Update - Anyone see any issues with this portfolio?

ValiantSon

bowlhead99 wrote: »

The Blackrock fund is cheaper by 0.13% at HL so if that money is being saved on half the assets in the LISA it will reduce the cost of using HL by between £6.50 and £9.75 versus the figures I was presenting for HL vs AJ Bell for a LISA in the £10-£15k range gross of bonus (i.e. year 3 of running the LISA).

So as I suggested HL are probably cheapest and easiest for now with AJ Bell taking over by the time you've done 3 years of maxing the ISA (assuming your funds are worth at least what you paid for them and haven't dropped in value). HL being totally based on your asset value will be cheap if we get a nice big stockmarket dip and the assets have a low value, even though you won't be happy with the value at the time

My comment also went hand in hand with my other suggestion that the OP would be better off sticking to just the Blackrock fund in the LISA, rather than combining it with the HSBC fund (primarily due to duplication, but also because of the increased cost), so the saving would be greater with HL. My comment about using only Blackrock was in a different post in the thread, so you may not have seen it.

bowlhead99

ValiantSon wrote: »

My comment about using only Blackrock was in a different post in the thread, so you may not have seen it.

I did see that. But presumably the OP's approach of having two funds in each of his ISA and LISA buckets is because he likes the attributes of each of those funds but is not fully sold on which one to get, so he is going to split the difference and do both.

The Blackrock fund by comparison to the HSBC one currently has a considerably higher (25% extra) allocation to UK equities along with more to Europe while having substantially less exposure to equities in US, emerging markets and Japan. With all those sectors offering returns which may differ significantly from each other in any given year, the difference in returns from the two funds from year to year is likely to be well in excess of a small fraction of a percent.

So, while he could just pile all his money into the Blackrock fund because he sees that he can get it discounted to 0.10% a year instead of 0.21% for HSBC, that will give him quite a different result from splitting the money half/half between HSBC and Blackrock, while only saving him half of the 0.11% saving per year because it's only half his portfolio he'd be switching (as half was already going to Blackrock). If I had initially planned to split the difference between those two rival approaches to the mixed asset space (one with 29.5% UK equity and one with 4.5% UK equity) then I wouldn't be tempted to go all in with Blackrock simply because of it offering me a 0.055% annual OCF saving over going 50:50. It's peanuts in the grand scheme of things.

So, on that basis I discarded the idea of piling everything into Blackrock just to save some fees (as there's no point sacrificing your preferred asset allocation for such a small cost differential) and just considered what the HL discount was really offering compared to AJBell undiscounted on the originally proposed portfolio.

As HL's discount isn't as big as the amount by which its annual fee percentage exceeds AJ Bell's, if the Blackrock is only part of the portfolio it doesn't shift the 'inflection point' on the 'AJ Bell cost vs HL cost curve' by a massive amount.

ValiantSon

bowlhead99 wrote: »

I did see that. But presumably the OP's approach of having two funds in each of his ISA and LISA buckets is because he likes the attributes of each of those funds but is not fully sold on which one to get, so he is going to split the difference and do both.

The Blackrock fund by comparison to the HSBC one currently has a considerably higher (25% extra) allocation to UK equities along with more to Europe while having substantially less exposure to equities in US, emerging markets and Japan. With all those sectors offering returns which may differ significantly from each other in any given year, the difference in returns from the two funds from year to year is likely to be well in excess of a small fraction of a percent.

So, while he could just pile all his money into the Blackrock fund because he sees that he can get it discounted to 0.10% a year instead of 0.21% for HSBC, that will give him quite a different result from splitting the money half/half between HSBC and Blackrock, while only saving him half of the 0.11% saving per year because it's only half his portfolio he'd be switching (as half was already going to Blackrock). If I had initially planned to split the difference between those two rival approaches to the mixed asset space (one with 29.5% UK equity and one with 4.5% UK equity) then I wouldn't be tempted to go all in with Blackrock simply because of it offering me a 0.055% annual OCF saving over going 50:50. It's peanuts in the grand scheme of things.

So, on that basis I discarded the idea of piling everything into Blackrock just to save some fees (as there's no point sacrificing your preferred asset allocation for such a small cost differential) and just considered what the HL discount was really offering compared to AJBell undiscounted on the originally proposed portfolio.

As HL's discount isn't as big as the amount by which its annual fee percentage exceeds AJ Bell's, if the Blackrock is only part of the portfolio it doesn't shift the 'inflection point' on the 'AJ Bell cost vs HL cost curve' by a massive amount.

I wasn't suggesting that Blackrock and HSBC were the same, but rather that with the relatively small sums being considered the difference in return would be minimal, and unmerited by the cost difference. No doubt you will disagree, but it is a matter of opinion.

