Keeping investing ratios consistent - asset allocation

JustAnotherSaver

Still slowly working my way through Tim Hale's book Smarter Investing & getting to the section about asset allocation as well as reading about this on other sites like Monevator as well. It made me think -

I contribute monthly. Bearing in mind that there are minimum amounts that can be invested in to a fund - i think with HL the minimum is £50pm? Your portfolio may be broken up in to a few funds with the ratios of 60%, 20%, 10%, 7%, 3% (i'm just throwing random figures for examples sake here).

Now if you're investing a couple K per month then fair enough but right now i'm doing £250.
Even going for the 7%, that's £17.50 which is below the minimum amount allowed for the month.

So how do you guys do it then when you drip feed? Do you just do it over a 12 month period?

So in the case above you factor that you'll contribute £3000 for the 12 months so 3% of that is £90 so at some point you'll just whack £90 into that particular fund & then nothing more for the remainder of that 12 months & instead you'll just concentrate on maxing out your other ratios (so £210 for the 7% & then move on and so on...)?


Maybe i'm overthinking but i tried thinking less & didn't even get this far

Tom99

I presume you can then spread your £250 between 5 funds at £50 each and then don't invest for a few months in the ones you only want a lower %age in.

I am with Halifax where there is no minimum but a £2 per deal fee, so it makes sense to stagger the investment rather than invest in every fund every month.

ColdIron

When you are talking absolutely tiny figures like these I think you might need to reassess whether you wouldn't be better served by a single fund until you reach a point where it makes sense. What tangible purpose will a £90 fund serve? Even if it grew 10% in one year when in another fund it would only grow 5%, that's the cost of a small kebab. BTW for HL it's £25 with their monthly savings plan otherwise £100

darkidoe

I would just save that £250/month in a high interest regular saver for a year earning 5% guaranteed and then lump it all into a fund at the end of the the year.

BLB53

Keep it simple and just go with Vanguard Lifestrategy where funds are automatically rebalanced.

JustAnotherSaver

ColdIron wrote: »

When you are talking absolutely tiny figures like these I think you might need to reassess whether you wouldn't be better served by a single fund until you reach a point where it makes sense. What tangible purpose will a £90 fund serve? Even if it grew 10% in one year when in another fund it would only grow 5%, that's the cost of a small kebab. BTW for HL it's £25 with their monthly savings plan otherwise £100

I get your point, though i do hope you realised that i wasn't just going to have £90 in a fund & call it a day? In the case of the OP i was listing % allocations & also my monthly contribution so while the 3% fund would be £90 in year 1 it would obviously increase year upon year upon year.
Also the 3% like i said was purely an example. Another (example) could be 4 funds of 25% each so now we're talking £750 per year, year upon year upon year (assuming the monthly contribution never increases which i'd hope it would).



The reason i was thinking about this was simply what i was taking from the book i mentioned where he details the need to diversify. I believe the VLS funds do a good job but do not cover everything? So isn't there benefit to adding maybe 1 or 2 other index trackers? Not 10 or 20 but just 1 or 2 in addition? Or not with the amounts listed? If it's the amounts listed that would have you saying only stick with VLS then at what point does it become an option to include 1 or 2 other index trackers?

For the record i am actually with the VLS range right now. It's just like i said, after getting maybe 3/4 the way through the book i was starting to wonder if i should include 1 or 2 other index trackers.

darkidoe wrote: »

I would just save that £250/month in a high interest regular saver for a year earning 5% guaranteed and then lump it all into a fund at the end of the the year.

That's actually an interesting thought. Like you said it's guaranteed.

I'd be interested to see what others think of this -vs- just putting the £250 into the fund month-by-month? Which would you suggest & why?

Alice_Holt

BLB53 wrote: »

Keep it simple and just go with Vanguard Lifestrategy where funds are automatically rebalanced.

Yep, firstly build up a good core build.
When you have reached a sensible amount in that fund, then (if you like) you can redirect contributions to another different / more specialised fund. When that has reached a sensible amount - rinse and repeat.

Don't try to split small contributions over many funds - pointless in terms of returns and much, much too complicated.

