Should we Invest in only one fund?

Stirfry

bostonerimus wrote: »

So what asset allocation are you looking for? How much equity and how much fixed income? and why? Do you know the charges of Artemis Strategic Bond? Personally I would never buy that fund. If you want a bit more fixed income why not just buy VLS40 or VLS20? Keep it simple and low cost!

You seem to be a big fan of VLS. What other funds shares have you invested in and why?

Audaxer

enthusiasticsaver wrote: »

If you have gone for the VLS40 you are even more risk averse than me as we have VLS60. Would ITs then be too risky for you as not as well diversified? I must admit doing more and more reading around this I have decided to keep to multi asset funds of funds.

We have decided to go for bucket approach to our retirement funding as it sounds like you are in similar position. First bucket is our pensions. 1 main occupational for my husband which he already takes, my occupational LGPS one which I will take next January (looked at deferring it but not really worth it) and my GMP one which kicks in at 2020. State pensions paid in 2024 and 2026. The second bucket will be a large cash buffer to subsidise pensions. The third bucket will be 2 multi asset funds, the Vanguard LS60 and either Legal and General multi asset 4 or Blackrock Consensus (not decided which level yet). When we drawdown on these will be up to market conditions and rate of depletion of bucket 2.

Firstly, apologies if I freaked you out mentioning the FSCS limit. I thought it important to get clarification on it, and am satisfied in view of what bowlhead has said that it shouldn't be a problem to have well in excess of £50k in any one fund. Even if it was an issue you wouldn't be that badly exposed as your funds are split between you and you husband.

Although I have gone for a VLS40 initially I am thinking I may have been too conservative, and thinking maybe I should have gone for a VLS60, as I do appear to be in a similar situation to you.

In view of what has been said maybe I should stick with trackers as well. If I do I'd like to split between two multi asset funds as well, just to have not all my eggs in the one multi asset basket. I had looked at the L&G Multi Index Income 4 fund, but didn't find the info that clear about the yield and the trackers in the fund, and it seemed to be for that particular fund on the L&G website you had to go through an IFA, although I believe it is available on some platforms. I've not looked at BlackRock Concensus yet.

The only thing that concerns me is that if I was to plough it all into a VLS60 and similar multi-asset at present, it would be quite a big initial loss (on paper at least) if there was a 40% or higher equity crash around the corner, so tempted to hold back some cash to invest when there is a drop - even although I know the advice is not to try and time the market.

ian-d

Audaxer wrote: »

The only thing that concerns me is that if I was to plough it all into a VLS60 and similar multi-asset at present, it would be quite a big initial loss (on paper at least) if there was a 40% or higher equity crash around the corner, so tempted to hold back some cash to invest when there is a drop - even although I know the advice is not to try and time the market.

I'm loading money in monthly to at least cover off highs and lows over a period of time, and whilst I agree that you can't time the market, I think holding a little back for the big drops isn't a bad idea.

enthusiasticsaver

ian-d wrote: »

I'm loading money in monthly to at least cover off highs and lows over a period of time, and whilst I agree that you can't time the market, I think holding a little back for the big drops isn't a bad idea.

I agree with dripping it in over a period of time rather than put it all in and then find the market drops immediately and you have nothing left to invest. There are a lot of people though who say time in the market is the main thing and trying to time it is pointless.

Marine_life

What an interesting thread. I have a couple of observations:

1. We are in a period of historically low interest rates so anything that has been written about "the 4%" rule is probably (almost certainly) wrong and there are commentators out there now who say it should be more like 2.5% if you want your money to last.

2. There is no empirical evidence that drip feeding into the market is a better strategy financially that putting it all in as soon as possible. The psychology of such a strategy is a different thing.

3. In a risk assessment I might say that I am happy to live with losses .....but I'm not and I don't think anyone else is. More to the point whether I have a risk profile that suggests I should be 80%, 50% or 10% in equities is almost irrelevant as the relative risk across equity classes is materially different.

bostonerimus

Marine_life wrote: »

What an interesting thread. I have a couple of observations:

1. We are in a period of historically low interest rates so anything that has been written about "the 4%" rule is probably (almost certainly) wrong and there are commentators out there now who say it should be more like 2.5% if you want your money to last.

Yes that is true, and using UK historical data the analysis results in something closer to 3.5%. 2.5% is quite pessimistic and drops out if the low interest rates combined with high P/E ratios right now. But remember the 4% rule does take into account all the bad years of market and bond returns and sequence of returns issues can be addressed with a cash buffer and maybe reducing withdrawals in down years.

2. There is no empirical evidence that drip feeding into the market is a better strategy financially that putting it all in as soon as possible. The psychology of such a strategy is a different thing.

