Advice transferring Cash Savings to Vanguard

dont_use_vistaprint

Hello

I know practically nothing about investments so please be nice!

Vanguard has been recommended to me by several people who do know more than me and listening to a programme on R4 they sound a good one.

My savings is currently in Cash ISA (£17K) earning practically nothing , sitting in current account (£13K) earning a measly £5 per month reward. The Cash ISA is primarily made of 3 years savings for 2 kids Uni costs & is just starting being used and for the next 5 years, but still being topped up £400-£700 per month. With salary sacrifice I also put around £500 a month into Aegon pension (Group Pen Default product)

Looking at the Vanguard lifestrategy products 100% stock through to 20% stock, they all look like pretty good returns.

So my question is 1) how do I best transfer the cash into Vanguard, all at once or in chunks each month,m do split it across the funds, or choose one say the 60% or 80% stock. 2) Is it worth retaining any in the CASH ISA? I'm OK with a bit of risk and could withstand losing 10-15% if it means I might gain 10-15%. 3) Should I put more each month into the pension and less into savings.

Thanks for any advice

A_T

Are you thinking of gains of 10-15% per year? That's is a little optimistic. Stocks have done very well the last few years but this may not continue. Think in terms of gaining 6-7% pa and perhaps risking losing 30-40% if the markets crash.

dont_use_vistaprint

Hi A_T

Im hoping to beat the CASH ISA rate of 0.something after any fees and if I can make 5% that would be fantastic. I'm happy to take risks to reach 10-20% like the 100% vanguard stock product does, with some of my money, but I wouldn't want to lose as much as 30% overall, probably 10-15% loss would be my limit.


I have looked at the trends for all the vanguard lifestrategy products for the last five years and they have never lost, always grown, many often 10-20% p.a, so a loss of 30-40% would be extraordinary.

Is this the general opinion of a large number of people that a crash like that is much more likely in the next 5 years than it was thought to be 5 years ago. ?

Shashy

dont_use_vistaprint wrote: »

I have looked at the trends for all the vanguard lifestrategy products for the last five years and they have never lost, always grown, so a loss of 30-40% would be extraordinary.

It wouldn't be extraordinary, but there's no point trying to second guess if/when it may occur. Standard advice tends to be that if you need the money within the next 0-10 years then you shouldn't be exposing it to equities anyway.

However, back to topic; when you say "move to Vanguard" do you mean using Vanguard as your investment platform, or do you mean investing it in one of their funds? Needs clarifying before people can best offer help :-)

dont_use_vistaprint

Hi Shashy

I mean using the online platform directly myself , putting lump sums and regular DD's from my bank accounts into the life strategy products, logging on and seeing how they are doing etc. Selling them when I need to access money , but mostly buying / saving. Had a quick look at a friends account and it seems straightforward for savings, I don't want to be buying and selling during the day or anything like that

Does that make sense?

dont_use_vistaprint

Shashy wrote: »

Standard advice tends to be that if you need the money within the next 0-10 years then you shouldn't be exposing it to equities anyway.

Sorry but what does that mean to me , in regard to putting money into the 5 different lifestrategy products. does it mean the 100% / 80% products are a bad idea and I should go for the 20% and 40% instead ? Why is that ?

AlanP_2

dont_use_vistaprint wrote: »

Hi A_T

Im hoping to beat the CASH ISA rate of 0.something after any fees and if I can make 5% that would be fantastic. I'm happy to take risks to reach 10-20% like the 100% vanguard stock product does, with some of my money, but I wouldn't want to lose as much as 30% overall, probably 10-15% loss would be my limit.


I have looked at the trends for all the vanguard lifestrategy products for the last five years and they have never lost, always grown, many often 10-20% p.a, so a loss of 30-40% would be extraordinary.

Is this the general opinion of a large number of people that a crash like that is much more likely in the next 5 years than it was thought to be 5 years ago. ?

Over an extended period of time you should do a lot better from equities than from cash.

Whilst the general direction of equities is that the vlue increases over time it doesn't do so steadily and reliably, they are UP, UP, DOWN, UP, SAME, DOWN, UP even on a minute / hourly / daily basis let alone over a year.

All equity markets have had a great run over the last 8/9 years since the last big down event (financial meltdown in 2007/8) but the next event to cause a major downturn could occur this afternoon, tomorrow or not for a few more years yet. The fact that all VLS funds have done well over the last 5 years is to be expected, they track broad global markets. When those markets fall in value they will track them down as well.

Looking back over historic returns would suggest that bull markets (where values go up & up) always end and prices fall, but then start to go up again at some point.

