Fund and broker advice please

seacaitch

dunstonh wrote: »

It has it's uses but its a niche fund. It starts at a higher risk than most consumers accept and ends up at a lower risk than most consumers accept. You are not in control of your asset allocation. It is higher cost than VLS. And alternative lifetstyling funds are available at 0.05%.

If you fit the niche, then fair enough but you may be better off just going with VLS80 and fundswitching down to 60 and 40 when you feel it is right for you.

Yes, I acknowledged the niche aspect in my post.

And I believe that, generally speaking, removing asset allocation decisions from the hands of the punter and into the hands of a process (whether to a risk target or to an asset allocation static target or pre-defined glide-path) will normally be a strength, not a weakness, and the VTRF range helps provide this.

Manually making decisions to dial down the risk by switching from VLS80->60->40, for example, will, due to human nature, almost inevitably involve an element of market timing creeping into the decision, something which many people prove poor at and find stressful to undertake. Hence an element of automation here will be an advantage to many people.

I'm an experienced investor (25 yrs) and have lived exclusively off an investment portfolio for 18 years now, so I'm happy to make these types of decisions for myself. But with my partner's early retirement portfolio, I'm seeking to help establish something as fire-and-forget as possible, requiring minimal decision making by her.

A key downside of the VTRF range is the same as that of VLS: home bias, no property etc, fixed asset allocations (although depending on the circumstances, these can also the strengths of the range, eg. helping drive some of the good performance to date when conditions proved favourable to the allocation).

The cost difference of VTRF to VLS is only 2 bps, so not material in the period over which this might be used (in my example).

The bit of new info in your post is your reference to the 0.05% alternatives. Which ones are you thinking of?

Malthusian

seacaitch wrote: »

And I believe that, generally speaking, removing asset allocation decisions from the hands of the punter and into the hands of a process (whether to a risk target or to an asset allocation static target or pre-defined glide-path) will normally be a strength, not a weakness, and the VTRF range helps provide this.

Except the decision isn't removed from the hands of the punter. Deciding to stay in the Vanguard Target Retirement fund and let it switch automatically is still a decision.

It is a truism that everyone should review their investments annually at minimum (or pay a professional to do it). At this point you need to review the investments that the VTR fund happens to be invested in at this given moment, and decide whether they are still suitable, taking into account any changes in circumstance. It makes no difference whether your asset allocation is fixed, based on a glide path or randomly chopped and changed every month based on what the Telegraph is pushing; it still need to be reviewed annually at minimum.

Assuming that it'll be fine because you put it into the hands of a pre-determined glide path years and years ago is bad investing.

Manually making decisions to dial down the risk by switching from VLS80->60->40, for example, will, due to human nature, almost inevitably involve an element of market timing creeping into the decision, something which many people prove poor at and find stressful to undertake. Hence an element of automation here will be an advantage to many people.

Why is letting a pre-decided lifestyling path automatically switch you from VLS80->60->40 a good idea but manually deciding to switch from VLS80->60->40 a bad idea?

seacaitch

Malthusian wrote: »

Except the decision isn't removed from the hands of the punter. Deciding to stay in the Vanguard Target Retirement fund and let it switch automatically is still a decision.

That is simply a statement of the obvious and isn't adding anything to the conversation.

Malthusian wrote: »

Assuming that it'll be fine because you put it into the hands of a pre-determined glide path years and years ago is bad investing.

Why is letting a pre-decided lifestyling path automatically switch you from VLS80->60->40 a good idea but manually deciding to switch from VLS80->60->40 a bad idea?

Your response reads as if you didn't actually read my post - or perhaps I didn't explain things well enough even though I tried to be clear writing it, but perhaps some important subtleties were lost.

Limiting their own involvement to strategic oversight, and "outsourcing" investment decision making to a sound and automated process is, for many people, likely to lead to better results than making decisions themselves on a tactical basis, where they are subject to emotions and events. Most investors are themselves the weak link in their own strategies.

With that rationale in mind, I'm interested in an approach that automatically attempts to de-risk part of a portfolio in order to meet a specific goal (a drawdown schedule). The desired schedule is known in advance and is unlikely to change. I described the specific use case earlier: partner's early retirement bucket to bridge ages 55-68.

I'd reiterate that I have myself been drawing down a (largely actively managed) portfolio for nearly two decades now, so I am not inexperienced in the task at hand, but I'm exploring methods to meet these goals in a different manner that's consistent with what I've written in the two paragraphs above.

I've explored VTRF as one option to help do this, and although not ideal can see how it could do a job, but I'm interested in other suggestions also.

cfw1994

dunstonh wrote: »

Given the small cost difference, I would choose whole of market over restricted every time. Things change often and the best option now won't be the best option in 5 years time.

