Advice sought on best way to start a stocks and shares portfolio

mrje103

I am hoping people would be willing to offer some advice on my intentions to build a stocks and shares ISA portfolio.

I am 34 and intend on invest £250 a month into a stocks and shares ISA. I have 6 months salary saved in cash for an unforeseen emergency expenditure. I don’t have any particular goal in mind, other than building a sizeable and diverse portfolio over the next 25 years.

Wider financial background, if relevant, is: mortgage with 19 years to go, but which I am about to start overpaying by £250 a month, reasonable pension scheme (civil service alpha), which I intend to pay an additional £250 into each month once my student loan is repaid in 18 months’ time.

With regards to my stocks and shares portfolio, I want to invest passively.

I am considering either investing all £250 each month into Vanguard’s Lifestyle 80 via their own platform. This appeals because it is split 80/20 equity to bonds and seems reasonably geographically diverse. Most importantly, the costs and fees are low – 0.22% for the fund and 0.15% for the platform charges. I think I would look to build about £40k-£50k in this, before I then start looking at other funds. So it would probably be my only holding for sometime.

Alternatively, I was considering investing the £250 in a 70% equity, 20% bond and 10% property split via Hargreaves Lansdown, most probably in L&G International Index fund @ 0.08%, L&G UK index @ 0.06 and L&G Gilts fund @0.10%, plus a low cost property tracker. This appeals because the fund costs are low and I would have some diversity and exposure to property. I also feel I would get a quicker understanding of investing if I was invested in different funds and areas, and could actively watch how they perform (as opposed to the single Vanguard fund which will only show me the combined performance of the equities and bonds). I’m also interesting in learning the ins and outs of rebalancing (which isn’t needed with Vanguard) My preference is probably for this option but my main concern is HL expensive platform fee of 0.45%, which will eat away at returns over the long term. Again, I would look to build £40-£50k before buying any other funds.

Would be grateful for any thoughts, comments or advice -thanks!. Be gentle, this is my first post

Albermarle

My preference is probably for this option but my main concern is HL expensive platform fee of 0.45%,

What you say is sensible but if you are concerned about the HL high fees , then go to a provider with lower fees but more choice than Vanguard. There are quite a few to chose from . AJ Bell; Cavendish; close brothers etc etc

bostonerimus

Albermarle wrote: »

What you say is sensible but if you are concerned about the HL high fees , then go to a provider with lower fees but more choice than Vanguard. There are quite a few to chose from . AJ Bell; Cavendish; close brothers etc etc

I agree that the OP has done a good job and has identified two good options for an ISA, either would be good. However, as a beginner, a wide choice of funds is not necessary and in fact it can be a disadvantage as it just leads to unnecessary complication and the chance that the investor might be lured away from their well considered and simple investment path. This is also a problem for more experienced investors. The Vanguard UK platform only gives you access to Vanguard funds, but that's an enormous range of options in it self and there's no need to have more choice.

Thrugelmir

mrje103 wrote: »

I am considering either investing all £250 each month into Vanguard’s Lifestyle 80 via their own platform. This appeals because it is split 80/20 equity to bonds and seems reasonably geographically diverse. Most importantly, the costs and fees are low – 0.22% for the fund and 0.15% for the platform charges. I think I would look to build about £40k-£50k in this, before I then start looking at other funds. So it would probably be my only holding for sometime.

Seems a reasonable starting point. All of us make a leap of faith at the outset. Let the fund manager handle the allocation of funds etc. As you say once the amount invested has built into a more sizable sum. Then you can diversify further into a broader range of assets.

Zorillo

You could consider putting the same money into the same investments within a LISA if you're willing to tie your money up to 60. There's up to £16k of bonus available to you.

Lizling

I was in a very similar situation to the OP a couple of weeks ago, except with a 5k lump sum to get things started. I wanted to learn a bit as I go too, so I picked Cavendish for the low fees, looked at one of their sample portfolios that roughly fitted my risk profile and what I would/wouldn't invest in, researched those funds and switched any I didn't like the look of with approximate equivalents, e.g. corporate bonds for corporate bonds, large company equities for large company equities...)

I made one mistake (one fund included companies I'm not ok with ethically) so I sold that and bought something else. Other than that, all going great so far!

A_T

mrje103 wrote: »

I am hoping people would be willing to offer some advice on my intentions to build a stocks and shares ISA portfolio.

I am 34 and intend on invest £250 a month into a stocks and shares ISA. I have 6 months salary saved in cash for an unforeseen emergency expenditure. I don’t have any particular goal in mind, other than building a sizeable and diverse portfolio over the next 25 years.

Wider financial background, if relevant, is: mortgage with 19 years to go, but which I am about to start overpaying by £250 a month, reasonable pension scheme (civil service alpha), which I intend to pay an additional £250 into each month once my student loan is repaid in 18 months’ time.

