Investing advise please

juststuff123

Hi Folks

I'm about to come into a chunk of money. About £50k. I already have money in a S&S ISA I invested £500 in 10 funds a few years ago, I picked the funds randomly ish using the wealth 150 as a guide and picked from a few different categories to try to be as diverse as possible. I've been comfortable with the performance - no losses and an increase in the portfolio value of about 27% since I opened it.

Now I'm about to increase the size of my portfolio considerably, what is an appropriate amount to hold in each fund and how many funds should I have? It makes me very nervous to have too much money in one place, but logistically it's not really reasonable to have £500 in 100 different funds.

Any thoughts / comments appreciated.

I have about £35k in assorted regular savers and current accounts and I've run out of good bank accounts to put my money now so I'll have to start investing money monthly too soon.

TJB24

Hi there,

Firstly congrats on your savings discipline to date. From your signature you;ve said you want to pay off your mortgage by Feb 2020. My first thoughts is put your inbound £50k towards that, as it's safest and would presumably give you more in your monthly budget with no more repayments to make.

Second, investing is all about your current circumstances and goals. Are you seeking to retire early? Move to a bigger house? Create a passive income stream through dividends? It all depends what you want to achieve.

You've already been sensible by diversifying, and with £35k in cash already I personally think you'd be safe to invest the whole £50k. The question is what level of risk/reward you are looking for.

As a fellow HL customer I'd say be skeptical about the Wealth 50 list they publish, as this is based on funds that give HL an incentive rather than having good performance. You've done well to date to diversify your holdings; 10 funds will mean you have stakes in about 300 individual companies.

A major point would be to drip feed the £50k into investments, not lump sum, to take account of the markets going up and down, and current global and UK uncertainty.

If you could provide more info I'm sure the forumati will give suggestions.

dunstonh

I already have money in a S&S ISA I invested £500 in 10 funds a few years ago, I picked the funds randomly ish using the wealth 150 as a guide

The 150 is a marketing list. Not a quality list.

£500 into 10 funds each is just pointless.

, what is an appropriate amount to hold in each fund and how many funds should I have?

if you are going to build a portfolio of single sector funds, then you would typically hold around 8-12 to cover the main sectors. Your weightings into each would depend on the risk profile and what sort of volatility range you are looking for.

Do you have the knowledge and understanding to build a portfolio and maintain it going forward? Would a multi-asset fund be more suitable?

A major point would be to drip feed the £50k into investments, not lump sum, to take account of the markets going up and down, and current global and UK uncertainty.

Although that would result in lower returns in the majority of periods.

El_Torro

Putting all the £50k in one fund could be a case of having too much money in one place, or it could be a very sensible option, depends which fund you choose.


For example putting all / most of your investments in a global multi asset fund, for example Vanguard Lifestrategy or HSBC Global Strategy, means you are diversified globally, and can even have a percentage of your holdings in bonds, depending on exactly which fund you choose.


As you might have guessed choosing 10 different funds based on their ranking on an arbitrary guide and hoping that gives you diversification is not the best strategy to go with. You don't need 10 funds to be diversified, though having a lot of funds is not necessarily a terrible thing, especially if your platform doesn't charge per transaction.


What you need is a strategy and an understanding of how to achieve diversity (this can either be very simple, or overly complicated, depending on how you want to play it). So continue reading up on investing, on this forum and other places, and keep asking questions. We all had to start somewhere

juststuff123

Hi TJB24

Thanks! I actually paid off my Mortgage last year! I'm working towards the second part of the goal, that is £100,000 in savings by Feb 2020.

My long term goals are another story. I really have no idea about what I want to do long term. I'm in my 30's so retirement is a way off yet. I sometimes contemplate quiting my job and getting something more interesting, less frustrating, part time and that's likely to come with a massive pay cut, so I'd like to have as much squirreled away as I can. The home I'm in now won't be my forever home but it's suits me right now and I enjoy being mortgage free. I want to keep my options open right now but since it could be years for me to decide what I want, shoving the whole lot into a pitiful savings account waiting for me to make a decision isn't really a good idea.

S&S really is the only way for me to go, it's just how do i go about it? How many funds how much in each I suppose i'm almost answering myself, I want to feel safe so i need to keep well diversified, maybe £1000 over 50 funds might be more manageable?

