Confused - Investment trusts vs Funds vs ETF

Hannah4518

Would really appreciate some guidance please.

I'm planning to move my old employer pensions into a SIPP (AJ Bell) and totally confused about what to invest in.

I think I can choose between Investment trusts, Funds, ETFs etc - I googled what these mean and it seems like the investments are structured differently, but I'm not sure what this means in terms of my pension?

I'm familiar with the Vanguard lifestrategy funds which are apparently mutual tracker funds, this is where I put my ISA savings. I believe the idea with this is to diversify across many companies/industries.

So what I'm asking is what's the difference between these SIPP investments and any advice on what might be a good option? I'm looking for low cost and diversified.

thanks

AnotherJoe

Don't take this personally but why are you moving your employers pension into a SIPP if you are so clueless regards investment ?
You have two choices, not exclusive, educate yourself and go see an IFA.
For education many here suggest Lars Kroijer as a start.
How much money is in the employers pensions.

Hannah4518

Around £100k in two pots which were with smaller pension schemes that merged with Aviva. I want to transfer out because I've had a bad experience with Aviva and trying to find out anything about my pension is impossible (they are unable to tell me even basic info because of "IT issue", every time I call over the last 4 months).

Yes I plan on educating myself, and I believe this forum is a good place to start.

Audaxer

Hannah4518 wrote: »

I'm familiar with the Vanguard lifestrategy funds which are apparently mutual tracker funds, this is where I put my ISA savings. I believe the idea with this is to diversify across many companies/industries.

So what I'm asking is what's the difference between these SIPP investments and any advice on what might be a good option? I'm looking for low cost and diversified.

There is no difference as Vanguard LifeStrategy funds can also be invested in a SIPP. They are low cost and give good global diversification. Investment Trust and ETFs are more complex products that you would need to research and understand before investing in them. Most people investing in Investment Trusts or other active funds would create a portfolio of different ITs and/or funds to give them good diversification. But a low cost globally diversified multi asset fund like Vanguard LifeStrategy funds is diversified enough to be a one fund portfolio, and probably give you as good returns long term, as you would get from most portfolios of ITs or active funds with a similar risk category to your VLS fund.

SonOf

think I can choose between Investment trusts, Funds, ETFs etc - I googled what these mean and it seems like the investments are structured differently, but I'm not sure what this means in terms of my pension?

Insured funds (pension funds) have 100% FSCS protection with no upper limit (some caveats on external funds)
Investment Trusts and ETFs have no FSCS protection whatsoever.
UT/OEICs have £85k FSCS protection per fund house.

ITs and ETFs are a more advanced option than UT/OEICS which in turn are a more advanced option of pension funds.

jamesd

Hannah4518 wrote: »

I can choose between Investment trusts, Funds, ETFs etc - I googled what these mean and it seems like the investments are structured differently

All are diversified. IT normally actively managed, the others can be active or passive (tracker). IT and ETF normally allow trading within a few seconds with settlement (paying you) a few days later. Other types normally at noon on the day after you give your instruction but early notice on the day could be done at noon a few hours later.

Hannah4518 wrote: »

I'm familiar with the Vanguard lifestrategy funds which are apparently mutual tracker funds

They use trackers internally but are actively managed to some degree.

Hannah4518 wrote: »

what's the difference between these SIPP investments and any advice on what might be a good option? I'm looking for low cost and diversified.

Pick the investment options you want then choose where to hold them and don't necessarily pick the cheapest.

SonOf

I'm familiar with the Vanguard lifestrategy funds which are apparently mutual tracker funds,

Mutual funds is an American term. Some have tried to integrate it over here but it doesnt have much of a footing. Make sure your reading is based on the UK not the US. Its different there.

And the VLS funds are fettered fund of funds with underlying passive funds with an active asset allocation (active is almost inevitable with a multi-asset fund in respect of allocations). VLS is not a tracker fund.

[Deleted User]

I would stay away from ITs, but that’s just my opinion.

Something like VLS is always a good, simple “buy and forget” option. VLS holds a bunch of indices and the allocation is steady. Only in “exceptional circumstances” will it stop being passive. The fund owner leaves leeway for active decisions but the likelihood of Vanguard using it is low.

You could save costs and gain more control with ETFs but you would need to read a couple of books first.

If you do go for a multi-asset fund, you still should read a book or two on asset allocation and risk.

Apodemus

SonOf wrote: »

Pension funds have 100% FSCS protection with no upper limit (some caveats on external funds)
Investment Trusts and ETFs have no FSCS protection whatsoever.
UT/OEICs have £85k FSCS protection per fund house.

ITs and ETFs are a more advanced option than UT/OEICS which in turn are a more advanced option of pension funds.

Surely FSCS is a red herring here? The value of the holdings in a DC pension pot, a SIPP an ISA or directly held will all rise and fall with markets regardless of the FSCS protection on the body that is holding them.

AnotherJoe

Apodemus wrote: »

Surely FSCS is a red herring here? The value of the holdings in a DC pension pot, a SIPP an ISA or directly held will all rise and fall with markets regardless of the FSCS protection on the body that is holding them.

I agree. Wholly confusing post for the OP who could read that (what you were responding to) and get the wrong end of the stick about whats protected.

Audaxer

Apodemus wrote: »

Surely FSCS is a red herring here? The value of the holdings in a DC pension pot, a SIPP an ISA or directly held will all rise and fall with markets regardless of the FSCS protection on the body that is holding them.

They will rise and fall as normal with markets, but if there did happen to be a major fraud in a fund house or platform and the investor did lose any of their investments due to the fraud, funds would be covered under FSCS up to £85,000, whereas ITs and ETFs being direct holdings are not covered by FSCS. The risk of losing money due to this is minimal and most people are not concerned about it, but it is a fact that ITs and ETFs are not covered by the FSCS.