Dealing with a lump sum investment - £76K

savingsguy

Hi there,

I'm fortunate enough to have £76000 to invest.
£40K of this within an ISA and £36 additional lump sum

I’m relatively new to investing and have been doing lots of research over the past weeks. My plan is to invest long term (15-20 years) aiming grow my money.

I’m hoping to allocate around 8% cash, 22% commodities (mostly gold), and 70% funds (ETFs). I want to keep it simple with low cost and diversification.

That's my situation at the moment. These are the questions I’m chasing (they are newbie ones I’m afraid, if you could bear with me).

• I have a lump sum to save, is it better to average it in monthly over a year? That mean keeping lots in cash for a while.
  
• Do you keep your cash allocation within your ISA or is it better to allow more allocation within your ISA to stocks/shares and keep cash in a high street savings account - interest is pathetic anyway? Or is there a better way to hold cash?
  
• If I contribute monthly to my Stocks and shares ISA and automatically buy shares in an ETF, do I get charged a trade fee each month? I intend to contribute £600/month to my investment ISA and fund 3 ETFs (£200 each per month). Do I pay three trade fees? This will help me choose my platform.
  
• For the lump sum that I’m unable to add to my ISA (as it’s full) - can I buy the same funds and transfer to my investment ISA next tax year? I guess I'll have to sell them, then transfer to the ISA and rebuy them within the ISDA each time at a fee?
  

If anyone could give their thoughts I much appreciate it. I know these may be obvious questions for some, but I'm still learning.

Best
J

DrSyn

1. I always suggest if you are new to investing(and you do have the right time frame) to watch both of the below before they do anything:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/



2, A good place to start is with a Global -Muti-Asset -Fund. Any of the one below would do:-

Multi-Asset Funds

From looking around the options seem to be:

Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

There is also Fidelity Multi Asset Allocator

Baillie Gifford Managed. Holds individual shares, rather than index funds.

Vanguard Life Strategy (VLS) seems the most often mentioned. The 60% shares/ 40 % bonds seems to me pretty much a "fire and forget" option.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link


3. There are arguments for both monthly and lump sum investing.
The bottom line is it depends on the individual.

4. I would suggest using a S&S ISA to avoid problems concerning tax. Also to use accumulation units if you do not require income.

5. It is probably better to avoid using Investment Trusts if you are a new to investing because they are more complicated than Funds or OEIC's. There are however others on this site who disagree.

6. ETF's are fine. However they are normally based in Ireland or Luxembourg than the UK. We do not know how BREXIT will affect them. So there is a added uncertainty with ETF's. Also stick to the main indexes, S&P, FTSE 100, etc. Yes you will be charged each time you buy them. They will have the same charges applied as shares.

Linton

savingsguy wrote: »

Hi there,

I'm fortunate enough to have £76000 to invest.
£40K of this within an ISA and £36 additional lump sum

I’m relatively new to investing and have been doing lots of research over the past weeks. My plan is to invest long term (15-20 years) aiming grow my money.

I’m hoping to allocate around 8% cash, 22% commodities (mostly gold), and 70% funds (ETFs). I want to keep it simple with low cost and diversification.

That's my situation at the moment. These are the questions I’m chasing (they are newbie ones I’m afraid, if you could bear with me).

• I have a lump sum to save, is it better to average it in monthly over a year? That mean keeping lots in cash for a while.

Since investments generally increase in value over time (if they didnt why would you buy them?) it is statistically best to buy them as soon as you have the money. The downside is that you may be annoyed if they fall in value just after you bought them. However slightly more often they will increase in value just after you buy them.

• Do you keep your cash allocation within your ISA or is it better to allow more allocation within your ISA to stocks/shares and keep cash in a high street savings account - interest is pathetic anyway? Or is there a better way to hold cash?

You need some cash in the ISA to pay charges, prepare for buying new shares/units, and possibly to act as a safe buffer as an alternative to bonds. What you do with the rest depends on why you are holding it. For example the objective of an emergency fund is to have the cash immediately available should you need it. Interest is a minor consideration. On the other hand you may be holding the cash as a house deposit for when you buy in 3 years time. In this case it would be reasonable to consider a 3 year fixed term savings account.

