Investing large sum in world tracker fund

Sailtheworld

Thrugelmir said:

Sailtheworld said:

Thrugelmir said:

poppy10_2 said:

Thrugelmir said:
The UK markets are throwing up interesting opportunities thanks to the boycott by so many. 

There is no "boycott." A boycott suggests people are avoiding buying UK shares to apply pressure for political or philosophical reasons.

People aren't buying UK shares because they are widely seen as offering poor prospects for future returns. By kidding yourself that you will be able to pick out "interesting opportunities" that the rest of the world can't see, you are claiming that you as an individual know more than the whole of the world's institutional and private investors put together. A risky proposition

I'm fortunate now to have the time and inclination to pursue investing as a "hobby". Part of my active portfolio is published every month in the Actives vs Passives thread. There's no kidding myself as that's real money at stake. Been both working in finance and investing long enough to have a full understanding of the risks involved in holding equities. My smallest UK holding has a market capitalisation of £23 million. Too small to even register on "investors" radars. Opportunities need not be big. 

It's pointless for someone with a gift like this to enigmatically suggest that someone looks for opportunities in the FTSE100. 

 Perhaps you should take the time to think before you post.  There's no reference in my posts to the FTSE100. 

Though I finally concede on one front. Not often do I place people on ignore. For you I've made an exception. Farewell. 

Fair enough. You won't see it but I'll still keeping pointing out that advising people without an investment edge to get one is a bit like advising people who are unlucky in love to look like Ryan Reynolds. Good advice but not particularly helpful of practical..

Consideredspender

uk1 said:

Consideredspender said:

Hi all,

I've got circa £300,000 (which I won't need for another 15 years or so) to invest in the markets in a passive world tracker fund and I was hoping to seek the guidance of you wise investors. 

To add to all this, I'm 44 and own a house and have ther funds that I've set aside for living worry-free on.

I would really appreciate your experienced inputs on these questions. I've read a number of investment books and read around the internet forums and feel I mostly know what I'm doing, but there is a lot at stake and thus I won't to give the decision due diligence.
Many thanks.
Kind regards.

Hi,

I suggest before you decide where to invest your cash you take a moment to consider whether you need to.  Consider whether or not you are likely to be sufficiently wealthy to "have enough" without the need to grow your pot.  A relatively few people are fortunate enough to "have enough" and if so have other options but very few stand back for a moment and ask thmselves the fundamentals.. 

For example if after some analysis and thought you conclude you might have enough then you could forgo the concern and worry of investments in what will be turbulennt and risky times and simply use low/no risk or even perhaps explore other options like for example to buy a second home in an area you might think of holidaying in or even retiring to.  This brings with it expense and perhaps tax implications but could provide an improvement to daily life and perhaps even replace some annual holiday costs.It can also provide an escape and haven from a full stressful life.  It is very easy to get sucked into the "common sense" approach of "where do I put my cash to see it grow" but not everyone needs to and if you don't then you could choose a less stressful alternative. Money is after all primarilly for spending if you have enough to.   My wife and I were fortunate to be in this position and I'm so pleased I thought it through.  As it happens my spreadsheet was right and I'm pleased I took this unusual philosphical approach.

Best whishes for whatever you decide and happy to flesh out more of this approach if it seems relevant to you.

Hi UK1,
Many thanks for taking the time to share your experience and wisdom. I am very happy to hear that your choice to not invest in the markets worked for you and brought you a happier, less stressful life.

The act of doing nothing is certainly something that I had considered, but I am uneasy that in doing nothing the process of inflation will severely impact on the future spending power of my savings. Going with reasonable approximations of inflation (which could turn out to be very optimistic) in less that 20 years my money's value will have halved, which will leave me with an annual spending budget less than I feel I could confidently live on at my basic level. And assuming this reduction in value, the impact will come at a time of my life when I will likely be less able to do anything to rectify the situation. And, sadly, I certainly don't think I want to rely on the state for any sort of standard of living. I'm far from a gluttonous spender: I don't buy the latest must-haves or sucumb to brands and am content to be where I am, with those in my community, so have chose not to holiday for the last 3 years. In my head, this leaves me with the option to either a) don't do anything and hope - with the associated worry b) invest in some form of inflation proof vehicle or c) return to working in a profession where I may not get the satisfaction and contentment I currently have. So, I definitely feel b) is my way forward. 

