Advice on S+S ISA and index tracker funds

OldManLogan

Hello All,
I know this is probably asked a lot and of course there is no definitive answer but I'm after some advice on a S+S ISA and how to select funds/index tracker funds.
I'm new to S+S investing and S+S ISA's but would be investing a lump sum to begin with followed by monthly payments. I would be investing with the goal of growth over 20 to 30 years + (into pension age and beyond) to hopefully give better overall returns than savings accounts. I'm prepared to take a medium amount of risk and ride out any dips in the market.

As I gain knowledge in years to come I would possibly add to a portfolio and diversify with other funds.
I've read as much as I can find on this site and forum and also articles on Monevator, Moneywise etc.
I have a decent pension through work and currently save into a LISA as well for the future (not in a position to max out the 20k ISA allowance through a combination of this and a S+S ISA so want to spread payments into both and also have added flexibility of adding to/diversifying S+S ISA).
I also have cash 'emergency' funds in an easy access savings account. (higher rate than current cash ISA's)
It seems for beginners Vanguard or Cavendish online are a good option with low fees, H and L seem to have loads of good info available but unnecessary high fees for what I'm aiming for? Does that sound right or any other platform options worth considering? 
In regards to funds, I think passive investing would fit my goals rather than active, Vanguard 60/40 seems like a good option for my risk tolerance and goals, would it be worth me investing in this and a passive index tracker such as iShares 100 UK Equity or a Global Index Tracker? Or would the Vanguard 60/40 fund fit my goals on its own without further diversifying? Following on from that is there any advantage to using the Cavendish platform (access to more funds) to begin with if the Vanguard funds are enough for my current goals?

Any help or advice would be greatly appreciated, also any recommended further reading etc,
Thanks

dunstonh

In regards to funds, I think passive investing would fit my goals rather than active, Vanguard 60/40 seems like a good option for my risk tolerance and goals, would it be worth me investing in this and a passive index tracker such as iShares 100 UK Equity or a Global Index Tracker?
If you are going to start introducing management decisions (such as breaking the asset allocation model of a multi-asset fund) then you are not really passive investing are you?

Why would you want a FTSE100 tracker?  One of the worst indexes to track for more than 20 years.
Or would the Vanguard 60/40 fund fit my goals on its own without further diversifying?
The whole point of a multi-asset fund is that it handles the diversification within itself.   Vanguard have made the management decisions on the sector weightings.    If you start adding in single sector funds, you are taking on the management decisions. What do you know about investing that makes you think you can do a better job than Vanguard?

Following on from that is there any advantage to using the Cavendish platform (access to more funds) to begin with if the Vanguard funds are enough for my current goals?
Remember that Vanguard is not necessarily the best option for some of the multi-asset funds.  There was a period they were but many would consider that some of the others are now better.  Personally, I would not use VLS40 or VLS60 at this time as I feel there are better alternatives.    A whole of market platform allows you choice.  A restricted single fund house platform takes away that choice.

OldManLogan

dunstonh said:

In regards to funds, I think passive investing would fit my goals rather than active, Vanguard 60/40 seems like a good option for my risk tolerance and goals, would it be worth me investing in this and a passive index tracker such as iShares 100 UK Equity or a Global Index Tracker?
If you are going to start introducing management decisions (such as breaking the asset allocation model of a multi-asset fund) then you are not really passive investing are you?

Why would you want a FTSE100 tracker?  One of the worst indexes to track for more than 20 years.
Or would the Vanguard 60/40 fund fit my goals on its own without further diversifying?
The whole point of a multi-asset fund is that it handles the diversification within itself.   Vanguard have made the management decisions on the sector weightings.    If you start adding in single sector funds, you are taking on the management decisions. What do you know about investing that makes you think you can do a better job than Vanguard?

Following on from that is there any advantage to using the Cavendish platform (access to more funds) to begin with if the Vanguard funds are enough for my current goals?
Remember that Vanguard is not necessarily the best option for some of the multi-asset funds.  There was a period they were but many would consider that some of the others are now better.  Personally, I would not use VLS40 or VLS60 at this time as I feel there are better alternatives.    A whole of market platform allows you choice.  A restricted single fund house platform takes away that choice.

Thank you for your reply and insight, as I say I'm new to investing in S+S.
My intention wasn't to make management decisions, rather to just invest in more than one fund, so a Vanguard Life Strategy one and an index tracker, my understanding was that they were both passive investment funds, is this pointless and just duplication/unnecessary?
The FTSE Tracker was just an example, are there any others you would recommend or further reading to compare?

