.

and it's not as simple as being responsible by not borrowing. most household debt is mortgage debt. 1 generation has borrowed so much that house prices have risen so far that many of the next generation can't afford to buy houses at all. or only with cripplingly big mortgages. but the alternative is cripplingly high rents.

bostonerimus

enthusiasticsaver wrote: »

Our essential expenditure is 100% covered by our occupational pensions (or will be by the time I retire at the end of this year). They will also cover the majority of our discretionary income but we want to have an annual buffer of £5k which will come from our cash reserves.

We have been pleased with the Vanguard LS60 but I have £90k in there (husband has £50k) and I am concerned this is too much to have in one fund - even though it is a fund of funds. I am just a little concerned it is all our eggs in the same basket.

The Vanguard LS60 is a very diversified fund and I would not be worried at all by having all my money in there. I don't think you need to complicate things with other funds.

If you have £140k in LS60 you'll probably be able to safely support a 4% index linked annual drawdown for 30 years...so that would be £5600. It looks like you are well set and don't need to do anything. Well done!

Audaxer

racey wrote: »

That's what I thought.

That's what I said - per fund house, not per fund.

Audaxer

bostonerimus wrote: »

The Vanguard LS60 is a very diversified fund and I would not be worried at all by having all my money in there. I don't think you need to complicate things with other funds.

If you have £140k in LS60 you'll probably be able to safely support a 4% index linked annual drawdown for 30 years...so that would be £5600. It looks like you are well set and don't need to do anything. Well done!

One of the things that concerns me about that is that in the 30 year period there will mostly likely be years when there will be losses. So do you still drawdown the 4% when the share price has dropped, or do you draw out more that 4% in years when there are large gains? Not sure that would be as straightforward as it sounds.

I'm in a similar position to original poster, and my plan was to put 50% into a VLS40 and 50% into income generating Investment Trusts (hopefully also with some growth). Ideally I would like to keep things simpler with it all in a VLS40 (or a VLS60), but I like the idea of getting regular income rather than rely totally on drawdown from VLS to supplement my pension.

It may be that the total return received from the 50% of my portfolio in VLS would provide more total return than the 50% in actively managed Investment Trusts, but not sure if that would definitely be the case?

I understand that the FSCS cover is only £50k for each fund house so I am nervous about putting over £50k into Vanguard or any other fund house.

economic

Audaxer wrote: »

One of the things that concerns me about that is that in the 30 year period there will mostly likely be years when there will be losses. So do you still drawdown the 4% when the share price has dropped, or do you draw out more that 4% in years when there are large gains? Not sure that would be as straightforward as it sounds.

I'm in a similar position to original poster, and my plan was to put 50% into a VLS40 and 50% into income generating Investment Trusts (hopefully also with some growth). Ideally I would like to keep things simpler with it all in a VLS40 (or a VLS60), but I like the idea of getting regular income rather than rely totally on drawdown from VLS to supplement my pension.

It may be that the total return received from the 50% of my portfolio in VLS would provide more total return than the 50% in actively managed Investment Trusts, but not sure if that would definitely be the case?

I understand that the FSCS cover is only £50k for each fund house so I am nervous about putting over £50k into Vanguard or any other fund house.

Then completely ignore funds. Even if you put say 30k, this will hopefully grow over time and then you will be nervous again!

I personally wouldn't worry about these risks, they are very very unlikely specially with a fund like vanguard.

racey

Audaxer wrote: »

That's what I said - per fund house, not per fund.

My understanding is that If Vanguard go bankrupt you do not lose your money.
Is that correct?