Consider This... (Vanguard Portfolio)

Vet

Background: 26y/o. Good job (approx 67k p/a pre tax). Pension contributions at minimum (employer max at 3%, myself 5%). >6 months holding cash. 
Currently invested in Vanguard ISA:
Lifestrategy 80% Equity fund - 48.5% approx
Target Retirement 2050 Fund (Hopeful) - 18.5% approx
FTSE all world high dividend yield - 32.5% approx
Total value: £15k ish
My plan long term isn't really to use the investments for any purchases. I will be looking at buying a house next year using the deposit from my LISA and partner's LISA.

Given this fact, do you think i'm wasting my time having the lifestrategy 80 when really I could just exchange it for a target retirement +/- dividend yield and let vanguard do the work for me instead of reducing the risk as I age e.g. dropping to 60/40/20 etc?

Appreciate any feedback! 

mooneysaver

Have you actually assessed the funds and allocations held within the target retirement? They drop to a very low equity percentage. Lifestrategy also has a UK weighting.

Given your current salary and target retirement age I  would recommend ensuring at least 64.33% of your portfolio is invested in gold (if you buy gold coins you will benefit from the tax breaks). This would offset your high risk holdings such as the FTSE all world high dividend yield.

Thrugelmir

On what basis did you select funds and allocate %'s ? 

Linton

You are 30 or more years from retirement, target retirement funds wont start reducing the risk for another 20 years or so, so they really are irrelevent to you now.  In any case they are only really appropriate for people planning to take an annuity as all the money has to be used in a single payment.   If you will be drawing down in retirement half your pot may not be needed for another 50 years. You wont need significant risk reduction for this money so it would be perfectly reasonable to stay invested mainly in equities until retirement and some time beyond.

I dont see any reason for not simply keeping all your money in VLS80.  

mooneysaver

Thrugelmir said:

On what basis did you select funds and allocate %'s ? 

The percentages are the value of each holding divided by the total value. It is just another way of showing how much of the portfolio is in each fund.

Linton

PS: since you are a higher rate tax payer you should seriously consider increasing your pension contributions.  Each £100you contribute saves you £40 tax.

Thrugelmir

mooneysaver said:

Thrugelmir said:

On what basis did you select funds and allocate %'s ? 

The percentages are the value of each holding divided by the total value. It is just another way of showing how much of the portfolio is in each fund.

I didn't realise that. Thanks. 

Zorillo

I would be putting £17k a year into my pension.

ColdIron

Why does a 26 y/o need a high dividend fund? It's the sort of thing you might look at in 30 years time or more. As a higher rate tax payer pensions are a no brainer

Vet

mooneysaver said:

Have you actually assessed the funds and allocations held within the target retirement? They drop to a very low equity percentage. Lifestrategy also has a UK weighting.

Given your current salary and target retirement age I  would recommend ensuring at least 64.33% of your portfolio is invested in gold (if you buy gold coins you will benefit from the tax breaks). This would offset your high risk holdings such as the FTSE all world high dividend yield.

thats quite a high proportion of portfolio to be in gold is it not? Isn't the usual around 10-15%?

Linton said:

You are 30 or more years from retirement, target retirement funds wont start reducing the risk for another 20 years or so, so they really are irrelevent to you now.  In any case they are only really appropriate for people planning to take an annuity as all the money has to be used in a single payment.   If you will be drawing down in retirement half your pot may not be needed for another 50 years. You wont need significant risk reduction for this money so it would be perfectly reasonable to stay invested mainly in equities until retirement and some time beyond.

I dont see any reason for not simply keeping all your money in VLS80.  

Okay thank you! Very interesting. I currently invest £1150 per month and its around £250 LS80, £300 - TR2050 and the rest in high dividend yield. Do you think this needs some adjusting?
My reasoning behind this was that as the time for retirement comes closer, it would be nice to have money already with risk reduction. 

ColdIron said:

Why does a 26 y/o need a high dividend fund? It's the sort of thing you might look at in 30 years time or more. As a higher rate tax payer pensions are a no brainer

Well, my logic here was that by buying an income fund I am merely setting up a side income for future use - I currently treat it like an accumulation fund in that when dividends are paid, they are immediately invested as new holding units. Really, it was a just a way to diversify 2 accumulation funds. What do you think?

Vet

Zorillo said:

I would be putting £17k a year into my pension.

My plan is to hopefully increase contributions this/next year, once I have bought a house and established a steady ins/outs bill wise.