• If I contribute monthly to my Stocks and shares ISA and automatically buy shares in an ETF, do I get charged a trade fee each month? I intend to contribute £600/month to my investment ISA and fund 3 ETFs (£200 each per month). Do I pay three trade fees? This will help me choose my platform.

You will be charged for every separate transaction - 3 ETF purchases are 3 transactions. Some platforms have a cheaper rate for regular contributions others dont. You could consider keeping the contributions in cash for a few months and then make a large purchase. And/or dont contribute 3X£200, rather put the whole £600 into a different single fund each month.

• For the lump sum that I’m unable to add to my ISA (as it’s full) - can I buy the same funds and transfer to my investment ISA next tax year? I guess I'll have to sell them, then transfer to the ISA and rebuy them within the ISDA each time at a fee?

You cannot transfer investments into an ISA, you do have to sell and rebuy. Some platforms may offer what is called a bed&ISA transaction where the ISA share/unit is bought immediately the non ISA one is sold so you dont risk price movements whilst you are out of the market.

If anyone could give their thoughts I much appreciate it. I know these may be obvious questions for some, but I'm still learning.

Best
J

One thought - have you considered using some of the money to increase your pension contributions? This is particularly worthwhile if you are a higher rate tax payer or if your employer will also contribute more.

Vet

DrSyn wrote: »

1. I always suggest if you are new to investing(and you do have the right time frame) to watch both of the below before they do anything:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/



2, A good place to start is with a Global -Muti-Asset -Fund. Any of the one below would do:-

Multi-Asset Funds

From looking around the options seem to be:

Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

There is also Fidelity Multi Asset Allocator

Baillie Gifford Managed. Holds individual shares, rather than index funds.

Vanguard Life Strategy (VLS) seems the most often mentioned. The 60% shares/ 40 % bonds seems to me pretty much a "fire and forget" option.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link


3. There are arguments for both monthly and lump sum investing.
The bottom line is it depends on the individual.

4. I would suggest using a S&S ISA to avoid problems concerning tax. Also to use accumulation units if you do not require income.

5. It is probably better to avoid using Investment Trusts if you are a new to investing because they are more complicated than Funds or OEIC's. There are however others on this site who disagree.

6. ETF's are fine. However they are normally based in Ireland or Luxembourg than the UK. We do not know how BREXIT will affect them. So there is a added uncertainty with ETF's.

Great info! watching the movie just now.

savingsguy

Wow, thank you so much for this brilliant information. There's a lot to go through - I'm going to check all the links and videos and will probably be back with more queries.

This has been very helpful, thank you so much.

aroominyork

On lump sum or drip feed watch this video https://m.youtube.com/watch?v=DMznHFuGJr4

NoMore

I second Lintons suggestion about pension, for tax efficiency, you should consider some of it for that

savingsguy

Thanks again for all the help - it's been brilliant. I really like the Lars Kroijer approach, it’s exactly what I’m after.

Index tracker and platform
Having looked at Vanguard LifeStrategy, it seems to tick so many boxes when compared to other approaches. It’s highly diversified globally, sector-wise…
Does anyone know if the LifeStrategy fund is an index tracker? From their website it’s “made up of Vanguard index funds and ETFs”.

I want a cheap index tracker. At 0.22% is seems quite cheap. And their ISA charge of 0.15% sounds good to me. I understand I’m stuck with their funds if I use them, but they seem to be good quality.
Vanguard offers a Bed and ISA which would be useful to transfer funds into my ISA

Lump sum
Thank you for that video about lump sums. Averaging in on a lump sum that doesn’t really matter hugely if I’m going to have a long term investment. The risk over the long term seems reduced. It would be nice however, for the world not to go into recession the day I put down my lump sum. If it does, I’ll understand I’m in for the long term.