Thank you for suggesting the property investment route. It was something I had considered seriously, but am currently less keen. I know "bricks and mortar can never fail" is a mantra in this country, but I do question it - we have had serious corrections in the past. Then there are the costs of purchasing, maintenance, alongside the worry of damage, voids etc; oh, and the suggestions in the news of increased CGT on property. And why should the UK property market be any less volatile that the values of an amalgamation of the big companies of the world.... I'm just not sure.

So, in summary, even though I feel I am of the same mindset as you and share your ethos, I still see the need to invest against inflation to some degree; not to grow my pot, but to stop it shrinking. I just want to leave the options for me and my surrounding family (mother, siblings, etc...) open. Any further thoughts would be gratefully received
 

shinytop

Consideredspender said:

shinytop said:

Consideredspender said:

steampowered said:

If you are concerned about short term drops, perhaps you could consider putting most of your money into an equity fund and a portion (perhaps 30%) into a bond fund?

Or selecting a multi-asset fund rather than a 100% equity fund?

That will reduce your likely returns, but will also reduce your likely volatility.

You can rebalance into higher equity exposure over time. It makes sense to increase equity exposure as markets drop, and reduce it as they rise, though you can never be sure whether you are calling it right or not.

Logically, short term drops are nothing to be worried about when you are investing for a 15 year time scale, but they can be challenging emotionally.

Many thanks for your comments. I do like the idea of a gradual exposure to the markets in order to mitigate timing woes. What I didn't say earlier was that I got the impression bond returns were very poor at the moment (investment grade, anyway) and thus that is why I was largely staying away from them and just plumping for cash. I was led to believe the old school split between equities and bonds was something that worked well many years ago when bonds paid a decent return, but was less realistic an option nowadays. Do I miss understand this? 

OP, although my circumstances are different, I wanted to invest a similar sum as you (it was a pension transfer from a works scheme to a SIPP) in tracker type funds.  I too was worried about large drops so I invested equally in VSL60 and HSBC Balanced in three monthly chunks.  In the end it probably didn't make a lot of difference but it made me worry slightly less.  I use II, which is fixed price so good value for this sort of amount.     

Thanks, shinytop. A concrete example helps me immensely. So you invested a third of you sum every month for 3 months? I will look at the two funds you suggest. And, although probably obvious, could I ask for any rational for your fund choices?

Yes, a little over £50k per month in each of the two for three months.  I chose these two funds because they are low cost, mainstream, medium risk multi-asset funds that suited my risk level.  I chose two different funds to hedge my bets a bit and also out of interest to see how they compared.  Although there is a lot of overlap between them  they use different allocation methods; VLS60 uses a fixed proportion of equities whereas HSBC Balanced used a risk-based approach so its proportion of equities varies.  Also, VLS60 has more of a UK bias.  Since I invested in November 2019 the HSBC one has done slightly better but there's not a lot in it and I'm happy enough with both. There are other similar funds available from L&G, Blackrock and the other main players.      

uk1

Consideredspender said:

uk1 said:

Consideredspender said:

Hi all,

I've got circa £300,000 (which I won't need for another 15 years or so) to invest in the markets in a passive world tracker fund and I was hoping to seek the guidance of you wise investors. 

To add to all this, I'm 44 and own a house and have ther funds that I've set aside for living worry-free on.

I would really appreciate your experienced inputs on these questions. I've read a number of investment books and read around the internet forums and feel I mostly know what I'm doing, but there is a lot at stake and thus I won't to give the decision due diligence.
Many thanks.
Kind regards.

Hi,

I suggest before you decide where to invest your cash you take a moment to consider whether you need to.  Consider whether or not you are likely to be sufficiently wealthy to "have enough" without the need to grow your pot.  A relatively few people are fortunate enough to "have enough" and if so have other options but very few stand back for a moment and ask thmselves the fundamentals.. 

For example if after some analysis and thought you conclude you might have enough then you could forgo the concern and worry of investments in what will be turbulennt and risky times and simply use low/no risk or even perhaps explore other options like for example to buy a second home in an area you might think of holidaying in or even retiring to.  This brings with it expense and perhaps tax implications but could provide an improvement to daily life and perhaps even replace some annual holiday costs.It can also provide an escape and haven from a full stressful life.  It is very easy to get sucked into the "common sense" approach of "where do I put my cash to see it grow" but not everyone needs to and if you don't then you could choose a less stressful alternative. Money is after all primarilly for spending if you have enough to.   My wife and I were fortunate to be in this position and I'm so pleased I thought it through.  As it happens my spreadsheet was right and I'm pleased I took this unusual philosphical approach.

