How to invest money that has been transffered to SIPP

mr_munchem

economic wrote: »

What I meant was I am new to biotech and em (haven’t invested much in them).

But I still think it's worth fully considering if there is any situation in which your parents might need that money - I'm thinking care?

Linton

Mr Munchen's original posting seems right to me. Investing £200K of someone else's money is a far more serious responsibility than investing your own and I think you should be taking professional advice for you own protection as much as for your parents' and brother's. In my view you are using inappropriate investments for the purpose. Just suppose the next great crash happened in 6 months time. The type of investments you are using could drop by 50%. What would happen to family relationships? Your parents say they arent bothered, they make start to be in those circumstances. How would you feel? What about the stress on yourself - would you lie awake worrying?

I suggest you focus more on wealth preservation and only a moderate steady return.

economic

mr_munchem wrote: »

But I still think it's worth fully considering if there is any situation in which your parents might need that money - I'm thinking care?

They will have enough money for that. They have a lot of cash plus their fairly conservative S&S ISA. They have a number of annuities plus full state pension that will kick in in a couple of years. a house worth 700k that is too big for their needs (so can release equity). They have potential inheritances themselves of around £400k in total (properties that earn income).

economic

AnotherJoe wrote: »

Looks fine to me for a 20+ year investment and not at all dissimilar to one of my SIPPs. I also have biotech, (international biotech Trust.) and EM (Vanguard , VFEM) and Scottish Mortgage !! Instead of vanguard LS I have HMWO as I don’t like the overconcentration that VLS has in the FTSE.

Strangely no one, including the IFA responding here,seems to have understood your clear requirements that the parents aren’t bothered about ups and downs as they won’t be using this / don’t need it and that its a very long investment timescale.

Thanks for your reply. Do you mind me asking how old you are? Not that it matters but at least i may feel more comfortable taking the risk i am proposing (since given the posts i am getting a little worried now about my selection, although i know i dont need to be).

What is your split like in terms of weightings? Are those 3 funds all you have in your SIPP(s)?

I can not make it any clearer to everyone - the money wont be needed by my parents. In fact they have a nice problem in that they have too much money then they need and are worried about future IHT implications. But i don't really want/need their money at the same time. For them to spend existing savings outside of their pension is the sensible thing to do for tax purposes which is why i want to construct a portfolio to suit me and my brothers needs long term - and i mean really long, like 20 years plus.

economic

Linton wrote: »

Mr Munchen's original posting seems right to me. Investing £200K of someone else's money is a far more serious responsibility than investing your own and I think you should be taking professional advice for you own protection as much as for your parents' and brother's. In my view you are using inappropriate investments for the purpose. Just suppose the next great crash happened in 6 months time. The type of investments you are using could drop by 50%. What would happen to family relationships? Your parents say they arent bothered, they make start to be in those circumstances. How would you feel? What about the stress on yourself - would you lie awake worrying?

I suggest you focus more on wealth preservation and only a moderate steady return.

Wealth preservation for who? Me and my brother are in our early 30s. We hopefully wont have access to it for a while. We certainly dont plan to depend on the funds. My parents wont need it at all. Isnt it worth looking at long term growth potential and taking the risk for it?

bowlhead99

economic wrote: »

i am asking the members of this forum whether it is a good idea to wait for a dip given markets are high.

Apart from a minority of posters who are gamblers, most forum members would not advocate 'taking a rest'. Because when you do that, it's just a guess that you think it will go down before it goes up further and you'll be able to pick the correct time to get back in at the right low point before it goes up again beyond where you first decided to get out and wait for it to go down.

You've seen this on lots of other threads no doubt, the question of whether or not to 'take a break' or 'drip feed and defer investing for a bit' comes up all the time.

Maybe drip feed in large chunks is best over the course of 3-6 months?

keep in mind the original pension was pretty much all in equities in the first place.

Exactly, the original pension was already invested and the only reason it's not invested any longer is because you decided the pension couldn't provide the returns wanted and you should move to another provider, and that choice forced you out of the market.

Presuming that assessment [that the old pension couldn't provide the returns your family needed] was correct (and not saying it was or wasn't...), your intention was not really to leave the market, it was simply to change provider. So to now take the active decision to hop out and miss much of the next 3-6 months' equities returns by which point you will be back in again, does not seem enforced or rational.

At the moment, people say (for example), US markets are 'a bit toppy'.

- But in the US, equity analysts are more bullish on equities than at any time on almost 40 years.

- The American Association of Individual Investors reports that private investors in the US have increased their holdings of equities from 66% to 72% of their assets over the last year, the highest level since the dot-com boom of 2000.

- A Bank of America Merrill Lynch survey shows that most institutional investors DD don't expect equity markets to peak until 2019 or later.

- In a classic sign of optimism, investors have been buying tech and industrials (yay tax breaks) and selling defensive or lower risk sectors like utilities or telecoms, with equities generally in emerging markets, Euro area and Japan all in favour. With the exception of a few such as Woodford (who thinks Brexit fears are overdone), UK equities are relatively less popular with institutional fund managers than at any time since 2001.

So the market is telling you, and the actions of the market participants are telling you, that global equities are a great place to be. You might decide that you are a contrarian and believe that you are right to sell all this current euphoria and slowly buy back in on a 3-6 month timescale ending April or July. That *might* be right - that we're about to suffer a sudden dip and it won't recover by April or July. But just as likely, or more likely, is that markets will be just as high or higher in April or July and then the crash will come later and meanwhile you'll have paid more for the equities by waiting, and missed dividends along the way.

