Stocks & Shares ISAs for 60+ yrs?

badger09

bowlhead99 wrote: »

The last time I had checked on Halifax they only listed one of the GS funds rather than the full range and one (the highest equity content) of BlackRock Consensus. Perhaps 'by popular demand' or perhaps listed but not actually available to purchase for new investors. I'm not a customer with a login so it might be different if you are logged in rather than browsing the funds centre as an outsider, and the search tool can be a bit tricky to find some funds.

I hold HSBC Global Strategy Dynamic in my ISA with IWEB.

They also offer Cautious and Balanced in the GS range (but I'm neither:D)

masonic

OldBill wrote: »

This is what Kroijer suggests in Investing Demystified, which I am reading at the moment. For an ISA, does this entail simply buying (say) £15k's worth of the ETF & £5k's worth of the bonds? Is that how it works for a (say) 75/25 split?

Yes, that's how it works. The only disadvantage over a single fund is that you'd need to rebalance, perhaps annually, either by diverting your usual contributions into the fund that needs to be topped up, by withdrawing from the fund that needs to be reduced, or by selling one and buying the other.

The advantage is if you need to draw down your investment, you can sell one without selling the other - useful in a stockmarket crash.

OldBill

Latest:

Shares - iShares Core MSCI World UCITS ETF GBP Hedged (Dist)
Bonds - XTrackers II Global Gov Bond UCITS ETF 2D - GBP Hedged XGSG - LU0641006290.

Both available on iWeb.

masonic

I'm confused as to why you have opted for a totally currency hedged portfolio. This means you will have no protection against devaluation of the pound, which is the current long-term trend. Essentially you are currency speculating, which is not the approach I thought you were trying to take.

Moreover, currency hedging, especially when applied to stockmarket investments, doesn't work. I've evaluated the currency hedged version of another large Blackrock ETF and found it didn't offer much protection against a weakening dollar, while it seriously stunted returns during times of a weakening pound.

OldBill

masonic wrote: »

I'm confused as to why you have opted for a totally currency hedged portfolio. This means you will have no protection against devaluation of the pound, which is the current long-term trend. Essentially you are currency speculating, which is not the approach I thought you were trying to take.

Moreover, currency hedging, especially when applied to stockmarket investments, doesn't work. I've evaluated the currency hedged version of another large Blackrock ETF and found it didn't offer much protection against a weakening dollar, while it seriously stunted returns during times of a weakening pound.

Oh, dear.

I was heading for the Vanguard All-World ETF (VWRL). But it it denominated in USD which, according to one of the sites I have been on, is not as good for a UK investor as a shares fund in GBP.

Same, more or less with the bonds:
https://pensioncraft.com/how-to-build-two-stock-portfolio/

Ramin makes a big deal - a very big deal - of investors ensuring that US bonds ARE hedged. I looked at the iShares IGLH GBP Edged funds but they are not on i-Web.

Diversify - don't diversify too much.
Hedge - don't hedge.
Long-term bonds are best - stick to short-term ones.

No wonder I'm confused.

Vanguard LifeStrategy funds are starting to look irresistible, whatever the UK overweighting.

masonic

OldBill wrote: »

I was heading for the Vanguard All-World ETF (VWRL). But it it denominated in USD which, according to one of the sites I have been on, is not as good for a UK investor as a shares fund in GBP.

VWRL is priced in £ on the UK exchange, but has a base currency and distributes in $, so your dividends will incur forex fees at iWeb. That's a minor drawback as dividends are only going to be a few % per year and the forex charge will be a few % of a few %.

Not sure why you don't just go for the unhedged version of iShares Core MSCI World ETF (SWDA). This is priced in £ on the London stock exchange, has a base currency of $, but is accumulative, so there are no dividends in a foreign currency.