Clearly I'm not trying to imply I know more than Vanguard about investing, as I say I'm new to this, by diversifying I simply meant investing in than more one fund. I'd read on Monevator about passive investments through index trackers and simply wondered if this would compliment a multi asset fund like Vanguard 60/40.
Are there any other multi asset funds you would recommend to look at further rather than VLS 60/40?
Thanks again for your reply and insight.

dunstonh

My intention wasn't to make management decisions, rather to just invest in more than one fund, so a Vanguard Life Strategy one and an index tracker, my understanding was that they were both passive investment funds, is this pointless and just duplication/unnecessary?
VLS is not a passive fund.   It is a fettered fund of funds that uses index trackers as its underlying investments but held to a model that is decided by Vanguard.     Fettered means in-house only.  Fund of funds, means it invests into other funds.   

Vanguard already have an allocation to UK equity in the VLS.   So, you adding another one increases your UK allocation.  In effect, you break their model to go with your model.    If you are going to do that, then you need more knowledge and understanding and have a strategy to follow.  Not just picking a fund at random.

With multi-asset funds like VLS, you do not need multiple funds. 

The FTSE Tracker was just an example, are there any others you would recommend or further reading to compare?
Nothing you read on this site regarding investments is a recommendation as that is a regulated activity.  The board is not authorised to do that.  And those of us in real life that are cannot do so as it would breach FCA rules.   So, everything you read here is opinion and discussion points only.
I would suggest you dont put any others in the mix.   Until you are able to understand investing better, there is no point trying to invest on your own model.   A good measure of understanding is that if you have to ask the question, then you are not ready to do it.

Clearly I'm not trying to imply I know more than Vanguard about investing, as I say I'm new to this, by diversifying I simply meant investing in than more one fund. 
No investor should be picking funds at random and putting random amounts into them (random perhaps wrong word but you get the idea).     A bit in this and a bit in that is not good investing.   You should have structure and reasoning to any model.  Vanguard do that for you with the VLS.    So, any attempt by you to deviate has to have good reason.   And the only reason for doing so is that you think you can do better.     If you dont think that then dont add any more funds.

I'd read on Monevator about passive investments through index trackers and simply wondered if this would compliment a multi asset fund like Vanguard 60/40
No. It would make things worse.   Remember VLS is already investing in passive investments.
Experienced investors are less likely to use a multi-asset fund and invest to their own model of single sector funds.   However, you are not at that level yet.   For example, how much would you allocate to Japan or US or Europe?  How much would you hold in small cap, medium cap and large cap?     When it comes to the fixed interest allocation, would you use gilts, index linked gilts, investment grade bonds. global bonds, high yield bonds etc?   If that is going over your head in terms of your current understanding then stick with a mutli-asset fund.

Albermarle

Vanguard LS funds are themselves using  a mix of index trackers and other instruments. So if you add another index tracker separately you are disturbing the carefully thought out balance of the VLS 60 . If you want to invest outside the VLS 60 ( or similar multi asset fund ) it makes more sense to look at something a bit more specialist - small caps; ethical : specific industry sectors etc 
Alternatives to VLS are : Blackrock consensus: L&G Multi index : Fidelity multi allocator and others . They are all similar but if you read the factsheets you will see there are some differences in asset allocation .

OldManLogan

dunstonh said:

My intention wasn't to make management decisions, rather to just invest in more than one fund, so a Vanguard Life Strategy one and an index tracker, my understanding was that they were both passive investment funds, is this pointless and just duplication/unnecessary?
VLS is not a passive fund.   It is a fettered fund of funds that uses index trackers as its underlying investments but held to a model that is decided by Vanguard.     Fettered means in-house only.  Fund of funds, means it invests into other funds.   

Vanguard already have an allocation to UK equity in the VLS.   So, you adding another one increases your UK allocation.  In effect, you break their model to go with your model.    If you are going to do that, then you need more knowledge and understanding and have a strategy to follow.  Not just picking a fund at random.

With multi-asset funds like VLS, you do not need multiple funds. 

The FTSE Tracker was just an example, are there any others you would recommend or further reading to compare?
Nothing you read on this site regarding investments is a recommendation as that is a regulated activity.  The board is not authorised to do that.  And those of us in real life that are cannot do so as it would breach FCA rules.   So, everything you read here is opinion and discussion points only.
I would suggest you dont put any others in the mix.   Until you are able to understand investing better, there is no point trying to invest on your own model.   A good measure of understanding is that if you have to ask the question, then you are not ready to do it.