Pension
Thanks for the pension suggestion. I’m embarrassed to say I know little about my pension! It’s a USS pension. There have been questions recently about the fund valuation covering up a shortfall.

There will be increased contributions from 8% to 11% over two years! I have no matched contributions. I’ll investigate more, perhaps tax benefits may be worthwhile. I’m not sure I trust it though.

Gold
I’ve also read Andrew Craig’s ‘Own the world’ which I thought was great and easy to understand. He overlaps a lot with Lars Kroijer on cheap, globally diverse ETF/Trackers. However his strong message is to keep 20-25% of investments in Commodities (predominantly gold). He mentions Harry Brown’s Permanent Portfolio and Yale and Harvard portfolios.

Lars Kroijer isn’t bothered about gold at all. I’d be interested to see if anyone has opinions on this? With the world feeling rather insecure at the moment and Brexit, perhaps gold is a good way to keep some stability and protect against inflation.

Many thanks!

DrSyn

I do not know which VLS fund you are interested. So I have supplied information from different sources to investigate at your leisure:-

40% Equity
https://www.vanguardinvestor.co.uk/investments/9238/portfolio-data?intcmpgn=ls40_findmore_link

60% Equity
https://www.trustnet.com/factsheets/o/acdq/vanguard-lifestrategy-60-equity

80% Equity (down at the bottom RHS)
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-accumulation


As you mentioned gold, this may be of interest to you:-
https://portfoliocharts.com/portfolio/permanent-portfolio/

Audaxer

savingsguy wrote: »

Index tracker and platform
Having looked at Vanguard LifeStrategy, it seems to tick so many boxes when compared to other approaches. It’s highly diversified globally, sector-wise…
Does anyone know if the LifeStrategy fund is an index tracker? From their website it’s “made up of Vanguard index funds and ETFs”.

I want a cheap index tracker. At 0.22% is seems quite cheap. And their ISA charge of 0.15% sounds good to me. I understand I’m stuck with their funds if I use them, but they seem to be good quality.

You don't need to use Vanguard's own platform to buy VanguardLife Strategy funds. While Vanguard's platform charge of 0.15% is good for relatively small amounts, if you are investing a large sum in a Vanguard LifeStrategy fund as a buy and hold investment, Halifax Share Dealing only charge £12.50 for the trade (buying the investment) and £12.50 per year as the platform charge. I think IWeb is even cheaper.

savingsguy

Thanks again. Here is my attempt at untangling some of the pricing. I have been struggling with the different structures. If someone could please check and confirm that I’m doing the right thing, that would be great.

Assuming I have £40,000 to invest in a S&S ISA.

Also, is ‘Vanguard LifeStrategy 100% equity’ is an index tracker/ETF or ‘fund’. ‘Fund’ seems loosely used, as a newbie I find it confusing?

Fund example - LifeStrategy 80% Equity Fund - Accumulation

• Ongoing charge 0.22%
• There is no initial charge!
• They mention a transaction fee of 0.5% - not really sure what this is?
  When are ongoing charged charged - are these annual charges?

0.22% fund charge=£88 per year
0.5% transaction fee=£200 per year (this seems a bit sneaky, it would be nice to know the total fund charge upfront unless I have it wrong)

Total cost=£288 (is this correct?)


Vanguard stocks and shares ISA

• 0.15% annual account fee
• No charge to switch holdings, deal, make payments or exit

0.15% annual fee=£60
0.22% fund charge=£288
Total charge for year=£348


Halifax Share Dealing

• £12.50 per year flat rate
• £12.50 per trade (assuming a single lump sum)

Annual fee and trade=£25.00
0.22% fund charge=£288
Total charge for year=£313


iWeb (seems to be owned by Halifax Share Dealing too)

• £25 opening charge
• No annual fee
• £5 dealing commision

Opening charge and dealing commision: £30
0.22% fund charge=£288
Total charge for year=£310


Hargreaves and Landsdown

• No opening fee
• 0.45% annual fee

0.45% annual fee=£180
0.22% fund charge=£288
Total charge for year=£468


Many thanks!