Well, happy to be corrected......but I would very respectfully differ here!
Given a small cost difference in fees, surely the best choice for the OP would be the one that costs the least?
You can always chose to move later if needed.....
You say “things change often”, & I am sure many options and possibilities could arise....but I can equally easily imagine 5-10 years passing, and the x% saved in fees (think the magic of compounding!) is key to maximising the long term pot for the OP, surely?

Have to say (as a non IFA!), I would just go with VLS, and given you are looking at a 15+ year outlook, probably the VLS80. Perhaps check you can adjust it in future to a 60 or 40, which I imagine is allowed..

Malthusian

seacaitch wrote: »

Limiting their own involvement to strategic oversight, and "outsourcing" investment decision making to a sound and automated process is, for many people, likely to lead to better results than making decisions themselves on a tactical basis

Philisophically maybe. VTR however isn't a sound process. It switches from 80% equities to 30% equities over time based purely on age. The odds that this is a suitable strategy given someone's retirement goals and prevailing marketing conditions, and the odds that this will remain a suitable strategy throughout the decades, even though both the punter's retirement goals and market / economic conditions are certain to change, are completely random.

I described the specific use case earlier: partner's early retirement bucket to bridge ages 55-68.

A far better alternative would be to manage it yourself, given you clearly know what you're doing. If the idea is to futureproof the strategy against you not being around, a better alternative would be to encourage them to seek independent financial advice if that day comes rather than blindly rely on an automated glidepath.

cfw1994 wrote: »

Given a small cost difference in fees, surely the best choice for the OP would be the one that costs the least?

I almost started wittering about the savings from not being dumped in offshore bonds but then I read the thread and realised we are talking about WOM vs restricted fund platforms rather than independent vs restricted advice.

The saving from using Vanguard to access Vanguard funds rather than a WOM platform is in the region of 0.1 - 0.15% (could easily be lower if you are looking to minimise fees with DIY platforms). You have to value your time as well.

Let's say that I have £100,000 invested across two platforms. Would I agree to do the admin on someone else's investment account for £50 a year? Hell no. So I'm not going to value my time at less than £50 a year by running two fund platform accounts either.

norfolkfred

Hi

I'm a newbie looking to invest via a platform like H&L , my question is if you buy equities & funds via a platform and the (yes i know its unlikely but) investment platform failed are the investments safe? I realise cash held would only be covered up to the fcsc limit


gratefull for any help

seacaitch

Malthusian wrote: »

Philisophically maybe. VTR however isn't a sound process. It switches from 80% equities to 30% equities over time based purely on age. The odds that this is a suitable strategy given someone's retirement goals and prevailing marketing conditions, and the odds that this will remain a suitable strategy throughout the decades, even though both the punter's retirement goals and market / economic conditions are certain to change, are completely random.

A far better alternative would be to manage it yourself, given you clearly know what you're doing. If the idea is to futureproof the strategy against you not being around, a better alternative would be to encourage them to seek independent financial advice if that day comes rather than blindly rely on an automated glidepath.

Our viewpoints are probably not hugely far apart.

I've operated plenty of different investment and trading strategies over the years, responding to evolving market conditions plus my own evolving investment personality and goals, but a common thread has been a desire to systematise where possible, so that's where I'm coming from. Not inflexible autopilots that may fly you into the ground, but outsourcing certain decisions to processes and rules that promote discipline.

I somewhat disagree with you about the "soundness" of the VTRF process, particularly in regard to the specific purpose I was considering it for. Somewhat, but not wholly, so I appreciate the points you make.

Systematised de-risking of part of a portfolio to a preset schedule entering and during a retirement phase is something I like the sound of as I can see benefits. But, the Vanguard multi-asset funds have asset allocations (as proxies for risk/volatility management + their home bias) that don't really appeal, particularly bearing in mind the market context w.r.t to bond yields. That's probably the main hindrance I see to me being able to make use of these funds for the job I had in mind.

dunstonh

cfw1994 wrote: »

Well, happy to be corrected......but I would very respectfully differ here!
Given a small cost difference in fees, surely the best choice for the OP would be the one that costs the least?
You can always chose to move later if needed.....
You say “things change often”, & I am sure many options and possibilities could arise....but I can equally easily imagine 5-10 years passing, and the x% saved in fees (think the magic of compounding!) is key to maximising the long term pot for the OP, surely?

Have to say (as a non IFA!), I would just go with VLS, and given you are looking at a 15+ year outlook, probably the VLS80. Perhaps check you can adjust it in future to a 60 or 40, which I imagine is allowed..

Given the small cost difference, I would pick an option that allows me to use whole of market investments. For example, picking HSBC instead of VLS60.

The issue is future proofing. Whole of market platforms are futureproofed. Restricted platforms or even own-brand only distribution does not have that.

I guess it is how much value you put on flexibility and choice vs being tied to one provider.

Marius_Titulescu

kidmugsy wrote: »

If you hope to retire early can you explain why you are investing in an S&S ISA rather than a personal pension of some sort?

Also very curious. It seems counter-intuitive to me.