VLS80 + What else?

twotonealex

Evening All,

Apologies for my many posts in recent times surrounding my very modest 'portfolio'.

My SIPP consists of around £5700-5800, I have halted contributions for the next 3 years to add to a LISA for a house purchase, however once done I will be continuing and upping contributions. (I'm 27)

Following some very helpful advice off the in-house investment experts I parted ways with my overly-diversified collection of around 10 funds, and have now cashed in my 'winnings' from my Fevertree holding by selling the whole thing.

I have invested around £3500 in VLS80, noting my risk appetite for maintaining the balance of at least 20% in bonds/cash etc.
I now have the remainder of around £2200-2300 and am considering a few options, however I am very much aware that given the very small amounts it will most likely have a negligible impact on my overall SIPP value for a while!

I know it's been a common theme, and recall a few threads recently relating to Brexit fears, but I want to keep my UK % sensible, considering the most likely outcome will result in some form of negative impact on UK markets (at least initially!).

I just don't know whether to diversify further than the VLS80 (Global) fund or whether I shouldn't worry about the UK exposure.

Options:

A) Put the rest of it in VLS80 and forget about it
Keep VLS80 and invest in a less UK-centric fund such as HSBC Global Strategy
C) Keep VLS80 and invest in something else such as an Index tracker (mindful that VLS80 contains some)

Once again, apologies - I know my SIPP is pitiful right now, as my DB pension has been the priority, and this SIPP will play a small part in bridging a 10 year pension gap.

Thanks everyone,
Alex

eskbanker

Not sure if you'll have seen this one but another recent thread discussed the level of UK exposure within various leading multi-asset funds: https://forums.moneysavingexpert.com/discussion/5869905/vanguard-alternatives-without-too-much-uk-exposure

IMHO the best thing to do, especially when starting with a small pot, is to work out an approach that encompasses not just your attitude to risk, but timescales, objectives, etc, and then decide how best to achieve that. It sounds like you've jumped from a poorly constructed portfolio to something better but before actually deciding what you're really aiming for, hence the partial reinvestment of your pot without establishing what to do with the rest.

Perhaps you should consider an option D of figuring out how much UK exposure you want and then using just one of the mainstream offerings (such as HSBC Global Strategy) to deliver it, rather than an incremental tweak on top of VLS?

dunstonh

At £5800 it really doesnt matter what fund you invest in. At all.

Its far too low to be worrying about it. Stick with one multi-asset fund until you get into much higher 5 digits, even 6 digits.

twotonealex

eskbanker wrote: »

Not sure if you'll have seen this one but another recent thread discussed the level of UK exposure within various leading multi-asset funds: https://forums.moneysavingexpert.com/discussion/5869905/vanguard-alternatives-without-too-much-uk-exposure

IMHO the best thing to do, especially when starting with a small pot, is to work out an approach that encompasses not just your attitude to risk, but timescales, objectives, etc, and then decide how best to achieve that. It sounds like you've jumped from a poorly constructed portfolio to something better but before actually deciding what you're really aiming for, hence the partial reinvestment of your pot without establishing what to do with the rest.

Perhaps you should consider an option D of figuring out how much UK exposure you want and then using just one of the mainstream offerings (such as HSBC Global Strategy) to deliver it, rather than an incremental tweak on top of VLS?

Point noted, I will read into this more.

dunstonh wrote: »

At £5800 it really doesnt matter what fund you invest in. At all.

Its far too low to be worrying about it. Stick with one multi-asset fund until you get into much higher 5 digits, even 6 digits.

This was my thought when creating this thread. Point made!

Thanks everyone.

bowlhead99

twotonealex wrote: »

I have invested around £3500 in VLS80, noting my risk appetite for maintaining the balance of at least 20% in bonds/cash etc.

Seems like a perfectly reasonable solution.

I now have the remainder of around £2200-2300 and am considering a few options, however I am very much aware that given the very small amounts it will most likely have a negligible impact on my overall SIPP value for a while!

You will be looking to retire with hundreds of thousands of pounds. At the moment, you have the first six . You are very correct that given the small amounts, you are not going to change the world with how you choose to allocate the last £2k

As you are looking for a fund that allocates your money across the world with about 80% of it in equities, VLS will broadly fit the bill for the first £3500. If it's right for the first £3500 it's not going to be wrong for the next £3500 and the next £3500, and the £3500 after that, and so on. Until perhaps you have £35000 and can look at it again because by that point, an extra percent gained or lost per year is £350 ; not £35.

