S&S ISA decisions

Abidylan

I would welcome any pointers on the following:

I already have X 2 S&S ISAs and considering a third one.
1-VLS 80 (doing OK)
2-Woodford (3rd year, no real progress)
3- Considering S&S ISA, undecided as to fund

A. I understand that having committed to the first 2, I should ‘set and forget’ and resist any temptation to switch, given these are the normal ups and downs in the market and are to be expected.

So apart from the advice to ‘stick’, is there anything else I should consider? I’m under no particular pressure I just wonder if there is ever a time to bail out?

B. Finally, I would also welcome any suggestions on investing in a third S&S ISA, that would complement what I already do have. Would it be ‘over the top’ to invest further in VLS or for broader diversification choose another multi index fund.

Thank you for your time.
Abidylan

badger09

Why do you need 3, or even 2 S&S ISAs?

Which platform are you with.

Approx how much is invested, and how much are you looking to invest now?

What are you trying to achieve?

Abidylan

I want to continue to make the most of my full annual ISA allowances and in addition to cash I am looking for a diversified portfolio as a long term investment, I!!!8217;m not entirely risk averse and I have been experimenting with some p2p investments also.

Like many inexperienced investors there is a temptation to want to !!!8216;take action!!!8217; (somewhat naive I know) or at least to consider options, if any. I!!!8217;m with Cavendish/ Fidelity Funds Network. I have cash waiting to be invested. Hence wondering whether to stick to VLS, as its familiar.

jimjames

If you're with a fund platform then you don't need to have any more ISAs, just add the money to your existing one in whichever funds you want

Abidylan

Thanks, aware of the technicality of adding money (using annual ISA allowance) , what I’m really looking for is help around fund selection to ensure a diversified portfolio. Is there a downside in my just loading more into Vanguard and leaving Woodford alone?

Do those of you who are more experienced investors stick to your initial choices, for the long haul?

bowlhead99

Abidylan wrote: »

Thanks, aware of the technicality of adding money (using annual ISA allowance) , what I'm really looking for is help around fund selection to ensure a diversified portfolio. Is there a downside in my just loading more into Vanguard and leaving Woodford alone?

The whole point of the vanguard fund you have it is not that it's 'familiar', but that it's already diversified. It invests in multiple asset classes around the world and holds equities in both developed and emerging markets.

If the amount you hold in it is one or two or three full annual ISA allowances, there is no real reason to add something different to it to 'diversify', unless you are a particularly sophisticated investor with a specific goal for which it doesn't cater - and without intending any disrespect, it doesn't sound like you are the sort of advanced investor who needs to introduce extra complexity.

Do those of you who are more experienced investors stick to your initial choices, for the long haul?

An experienced investor should have the ability to pick a portfolio of 'initial choices' that work for the long haul subject to periodic rebalancing and monitoring their activities to ensure they're still fit for purpose.

They may find over time that they discover a new product which was not previously available, or of which they weren't previously aware, which could improve the portfolio if added - perhaps just bolted-on, or perhaps in replacement of something else. So, it is certainly not unheard of for an experienced investor to add or change a portfolio, but you might expect them to be more likely to get it right first time.

There is probably a tipping-point where an inexperienced investor becomes an experienced and seasoned veteran, for whom selecting an advanced and complex portfolio (rather than just buying a portfolio fund like VLS off the shelf) becomes something suitable for them to do. Gaining experience is a slow process that happens over time if you take a real interest.

However, I suspect many inexperienced investors perceive they have reached that point well before they really have.

In year one, they buy a multi asset portfolio fund. But in year two, they are impatient, and already have a whole year of having that fund sit in their online account, so they figure they are experienced or at least "intermediate" rather than beginner, because nobody likes the negative connotations of being a beginner or newbie. And they know (or think they know) that non-novice investors don't all just use off-the-shelf ready-made portfolio funds like VLS.

So they read the popular press at the time and decide Woodford is a good manager, so they buy his specialist fund that only really caters to one sector out of ten to fifteen, and throw it into the existing portfolio without addressing the other ten to fifteen sectors. They think by doing that, they have 'diversified' away from their previously-held multi-asset fund, when instead they have actually increased their concentration to that particular sector.

Then the next year, continuing with the perception that 'the more the merrier' when trying to diversify, they look around at the 3000 other fund options and wonder which of those funds they should buy for the coming year's allowance. Unsure, they ask for opinion online, and also ask whether more experienced investors change their portfolios.

Really the guidance they should get is:

Experienced investors do change their portfolios but they fully understand their own goals and objectives and opinions, and they understand the options available and how those options might complement their existing holdings or other new holdings in pursuit of the goals. But that doesn't mean that a less-experienced investor should change up their existing portfolio, unless it's been designed poorly.

If your portfolio ain't broke, don't try to fix it. If it is broke, consider using your slightly-increased experience acquired since the point when you first built it, to rip it up and start again. What you don't need to do is take it in turns to buy something different with each new annual ISA subscription because a portfolio that's a third generalist global multi asset, a third specialist UK-focussed equity income, a third [something else picked based on the answer to 'what should I buy next' from an anonymous person online] is unlikely to be the optimum portfolio for anyone.

You could probably instead replace the whole lot with VLSxx% equity, or with one of a number of their rivals in the same field who have sprung up with more offerings since VLS launch. I think Woodford is still a decent manager but that doesn't mean I would put a third of my portfolio into one of his specialist funds when there are lots of other sectors to fill. However, you haven't given any indication of values. Perhaps your VLS ISA is eight times the size of your Woodford one, in which case you could just add more of the same in the same proportions if you like that particular allocation.