Best whishes for whatever you decide and happy to flesh out more of this approach if it seems relevant to you.

Hi UK1,
Many thanks for taking the time to share your experience and wisdom. I am very happy to hear that your choice to not invest in the markets worked for you and brought you a happier, less stressful life.

So, in summary, even though I feel I am of the same mindset as you and share your ethos, I still see the need to invest against inflation to some degree; not to grow my pot, but to stop it shrinking. I just want to leave the options for me and my surrounding family (mother, siblings, etc...) open. Any further thoughts would be gratefully received
 

Hi, no problem, pleased that the thoughts were useful.  You asked for any further thoiughts and for what it's worth I think the following philosphical approach was the most important  planning decision I (we) made and you might want to consider carefully this issue rather than just follow established traditional presumption without a bottle of wine and ponderings. 

When I was in planning mode I had a speadsheet which was intended to take me from where I was when I started our business to the presumed date that we might no longer exist passing through an unclear retirement age   So it went down the page year on year with opening and closing balances for cash and assets with cash added and cash spent. I used it from when I was thinking of giving up corporate life and starting the business as a personal cash flow through to retirement and onwards so with whole life implications both for starting a business and older age etc.  It enabled me to tell my wife when she supported me in starting our business that "the worst that would happen is that we would lose everything including our home and might live in a caravan".  Much to my admiration she still wanted to go for it.  You might think this as odd behaviour for someone who is cautious with investments ... but that's another topic.

My wife and I are exactly the same age and we presumed that we would both last to 90.  A key consideration I noticed amongst others planning ahead was that they always felt that the growth in their fund once retired should match their spend and be protected.  In other words the fund should have it's value protected and increased through retirement.  I decided to think of it as a cash sinking fund where I would tolerate without any fear that it might be zero at age 90. In other words I'd strip out our fixed assets from the spreadsheet, simply leaving property and possessions to our kids and spending cash with the fixed assets as an emergency fund that I planned not to use.   Our pension incomes were introduced at appropriate ages in the spreadsheets.  This effectively means that the fund would reduce after retirement each year but increase by retirement income until the last of us goes when if planned perfectly the fund should be zero.  I also factored in that excess property - for example our beach home - was as I said would be our emergency buffer for wholly unexpected large emergency needs ie care home or hugely expensive medical care that we didn't want to wait for,  But if not needed would remain a place to commute between with our main home. I had a series of smaller spreadsheets that predicted our annual spend on everything.

As it turned out our business lasted us for around 18 years and provided us with a logical moment in time when the opportunistic idea I'd exploited as a new business had run it's path and I'd fully milked the concept and optimised revenue and built personal savings and we had a cross-roads choice of thinking of something new to do or retiring very early ie age 50.  In fact we shrugged and stopped and the cautious planning has proved to be very over cautious and has meant that the fund I had intended to be a sinking fund isn't sinking because effectively we aren't spending enough even though we are trying.  I'm not suggesting everyone is as fortunate to do this but the basic approach of thinking of the end fund when you start depeleting it as a sinking fund rather than a growing fund enables you to think through other options when planning and potentially mkes a huge difference but it is scaleable to different people and different funds and spending profiles and needs.

I only ramble on about this because I notice people fall into the philosophy that all funds must grow whereas I believe that we can have a carefully planned sinking fund.

I hope this is of value and the best of luck with your life and plans ,,,,

shinytop

uk1 said:

Consideredspender said:

uk1 said:

Consideredspender said:

Hi all,

I've got circa £300,000 (which I won't need for another 15 years or so) to invest in the markets in a passive world tracker fund and I was hoping to seek the guidance of you wise investors. 

To add to all this, I'm 44 and own a house and have ther funds that I've set aside for living worry-free on.

I would really appreciate your experienced inputs on these questions. I've read a number of investment books and read around the internet forums and feel I mostly know what I'm doing, but there is a lot at stake and thus I won't to give the decision due diligence.
Many thanks.
Kind regards.

Hi,

I suggest before you decide where to invest your cash you take a moment to consider whether you need to.  Consider whether or not you are likely to be sufficiently wealthy to "have enough" without the need to grow your pot.  A relatively few people are fortunate enough to "have enough" and if so have other options but very few stand back for a moment and ask thmselves the fundamentals.. 