Du you feel lucky, punk?

economic wrote: »

What you say is mostly true. However i am asking for recommendations on biotech and EM as i am fairly new.

If you are fairly new, why not also ask for recommendations on healthcare and exploitation of natural resources, battery tech and automation, and all the other things that could be decent 'themes' over the next half century? The answers surely can't be that SMT and Fundsmith and Vanguard have got all those themes adequately covered in appropriate ratios but have accidently forgotten about emerging markets and bio/health.

The VLS100 fund covers emerging markets as one of its regions, and accesses such markets via a cap-weighted index. Is that a suitable, or the most suitable, way of doing it? If so, buy more EM index if you want more EM or don't bother if you think it's already the right amount. Whereas if you believe it's the wrong way to take EM exposure, then don't buy the VLS, buy the indexes you want for the developed world and but active funds for emerging and frontier regions.

am also asking if there is anything i may be missing or if the portfolio construction is "off".

Perfection is in the eye of the beholder.

Fundsmith and SMT are a couple of ways of getting globally US- weighted exposure following high conviction strategies if you don't think VLS is the way to do it. Whereas VLS is a way to get large cap stocks in a variety of regions covered on an index basis. If you don't think any of the three of them has it quite right, you could buy all three of them, though it sounds like your ratios are somewhat arbitrary.

I already have investments in fundsmith (and polar capital tech which is similar to SMT) so these funds are not new to me and i know what is invested in them and the type of risk i will be investing in.

Noted. But just because you use SMT or Fundsmith in one portfolio doesn't mean it's right for another portfolio which perhaps has a different objective. Even if they might 'hit the spot', you could use this opportunity to put the eggs of this portfolio in different baskets.

perhaps i should reduce the weightings on fudnsmith and SMT to 15% each and have the rest in lifestrategy 100%?

Seems straightforward enough, if somewhat arbitrary. How often will you rebalance between the three funds? a What about the fact that you don't think the 6-8% of EM embedded within the VLS is sufficient, and the use of those two global funds will dilute that exposure even further. Change of plans?

Linton

economic wrote: »

Wealth preservation for who? Me and my brother are in our early 30s. We hopefully wont have access to it for a while. We certainly dont plan to depend on the funds. My parents wont need it at all. Isnt it worth looking at long term growth potential and taking the risk for it?

With your own money you can go gung-ho for growth and shrug your shoulders if events catch you out. Do your parents and brother have your level of understanding of the reality of investing? Are they buying into your investment choices with open eyes? Using an IFA takes you out of the firing line when the inevitable crash happens.

If you look on the Deaths, Funerals and Probate board you are likely to see stories every week or two of families being torn apart by ££££££s.

economic

Bowlhead - thanks for your comments and certainly understand where you are coming from. Deciding on investments is more of an art then a science and as you say what looks perfect for person A will look imperfect for person B.

What i would like to ask (seeing as i take your comments very seriously as you are well respected on these boards and clearly have a lot of knowledge) is what do you suggest as a portfolio construction given my position:

- I have a 200k cash SIPP to manage and to decide what to invest in.

- Lets say previously the money was invested in a portfolio similar to a VLS100% fund (which is more or less the truth).

- I know with 100% certainty that my parents will not need to draw on this SIPP.

- Me and my brother do not plan to depend on the funds and the SIPP is expected to be accessed by us in 25 years time.

- Me and my brother are fully comfortable with taking risk and can handle large drawdowns of say 50%.

- The aim is for growth long term (25 years expected time horizon).

How would YOU construct a portfolio given the above?

mr_munchem

Can I ask how you’re going to draw the SIPP in such a way that you and your brother can split it? Maybe I’m missing something.

I would still be cautious with investing this on behalf of your parents and brother, an IFA visit I think would still be good!

AnotherJoe

economic wrote: »

Thanks for your reply. Do you mind me asking how old you are? Not that it matters but at least i may feel more comfortable taking the risk i am proposing (since given the posts i am getting a little worried now about my selection, although i know i dont need to be).

What is your split like in terms of weightings? Are those 3 funds all you have in your SIPP(s)?

I can not make it any clearer to everyone - the money wont be needed by my parents. In fact they have a nice problem in that they have too much money then they need and are worried about future IHT implications. But i don't really want/need their money at the same time. For them to spend existing savings outside of their pension is the sensible thing to do for tax purposes which is why i want to construct a portfolio to suit me and my brothers needs long term - and i mean really long, like 20 years plus.

I am early 60’s and recently retired and in a similar way to your parents SIPP this one is “earmarked” if that’s the right term for long term investment, and it’s quite likely my kids will get it. I have other sources of funds I’ll be using well before this one including ones outside tax shelters I am spending down first, currently they are growing faster than I am spending. I could almost be your parents LOL.

No the three are not the only investments in the SIPP. The biotech and EM funds are around 10% (just had a look). I also have a big chunk of Fundsmith, some single company shares and overall the makeup would give some respondents here who don’t seem to be able to cater for high risk in any circumstances, apoplexy followed by a heart attack.

EDIT Update; FWIW I wouldn't bother visiting an IFA, because you know what they will advise, a bunch of safe stuff irrespective of your wishes however much you express them (look whats happened in this thread) ,plus they will charge you for advising you to do something you dont want. Thats their job, to suggest "safe" and also they have to protect themselves.

One key point, they certainly dont know any more than you or me what funds will do best long term, so once you've decided to go for a particular level of safe/risk/not safe, then really its a cr*pshoot as to which funds to pick. Yours seems as good as any to me just because that's what I've got (although mine is a bit riskier) so obviously "i would say that wouldn't I?"