passive investing

Novice_investor101

I, for one, value the information that the IFA's, and other more knowledgeable people, write on this board.
As my username will tell you, I joined MSE not having much of a clue about investing other than seeing other people's money doubling without them doing anything... I came here to learn & get some pointers.

This site, those people & what they wrote over the last 18months has taught me to understand my risk profile, understand where I've made mistakes & given me pointers to what sort of funds would be suitable for me (out of the 3000+ available) - once I'd gotten over the DIYing badly stage of constantly switching & adding more & more random funds with no rhyme or reason to them other than to feel like I was "investing". It was reading consistent information from the likes of DunstonH & Alex that made me realise what I was messing up, how & why!
I think every newbie goes through the same journey.

Fortunately, I learnt fairly early on (or on a couple of occasions got told) that getting fund happy/unhappy on a regular basis is just a recipe for loss - so I've only lost a grand total of £100 from selling funds at a loss when I realized they were outside of my risk tolerance.

Today my total portfolio, including pensions, LISA,ISA etc are showing a value about £1000 less than I paid for them. But, I've only had them for 2 years or less so to be expected this early on & in light of the bull run. This is now a buying opportunity, a thing I only understand because the IFA's etc on hear didn't give advice, but they did give a free education.

bowlhead99

bradqwer wrote: »

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One question I have just had a read of the LISA which I believe you can invest up to £6k per year this is roughly what Ill try to invest per year but it will be a retirement fund as I doubt my ability to ever purchase a house.

The limit for what you put in is £4k per year. Each £1 you put in, the government gives you 25p in the account as bonus, so if you put £4k in, the government tops it up by £1k as bonus, and you'll have £5k in the account, before investment growth

But the catch is, if you're not using it for purchasing a house, you can't take it out without a penalty until you're 60.

a) that's fine if you're using it for retirement, which could work for many people - but you did say earlier your investment was for a 10-15 yr timescale at which point you'll be only 50 not 60.

b) if the goal is retirement: if you're a higher rate taxpayer (don't think you said whether you were or not), the bonus of 25% may be less than the "bonus" of tax relief you would get by using a traditional pension. Although a pension is totally locked away until your late 50s, whereas an S&S LISA you could give up the bonus and pay a small penalty to access the money, if it turned out your planning had gone badly wrong.

Is the LISA strictly a cash saving scheme or would i be better served buy wrapping the investments in a S&S Isa

A LISA an be either a cash scheme from a bank or building society, or it can be an S&S investment scheme from an investment firm (like Hargreaves Lansdown you mentioned, or AJ Bell Youinvest, other rivals, etc). They both have the same contribution limit of £4k a year (plus the bonus makes £5k).

If your goal for the money was retirement funding rather than property purchase - to be accessed over the age of 60 - but you're only in your late 30s now: you'd be insane to use a cash version of the LISA scheme instead of an investment version, because the value of a cash deposit would be eroded by inflation over the next couple of decades (whereas the investment version should hold its own and hopefully give inflation-beating returns).

I see the LISA gives u a yearly bonus

For clarity, it only gives you the bonus each year you put money in, up to the annual limit (a month or so after you put the money in and the provider claims it for you), but it doesn't give you the bonus *again* on the same money in future years if you're not putting new money in. You just get the 25% once on every pound you contribute.

bradqwer

bowlhead99 wrote: »

The limit for what you put in is £4k per year. Each £1 you put in, the government gives you 25p in the account as bonus, so if you put £4k in, the government tops it up by £1k as bonus, and you'll have £5k in the account, before investment growth

But the catch is, if you're not using it for purchasing a house, you can't take it out without a penalty until you're 60.

a) that's fine if you're using it for retirement, which could work for many people - but you did say earlier your investment was for a 10-15 yr timescale at which point you'll be only 50 not 60.

b) if the goal is retirement: if you're a higher rate taxpayer (don't think you said whether you were or not), the bonus of 25% may be less than the "bonus" of tax relief you would get by using a traditional pension. Although a pension is totally locked away until your late 50s, whereas an S&S LISA you could give up the bonus and pay a small penalty to access the money, if it turned out your planning had gone badly wrong.



A LISA an be either a cash scheme from a bank or building society, or it can be an S&S investment scheme from an investment firm (like Hargreaves Lansdown you mentioned, or AJ Bell Youinvest, other rivals, etc). They both have the same contribution limit of £4k a year (plus the bonus makes £5k).

If your goal for the money was retirement funding rather than property purchase - to be accessed over the age of 60 - but you're only in your late 30s now: you'd be insane to use a cash version of the LISA scheme instead of an investment version, because the value of a cash deposit would be eroded by inflation over the next couple of decades (whereas the investment version should hold its own and hopefully give inflation-beating returns).

For clarity, it only gives you the bonus each year you put money in, up to the annual limit (a month or so after you put the money in and the provider claims it for you), but it doesn't give you the bonus *again* on the same money in future years if you're not putting new money in. You just get the 25% once on every pound you contribute.

Cheers for this reply very helpful one last question if i wanted to go down the S&S LISA route which is obv the best in terms of u get a bonus from the government but its genuinely locked away could this be used to purchase the vanguard 80 product or is that like a whole different ball game sorry if that makes no sense.

I have kind of set my idea on just the normal S&S ISA purchasing the Vanguard 80/20 product and drip feeding into that but if i can use the same product but locked into a LISA which will give me a extra bonus in retirement then that could be appealing assuming the returns would be the same as the normal S&S version + the government bonus for being locked away

Alistair31

bradqwer wrote: »

could this be used to purchase the vanguard 80 product or is that like a whole different ball game sorry if that makes no sense.

