Large inheritance DIY vs professional

atush

johnadams7 wrote: »

Thanks for the advice. I have taken a fair bit out, to allow for day to day spending. Plus a fairly large rainy day fund. Other areas are covered, hence long term and I can go for day to day risk.

So roughly where it sits, has it achieved 6.5% pa over the last 5 years net of fees. So just over 30%. I believe over 10 years, the figure is closer to 10%, so 80%. But it wasn't invested in the dynamic account, rather the lowest risk one, as clearly my dad had a different objective.

Still being coy about the amounts. Need a ballpark. even if high 5 fig, low, mid or high 6 fig etc. Good to see you put aside emergency cash funds.

Where is the money now where you are paying 2%?

I agree your initial proposal was a bit odd, using VLS80 and then some other things as you like could be a good idea. Lindsell train- if you like it, buy it. i hold it. if you follow this approach you could DIY, but i wont rec that until we know the ball park of your investment.

SJP is a total Dud. unless you like paying more fees that you are paying now, and are happy to pay 6% to leave.

If you dont like % fees, you can ask for a transactional set price. This will in in the K's depending on pot size, but tends to be cheaper than % for larger pots. If you want ongoing advice ie rebalancing etc, then look for 0.5%

seacaitch

johnadams7 wrote: »

So perhaps removing the passive investments out, and adding a few well performing active investments will help.

...

For instance if I invest in Lindsell train global equities, I doubt the underlying fund in Vanguard invested in global equities has done as well as LT.

To labour the point that AnotherJoe has already made, because it's important: there is really no such thing as funds that are performing well, but there are ones that have performed well. There's no present tense with fund performance, only past and future.

You cannot simply assume that past out-performance will continue into the future. Regulators have made investment firms plaster this all over their marketing material, but still investors don't want to believe it.

Very often, past out-performance mean reverts, such that under-performance lies in the nearer future, not additional out-performance, ie. the opposite of what an investor may have assumed or hoped for. Asset class return 'periodic tables' do a good job of visually representing this sort of idea:
https://awealthofcommonsense.com/2019/01/updating-my-favorite-performance-chart-for-2018/


If there are investment strategies that may be capable of persistent outperformance measured over long timeframes, and I suspect (based on the academic research I've read) that the best candidates for this are those strategies exploiting the quality/profitability factors, then as an investor in such strategies you must still be prepared for potentially lengthy periods of under-performance even if the strategy eventually goes on to outperform in the even longer term.

Many/most investors are impatient, and will ditch a strategy that underperforms for just a short period, never mind 3, 5 or perhaps 10 years of underperformance. So if you intend to invest in such a strategy you need to go in with eyes wide open, confident in your fortitude to sit patiently through any such periods of lengthy underperformance. In real time, you'll have no idea when such periods will begin or end, so will be unable to apply any sort of timing so as to avoid such bouts of underperformance, so you'll just have to be patient.

The reality for many investors is that they have limited or even poor self-control and are thus prey to their own biases, and relevant in this context is recency bias of being drawn to recent outperformance and being repelled by recent underperformance. This being the case, even if you are fortunate enough to alight upon an investment strategy (eg. one exploiting quality/profitability factor) that may be capable of long term outperformance, you as an investor are quite likely to underperform the actual strategy, and may underperform the market, due to your own timing decisions of when you choose to enter and exit the strategy.

Linton

I think things are more nuanced than Seacaitch says....


1) There is a definite momentum effect in investments - those that have performed well one year tend to perform well the next more often than pure chance would suggest. Similarly for those that perform badly. So past performance is a partial guide to future performance. The reason for this I would guess is the behaviour of those investors who choose what to buy on the basis of recent data. Good performance attracts further investment which causes prices to rise. At some point all such investors have bought. So out-performance falters, people see the party is over and sell.


2) Reversion to mean does not imply that high performers are more likely to be low performers next year and vice versa. If that were true buying the dogs would be a successful strategy. The theory is that there is no relationship between past and future so that the top performers are likely to be less good but only because there is no room for them to rise further.


3) At first sight the asset class tables may appear random. But there appear to be some patterns. For example in 9 out of the 11 years depicted small companies out performed midcaps. Pure chance? Difficult to say but it must be worth investigating.

johnadams7

atush wrote: »

Still being coy about the amounts. Need a ballpark. even if high 5 fig, low, mid or high 6 fig etc. Good to see you put aside emergency cash funds.

Where is the money now where you are paying 2%?