It is worth bearing in mind you only really make a LOSS when you sell, until that point it is a just a number on a computer somewhere.

Taking retirement savings as an example:


If you are in your 20s then a fall of 30/40% is almost irrelevant as you can't access it until 55 at the earliest anyway and the expectation would be that it would go up in value substantially over the next 35 years so you are not realistically going to make a loss due to that event.

If you were 54 it becomes a lot more relevant if you were hopingto access it at 55 as you don't have much recovery time so you might have to sell and make that loss.

This is why the timescale of your investment plan is key, give or take a year or so (you might decide to continue working until 56 as you get closer).

I wouls suggest that you look at the "whole financial / family / lifeplan situation" in the round and not pick out one bit (£17k / £13k that is in cash at the moment).

So ages, mortgage, pension, spouse pension, savings, planned expenditures, hoped for retirement dates, new Maserati as a Birthday Present - whatever is relevant to you.

Once you have a clear idea of what "cash" you need when, for what purpose, you can come up with a plan to get there.

Given what you say below I wouldn't put the Cash ISA money into any investments as you need to spend it over the next few years. Interest paying Current Accounts & Regular Savers would be a better option to earn more on it without risk (except inflation which you have as a risk already so no change there).

The £13k, if that is your only other easily available cash, I would do the same with so that you have an Emergency Pot just in case redundancy strikes, or you need to pay a largish unexpected bill (new boiler maybe). You don't want to be relying on selling an investment at whatever price it happens to be that day just because you "must" have the money now.

Soemone who works for the same organisation as their spouse faces a much more difficult situation in the event of redundancies than if both are with separate companies, even better if in different sectors of the economy.

As I say, look at in the round, I have just picked up on the 2 points you mentioned but there could be lots of other stuff we know nothing about which could change those opinions.

bostonerimus

dont_use_vistaprint wrote: »

Hello

I know practically nothing about investments so please be nice!

Vanguard has been recommended to me by several people who do know more than me and listening to a programme on R4 they sound a good one.

My savings is currently in Cash ISA (£17K) earning practically nothing , sitting in current account (£13K) earning a measly £5 per month reward. The Cash ISA is primarily made of 3 years savings for 2 kids Uni costs & is just starting being used and for the next 5 years, but still being topped up £400-£700 per month. With salary sacrifice I also put around £500 a month into Aegon pension (Group Pen Default product)

Looking at the Vanguard lifestrategy products 100% stock through to 20% stock, they all look like pretty good returns.

So my question is 1) how do I best transfer the cash into Vanguard, all at once or in chunks each month,m do split it across the funds, or choose one say the 60% or 80% stock. 2) Is it worth retaining any in the CASH ISA? I'm OK with a bit of risk and could withstand losing 10-15% if it means I might gain 10-15%. 3) Should I put more each month into the pension and less into savings.

Thanks for any advice

First of all educate yourself about investing, funds and pensions. The basics shouldn't take you long. You should probably be emphasizing pensions because of the tax breaks, but you need to understand your pension. Is it a final salary one or a defined contribution one where you pick investment funds?

If you are thinking of moving a cash ISA to stocks and shares ISA realize that the latter comes with risk of losing money. A 100% stock fund will give you the chance of big gains and losses....if you go with a 100% bond fund those gains and losses will be significantly smaller.

Linton

Cash savings and equity (share based) investing serves two different purposes. It would be wrong to move money from cash to investments purely because interest rates are low. If you need to use the money in 5 years or less investing in shares would be foolish as there is a reasonable chance you will have less money at the end than you started with. On the other hand if you dont need the money for the next 10 years keeping it all in cash could well lead to you significantly losing out to inflation.

One thng you could do is to split your money into two separate tranches. Keep sufficient to meet the next 5 years (or more) requirements as cash and invest the rest for the long term.

Now isnt any more or less risky than it was 5 years ago. It just turned out that we have been extremely lucky over the past 5 years. Whether this will apply for the next 5 is another matter entirely. In 2000 it turned out that there were 2 very large crashes in the following 8 years. It's unpredictable.

Bravepants

Agree with the good advice here.


+1 for the fact that you only have a loss if you sell when low.

dont_use_vistaprint

Hmm thank-you for the advice, seriously i mean that, but it seems to be saying to simply accept that inflation will slowly erode my £30K savings, rather than attempt to make it work.

Imagine its 30K not needed for 10+ years , how best to move it , all at once, a certain amount per year? choose one or multiple Vanguard LS products ?