Advice for a newbie please

cragside

I am 44 but have only just decided to try investing (apart from an employer share purchase scheme and a company flotation), so I'd love a bit of advice before I commit.

I want to get some long-term growth started in a S&S ISA but I don't have a firm time frame for when I'll need to cash in. Obviously I have rainy day money put aside in easy access savings but life might throw a curveball. It will be minimum 5 years, hopefully much longer (or maybe I should be thinking ahead to retirement in 20 years, how depressing!) and I know I might have to ride out any losses over the course of a decade. I want to drip feed something like £300 a month in, but I also have a £10K lump sum to get started. I've been overpaying my mortgage by £300pm for 18 months now, and have just upped that to £400 because I don't want to have a mortgage as I approach retirement (17 years left if I don't overpay, 9 if I do £400) but maybe I could put that extra £100 into the ISA.

I have hardly any spare time, I want a low cost, low maintenance option, and don't see myself becoming an expert in investments tbh, so I like the look of the LifeStrategy 80% Equity Fund (Accumulation) direct with Vanguard, and maybe move to the 60% one in 10 years.

I have two questions:

1 - The FTSE Global All Cap Index Fund also looks good. Should I add this as well or is there too much overlap?

2 – Should I start off by depositing my full £10K lump sum to get things kick started, or spread the risk by making my monthly payments much higher initially to use up the lump sum over a period of time? A Monevator article makes me lean towards the first option, as it says studies found that lump sum investing beat drip-feeding around two-thirds of the time in the UK and US.

Thanks!

MaxiRobriguez

1) Pick one or the other.

2) Flip a coin as to what's going to be best for you. Do what you're comfortable with, there isn't a wrong answer if you're going to leave your investments for the long term,

3) The answer to the question you didn't ask: Pension contribution may be more suitable than a S+S ISA. What is your current provision and what does your employer offer?

Audaxer

cragside wrote: »

2 – Should I start off by depositing my full £10K lump sum to get things kick started, or spread the risk by making my monthly payments much higher initially to use up the lump sum over a period of time? A Monevator article makes me lean towards the first option, as it says studies found that lump sum investing beat drip-feeding around two-thirds of the time in the UK and US.

It possibly makes more sense to put it in as a lump sum, but it depends if you can cope if there suddenly is an equity crash. If you had put the £10k into a VLS60 at the start of last year, it would have grown by around 15%. It might continue to grow this year if you put £10k in now, but it could lose over 20% in an equity crash, but should be okay long term. If in doubt I would maybe invest monthly over a 6 month or a year period.

Thrugelmir

Could you not pay a lump sum into the mortgage now and then pay a higher level of monthly contributions into your choosen pension option? That way you can dip your toe into the water. Markets in general have had good run in recent years. While markets may not crash. They could potentially disappoint for an extended period.

cragside

MaxiRobriguez wrote: »

3) The answer to the question you didn't ask: Pension contribution may be more suitable than a S+S ISA. What is your current provision and what does your employer offer?

Good point, I should have given my pension details.
I pay 5% or £196
Employer 11% or £431
I also pay AVCs of 1% or £37
total £664 pm
Apparently the value is £54500 (cost £48500). Usual deal, higher risk now, lower towards retirement. And the contribution percentages change as you age.
I've been meaning to increase my AVCs so I'll get on that.
However I still want the ISA so I can get to the money should I need some/all of it before retirement - the bank of mum and dad may well be called upon, for example! (I have a 3 yo)

cragside

Thrugelmir wrote: »

Could you not pay a lump sum into the mortgage now and then pay a higher level of monthly contributions into your choosen pension option? That way you can dip your toe into the water. Markets in general have had good run in recent years. While markets may not crash. They could potentially disappoint for an extended period.

Until recently overpaying my mortgage was the only thing I wanted to do with this extra money, but as mortgage rates are so low I'd like to get the lump sum earning a higher rate via S&S while still overpaying every month. I'll have another look at the mortgage calculator and think again.
And I suppose my intention is to have the option of accessing the money in the decade before I retire (if the fund is doing well), although I will increase my pension contributions as well so thanks for the suggestion. While my rainy day money will cover me if I'm out of work for at least 6 months, I might want to cash in for some other reason.

I've read that equities are overpriced right now so it might be a bad time to throw £10K into them, but then again the trend might continue so I think I need to just jump in. Possibly by spreading the £10K over the first 12 months.

Thrugelmir

Low interest rates aren't necessarily a good indicator of longer term market returns. Ultimately what drives markets sustainably upwards is company profitabilty. Being mortgage free gives one peace of mind. More to life than simply making money (well attempting to at least). Reducing debt levels is just another form of insurance against the uncertainities that life throws up.

Albermarle

I've read that equities are overpriced right now so it might be a bad time to throw £10K into them, but then again the trend might continue so I think I need to just jump in. Possibly by spreading the £10K over the first 12 months.

Nobody knows what will happen, but the generally accepted view is that returns in the next 10 years will probably not be as good as the last 10.
However that should not stop you investing, and if you feel more comfortable by spreading it our then do that.

However I still want the ISA so I can get to the money should I need some/all of it before retirement

In case you are not aware , a pension is available from age 55 ( maybe 57 by the time you get there ) whether you are actually retired or not .
You do not mention your salary . If you are paying 40% tax then pension is even more the go to option .

cragside

Albermarle wrote: »

In case you are not aware , a pension is available from age 55 ( maybe 57 by the time you get there ) whether you are actually retired or not .
You do not mention your salary . If you are paying 40% tax then pension is even more the go to option .

I did know that but have never thought it'd be something I would do. I've always assumed I won't have enough spare money in my pension pot to have the luxury of withdrawing any early. Is that quite common then?
As for salary, I'm only on £47k.

Albermarle

I did know that but have never thought it'd be something I would do. I've always assumed I won't have enough spare money in my pension pot to have the luxury of withdrawing any early. Is that quite common then?

I suppose by 'early' you mean before the state pension age , which for some people is also their retirement age .
Many posters on this forum , plan ( or already have ) to stop work at 55 or not long after .Often they have a couple of pensions. A final salary one that they take at 60 to 65 and a DC one , like yours that they use to fill the gap between taking the other pension + the state pension.
Most of them have substantial savings and investments but a few are prepared to live on a shoestring just to retire early .
This is a Pensions forum so not really representative of the general population , where probably not many people can afford to retire before 60 or even 65.