Abidylan

Bowlhead99. Thank you so much for your considered and detailed reply. I very much appreciate your time as well as the benefit of your experience .

Your analysis of my situation is astute, and largely accurate. I do however still consider myself to be a novice investor.

It!!!8217;s such a complex area and the more I read the less I feel I know, hence my willingness to engage in this forum.

My focus is on exploring investment options - more of the same or switch, if so, where? Are VLS!!!8217; rivals (HSBC Global Strategy and L&G Multi Index funds) too similar?

Thanks for all the help I!!!8217;ve had so far. Any further pointers would be also welcome.

bowlhead99

Abidylan wrote: »

My focus is on exploring investment options - more of the same or switch, if so, where? Are VLS' rivals (HSBC Global Strategy and L&G Multi Index funds) too similar?

Either of those could be fine.

They have different approaches to each other, with L&G having a relatively high UK-listed equities content and HSBC being more international with a much lower UK content. But they both have a range of funds targeted for different risk levels so you don't need to do the thinking, just buy and forget and they will aim to keep the portfolio on track for that particular risk level.

It is a much more sensible approach for a novice, than buying single sector specialist funds like Woodford's UK equity income fund, and then trying to buy a whole load of other funds to balance it out to cover all the other sectors and give yourself a rounded portfolio.

The approach taken by HSBC and L&G differs from Vanguard's, in that Vanguard fixes the percentage of equities within the total and the percentage of UK equities within the total equities, and keeps rebalancing back to that target. You just decide what percentage you want in total equities and everything else follows. The others also periodically adjust the weights of different areas (regions as well as asset classes) to follow a target model, but don't guarantee a specific level of bonds, which will vary from time to time as the global economies go through their cycles. You just say what risk level you want, and they do the rest, with a slightly more active approach, but similar cost.

Here are the factsheets for L&G Multi-asset 6
https://literature-lgim.huguenots.co.uk/srp/documents/?type=FS&ISIN=GB00BYXQ3L49
and 5
https://literature-lgim.huguenots.co.uk/srp/documents/?type=FS&ISIN=GB00BYXQ3K32
(the bigger number the higher risk and potential return)


Vanguard (unlike L&G) does not use a particular direct property component, because they want to invest in all their own funds and they don't have one, so they make the excuse that you don't really need it. They have less of an active management overlay, just sticking to stocks and bonds which are the main tools the others use, but in a different mix.

In your shoes, I would probably:


- scrap the Woodford fund, not because it's necessarily going to be a bad fund but because it's a specialist fund and there is no point trying to build a whole portfolio of specialist funds when you don't have the tools for the job (the tools for the job being knowledge and experience of asset allocation and an understanding of all the products out there in all the sectors, or a paid advisor to help).

- put your Woodford money into one of the other product ranges mentioned, picking a suitable level of risk (don't just buy the HSBC Adventurous one because you saw it went up more than Dynamic or Balanced or Cautious when the stock market went through the roof and sterling revalued - because the opposite can happen).

- if that product range is good enough for your ex-Woodford money it is good enough for your new ISA money for the current year too.

- consider whether to move your Vanguard to one of the other product ranges mentioned, to keep everything simple in one fund, or keep it where it is. And if you want to keep it where it is, maybe use that instead of the other product ranges to replace your Woodford and the new money... and then you'll still have everything simple in one fund.

You say your VLS 80 has been doing 'OK', but really the long term view is that it has been much more than 'OK' over the 7 years in which it has existed - producing strong returns as it has been helped by the booming global markets and the devaluation of pound sterling, when you measure its global results in pound sterling.

If you've only caught the tail end of its performance by buying in recently, you might not notice that the longer term returns have been great - but generally you should not expect those results again over the *next* 7 years from an 20% UK equity/60% international equity / 20% bond mix like VLS 80.



So, set your expectations accordingly and if you are considering how much risk you're willing to take, assume that something like a VLS 80 or 100, or HSBC Adventurous could lose 40% over a year or two and you might need to wait a pretty long time for recovery if it does. Obviously (I hope) you won't intend to sell up when prices are on the floor, so it might just be an 'on paper' loss but you need to have the stomach for it, because some people think they can handle it and then a crash happens and they realise they can't, and they take the money out of the fund to avoid losing more, and then they miss it going back up so they've destroyed their wealth.

jimjames

Abidylan wrote: »

Thanks, aware of the technicality of adding money (using annual ISA allowance) , what I’m really looking for is help around fund selection to ensure a diversified portfolio. Is there a downside in my just loading more into Vanguard and leaving Woodford alone?

Do those of you who are more experienced investors stick to your initial choices, for the long haul?

I think the problem is your terminology, I read "Finally, I would also welcome any suggestions on investing in a third S&S ISA" as meaning you want to open a third ISA, when it appears you actually mean fund not ISA. A S&S ISA can contain many funds, the ISA is just the wrapper.

As above the idea of a VLS fund is to be diversified so you shouldn't need to have any other funds alongside it but if you want to dabble then you could have a small amount in something more speculative.

Abidylan

Thank you Jimjames. Yes I need to work on my terminology. Thanks for the guidance and feedback, it!!!8217;s the only way to learn.

Abidylan

Wow! I need to take some time to absorb and reflect on this Bowlhead99. I’m grateful for your helpful guidance.

I have been having second thoughts on Woodford income Focus , as it doesn’t seem to have got off the ground, even though I am aware that it takes time for a new fund to build up. Also had second thoughts about it’s UK focus.

Quite a lot to get my head around. I’ll give it my careful consideration, when I’m wide awake!
Thanks very much.