Changing your investment approach. Managing your portfolio.

JustAnotherSaver

I've got to the point where my attitude has changed based on the books i've been reading compared to what it was when i started out a few years ago. Not drastically but still, it's changed and i'm not really sure on the best way to go forward so i'd like to not necessarily ask for advice but ask for your opinion as i'm sure some reading this will have been in a similar situation.


Right to kick off, i opened my SIPP with Cavendish Online and transferred what i'd built in my S&S ISA to it, investing in the funds
* Vanguard Emerging Markets Stock Index Acc (£3.1k)

* Vanguard LifeStrategy 100% Equity Acc (£14.6k)


I've put the values in each at the end. The total pot is £17.7k which being in my mid 30s, in my opinion, isn't enough/a lot.


Then i started reading more and more trying to educate myself on investing. Reading websites, reading books, reading posts from you guys, other websites etc.


As i've come to the end of my most recent book my opinion has changed.


No longer would i put any money in to Vanguard Emerging Markets
and the VLS100, i would probably go more VLS80 or just not necessarily Vanguard at all. Perhaps HSBC Global Strategy Dynamic. Not overly happy with the 100 for starters and reading the VLS has UK weighting - hence the comment about HSBC as an option, or even a similar fund from a different provider (I haven't fully looked in to that bit yet).




So first question is what would you do from here? Obviously future payments would go in to different funds but what about the existing contributions? Would you personally leave them be or would you re-allocate that money in to your new fund?
Or another option entirely that i haven't thought of?




Second one - as i see it something like VLS80 and HSBC Dynamic are similar. Obviously there's differences but i didn't say they were identical. It's not like comparing investing in VLS80 with say, Apple or Facebook as your 30 year plan.
I know some here have invested in for example VLS80 and VLS60 at the same time, VLS100 and VLS80 at the same time.
Is there anything particularly wrong with investing in say VLS80 and HSBC Dynamic together?

This is more a curiosity thing. As i see it they're similar - it's not like going VLS20 and HSBC Adventurous. Their charges are almost identical. So with the same amount invested in each over 10, 20 years, i wonder which would be the better return. If you put £20k in to one at 0.22% charge on the lot, or £10k in to each at 0.22% on one 10k and 0.21% charge on the other £10k then it's not costing you any more. Still, i can't help but feel there's a negative to it that i haven't thought of.

danm

Interested in responses. I just posted something similar, although my starting point is considerably ‘messier’

El_Torro

JustAnotherSaver wrote: »

So first question is what would you do from here? Obviously future payments would go in to different funds but what about the existing contributions? Would you personally leave them be or would you re-allocate that money in to your new fund?
Or another option entirely that i haven't thought of?

I wouldn't invest in both a VLS 100 and a VLS 80. In that position I would transfer everything to the VLS 80.


As for the Emerging Markets index, the answer to that is a bit trickier. If you think that global trackers under represent Emerging Markets then there is an argument to keep what you have in that fund. Personally on my next rebalance my plan is to have nothing but multi asset global trackers and perhaps a complimentary Small Companies fund. That's not necessarily the "right" choice though, we'll only know for sure whether you should keep your Emerging Markets tracker with hindsight. From an adequate distribution point of view I'd say you could argue it either way.

JustAnotherSaver wrote: »

Second one - as i see it something like VLS80 and HSBC Dynamic are similar. Obviously there's differences but i didn't say they were identical. It's not like comparing investing in VLS80 with say, Apple or Facebook as your 30 year plan.
I know some here have invested in for example VLS80 and VLS60 at the same time, VLS100 and VLS80 at the same time.
Is there anything particularly wrong with investing in say VLS80 and HSBC Dynamic together?

No, there's nothing wrong with having multiple multi asset global trackers. Simplicity purists will tell you it's adding unnecessary complication; an argument I don't necessarily disagree with. Still, it shouldn't significantly affect your long term returns.

As you say VLS and HSBC Global Strategy are not identical. For one thing VLS puts about 25% of its equities in the UK, whereas HSBC doesn't have that bias so has about 5% in the UK. If you think that 25% is too high and 5% is too low then that's already one reason to own both funds.

DrSyn

You can make investing as simple or as complicated as you like. I go for the simple.

It is in interest of the the investment industry to make it look complicated.
That way they have a better chance of extracting as much money from you as they can. They wish to make the average person think they cannot go it alone & needs all these different funds.The average person does not.

Examples:

(a) The OP, for the amount of money they are investing can get by with just one low cost global multi asset fund set at risk level they are comfortable with, in my opinion.


(b) danm, really does not need a portfolio of 11 different funds.
Just what is the overlap between those funds?
What is the share/bond split of the portfolio?