£35 for a few years is absolutely nothing in the context of retiring with £350000. And anyway, you don't know if changing up the mix will give you £35 extra or £35 less! If the fund you are considering has broadly the same objectives and invests in broadly the same kind of stuff, it will get broadly the same sort or return, though it will take turns swapping with vanguard on who has the better return in a given week, year or decade.

I just don't know whether to diversify further than the VLS80 (Global) fund or whether I shouldn't worry about the UK exposure.

On £5-6k you really don't need to be more diversified than equities in many hundreds or thousands of companies across all major developed and emerging economies plus bonds issued by many hundreds of companies and governments. Which your first £3500 is getting you. So so that for the next £3500 too, and the one after that

A) Put the rest of it in VLS80 and forget about it

Yes

Keep VLS80 and invest in a less UK-centric fund such as HSBC Global Strategy

For £5-10k, one fund is fine. Either pick one or the other. Vanguard is either fine, or it isn't.

And it's fine.

You don't need to split the difference with some other fund that also claims to be fine, to get some sort of average result. Or you will end up with tens of funds the more you research and think "hmm, that is slightly different, I wonder if I should do that too...".

C) Keep VLS80 and invest in something else such as an Index tracker (mindful that VLS80 contains some)

The whole point of Lifestrategy is that it takes your money and allocates it across indexes with a professionally constructed methodology and allocation. There's no point breaking that, by deciding you know best, to try and gain (rather than lose) an extra few tenners a year on your retirement fund

Just recognise that you don't know any better and are just fiddling for the sake of it because you read about people with large portfolios trying to justify their choices on the internet. Don't try to build a baby version of a large portfolio. The Lifestrategy you bought with the first £3500 is already a baby version of a large portfolio, and it's just patiently sitting around waiting for you to buy the other £2300 of it and leave it alone to do its thing for a few years.

When you come back with more money in a few years, have another conversation with yourself and try to decide why pounds number 6000 to 7000 should be invested any differently from the first 6000. You have a couple of years to think on it and will still come back to the same A, B, C choices and if Vanguard are still in business you will probably get the same answers.

Once again, apologies - I know my SIPP is pitiful right now, as my DB pension has been the priority, and this SIPP will play a small part in bridging a 10 year pension gap.

So whether you win or lose a few more tenners by tossing a coin between HSBC and Vanguard or by adding another tracker to Vanguard's allocations to change the average allocation... it's not going to make any material difference to your retirement prospects. Either you are investing enough into your SIPP to successfully bridge your gap, or you're not.



Edit, ah well it seems this was already answered by others (with the same answers) while my tube train was underground. Happy investing!

twotonealex

bowlhead99 wrote: »

Seems like a perfectly reasonable solution.
You will be looking to retire with hundreds of thousands of pounds. At the moment, you have the first six . You are very correct that given the small amounts, you are not going to change the world with how you choose to allocate the last £2k

As you are looking for a fund that allocates your money across the world with about 80% of it in equities, VLS will broadly fit the bill for the first £3500. If it's right for the first £3500 it's not going to be wrong for the next £3500 and the next £3500, and the £3500 after that, and so on. Until perhaps you have £35000 and can look at it again because by that point, an extra percent gained or lost per year is £350 ; not £35.

£35 for a few years is absolutely nothing in the context of retiring with £350000. And anyway, you don't know if changing up the mix will give you £35 extra or £35 less! If the fund you are considering has broadly the same objectives and invests in broadly the same kind of stuff, it will get broadly the same sort or return, though it will take turns swapping with vanguard on who has the better return in a given week, year or decade.

On £5-6k you really don't need to be more diversified than equities in many hundreds or thousands of companies across all major developed and emerging economies plus bonds issued by many hundreds of companies and governments. Which your first £3500 is getting you. So so that for the next £3500 too, and the one after that



Yes For £5-10k, one fund is fine. Either pick one or the other. Vanguard is either fine, or it isn't.

And it's fine.

You don't need to split the difference with some other fund that also claims to be fine, to get some sort of average result. Or you will end up with tens of funds the more you research and think "hmm, that is slightly different, I wonder if I should do that too...".

The whole point of Lifestrategy is that it takes your money and allocates it across indexes with a professionally constructed methodology and allocation. There's no point breaking that, by deciding you know best, to try and gain (rather than lose) an extra few tenners a year on your retirement fund

Just recognise that you don't know any better and are just fiddling for the sake of it because you read about people with large portfolios trying to justify their choices on the internet. Don't try to build a baby version of a large portfolio. The Lifestrategy you bought with the first £3500 is already a baby version of a large portfolio, and it's just patiently sitting around waiting for you to buy the other £2300 of it and leave it alone to do its thing for a few years.