Help please.

juststuff123

Thanks everyone,

I think i'll do a bit more research, I used the W150 as a guide to pick a selection of funds from different sectors, but for any new investment I'll look a little further thanks. I'll also read up about the multi asses funds.

I'm an expert when it comes to bank accounts and budgeting but I still feel I'm in over my head when it comes to S&S. Investing for Dummys here I come!

eskbanker

juststuff123 wrote: »

I'll also read up about the multi asses funds.

Would you hold these for donkey's years, or has the bottom fallen out of that market?

TJB24

juststuff123 wrote: »

Hi TJB24

Thanks! I actually paid off my Mortgage last year! I'm working towards the second part of the goal, that is £100,000 in savings by Feb 2020.
...
I suppose i'm almost answering myself, I want to feel safe so i need to keep well diversified, maybe £1000 over 50 funds might be more manageable?

Help please.

No problem, nicely done! High paying job, I assume?

Firstly, don't follow the advice of some random on the internet. Do your own research, wherever possible. Personally I'd think if you have no mortgage and £35k savings, S&S is a good way to go. A few suggestions from this random:

1. Don't invest the £50k all in one go. The market might drop 15% right after. It's better to drip feed it over time, maybe £5k per month. Google "pound cost averaging". That way you're protected from market volatility.

2. Consider your tax exposure. You have £20k per year ISA allowance, and might be holding the investments in the long term. Anything above that will be liable for capital gains and dividends tax. If you can, maybe invest the max before the end of this FY, £20k next year and then thereafter.

3. Consider alternatives. It sounds like you're in a position to think about early retirement. You could add even more to the £50k in government bonuses or tax relief. You could open a Self Invested Personal Pension, also invested in S&S, and recieve a 40% bonus in tax relief (assuming you're a higher rate taxpayer, otherwise 20% for basic rate). SIPPs can be accessed from age 55 or 57 depending on your DOB. Additionally you can put up to £4k/yr into a Lifetime ISA for a 25% bonus, only this counts towards your £20k ISA limit, but is entirely tax free when you come to access it from age 60.

4. Investing into 50 individual funds is likely to be unmanageable. I read that 90% of funds actually underperform the whole stock market itself. Better to choose between 5 and 10 funds that you've researched and have confidence in.

5. Consider strategy, do you want your stocks to focus on growth, or dividend income, or a mix?

6. Consider risk; equities (funds with shares in individual companies) are considered to have higher risk because the market price can go up or down. Bonds in contrast have a fixed payout, but will perform less well.

You may have heard of the FIRE movement - financial independence, retire early. This blog is a mainstay of it. Even if you're not looking to retire it has some good tips, including on investing. Many members of the FIRE movement swear by Vanguard index funds. These simply track the overall stock market rather than take bets on specific companies, so the risk is arguably lower, and it's managed by robot so the running costs are minimal. Some Vanguard funds are specialist and have a pre-programmed flight path based on a target retirement date (i.e. retire 2040) that will start switching from equities to bonds over time to reduce risk the closer you get to retirement. Example here.


Hope this helps!

dunstonh

1. Don't invest the £50k all in one go. The market might drop 15% right after. It's better to drip feed it over time, maybe £5k per month. Google "pound cost averaging". That way you're protected from market volatility.

However, most people do invest on a single basis because in the majority of periods it is the best thing to do. You do not phase investments to make more in the returns. You phase because you are nervous. If you are nervous then perhaps the real problem is that you are investing above your risk profile.

. I read that 90% of funds actually underperform the whole stock market itself.

Not in the UK but in some markets that is the case.

enthusiasticsaver

Way too many funds and picking from wealth 150 probably means they are expensive. I started small with investing too and now we have considerable amounts in stocks and shares are now going down the IFA route.

We started with a multi asset fund for the diversity at a risk level appropriate for us and went for a 60% equities and 40% bonds Vanguard Lifestrategy fund. Saves having lots of different funds. There are loads of multi asset funds around and if you pick a passive index fund ( or funds) the costs are generally lower than managed funds. Alternatively get an IFA to advise.

juststuff123

Thanks everyone

TJB24 wrote: »

No problem, nicely done! High paying job, I assume?

No not particularly, probably about £40k including bonuses and my second job. I'm just very tight and have no Kids!


Enthusiastic saver - Funnily enough the 60% vanguard lifestyle is currently at the top of my chosen fund list.


I'll definitely have a look into FIRE too.

Thanks!