I agree your initial proposal was a bit odd, using VLS80 and then some other things as you like could be a good idea. Lindsell train- if you like it, buy it. i hold it. if you follow this approach you could DIY, but i wont rec that until we know the ball park of your investment.

SJP is a total Dud. unless you like paying more fees that you are paying now, and are happy to pay 6% to leave.

If you dont like % fees, you can ask for a transactional set price. This will in in the K's depending on pot size, but tends to be cheaper than % for larger pots. If you want ongoing advice ie rebalancing etc, then look for 0.5%

Hi, Well in total the amount is 7 figures, excluding the value of the house. But it must be split equally between two.

So there have been thoughts of investing anywhere around £400,000 - £500,000.

Part of me thinks its sensible to close the existing investments. Transfer the full amount to marcus or equivalent. Then trickle in, over 24 months or so, the full amount I will be investing monthly.

On the other hand, I feel its a long term investment, at least over a decade or two, and therefore if I just invest the full amount in one go, the period will iron out any bumps.

trickydicky802

I'd ask if the OP has a mortgage or any other debts. If so, use the inheritance to pay them all off first.



Then, with their extra disposable income from having no repayments to make (and any remaining inheritance lump sum), pay into a decent drawdown pension scheme. That alone will give them 20% pa growth through simple tax relief and that's before any growth in the pension fund itself.


It will all be accessible by age 55, which may or may not be acceptable dependon on the OPs current age.

johnadams7

atush wrote: »

Still being coy about the amounts. Need a ballpark. even if high 5 fig, low, mid or high 6 fig etc. Good to see you put aside emergency cash funds.

Where is the money now where you are paying 2%?

I agree your initial proposal was a bit odd, using VLS80 and then some other things as you like could be a good idea. Lindsell train- if you like it, buy it. i hold it. if you follow this approach you could DIY, but i wont rec that until we know the ball park of your investment.

SJP is a total Dud. unless you like paying more fees that you are paying now, and are happy to pay 6% to leave.

If you dont like % fees, you can ask for a transactional set price. This will in in the K's depending on pot size, but tends to be cheaper than % for larger pots. If you want ongoing advice ie rebalancing etc, then look for 0.5%

trickydicky802 wrote: »

I'd ask if the OP has a mortgage or any other debts. If so, use the inheritance to pay them all off first.



Then, with their extra disposable income from having no repayments to make (and any remaining inheritance lump sum), pay into a decent drawdown pension scheme. That alone will give them 20% pa growth through simple tax relief and that's before any growth in the pension fund itself.


It will all be accessible by age 55, which may or may not be acceptable dependon on the OPs current age.

No mortgage. As you can see i'm keeping a fair bit liquid, or indeed plenty, so really I know my pension position. I have a NHS pension. I know the forecase etc, plus as i've said a few times I have kept plenty of money on the side. Not a 10k runny day fund. Rather a 200k runny day fund.

So as per my previous message I have a large amount to invest. I don't need to hold more back for pensions etc,

johnadams7

forecast as spelling wrong.

atush

OK so a goodly amount.

And you really dont want to lose 6% of it to SJP.

So look for an IFA who will do it at a set price. If you w ant ongoing servicing, dont commit to anything more than 0.5%

System

I would suggest you use an Independent Financial Adviser. Shop around, ask whether you pay them a set fee or whether they take some or all of their payment from the provider / investment (someone will correct me there, but I know what I mean!!). Ask your colleagues / friends if they have any recommendations for an IFA.

He / she will be in a far better position to know where and how to invest the funds, with plenty of input from you and they will keep an eye on them. If something is about to go pear-shaped in the financial world, or indeed the opposite ,they will be watching the ups and downs and be able to advise if something in your portfolio needs to be moved or changed.

I have used an independent financial adviser since I got my first mortgage in 1988. I have been with my current adviser for around 16 or 17 years and he is worth his weight in gold (I had one I didn't like before him). My needs have changed over the years and my portfolio has been changed to match. Having an IFA suits me, but maybe it doesn't suit everyone.

Surely you can find a few in your area and make an appointment for a chat and see what they have to say about how they work with their clients, and what they can do for you and how they charge for their services.

johnadams7

atush wrote: »

OK so a goodly amount.

And you really dont want to lose 6% of it to SJP.

So look for an IFA who will do it at a set price. If you w ant ongoing servicing, dont commit to anything more than 0.5%

Yes, I was asked for a very rough figure. Hence I published that as it may go 10-20% in either direction.

So would no-one suggest whacking it all in vanguard 80:20 ?

What about the place the money currently is at ? 2% ish fees but has done well, and YTD is 10% on a balanced portfolio.