For example if after some analysis and thought you conclude you might have enough then you could forgo the concern and worry of investments in what will be turbulennt and risky times and simply use low/no risk or even perhaps explore other options like for example to buy a second home in an area you might think of holidaying in or even retiring to.  This brings with it expense and perhaps tax implications but could provide an improvement to daily life and perhaps even replace some annual holiday costs.It can also provide an escape and haven from a full stressful life.  It is very easy to get sucked into the "common sense" approach of "where do I put my cash to see it grow" but not everyone needs to and if you don't then you could choose a less stressful alternative. Money is after all primarilly for spending if you have enough to.   My wife and I were fortunate to be in this position and I'm so pleased I thought it through.  As it happens my spreadsheet was right and I'm pleased I took this unusual philosphical approach.

Best whishes for whatever you decide and happy to flesh out more of this approach if it seems relevant to you.

Hi UK1,
Many thanks for taking the time to share your experience and wisdom. I am very happy to hear that your choice to not invest in the markets worked for you and brought you a happier, less stressful life.

So, in summary, even though I feel I am of the same mindset as you and share your ethos, I still see the need to invest against inflation to some degree; not to grow my pot, but to stop it shrinking. I just want to leave the options for me and my surrounding family (mother, siblings, etc...) open. Any further thoughts would be gratefully received
 

Hi, no problem, pleased that the thoughts were useful.  You asked for any further thoiughts and for what it's worth I think the following philosphical approach was the most important  planning decision I (we) made and you might want to consider carefully this issue rather than just follow established traditional presumption without a bottle of wine and ponderings. 

When I was in planning mode I had a speadsheet which was intended to take me from where I was when I started our business to the presumed date that we might no longer exist passing through an unclear retirement age   So it went down the page year on year with opening and closing balances for cash and assets with cash added and cash spent. I used it from when I was thinking of giving up corporate life and starting the business as a personal cash flow through to retirement and onwards so with whole life implications both for starting a business and older age etc.  It enabled me to tell my wife when she supported me in starting our business that "the worst that would happen is that we would lose everything including our home and might live in a caravan".  Much to my admiration she still wanted to go for it.  You might think this as odd behaviour for someone who is cautious with investments ... but that's another topic.

My wife and I are exactly the same age and we presumed that we would both last to 90.  A key consideration I noticed amongst others planning ahead was that they always felt that the growth in their fund once retired should match their spend and be protected.  In other words the fund should have it's value protected and increased through retirement.  I decided to think of it as a cash sinking fund where I would tolerate without any fear that it might be zero at age 90. In other words I'd strip out our fixed assets from the spreadsheet, simply leaving property and possessions to our kids and spending cash with the fixed assets as an emergency fund that I planned not to use.   Our pension incomes were introduced at appropriate ages in the spreadsheets.  This effectively means that the fund would reduce after retirement each year but increase by retirement income until the last of us goes when if planned perfectly the fund should be zero.  I also factored in that excess property - for example our beach home - was as I said would be our emergency buffer for wholly unexpected large emergency needs ie care home or hugely expensive medical care that we didn't want to wait for,  But if not needed would remain a place to commute between with our main home. I had a series of smaller spreadsheets that predicted our annual spend on everything.

As it turned out our business lasted us for around 18 years and provided us with a logical moment in time when the opportunistic idea I'd exploited as a new business had run it's path and I'd fully milked the concept and optimised revenue and built personal savings and we had a cross-roads choice of thinking of something new to do or retiring very early ie age 50.  In fact we shrugged and stopped and the cautious planning has proved to be very over cautious and has meant that the fund I had intended to be a sinking fund isn't sinking because effectively we aren't spending enough even though we are trying.  I'm not suggesting everyone is as fortunate to do this but the basic approach of thinking of the end fund when you start depeleting it as a sinking fund rather than a growing fund enables you to think through other options when planning and potentially mkes a huge difference but it is scaleable to different people and different funds and spending profiles and needs.

I only ramble on about this because I notice people fall into the philosophy that all funds must grow whereas I believe that we can have a carefully planned sinking fund.

I hope this is of value and the best of luck with your life and plans ,,,,

I agree with your concept of a sinking fund.  I'm not sure if most people have preservation as their main objective (although some do).  It's more that preservation is the consequence of the real main objective of not running out of money. Unfortunately a 95% success rate means does not mean 95% dying as they spend their last penny; while this may be the case for a few, many will die with more than they started with.  

Actually, I'd be interested to know the other side of the safe withdrawal rate simulations, i.e. at 3 or 4% or whatever, how many die with 100%, 50% or whatever left.  Anyone?