Yes.

The LISA is the plastic carrier bag into which you place the VLS80 product.

Alexland

If you get a S&S LISA from a DIY platform such as AJ Bell YouInvest or Hargreaves Lansdown you can buy into mixed asset funds including VLS80.

I suggest you carefully study their fee structures before opening your LISA account. For funds the AJB percentage platform fee is lower but they charge £1.50 per trade. HL have a higher percentage platform fee but no charge for fund trades.

As such AJB is more suited to investors who will make large infrequent trades and HL is more suited to small amounts, regular trades and/or holding multiple funds (not that you need to).

To make it more complicated HL have negotiated a discount which reduces the Blackrock Consensus 85 fund fee to 0.09% which makes it significantly more attractive than VLS80 at 0.22%.

You might notice that LISA platform fees are higher than the cheapest S&S ISA fees which slightly errodes the benefit of the 25% bonus.

Alex

A_T

Alexland wrote: »

If you get a S&S LISA from a DIY platform such as AJ Bell YouInvest or Hargreaves Lansdown you can buy into mixed asset funds including VLS80.

I suggest you carefully study their fee structures before opening your LISA account. For funds the AJB percentage platform fee is lower but they charge £1.50 per trade. HL have a higher percentage platform fee but no charge for fund trades.

As such AJB is more suited to investors who will make large infrequent trades and HL is more suited to small amounts, regular trades and/or holding multiple funds.

To make it more complicated HL have negotiated a discount which reduces the Blackrock Consensus 85 fund fee to 0.09% which makes it significantly more attractive than VLS80 at 0.22%.

You might notice that LISA platform fees are higher than the cheapest S&S ISA fees which slightly errodes the benefit of the 25% bonus.

Alex

I wouldn't make a such a small difference in fees a determining factor in choosing - paying 0.13% more is not going to send you to the workhouse. I'd be more concerned that 35% of the equities in Blackrock Consensus 85 are in UK listed equities - mostly the FTSE 100.

Alexland

A_T wrote: »

I wouldn't make a such a small difference in fees a determining factor in choosing - paying 0.13% more is not going to send you to the workhouse. I'd be more concerned that 35% of the equities in Blackrock Consensus 85 are in UK listed equities - mostly the FTSE 100.

Indeed according to HL data today Consensus 85 is 32% UK equities versus VLS80 at 23%. My LISA money is in Consensus 100 which is only 13% UK equities however we are again getting above the OPs stated risk tollerence. Unless they went lower risk in their S&S ISA to compensate?

Alex

Fruganomics

dunstonh wrote: »

Multi-asset funds are not passive. They may have underlying passive funds within them. However, the asset weightings are a management decision.

VLS is a fettered fund of funds on a returns-focused strategy. Most of the others are fettered or unfettered fund of funds on a risk targetted strategy. Effectively this means VLS will move around the risk profiles as its allocations are rigid. Whereas the risk targetted ones will adjust their allocations based on the economic cycle and market values. It could be argued that VLS is better at the higher risk end but the others are better at the lower/medium risk end.

You do have to be wary as Vanguard has a bit of a biased following on the internet who pray in the church of Vanguard and will not consider others. Even though others have come along and improved upon Vanguards offering.

Vanguard is fine. Once they were leading in most of the areas they are involved in but that is no longer the case. So, keep an open mind and do not become brainwashed into believing Vanguard is the one true God.

this looks like what I need to know in order to move forwards and make a decision . . . .

Fruganomics

(dunstonh said) . . . . consider all funds and platforms, not just Vanguard & Hragreves Lansdown, despite them getting a lot of mention on the internet . . . . because others have come along and improved upon Vanguards offering, and other platforms are cheaper than HL.!
"Vanguard is fine. Once they lead in most areas they are involved in, but that is no longer the case.

So, can someone tell me what these other lovely funds are please ?

I've prepared my investment quandary below . . . . . . . .

Audaxer

Fruganomics wrote: »

(dunstonh said) . . . . consider all funds and platforms, not just Vanguard & Hragreves Lansdown, despite them getting a lot of mention on the internet . . . . because others have come along and improved upon Vanguards offering, and other platforms are cheaper than HL.!
"Vanguard is fine. Once they lead in most areas they are involved in, but that is no longer the case.

So, can someone tell me what these other lovely funds are please ?

Vanguard and Hargreaves Lansdown are investment platforms. The Vanguard platform only hosts Vanguard funds. The multi asset funds on there and discussed a lot on this forum are Vanguard LifeStrategy funds (VLS) and come in various risk levels and are low cost and globally diversified. The other mainstream platforms like Hargreaves Lansdown, AJ Bell, Halifax Share Dealing, Interactive Investor etc. all have thousands of fund to choose from including VLS funds. Examples of other low cost globally diversified multi asset funds available on most of these platforms are HSBC Global Strategy and L&G Multi Index funds. The different platforms have different charging structures - Vanguard charge only 0.15% of your balance annually whereas HL charge 0.45%. Halifax Share Dealing just charge a fixed fee of £12.50 annually, but also charge £12.50 for each deal, but HL doesn't charge for fund dealing, and I don't think Vanguard platform does either. If you have for example a large lump sum to invest in VLS, Halifax Share Dealing is a good option, but if you are paying in small amounts monthly Vanguard platform is probably better.

You will be able to find out more about platform options and multi asset funds on the Monevator website.