The base currency is largely irrelevant as the underlying stocks will be priced in local currency (USD, EUR, JPY, GBP etc). Which means you are getting the same exposure to all of those companies (and currencies) as if you went out and bought those companies on their relevant exchanges and held them directly.

It really doesn't make much sense to diversify internationally, thereby gaining exposure to many different economies, but then try to cancel out that diversification through hedging, which doesn't work in practice anyway and just adds complexity and costs.

There is a case for hedging international bonds and Vanguard does this in Lifestrategy, but only partially (I don't personally agree with it, one should stick to UK bonds if one wishes to eliminate currency risk from defensive assets). But I'd favour UK savings accounts over UK Government bonds given the low returns baked into the latter for the foreseeable future.

No wonder I'm confused.

You started out modelling your portfolio on the philosophy of Lars Kroijer, which was eminently sensible. This calls for the use of simple neutral total market index funds with no hedging strategies or other biases. Clearly other articles you have read have advocated adding some of these complexities, but you need to decide whether you want to go with Lars' recommendations or change strategy.

OldBill

masonic wrote: »

There is a case for hedging international bonds and Vanguard does this in Lifestrategy, but only partially (I don't personally agree with it, one should stick to UK bonds if one wishes to eliminate currency risk from defensive assets). But I'd favour UK savings accounts over UK Government bonds given the low returns baked into the latter for the foreseeable future.

Kroijer agrees:
["Currency] matching is better done by purchasing government bonds in your home currency (the minimal risk asset) . . . . Currency-hedged investment products do exist but in my view the ongoing hedging expense adds significant costs without clear benefits, and on occasion further fails to provide an accurate hedge."
Investing Demystified, (2nd ed.], p.58.

So at least THAT'S clear - so why on earth the guy at pensioncraft.com bangs on repeatedly about the virtue of hedging to offset "the currency risk" - and he really does do that - is beyond me.

A propos using a savings account instead of purchasing UK bonds. This is something that is mentioned very frequently, on these forums and far beyond. For practical purposes of setting up a S&S ISA, does this mean that the full £20k is allocated to the shares and a further few grand (say) is deposited in a UK savings account; or is the share allocation pared back, leaving some cash in the ISA? I apologise for asking such a basic question, but commentators re this matter just seem to assume that we will all know the mechanics of this.

(And thank you, once again, masonic, for your patient and informed comments!).

masonic

OldBill wrote: »

A propos using a savings account instead of purchasing UK bonds. This is something that is mentioned very frequently, on these forums and far beyond. For practical purposes of setting up a S&S ISA, does this mean that the full £20k is allocated to the shares and a further few grand (say) is deposited in a UK savings account; or is the share allocation pared back, leaving some cash in the ISA? I apologise for asking such a basic question, but commentators re this matter just seem to assume that we will all know the mechanics of this.

Yes, ideally you would save into a series of fixed rate savings accounts, so that money is gradually returned to you at regular intervals for reinvestment as accounts mature. During a stockmarket crash this money can be used to top up your S&S investments, otherwise it is rolled over into another fix. You could use an easy access account like Marcus in place of this to keep things simple, albeit you'll earn less interest. It will probably make more sense for you to do the latter on the scale you are investing in S&S.

I'm operating on a much larger scale than your proposed investment, but by way of example, some time ago I started investing £1k into the best 6-, 12-, 18-, and 24- month fixed rate savings account each month. After 6 months I had a ladder of 24 accounts returning £1k + interest per month, which I am now reinvesting in the best 2 year fix to keep the money turning over.

OldBill

That's way over my head.

All I wanted to do was have a couple of funds in an ISA - a shares one and a bonds one. But since everyone seems to agree that (for the present, at least) bonds are a complete waste of time, what is left, basically, is a one-stop-shop off-the-shelf S&S ISA. But that, too, will contain bonds. So the money spent on that portion of the one fund (which will be10% at the very least) will, in effect, be wasted.

masonic

As I said, you can keep things simple by just opening an Marcus account and use that.