Lazy first time investor - 20 K in Vanguard S&P 500 ??

dhjb

I would like to open my first S&S ISA  - I have 20 K so the max allowance and I am planning to top it once a year , separately I have emergency savings ,yes. 
I am 29 and I have a stable job for now .  I wont need the funds anytime soon as I just bought my first flat last year . Perhaps 7-10 years term. 
I was looking at Vanguard - they have only Income share class and don't offer accumulation so that I take advantage of the compounding interest .  How about if I go for the Income share class and I manually reinvest the quarterly dividends ? Is this something that people do ? Does the cash div go directly into my banck account or sits in the vanguard account ?

If I want 'Accumulation ' I would have to go through a broker and I would ideally like to save the fees . What is the best cost saving platform? I wont be doing trading with Acc- I will just top it up with 1 or 2 trades per year.

kuratowski

First off, why have you picked the S&P 500?  That's a US index.  For a first time investor you want a global portfolio, not putting all your money in just one country.  Suggest looking at a World Index fund (such as L&G or Fidelity).  This would be available in ACC units which, as you've suggested, will suit you better.

If you did hold INC units the dividends would be paid into the S&S ISA as cash and you could choose to reinvest them, but you might incur transaction charges in doing so, and inside an ISA the ACC units are usually preferred.

How much are you paying into your pension?

dunstonh

Single sector investing is bad quality investing.   It doesn't matter what that sector is.
100% in a S&P 500 tracker is not lazy. Its poor.   You are effectively gambling on both the US stockmarket and sterling exchange rate working in your favour and being best.     Problem is that US equity was the standout performer in the last cycle but its rare for the same sector to be best two cycles in a row.  Some of that gains in the last cycle were down to US equity being one of the worst performers in the cycle before that.  Plus, sterling falling helped UK investors.     In the long term, you would expect to see Sterling rise again. So, that will handicap global assets and you would not bet on the US being best in this cycle.

 How about if I go for the Income share class and I manually reinvest the quarterly dividends ? Is this something that people do ? 

Yes, I always pick income units where available.  I just prefer the cleaner audit trail and it makes for better rebalancing.

dhjb

Two different opinions on accumulation and income . I feel even more confused . 
I saw sp500 has a better performance than the global all cap . Also it is 50% is sp500 out of the global all cap. America is the best performing economy ,or at least for the next 5-7 years which I'm interested in ,after that I don't care . Also why do I need to see the dividends when it is in a ISA tax free .

AnotherJoe

dhjb said:

Two different opinions on accumulation and income . I feel even more confused . 
I saw sp500 has a better performance than the global all cap . Also it is 50% is sp500 out of the global all cap. America is the best performing economy ,or at least for the next 5-7 years which I'm interested in ,after that I don't care . Also why do I need to see the dividends when it is in a ISA tax free .

No, you didnt.

You saw that in the past, it had better performance.

Will that trend continue? No idea, but dont you think investing would be awfully easy if all you needed to do was pick out last years best performing fund and invest in that?  Its not that easy !

I am impressed you know that America will have teh best performing economy for next 5-7 years. I presume thats your belief rather than you have a time machine? Fair enough in that case. Ive taken a few punts that would make Dunstonh's hair go white as well (and mine some of them ! ) so do go with your convictions, its not as if you've bought Brazillan Sugar cane futures or soemthing super niche.

Oh yeh, re the dividends, Dunstonh is a bit obsessed about them and Inc funds being better, but as you say, in an ISA, makes no difference, but is more hassle,  and in fact statistically Acc will have marginally better performance than Inc in the long run.

Alistair31

dhjb said:
America is the best performing economy ,or at least for the next 5-7 years which I'm interested in  .

I’m interested in next Fridays Euromillions numbers, just let me know them by PM. Thanks. 

dunstonh

Two different opinions on accumulation and income .

Not really. I just gave my preference.    Acc units works out the same as inc units reinvested.   I just prefer inc units as we use the income reinvested to rebalance the portfolio. i.e. the income doesnt buy units of the same fund. it buys units of the fund that is below the target weightings.   (plus, it gives a nicer audit trail )

I saw sp500 has a better performance than the global all cap

As I said, in the last cycle, US equity was the standout performer.  In the cycle before that, it was one of the worst performers.   All past performance tells you is what was best in the past.  Not what is going to be best in the future.     It is rare for the best sector in one cycle to be the best in the next.    However, that is what you are betting on by selecting an S&P500 tracker.

With Sterling where it is and where it is expected to go, that will work against US equity when valued in Sterling.

America is the best performing economy ,or at least for the next 5-7 years which I'm interested in

How do you know that?   The future is unknown.  Trump shot his load economically in the last cycle.  We don't know what there is left to use in the new cycle. 

dhjb

While I dont know about the whole economy of America, I am betting on the companies included in the sp 500 and mainly MSFT, AAPL, AMZN, GOOGL AND FB which are 20 % of the sp 500 . Would you disagree that those 5 would under perform ? I dont think so . 

MaxiRobriguez

In which case why buy an S&P tracker and be weighed down by underperforming US mid-cap stocks when you could just buy a technology fund which overweights those FAANGs?

If you think you know what is going to happen, then there's nothing stopping you putting your eggs in one basket. If you take a step back and assume you don't have all the data and understanding that drives global markets, and the luck to benefit from unforseen events, then it's better to diversify and take market returns, which means a global tracker, not a US one. 

There isn't a right or wrong answer, you just need to take a decision that suits your investing needs relevant to your risk appetite. Just realise when analysing the decision for yourself that you might be biased to some hubris, and adjust your decision making process accordingly. 

dunstonh

dhjb said:

While I dont know about the whole economy of America, I am betting on the companies included in the sp 500 and mainly MSFT, AAPL, AMZN, GOOGL AND FB which are 20 % of the sp 500 . Would you disagree that those 5 would under perform ? I dont think so . 

Short memory.  Remember the last time tech companies became inflated?  90% drop in share prices followed on tech companies.

Remember Yahoo?   Where is that today compared to where it was?

bowlhead99

dhjb said:

While I dont know about the whole economy of America, I am betting on the companies included in the sp 500 and mainly MSFT, AAPL, AMZN, GOOGL AND FB which are 20 % of the sp 500 . Would you disagree that those 5 would under perform ? I dont think so . 

Would I disagree that those 5 would perform no better than the average of everything else? It doesn't seem a certainty. And even if buying 500 companies from one country's stock market is no riskier than better than buying 5000 companies from lots of stock markets (which it is) - does it make sense to have 20% of all the money in just five companies and 80% in four hundred and ninety five companies?

Seems a strange way to place your bets. Even if the balance sheet of Facebook is something you know better than Tencent and Amazon more than Alibaba and Apple more than Samsung, it's a bold move to have your biggest bets be the FAANGs of that market and not bother with small or midsize companies or the stockmarkets of any other country on the planet.