What funds for SIPP?

Harribo1

Due to a period of poor performance and high fees, I've decided to move my pension which was managed by an independent adviser to a SIPP on the AJBell platform.

I'm looking at funds to invest in, and having done well out of the Lifestrategy fund in a S&S ISA I'm leaning towards the Vanguard Target Retirement 2040 Fund.

As far as I can tell, this has a good performance and is spread across various asset classes but I'm wondering if this is a diverse enough strategy and if not, what funds would people recommend investing in?

For context, my current portfolio is spread across 20 funds, one of which (M+G property) has been suspended, hence why I'm sceptical about the benefit of paying for an adviser and spreading across so many funds.

I'm 33 yo and I will be putting approx £180k into the SIPP now and hopefully £40k/pa ongoing.

I plan to retire at 55 when I can get my hands on some of the cash and I have an appetite for risk vs reward.

Any advice welcomed!

[Deleted User]

Why not invest directly into the stock market?

It will save you a lifetime of fund management fees.

If you're not sure which stocks to invest in, you could take a look at the top holdings of some funds that have done well for you, and start with them.

[Deleted User]

As far as I can tell, this has a good performance and is spread across various asset classes but I'm wondering if this is a diverse enough strategy and if not, what funds would people recommend investing in?

Sorry to be picky, but what you need is a good strategy rather than a “diverse” one.

You also need to have a diversified portfolio with lots of different stocks from various regions and industries as well as other asset classes. Vanguard target retirement provides both. You own the world of stocks and bonds in a single fund; can’t get more diversified. And the strategy is sound:

1. Simplicity
2. maximum diversification
3. lowering percentage of volatile assets over time as you approach retirement
4. Low costs
5. Stick with the plan

You can try and improve on this strategy e g by reducing the cost a bit and gaining more control but the downside would be:

a) loss of simplicity and
b) temptation to start messing with your portfolio, particularly during prolonged bear markets

The latter invariably results in loss of performance

Harribo1

Thanks, so are you saying you would simply put all of the cash into the Vanguard fund?

[Deleted User]

Harribo1 wrote: »

Thanks, so are you saying you would simply put all of the cash into the Vanguard fund?

Depends.

1. If I had experience of investing, including experience of sticking with “the plan” during a bear market then I would seek more control and lower costs. This can be achieved in a relatively simple portfolio of 4 to 6 ETFs.

2. If I were relatively new to investing, clueless about ETFs, too busy to invest the time into educating myself, then absolutely. I would invest 100% of my pension into Vanguard’s LifeStrategy fund.

P.S. The other consideration is the size of your portfolio. Under 100k the cost advantage of the first approach is too small (if any). Over 500k option 1 might be worthwhile, but there is still a risk of behavioural problems and the additional effort.

SonOf

I'm looking at funds to invest in, and having done well out of the Lifestrategy fund in a S&S ISA I'm leaning towards the Vanguard Target Retirement 2040 Fund.

Not a great fund in my opinion. Higher charges (vs the non-lifestyle version) for a fund that reduces risk over a period that is unlikely to match de-risking that is suitable for you.

As far as I can tell, this has a good performance and is spread across various asset classes

It has only been available in a period of positive returns. So, what do you expect?

For context, my current portfolio is spread across 20 funds, one of which (M+G property) has been suspended, hence why I'm sceptical about the benefit of paying for an adviser and spreading across so many funds.

Spreading across single sector funds is normal for a portfolio. You expect around 6-15 typically. The Vanguard fund is a fund of funds and that too spreads across a range of funds. So, it is doing virtually the same thing the adviser was doing. Except for using own-brand funds.

Ignore ZingPowZing as he is the forum troll (just look at his previous posts for reference). His comments on this thread, like most of his otherse, are incorrect and potentially dangerous for you to follow.

kinger101

Nothing wrong with the fund per se, but it's not something I'd choose as I'd have no control over the ratio of the stock to bonds. I don't believe there's a one size fits all for this.

It depends on many things, including

(a) attitude to risk
(b) whether an annuity purchase is envisaged
(c) other sources of assets/income available in retirement

But if you're looking for simplicity, it's much better than the default option in many employer's pension schemes.

AnotherJoe

What sonof says, not target retirement, which is an old fashioned concept these days. Just buy an equity and bond mixture in whatever ratio floats your boat.

Harribo1

kinger101 wrote: »

It depends on many things, including

(a) attitude to risk
(b) whether an annuity purchase is envisaged
(c) other sources of assets/income available in retirement
.

a) I think when I did the assessment with the FA when I set up the pension 7 years ago I was classed as 'moderately adventurous, one down from the greatest level of risk.
b) At the minute, the plan is to take the 25% lump sum and buy an annuity, who knows what the future holds but this is what I am planning for.
c) I have no idea but I'm planning for no as currently no other source of income other than the company I run.

Harribo1

AnotherJoe wrote: »

What sonof says, not target retirement, which is an old fashioned concept these days. Just buy an equity and bond mixture in whatever ratio floats your boat.

You make that sound very easy, like picking up a loaf of bread and a pint of milk! But to me it sounds like a headache and also, I'm assuming, requires some ongoing management, at least in terms of the equities?

General update In terms of costs I've discovered that AJB charge for the ongoing fund charge in addition to their standard .25% fund custody charge, so in the case of the Vanguard fund, this would be approx .49%. To do this directly with Vanguard when their platform is ready (apparently by end of Feb) this charge would be .15% platform charge + .24% = .39% overall - so I will likely wait for this.

To do as people are suggesting and buy a mix of ETFs and shares would mean by my reckoning .01% at least for management of the ETFs on top of AJB's .25% share custody charge, and a one-off fee for purchase of each share - this would obviously be the cheaper route, but as above, leaves me having to choose the shares and ETFs and possibly change these at certain points which I really don't want the hassle of.

[Deleted User]

AnotherJoe wrote: »

What sonof says, not target retirement, which is an old fashioned concept these days. Just buy an equity and bond mixture in whatever ratio floats your boat.

Disagree. “Target retirement” is a solid concept, very popular and for good reasons.

It is true that investment horizon goes beyond the actual retirement date, often by decades. That means keeping a portion in equities. At the same time there is still a need to reduce volatility once you are no longer receiving salary or even when you are approaching that moment.