Again true, but people can have difficulty putting in a large amount all at once and practically speaking they will take small amounts from their pay and invest it. Even rebalancing has been shown to have no advantage.

bostonerimus

enthusiasticsaver wrote: »

Thanks everyone for some very detailed and useful responses. I agree with Coodiron and bowlhead about not committing to regular drawdown from our investments and we will instead keep a large cash buffer to subsidise our pensions. I have decided against managed income funds.

I must admit I freaked a bit when people mentioned the £50k Fscs limit re fraud as we have 3 times that with Vanguard. i like however the fact that the Vanguard LS60 is already well diversified but for my peace of mind I am going to look at another fund manager offering a similar product to invest in going forward as we will have a further £100k to drip feed in over next year and I feel that is too much for one fund house. We have never kept our banking all with one bank so I see no reason to not use the same philosophy with our investments.

I am thinking a good aim eventually is 15-20% cash and 80-85% invested.

Be careful not to have too much in cash. Not having enough in equities can reduce your returns and those are important to keep up with inflation.

Of course this also depends on the level of guaranteed pension income you have coming in. If you have your basic expenses covered by pensions you can look at investing anything else you have in two ways.

1) I have my expenses covered so I don't need to take any risks with my other money. Just put it in some fixed income/savings bonds that will keep up with inflation.

2) I have my expenses covered so I can take risks with my other money. Invest it in an equity heavy portfolio and hope to grow it significantly. You can take the risk of losing capital because your income need is covered by pensions.

The tricky situation is where you have to fund retirement mainly from drawdown.

Redski69

enthusiasticsaver wrote: »

Thanks everyone for some very detailed and useful responses. I agree with Coodiron and bowlhead about not committing to regular drawdown from our investments and we will instead keep a large cash buffer to subsidise our pensions. I have decided against managed income funds.

I must admit I freaked a bit when people mentioned the £50k Fscs limit re fraud as we have 3 times that with Vanguard. i like however the fact that the Vanguard LS60 is already well diversified but for my peace of mind I am going to look at another fund manager offering a similar product to invest in going forward as we will have a further £100k to drip feed in over next year and I feel that is too much for one fund house. We have never kept our banking all with one bank so I see no reason to not use the same philosophy with our investments.

I am thinking a good aim eventually is 15-20% cash and 80-85% invested.

If you consolidate it all into one Platform you can get preferential rates across your portfolio Fees. For example, Fidelity will give you 20bps across your portfolio if you hold £250K+ with them and an enhanced Client Service offering - as opposed to other Platforms that'll charge you Banded 45bps tapering off.

Feels like a sensible thing to me to lower your overheads !

Ps. Fund Houses deal with some ludicrously wealthy Clients with Portfolio values way into the millions of pounds per Client ... so, £100K is not close to too much for one Fund House and won't even qualify you as a Wealth Client with some !

Hope that helps put some concerns to bed & helps save you some money in Fees !

enthusiasticsaver

Marine_life wrote: »

What an interesting thread. I have a couple of observations:

1. We are in a period of historically low interest rates so anything that has been written about "the 4%" rule is probably (almost certainly) wrong and there are commentators out there now who say it should be more like 2.5% if you want your money to last.

2. There is no empirical evidence that drip feeding into the market is a better strategy financially that putting it all in as soon as possible. The psychology of such a strategy is a different thing.

3. In a risk assessment I might say that I am happy to live with losses .....but I'm not and I don't think anyone else is. More to the point whether I have a risk profile that suggests I should be 80%, 50% or 10% in equities is almost irrelevant as the relative risk across equity classes is materially different.

Interesting observations ML. I think psychologically I find it easier to drip feed money into my portfolio. Although I accept there are ups and downs I don't want to put a significant amount into my portfolio and then check a few weeks later to see the value has taken a nose dive and it is worth significantly less and the red arrow showing how much it has gone down. If I dripfeed I don't worry about it so much as I think it will probably average out over the year with sometimes the value going up just after buying and sometimes going down. On dripfeeding though I just tend to do a monthly or bi monthly payment rather than try and time the market.

enthusiasticsaver

bostonerimus wrote: »

Be careful not to have too much in cash. Not having enough in equities can reduce your returns and those are important to keep up with inflation.

Of course this also depends on the level of guaranteed pension income you have coming in. If you have your basic expenses covered by pensions you can look at investing anything else you have in two ways.

1) I have my expenses covered so I don't need to take any risks with my other money. Just put it in some fixed income/savings bonds that will keep up with inflation.

2) I have my expenses covered so I can take risks with my other money. Invest it in an equity heavy portfolio and hope to grow it significantly. You can take the risk of losing capital because your income need is covered by pensions.

The tricky situation is where you have to fund retirement mainly from drawdown.

Yes, I think it is a bit of a balancing act. Our expenses are mainly covered by pensions but being newly retired there are things we want to do in the early years while we are fit and healthy and those will cost money. Hence the 20% cash buffer. It could well be we never need to touch the investments unless either of us needs care in later life.