Wise choices?

oofazi

Good evening Forum Expertise,

Having recently seen into the future from a career perspective, knowing I have approx. 10 years of fairly well paid work to come, thought I'd try to start investing having some funds available.

I am thinking of bond and equity funds for an upcoming lump sum & further salary I can siphon from to top up regularly. Looking to invest probably for more than 10 years as I am 45 with a good spread of risk and diversification.

I've only about £500 in VLS80, I should probably start to dedicate funds to this aswell......?

Having made the below choices (and having a Vanguard account for the above, notwithstanding the .22% OCF for that alone), please see the below with OCFs:

[FONT=&quot]Bonds[/FONT]

[FONT=&quot]Global Bond Index Fund[/FONT][FONT=&quot] - Hedged Accumulation .15%[/FONT]
[FONT=&quot]EUR Corporate Bond UCITS ETF[/FONT][FONT=&quot] (VECP) .12% [/FONT]
[FONT=&quot]USD Emerging Markets Government Bond UCITS ETF[/FONT][FONT=&quot] (VEMT) .25%[/FONT]
[FONT=&quot]U.K. Gilt UCITS ETF[/FONT][FONT=&quot] (VGOV) .12%[/FONT]

[FONT=&quot]Equities[/FONT]

[FONT=&quot]FTSE Developed Europe ex UK UCITS ETF[/FONT][FONT=&quot] (VERX) .12%[/FONT]
[FONT=&quot]FTSE 250 UCITS ETF[/FONT][FONT=&quot] (VMID) .10%[/FONT]
[FONT=&quot]S&P 500 UCITS ETF[/FONT][FONT=&quot] (VUSA) .07%[/FONT]
[FONT=&quot]FTSE All-World UCITS ETF[/FONT][FONT=&quot] (VWRL) .25%[/FONT]

Do you think I am doubling up unnecessarily on any of these choices? The total OCF of the above is 1.18% seems to be very good but still has the .15% platform charge to be added, and does not include the VLS80 charge of .22% mind.....with this fund added it would be 1.4% OCF.

What I dont know is of the ETF dividends, do I manually have to monthly or quarterly have to reinvest the small amount of £'s and pence back into the respective ETFs from which they came? Or can they be simply accumulated (using a check box when you buy into the fund) as there are no separate choices of income/ accumulator funds - just the single choice of fund?

Also, if a yield is stated as 3% for example, to work out the monthly income is that 3% divided by 12 for the months of the year = 0.25% then use this % as the increase on say £500 being a total of £1.25, increasing as each month passes, £501.25 + 0.25% = £502.503 and so on - but manually have to transfer the monies into each fund? (That would be a right faff!)

Please tell me if I am wrong as I'm probably incorrect and I'll get back less than I would be expecting!

Many thanks.

oofazi.

MarkCarnage

You would be doubling up with FTSE All World and all the rest of the equity ETFs to a degree, especially US.

You appear to be simply adding up the OCFs rather than taking a weighted sum of them.So your total OCF should be somewhere between 0.1-0.2% I imagine. You would only have the platform fee to add.

I don't know the detail of Vanguard dividends, but I imagine they will pay quarterly or semi-annually and would think that there must be some kind of automated reinvestment if you look hard enough....

Albermarle

Having recently seen into the future from a career perspective, knowing I have approx. 10 years of fairly well paid work to come, thought I'd try to start investing having some funds available.

What is your pension situation ? Is there a reason why you are looking to invest outside a pension?

MallyGirl

another vote for pension - if you are looking at a 10 year horizon you would be at (or near, if future legislation changes it from 55) to the point where you could access your TFLS as a minimum. Tax (and NI if you can salary sacrifice) breaks make a pension a good investment.

oofazi

Understood ref your first point - maybe I should reduce the number of a US dedicated ETF, to avoid over-exposure.


