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Wise choices?

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.
«13

Comments

  • 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
    Albermarle Posts: 28,277 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    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
    MallyGirl Posts: 7,261 Senior Ambassador
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    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.
    I’m a Senior Forum Ambassador and I support the Forum Team on the Pensions, Annuities & Retirement Planning, Loans
    & Credit Cards boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com.
    All views are my own and not the official line of MoneySavingExpert.
  • oofazi
    oofazi Posts: 25 Forumite
    Ninth Anniversary
    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
    oofazi Posts: 25 Forumite
    Ninth Anniversary
    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
    oofazi Posts: 25 Forumite
    Ninth Anniversary
    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
    oofazi Posts: 25 Forumite
    Ninth Anniversary
    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
    eskbanker Posts: 37,635 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    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
  • 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
    oofazi Posts: 25 Forumite
    Ninth Anniversary
    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.
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