Clearly I'm not trying to imply I know more than Vanguard about investing, as I say I'm new to this, by diversifying I simply meant investing in than more one fund. 
No investor should be picking funds at random and putting random amounts into them (random perhaps wrong word but you get the idea).     A bit in this and a bit in that is not good investing.   You should have structure and reasoning to any model.  Vanguard do that for you with the VLS.    So, any attempt by you to deviate has to have good reason.   And the only reason for doing so is that you think you can do better.     If you dont think that then dont add any more funds.

I'd read on Monevator about passive investments through index trackers and simply wondered if this would compliment a multi asset fund like Vanguard 60/40
No. It would make things worse.   Remember VLS is already investing in passive investments.
Experienced investors are less likely to use a multi-asset fund and invest to their own model of single sector funds.   However, you are not at that level yet.   For example, how much would you allocate to Japan or US or Europe?  How much would you hold in small cap, medium cap and large cap?     When it comes to the fixed interest allocation, would you use gilts, index linked gilts, investment grade bonds. global bonds, high yield bonds etc?   If that is going over your head in terms of your current understanding then stick with a mutli-asset fund.

That is really helpful, thank you. Clearly I have a lot to learn and understand before making any investment decisions on individual funds etc. I'll stick to one multi asset fund for now until I have more experience and knowledge to change that strategy. 

OldManLogan

Albermarle said:

Vanguard LS funds are themselves using  a mix of index trackers and other instruments. So if you add another index tracker separately you are disturbing the carefully thought out balance of the VLS 60 . If you want to invest outside the VLS 60 ( or similar multi asset fund ) it makes more sense to look at something a bit more specialist - small caps; ethical : specific industry sectors etc 
Alternatives to VLS are : Blackrock consensus: L&G Multi index : Fidelity multi allocator and others . They are all similar but if you read the factsheets you will see there are some differences in asset allocation .

Thank you I think I need to stick to a single multi asset fund for now, I'll have a look at some of the alternatives to VLS.

bostonerimus

Don't get confused, something like VLS60 or VLS80 will be just fine for anyone starting a long term ISA investment. Do not be tempted to get anymore complicated in an effort to get larger returns. However, please read some of the books and websites about UK investing and understand what you are doing and why. It is good to be an educated investor and then you will be able to grasp the arguments for keeping things simple.

OldManLogan

bostonerimus said:

Don't get confused, something like VLS60 or VLS80 will be just fine for anyone starting a long term ISA investment. Do not be tempted to get anymore complicated in an effort to get larger returns. However, please read some of the books and websites about UK investing and understand what you are doing and why. It is good to be an educated investor and then you will be able to grasp the arguments for keeping things simple.

Thank you, are there any specific websites or books you would recommend?

Alexland

OldManLogan said:

I have a decent pension through work and currently save into a LISA as well for the future

By 'save' do you mean you are using a Cash LISA for age 60+? If so that's inappropriate as the circa 1% interest rate will not keep up with changes in spending power so you are burning your bonus on inflation. Consider transferring to a S&S LISA with someone like AJ Bell Youinvest who are a viable business, accept inbound LISA transfers and offer a wide choice of investments at reasonable charges. Cash LISAs are only suitable for people who will soon be making a qualifying first time property purchase.

Mrbeethoven

OldManLogan said:

bostonerimus said:

Don't get confused, something like VLS60 or VLS80 will be just fine for anyone starting a long term ISA investment. Do not be tempted to get anymore complicated in an effort to get larger returns. However, please read some of the books and websites about UK investing and understand what you are doing and why. It is good to be an educated investor and then you will be able to grasp the arguments for keeping things simple.

Thank you, are there any specific websites or books you would recommend?

You've already mentioned Monevator, that's an excellent resource for UK investors to learn from. If you haven't already done so I would suggest having a good look at the Best Of section and the Passive Investing section.

There are also some very entertaining and useful/relevant posts on the UK site The Escape Artist.

It's also worth a read of The Stock Series on the J L Collins blogsite. It's US but most of it is relevant to the UK as well. It may also provide some comfort when investing during times of market turmoil. 

https://jlcollinsnh.com/stock-series/

All three sites are entertaining as well as informative.