Yes, I have been just adding them up and thought if they are individually charging OCFs per fund, they are 'the sum of', ie a total, rather than 'the average of'? If I am wrong - I assume they are the mean average, is that correct?


I will check with Vanguard for the auto reinvestment piece you mention - I really don't want to be reinvesting pounds and pennies each month back to respective funds..... (however, at work most if not all of the business day can be a PITA!!


Other than that can you see any other issues from a 'sound investment' perspective? Just nervous, I suppose.

oofazi

Albemarle - you have reminded me, this is another question - I am currently building a work pension, but am unsure if I can start a SIPP, as I am in the military. I have and am being stung with significant tax charges from some retail bonds locked in till 2022 and am a 40% tax payer.... so my Tax Code has been changed (to K205) and my monthly salary is significantly reduced. Your suggestion of starting a SIPP, if it is possible, could mitigate this from a tax relief perspective - am I correct?

oofazi

MallyGirl wrote: »

another vote for pension - if you are looking at a 10 year horizon you would be at (or near, if future legislation changes it from 55) to the point where you could access your TFLS as a minimum. Tax (and NI if you can salary sacrifice) breaks make a pension a good investment.

My military pension would start at 55, I don't know what the term 'TFLS' is, apologies. The consensus suggests that a SIPP would make good financial sense - my question would be are the choices made above suitable, notwithstanding the changes possibly needing to be made from over exposure identified by MarkCarnage?

oofazi

MarkCarnage wrote: »

You would be doubling up with FTSE All World and all the rest of the equity ETFs to a degree, especially US.

You appear to be simply adding up the OCFs rather than taking a weighted sum of them.So your total OCF should be somewhere between 0.1-0.2% I imagine. You would only have the platform fee to add.

I don't know the detail of Vanguard dividends, but I imagine they will pay quarterly or semi-annually and would think that there must be some kind of automated reinvestment if you look hard enough....

Thank you MarkCarnage - I have just found the quote button...... haven't used this site much (luddite) - but have replied to you.

eskbanker

oofazi wrote: »

I don't know what the term 'TFLS' is, apologies.

Tax-Free Lump Sum, i.e. the 25% of your pension pot that can be accessed in one go without being subject to income tax: https://www.gov.uk/tax-on-pension/tax-free

MarkCarnage

oofazi wrote: »

Understood ref your first point - maybe I should reduce the number of a US dedicated ETF, to avoid over-exposure.


Yes, I have been just adding them up and thought if they are individually charging OCFs per fund, they are 'the sum of', ie a total, rather than 'the average of'? If I am wrong - I assume they are the mean average, is that correct?


I will check with Vanguard for the auto reinvestment piece you mention - I really don't want to be reinvesting pounds and pennies each month back to respective funds..... (however, at work most if not all of the business day can be a PITA!!


Other than that can you see any other issues from a 'sound investment' perspective? Just nervous, I suppose.

Yes it's a weighted average OCF. Simple example:

£100 split 50/50 in two funds charging 10bps and 20bps. Weighted cost is:

0.5 x 10bps = 5bps, plus 0.5 x20 bps = 10bps. Total weighted cost = 15bps (0.15%) plus your platform costs.

If you want a predominantly equity portfolio, low cost and diversified, and are happy with passive, that's not a bad start.

Others rightly comment that directing it to pensions vehicle may be more tax efficient and that is a different debate.

oofazi

eskbanker wrote: »

Tax-Free Lump Sum, i.e. the 25% of your pension pot that can be accessed in one go without being subject to income tax: https://www.gov.uk/tax-on-pension/tax-free

Got it, thank you. I still need to determine any implication from having a mil pension to start a SIPP...funny, you'd think there was regular contact with financial expertise for large cohorts of personnel which has in part been out-sourced to Forces Pension Society which offer great advice collectively, but do require subscribing to for personal circumstances. Our pay staff are not qualified to offer any information - so vehemently avoid talking about it. I am thankful for this forum's wealth of knowledge.