Personally, I prefer the HSBC Global Strategy approach to the Blackrock Consensus one, but in a previous thread the OP was very keen on the Blackrock fund and so it seems strange that they are now looking to mix it with HSBC. I may be completely wrong, but I suspect that, far from a detailed analysis of the allocations within each fund, the OP has plumped for buying both because they are a bit at sea as to what is best. Their apparently spur of the moment decision to split an intended VLS80 ISA investment into a VLS80 + VLS60 one for five years and then probably lump everything into VLS80 would suggest that this was the case.

FIRSTTIMER

Thanks for all this advice. The reason for the split is because of that very reason quoted. I want to see how they perform as I am relatively new to it all.


The four funds will give me some confidence in terms of balance and the very different approaches. I want to see how blackrock performs versus hsbc global on an even split and then review in 5 plus years. I will have another 15+ years to transfer one into the other etc. I do not want all my eggs in one basket - hence the split with the LISA as well as the split with the SSISA with vangaurd. It might be the case the I mix the SISSA to vangaurd 80/100 even split and then move the LISA to all Blackrock or all HSBC Global.

FIRSTTIMER

you are correct here - I am cautious hence the 60/80 split. I will probably go 80/100 in 5 years then in another 10 years on top of that go back to 60/80 and then continue to review to minimise losses etc.

bowlhead99

ValiantSon wrote: »

I wasn't suggesting that Blackrock and HSBC were the same, but rather that with the relatively small sums being considered the difference in return would be minimal, and unmerited by the cost difference. No doubt you will disagree, but it is a matter of opinion.

The returns may not differ much in the long run but with one offering 25% more in the UK while only offering one fifth of the emerging markets exposure and considerably reduced US and Japan exposure, they will certainly not have the same outcomes.

For a saving of only 0.11% per year on the money you flip from the HSBC strategy to the Blackrock strategy (one nineth of a percent per year, on half your money, so 17-18 years for the cost difference to be one percent on your portfolio as a whole), I wouldn't advocate flipping all your money to the 'cheaper' strategy. It would be the tail wagging the dog.

Our difference of opinion is basically just that
- you can't see why someone should pay an extra nineth of one percent per year on half the investments to access a different strategy that might not be better ;
- while I don't see that if you have selected a strategy (even if the method of selection of that initial selection was as basic as just: these two global mixed asset funds approach the problem from two substantially different angles and have broadly similar costs and I don't know which one is best so I will split the difference), then a saving of 0.11% per annum on the half portfolio I didn't initially allocate to BlackRock, is not a significant carrot for me to switch that half portfolio to BlackRock.

Asset allocation first, cost second. The two portfolio options (i.e. 50/50 HSBC Dynamic to BR 85; or 0/100 HSBC Dynamic to BR 85) won't be close to being within a percent of each other after the 18 years it would take for the 0.11% saving on the half portfolio shifted to BR in the latter option to make a whole percent of cost saving. But more importantly, the BR cost saving only exists because HL can afford to offer it by charging 0.2% extra for platform administration and then giving you some of the extra platform fee back as a token discount. Even if that 'special offer' endured for 18 years, the investor would have long since jumped (maybe a decade and a half earlier) to a cheaper provider who didn't need to offer such kickbacks to entice investors.

Personally, I prefer the HSBC Global Strategy approach to the Blackrock Consensus one, but in a previous thread the OP was very keen on the Blackrock fund and so it seems strange that they are now looking to mix it with HSBC. I may be completely wrong, but I suspect that, far from a detailed analysis of the allocations within each fund, the OP has plumped for buying both because they are a bit at sea as to what is best. Their apparently spur of the moment decision to split an intended VLS80 ISA investment into a VLS80 + VLS60 one for five years and then probably lump everything into VLS80 would suggest that this was the case.

I agree, the OP does not necessarily know what is best for them to buy, and has said as much - similar to how neither you nor I know whether they would be more comfortable with the results of what HSBC Dynamic gives them or what the results of BlackRock 85 gives them.

As we can't advise which is better (other than a nod to fractional costs which are certainly not the be-all and end-all of global asset allocation), the best we can do is offer comments on platform choice and the fact that the funds offer a different asset mix. Different ways to skin the cat.

You have fulfilled the brief literally ("can anyone see a much cheaper option cost wise": yes, you can save an eighteenth of a percent on the LISA portfolio by going all in on Blackrock - may or may not be considered a 'much' cheaper option, but good to know). While I raised the point that cost most certainly isn't everything, commented on the breakeven point between HL and a rival and answered the bit about penalties. So, between the two of us the OP probably has a perfect answer to his question, though our natural tendencies to want to get our point across may sound like we disagree more than we do.

enthusiasticsaver

Looks ok to me but I would have gone with just one diversified multi asset fund on a relatively small amount but I understand why you want to spread the risk further by choosing four.