With regards to my stocks and shares portfolio, I want to invest passively.

I am considering either investing all £250 each month into Vanguard’s Lifestyle 80 via their own platform. This appeals because it is split 80/20 equity to bonds and seems reasonably geographically diverse. Most importantly, the costs and fees are low – 0.22% for the fund and 0.15% for the platform charges. I think I would look to build about £40k-£50k in this, before I then start looking at other funds. So it would probably be my only holding for sometime.

Alternatively, I was considering investing the £250 in a 70% equity, 20% bond and 10% property split via Hargreaves Lansdown, most probably in L&G International Index fund @ 0.08%, L&G UK index @ 0.06 and L&G Gilts fund @0.10%, plus a low cost property tracker. This appeals because the fund costs are low and I would have some diversity and exposure to property. I also feel I would get a quicker understanding of investing if I was invested in different funds and areas, and could actively watch how they perform (as opposed to the single Vanguard fund which will only show me the combined performance of the equities and bonds). I’m also interesting in learning the ins and outs of rebalancing (which isn’t needed with Vanguard) My preference is probably for this option but my main concern is HL expensive platform fee of 0.45%, which will eat away at returns over the long term. Again, I would look to build £40-£50k before buying any other funds.

Would be grateful for any thoughts, comments or advice -thanks!. Be gentle, this is my first post

One of the good things about the Vanguard platform is that you can invest small amounts of cash at any time via debit card - many platforms have a minimum for an ad-hoc lump sum deposit (e.g. Cavendish/Fidelity is £800). So if you're earning and find you have a bit of spare cash you can pop it in your ISA.

At your age you might want to consider going 100% equities with their FTSE Global All Cap Index fund.

bostonerimus

Lizling wrote: »

I was in a very similar situation to the OP a couple of weeks ago, except with a 5k lump sum to get things started. I wanted to learn a bit as I go too, so I picked Cavendish for the low fees, looked at one of their sample portfolios that roughly fitted my risk profile and what I would/wouldn't invest in, researched those funds and switched any I didn't like the look of with approximate equivalents, e.g. corporate bonds for corporate bonds, large company equities for large company equities...)

I made one mistake (one fund included companies I'm not ok with ethically) so I sold that and bought something else. Other than that, all going great so far!

This looks like a start. Now you have to decide how you will manage your portfolio. Are you going to rebalance and if so how often? how will you invest new money? and what happens if a fund drops drastically...? Think through the scenarios and develop a plan so that you don't have to do this in a panic if the markets fall by 20%.

mrje103

Albermarle wrote: »

What you say is sensible but if you are concerned about the HL high fees , then go to a provider with lower fees but more choice than Vanguard. There are quite a few to chose from . AJ Bell; Cavendish; close brothers etc etc

Many thanks. I have looked at other platforms as well but they all seem to come with draw backs. AJ Bell, for instance, has a reasonably low fee of 0.22% but I think then charges £1.50 for each fund purchase - even regular ones I think. I also quite like the vast range of funds and other options HL has just not sure if i like enough to pay 0.45%.

mrje103

Thanks for this.

If i were to go with the Vanguard option, is building up a sum of £50k first the sort of sum people would advise, or would i be better adding other funds at, say, £30k?

Secondly, and i am showing my inexperience here, is there a sensible approach to adding additional funds? What I mean is, if i have built up £50k in the Vanguard fund do i then sell a portion of that to acquire other funds (as well as buying others with the £250 a month), or keep the £50k 'intact' and simply use my £250 a month to purchase other funds.

|Finally, is there a sensible approach to selecting additional funds. If i have £50k in a geographically diverse tracker, will i not start to unbalance my holdings if i then started to invest in, say, an emerging markets tracker or a smaller cap UK tracker? I guess i could switch to a commodity that isn't in the Vanguard Lifestyle 80, such as property, but i wouldn't want that to account for a huge amount of a portfolio.

Apologies, i realise some of the above probably sounds naïve but i am keen to learn from others experience.

bostonerimus

mrje103 wrote: »

Thanks for this.

If i were to go with the Vanguard option, is building up a sum of £50k first the sort of sum people would advise, or would i be better adding other funds at, say, £30k?

It's very much personal. With VLS80 you are very diversified with money spread across the world and economic sectors and I'd feel ok having millions in it. However, you might look at the asset allocation and think that say the UK weighting is too much and so you could add a global equity and bond fund. There was another thread where a two fund portfolio was suggested of a global equity and a global bond fund owned in the ratios you want. I like that as it's cheap and simple, although you would have to rebalance that portfolio yourself, but that would be easy, just look at it every 6 months do a transfer. VLS80 is a good starting point and don't think that by slicing and dicing yourself and adding lots of other funds that you will necessarily do much better. So buy your multi-asset fund now and keep reading and learning and by the time you get to a 50k balance you will know what you want to do.