The more funds you have, the cost normally goes up, as does the complexity and time to manage it. Also if you are a newbie or do not have the time to learn investing, it becomes discouraging.

I assume you have watched both of these:-
http://www.kroijer.com/
https://www.ifa.com/indexfundsthemovie/


The following is for the US markets but it shows what can happen. Have a look at the charts next to the photo:-

https://www.getrichslowly.org/bull-bear-markets/


This is why you should select the risk level with care and always have an emergency fund.

Vanguard is actually owned by its fund holders. Like a building society.

VLS : They will re-balance to the share/bond split you have chosen. You have to accept the risk which goes with that split. They have a higher UK content than HSBC Global Strategy.

HSBC Global Strategy : They will re-balance to try and keep the the risk level you have chosen the same.

MaxiRobriguez

The big question which you need to assess is when do you plan to use the money you've invested? Is it a retirement fund, so you have 30+ years before you need it, or is it sooner?

The longer you've got until you want to access it, the more aggressive you can be. That means 100% equities and overweighting to emerging markets and small companies.

I'm a couple years younger than you and my emerging markets allocation makes up about 30% of my portfolio, it's my biggest allocation, but it's in my pension fund so won't be able to access it for 30 years. I wouldn't choose to have that in my S+S ISA, which currently doesn't really have a planned use, but I suspect I may want to use it for a bigger house purchase/semi-retirement in 10-15 years. In my S+S ISA I'm looking to pick up cheap UK dividend stocks which should be protected somewhat against major market downturns and not be as volatile as smaller/emerging funds, so I will be able to take out the money as and when required.

green_man

As above, it depends somewhat your you investment horizon, I assume this isn’t a retirement fund otherwise a SIPP would be a better home. I think your original approach is OK if you are 10+ years committed. Many people do supplement mutiasset funds with EM or small companies satalite funds as there allocation to these areas is typically very small.

So again it depends how complex you want to make things. Either identify a fund, or small selection of funds that fulfil your strategy and switch to them, or add various funds to what you have to fulfil and keep balancing accordingly. Be aware though you might change your strategy again if you read more:-) What then?

My intention is to go with the HSBC balanced fund, supplemented by 10% smaller companies and 10% EM and 15% cash, in my SIPP Drawdown fund (pulling about 4% a year from this). But there is no 100% right solution (though there are probably some very wrong solutions).

badger09

green_man wrote: »

As above, it depends somewhat your you investment horizon, I assume this isn’t a retirement fund otherwise a SIPP would be a better home. I think your original approach is OK if you are 10+ years committed. Many people do supplement mutiasset funds with EM or small companies satalite funds as there allocation to these areas is typically very small.

So again it depends how complex you want to make things. Either identify a fund, or small selection of funds that fulfil your strategy and switch to them, or add various funds to what you have to fulfil and keep balancing accordingly. Be aware though you might change your strategy again if you read more:-) What then?

My intention is to go with the HSBC balanced fund, supplemented by 10% smaller companies and 10% EM and 15% cash, in my SIPP Drawdown fund (pulling about 4% a year from this). But there is no 100% right solution (though there are probably some very wrong solutions).

OP's post is about SIPP;)

green_man

badger09 wrote: »

OP's post is about SIPP;)

Doh!:embarasse. Comments still apply though

MaxiRobriguez

I too missed the SIPP wording in OP.

In which case, at mid-30's I suspect that 100/0 split is more favourable than 80/20 in the current environment and emerging market overweighting isn't to be shied away from. Re-assess at 45.

Thrugelmir

DrSyn wrote: »

Vanguard is actually owned by its fund holders. Like a building society.

Unlike a Building Society there's no ability to approve Executives Remuneration for example. With a Building Society every member has a vote they can cast.

As a private entity Vanguard don't have to disclose what their executives earn. Certainly not run on a charitable basis. They'll offer whatever products are profitable to run.

DrSyn

Thrugelmir wrote: »

Certainly not run on a charitable basis. They'll offer whatever products are profitable to run.

You forgot to mention:-

(a) Vanguard started the first index mutual fund and were laughed at by the investment industry at the time. They called it "Jack Bogle's Folly ".

(b) That Jack Bogle when he retired, handed over the company to the fund holders and did not keep it for himself.

(c) Vanguard has been a leading force in driving down fund charges.

The above suggest they have their fund holders interest at heart.

I still remember when unit trust costs were low, because they where control by law. The industry said that being allowed to charge what they like, would not mean the costs would go up.

So the legal control on what a unit trust could charge was removed. So what then happens:-
1. Charges start their upward journey.
2. Adverting of the products shoot up.
3. The cult of the "Star Manager" is born!