Consider This... (Vanguard Portfolio)

Alice_Holt

"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"

Why an ISA and not a SIPP (with its tax advantages) for contributions geared towards your retirement?

Why not Emerging Markets / Global small co's fund as a complement to the LS fund, (since the dividend fund is likely to replicate more of your existing holdings within LS, and the 2050 fund)?

DireEmblem

If you were investing afresh right now, I would say to ditch the high dividend yield fund.  I would need to look at it’s holdings and determine my take on its recovery from this years drop.

The other two funds have an almost identical performance profile, so you could simplify switching to one.

Agree with other comments, once you get your house, increase your pension contributions to take advantage of the tax breaks.

IvanOpinion

As a 26 year old you seem to be playing it very safe.  Have you considered looking at some of the managed multi asset funds like Ballie Gifford managed, Royal London Sustainable World (not recommendations, just a couple of examples).

ColdIron

Vet said:

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?

You can set up a fund in minutes, no rush for this one, you have decades. The problem with higher yielding funds is that, because of the type of companies they invest in, they produce lower total returns (a combination of growth and dividends) than growth ones even with dividends reinvested. What would you rather hold for 30 years, Amazon (who have never paid a dividend) or an old dinosaur like British American Tobacco?

Vet

IvanOpinion said:

As a 26 year old you seem to be playing it very safe.  Have you considered looking at some of the managed multi asset funds like Ballie Gifford managed, Royal London Sustainable World (not recommendations, just a couple of examples).

Because I invest via the Vanguard platform, i'm fairly restricted on what I can buy! Do you really think these are very safe options? I thought by choosing an 80:20 split equities to bonds I was choosing a higher risk option.

ColdIron said:

Vet said:

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?

You can set up a fund in minutes, no rush for this one, you have decades. The problem with higher yielding funds is that, because of the type of companies they invest in, they produce lower total returns (a combination of growth and dividends) than growth ones even with dividends reinvested. What would you rather hold for 30 years, Amazon (who have never paid a dividend) or an old dinosaur like British American Tobacco?

Okay thats understandable. Thank you.
I'm considering actually closing my LS80 and switching it just for the RF2050 to simplify things, because essentially, they are much in the same currently.
You think that the VHYL really isn't worth holding at this point? Its currently producing roughly 3.2% yield - I thought fair in the current market.

ColdIron

Vet said:

You think that the VHYL really isn't worth holding at this point? Its currently producing roughly 3.2% yield - I thought fair in the current market.

Yes that's right, it's the wrong type of fund at 26. The dividend is reasonable but it comes at the expense of growth because it filters out companies that don't pay a dividend below a particular level (Amazon, Google, Facebook, Netflix etc), REITS, Investment Trusts and a few others

I am retired and more of an income investor these days so VHYL is part of my income portfolio but I take the dividends as I no longer have a salary. I am less focused on growth but there are a few good years in me yet so I also have a separate growth portfolio and there is no place for VHYL in it

At 26 with 30 odd years ahead of you you want to focus on total return. Disregarding swathes of companies with good growth prospects is unlikely to to be the best way to achieve that goal

FWIW I'd forget the Target Retirement funds as well. 30 years is a long time and a lot can happen. For all we know it may not even exist in its current form by then having reacted to unforeseeable events, legislation and changes over the investment horizon

Albermarle

Normally the reason to invest in an ISA rather than a pension , is that the money is accessible , whereas with a pension it is tied up until you are older /near retirement date . If you are actually saving largely for retirement then a pension is better due to the tax relief, especially if you are higher rate taxpayer .
You are investing in an ISA but into a target retirement fund , which is illogical . You are worrying about which investments are best for you , whilst at the same time throwing away the opportunity to gain thousands in tax relief.
Finally the plan to invest more in a pension later might not work as one day this higher rate tax relief will be modified/abolished as it as seen as too generous by many. 

A_T

I wouldn't use the high dividend tracker it's likely to hinder growth. I'd use VWRL instead.

Vet

ColdIron said:

Vet said:

You think that the VHYL really isn't worth holding at this point? Its currently producing roughly 3.2% yield - I thought fair in the current market.

Yes that's right, it's the wrong type of fund at 26. The dividend is reasonable but it comes at the expense of growth because it filters out companies that don't pay a dividend below a particular level (Amazon, Google, Facebook, Netflix etc), REITS, Investment Trusts and a few others

I am retired and more of an income investor these days so VHYL is part of my income portfolio but I take the dividends as I no longer have a salary. I am less focused on growth but there are a few good years in me yet so I also have a separate growth portfolio and there is no place for VHYL in it

At 26 with 30 odd years ahead of you you want to focus on total return. Disregarding swathes of companies with good growth prospects is unlikely to to be the best way to achieve that goal

FWIW I'd forget the Target Retirement funds as well. 30 years is a long time and a lot can happen. For all we know it may not even exist in its current form by then having reacted to unforeseeable events, legislation and changes over the investment horizon

Albermarle said:

Normally the reason to invest in an ISA rather than a pension , is that the money is accessible , whereas with a pension it is tied up until you are older /near retirement date . If you are actually saving largely for retirement then a pension is better due to the tax relief, especially if you are higher rate taxpayer .
You are investing in an ISA but into a target retirement fund , which is illogical . You are worrying about which investments are best for you , whilst at the same time throwing away the opportunity to gain thousands in tax relief.
Finally the plan to invest more in a pension later might not work as one day this higher rate tax relief will be modified/abolished as it as seen as too generous by many. 

I really appreciate the help. I've take both your opinions on the matter and will be adjusting my portfolio accordingly. Thank you once again.

dunroving

Just another voice to add to those suggesting you invest in a SIPP rather than ISA (if you really are investing for retirement, and not for other purposes). If you are unsure, or are "a bit of both" (investing for retirement, and also for spending before retirement), maybe at least put some in a SIPP.

I used to be a higher rate taxpayer before I retired, and it was an absolute no brainer to me. Invest £60, receive an additional £40 almost immediately. Yes, you will likely have to pay tax on drawdown, but more than likely to be at a lower rate; plus 25% is tax-free. Effectively, at the top end, currently you receive £60 in salary for every £100 you earn. If, instead, you invest that £100 in a SIPP, when you drawdown you will receive £25 tax-free plus (£75 x 0.80 = £60) = £85.Even if you are fortunate enough to be a higher-rate taxpayer in retirement, you'd receive £25 tax-free plus (£75 x 0.60 = £45) = £65.

The above is rather simplistic - it ignores NI contributions and growth, but it was a compelling reason that convinced me of the reason to invest in a SIPP.

One never knows when the higher-rate tax relief will be withdrawn, so get in while you can. Who knows what measures this government and future governments will use to claw back the horrendous debt they are incurring at the moment?