When you come back with more money in a few years, have another conversation with yourself and try to decide why pounds number 6000 to 7000 should be invested any differently from the first 6000. You have a couple of years to think on it and will still come back to the same A, B, C choices and if Vanguard are still in business you will probably get the same answers.

So whether you win or lose a few more tenners by tossing a coin between HSBC and Vanguard or by adding another tracker to Vanguard's allocations to change the average allocation... it's not going to make any material difference to your retirement prospects. Either you are investing enough into your SIPP to successfully bridge your gap, or you're not.



Edit, ah well it seems this was already answered by others (with the same answers) while my tube train was underground. Happy investing!

Thanks Bowlhead99, another equally well made point.

I'll give it a rest, and revisit this whenever that may be in the future.

Alexland

Just one comment from me is that if you are still saving in your LISA for a property purchase you might not want to tie too much of your other money up in pensions at this stage.

Sure make a big enough pension contribution to get employer matching (and avoid higher rate tax if applicable) but if your dream house is unaffordable by a few thousand pounds then you might regret making those extra pension contributions. There is plenty of time to contribute to a pension when you have met the affordability criteria for the property.

Alex.

DennisTenus

It continually amazes me why some people on here think VLS 80 is so great and the best option for all.... I have considerable money invested in it and so far returns are almost my worse performing fund. Looking at past performance compared to many other funds it just ok.

Yes I know my other funds may be higher risk but there is risk in not taking enough risk. What's the point?!

eskbanker

DennisTenus wrote: »

It continually amazes me why some people on here think VLS 80 is so great and the best option for all.... I have considerable money invested in it and so far returns are almost my worse performing fund. Looking at past performance compared to many other funds it just ok.

Yes I know my other funds may be higher risk but there is risk in not taking enough risk. What's the point?!

Perhaps you're misunderstanding people who say (factually) that it's a well-diversified low-cost fire-and-forget fund of funds and are instead thinking that you're hearing them opining that it's "great and the best option for all"?

Are you comparing it with genuine peers and if so, which ones and over what period?

bowlhead99

DennisTenus wrote: »

It continually amazes me why some people on here think VLS 80 is so great and the best option for all....

Nobody in this thread is saying it is the best option for all. It's just being suggested that if OP has it and understands it he might as well buy more of it, as there is minimal value in going bespoke at minimal values.

I have considerable money invested in it and so far returns are almost my worse performing fund.

Yes I know my other funds may be higher risk

So, well done, you selected higher risk funds in a period when markets were going up, and you got a better return. How would they have done in a period when markets were not all going up so emphatically? The point of investing is to buy something that suits your needs; not to get the highest return in a short period by buying a risky selection of holdings and hope you won't have to laugh off the heavy losses.

Looking at past performance compared to many other funds it just ok.

So you can compare it against many other funds which take the same sort of risks, and it performs OK against them. And it's globally diversified, holds multiple asset classes, with a low OCF. Job done.

So, remind me why we shouldn't suggest that the OP, who has already invested £3k into it, invest his next £2k into it too? The fact that having it as a lazy option suitable for newbies gets a bit monotonous is not a good reason for him to avoid it. If you suggest something else would be better for him, ensure you accommodate the limited information you have about his needs, his knowledge and understanding of investment funds generally

there is risk in not taking enough risk. What's the point?!

I don't know what the point is, it's your post

There's plenty enough risk in investing in something that could lose 40% or more in a crash such as VLS80. By contrast, there's not a huge amount of 'risk of missing out' on returns by capping your equity content at 80% of your fund holdings. If you are like the OP, considering investing £2200-2300 in a fund (not £220000-230000), it seems pretty fit for purpose.

StellaN

DennisTenus wrote: »

It continually amazes me why some people on here think VLS 80 is so great and the best option for all.... I have considerable money invested in it and so far returns are almost my worse performing fund. Looking at past performance compared to many other funds it just ok.

Yes I know my other funds may be higher risk but there is risk in not taking enough risk. What's the point?!

As others have already said, it is always relative to one's risk exposure. I myself am invested in 100% equities so in a bull market my funds/IT's are expected to do better than VLS80, however I have a sufficient cash fund to see me through a crash so my risk exposure is quite high. Nonetheless, for most people who are new to investing as well as some experienced investors then one multi-asset fund instead of a bespoke portfolio is fine for them because they have a lower tolerance to risk - so horses for courses.

There are of course other multi-asset funds to select from apart from VLS and these include HSBC Global Strategy (which I like), L&G Multi-Index, Blackrock Consensus, Architas Multi-Asset etc..