JustAnotherSaver

Alice_Holt wrote: »

Yep, firstly build up a good core build.
When you have reached a sensible amount in that fund, then (if you like) you can redirect contributions to another different / more specialised fund. When that has reached a sensible amount - rinse and repeat.

Don't try to split small contributions over many funds - pointless in terms of returns and much, much too complicated.

What would be considered a sensible amount? Currently i'm at around £9k in the VLS fund.

After reading other books and getting most of the way through this one as well as online articles i've read too i'm fairly sure it would still be index trackers i'd be looking at, but just where VLS is perhaps lacking.

bigadaj

JustAnotherSaver wrote: »

What would be considered a sensible amount? Currently i'm at around £9k in the VLS fund.

After reading other books and getting most of the way through this one as well as online articles i've read too i'm fairly sure it would still be index trackers i'd be looking at, but just where VLS is perhaps lacking.

Vls isn't strictly and index tracker, it's a diversified multi asset fund that allocates your investments across a range of trackers in different markets.

It will do a fine job, like any other multi asset fund of funds in spreading across a diversified range of equities and bonds. It doesn't include property, little in the way of smaller companies, and the exact allocation may not quite meet your needs, so it's fine to invest in side funds if you so desire.

However many assets are correlated, and your side funds need to be at least a few hundred of not a few thousand to make much difference, since they'll probably only make a few per cent of your total allocation this gives an indication of the size of your investments when it's worthwhile to diversify. You're certainly looking at several tens of thousands before it's worth worrying about.

ColdIron

JustAnotherSaver wrote: »

I get your point, though i do hope you realised that i wasn't just going to have £90 in a fund & call it a day?

Yes, I get that these were only examples but chose to use one of them to illustrate a point. However even if you allocated a tenth of your £3,000 this year we are still in Rogan Josh and a Cobra territory using my 10%/5% comparison. I note now you already have £9K in the VLS100

The reason i was thinking about this was simply what I was taking from the book i mentioned where he details the need to diversify. I believe the VLS funds do a good job but do not cover everything?

Well at 100% equities there are some entire asset classes missing on the diversification front and if this is your issue then VLS80 (with its 10,000 extra bond holdings) would be an easy solution to the obvious omission without adding a separate fund. You could argue that with a 30 year investment horizon bonds could be a drag on performance but equally there is an argument that different asset classes have a rebalancing value in different market conditions, I think Hale does cover this. Most ready made pension funds will not be equity only

So isn't there benefit to adding maybe 1 or 2 other index trackers?
...
at what point does it become an option to include 1 or 2 other index trackers?

Like most things it will depend on many factors and be different for everyone but I'd suggest some way north of 4 figures to escape fast food based analogies. If I'm honest, in your position I'd be tempted to add a small allocation of something it does not, or cannot, already cover (like small caps) but I wouldn't kid myself it would make much difference at this level beyond satisfying my urge to tinker. If diversification was my driver I'd look at something not equity based rather than increasing the risk and volatility of an already high risk fund. What did you have in mind?

Maybe i'm overthinking but i tried thinking less & didn't even get this far

Sometimes less is more

JustAnotherSaver

I googled and found http://citywire.co.uk/money/7-reasons-why-6-savings-accounts-are-too-good-to-be-true/a694900/3

I'm guessing this basically answers whether it's worth saving in a regular saver and then at the end of the 12 month term dumping that money into my fund (be it in S&S ISA form or pension or whatever)...

...in that the answer would be no, just put it straight in to the fund as you don't get the full 5% (or 6% as mentioned in that link).

bigadaj wrote: »

Vls isn't strictly and index tracker, it's a diversified multi asset fund that allocates your investments across a range of trackers in different markets.

It will do a fine job, like any other multi asset fund of funds in spreading across a diversified range of equities and bonds. It doesn't include property, little in the way of smaller companies, and the exact allocation may not quite meet your needs, so it's fine to invest in side funds if you so desire.

However many assets are correlated, and your side funds need to be at least a few hundred of not a few thousand to make much difference, since they'll probably only make a few per cent of your total allocation this gives an indication of the size of your investments when it's worthwhile to diversify. You're certainly looking at several tens of thousands before it's worth worrying about.

So in short sticking to the VLS single fund is fine enough (just a case of selecting the desired ratio - 20/40/60/80/100) until the pot becomes significant, say above £50k?