Vanguard Pension

BritishInvestor

Deleted_User said:

BritishInvestor said:

Mutton_Geoff said:

Albermarle said:

Due to her young age the LISA should be invested so should be a stocks and shares LISA.
I used to be a low/medium risk sort of person but having learnt more about investing , it is clearly the wrong strategy for a long term regular  pension or LISA investor with a very long time frame . The VLS 20 and 40 funds mentioned above are really more suitable for someone already with a big pot and near retiring . You need to look at the VLS 60 & 80  &100 .
Maybe these links will be useful.
https://monevator.com/investing-for-beginners-why-do-we-invest/
https://www.moneysavingexpert.com/savings/investment-beginners/

Good advice. The danger of a risk averse investment with a long timescale ahead is that by the time you realise performance is related to risk, it will be too late to do anything about it. Risk must be measured over a long period of time together with the compounding effect of time.

You'll need to hold your nerve too, most people would be horrified if your chosen investment suddenly halved in value but I would view it as a buying opportunity since your £100 a month will now be buying twice as many units which then recover value further down the line. (Pound cost averaging).

The other point is that whilst any pension saving is admirable, especially at a young age, £100 a month will only generate a pot of £100,000 in 30 years (conservative estimate). A drawdown rate of 4% will provide you with a pension of £4,000 a year. All at today's rates but hardly life changing. If you can afford to squirrel away more nuts now, the compounded effect will be even greater.

There are plenty of funds and platforms to choose from but Vanguard are currently in vogue, and as Albermarle suggests, I would seriously be looking at being 100% in equity based investments at this stage in life.

"I would seriously be looking at being 100% in equity based investments at this stage in life."
I think you would have to be very comfortable that you would stick to the plan during the inevitable downturns. I would suggest that many might not.

People who put money into a simple  fund find it easier to stick to the plan. People who have a complex portfolio, requiring regular monitoring and rebalancing, find it much harder. 

Agreed, in the sense that the less often you look at the portfolio, the less chance you have of observing (temporary) falls and therefore less inclined to "fiddle".

ZeroSum

Just to throw in another option. 
Rather than the life strategy funds, could consider the target retirement ones which gradually reduce risk the closer you get to retirement. 

Alexland

Deleted_User said:

1. That’s an extremely  pessimistic forecast.  Possible but   I doubt we’ve ever had the stock market return so little over a 30 year period.  

Lowering interest rates have been pushing up asset prices for most of that period which damages their ability to compound at historic rates and there isn't much room left for interest rates to keep reducing in the next 30 years. Shouldn't be that controversial it's just maths. A lower return environment means people will need to contribute more or retire later.

Deleted_User said:
2. Multi-asset tracker funds cheaper than VLS? Which ones? 

Multi asset funds are not trackers but may contain them. Either way the HSBC multi asset and tracker funds are available on EQi some of which have lower costs than the Vanguard equivalents.

[Deleted User]

Alexland said:

Deleted_User said:

1. That’s an extremely  pessimistic forecast.  Possible but   I doubt we’ve ever had the stock market return so little over a 30 year period.  

Lowering interest rates have been pushing up asset prices for most of that period which damages their ability to compound at historic rates and there isn't much room left for interest rates to keep reducing in the next 30 years. Shouldn't be that controversial it's just maths. A lower return environment means people will need to contribute more or retire later.

Deleted_User said:
2. Multi-asset tracker funds cheaper than VLS? Which ones? 

Multi asset funds are not trackers but may contain them. Either way the HSBC multi asset and tracker funds are available on EQi some of which have lower costs than the Vanguard equivalents.

1. There is no maths which tells you returns will be low for the next 30 years. Its just not maths. Its your wild guess. The effect of interest rates on stock prices is far, far more complex than what you are suggesting. 

2. VLS is a fund of multiple trackers with stable allocation. HSBC does not offer anything like that to my knowledge. It has active multi-asset funds.  Investing into active or “dynamic allocation” funds would require the investor to pay a lot of attention. 
There are cost efficient passive ETFs which do the same job as VLS but its likely too complicated for the OP. 

Alexland

Deleted_User said:

1. There is no maths which tells you returns will be low for the next 30 years. Its just not maths. Its your wild guess. The effect of interest rates on stock prices is far, far more complex than what you are suggesting. 

When creating a long term investment plan you have to make an assumption on future growth based on reasonable inputs. Just assuming that historic rates of growth will continue when P/Es are already stretched due to the low interest rate environment would be very optimistic indeed. Unless a miracle happens where do you expect the extra earnings to compensate for the high share price to come from? Remember the £100k example was supposed to be conservative.

Deleted_User said:

2. VLS is a fund of multiple trackers with stable allocation. HSBC does not offer anything like that to my knowledge. It has active multi-asset funds.  Investing into active or “dynamic allocation” funds would require the investor to pay a lot of attention. 

The amount of tactical asset allocation in the HSBC GS range is low and so doesn't require the investor pays any more attention than if using VLS. With VLS the fixed allocation causes the risk profile to vary across the economic cycle which isn't ideal from the customer's perspective but either way they are both good fund series.

Albermarle

 It has active multi-asset funds.  Investing into active or “dynamic allocation” funds would require the investor to pay a lot of attention. 

I am pretty sure that the vast majority of investors in HSBC global strategy multi asset funds , pay them very little attention and see them as a fire and forget investment, similar to VLS.

Some  prefer these type of risk based multi asset funds to the fixed allocation types like VLS.

shinytop

Albermarle said:

 It has active multi-asset funds.  Investing into active or “dynamic allocation” funds would require the investor to pay a lot of attention. 

I am pretty sure that the vast majority of investors in HSBC global strategy multi asset funds , pay them very little attention and see them as a fire and forget investment, similar to VLS.

Some  prefer these type of risk based multi asset funds to the fixed allocation types like VLS.

I have both in roughly equal amounts and I pay them equal amounts of attention.  Which is not very much at all.   

[Deleted User]

“When creating a long term investment plan you have to make an assumption on future growth based on reasonable inputs. Just assuming that historic rates of growth will continue when P/Es are already stretched due to the low interest rate environment would be very optimistic indeed. Unless a miracle happens where do you expect the extra earnings to compensate for the high share price to come from? Remember the £100k example was supposed to be conservative.”

No you don’t ‘need’ to assume future growth. I haven’t.  People like to make guesses about the future. Thats ok as long as you dont build your actual plans based on wild guesses like stock movements over the next 30(!) years.   Your plan should be flexible enough so you can respond to whatever happens. And in the case of the OP, there is really no need to make projections. Just invest as much as you can and retire many years later when you can afford it. Its all about time in the market. 

Nor do you actually KNOW that the stock prices are “high” right now. I’ve heard people make this claim for decades. Guess what? The stock prices are a hell of a lot higher than they were 10 years ago. Or 20. Or 30. Check it out. https://en.m.wikipedia.org/wiki/Dow_Jones_Industrial_Average#/media/File%3ADJIA_historical_graph_to_jul11_(log).svg 

Does not mean the growth rate will stay the same. Most certainly does not mean it will be a small fraction of historic growth rates. 

[Deleted User]

Albermarle said:

 It has active multi-asset funds.  Investing into active or “dynamic allocation” funds would require the investor to pay a lot of attention. 

I am pretty sure that the vast majority of investors in HSBC global strategy multi asset funds , pay them very little attention and see them as a fire and forget investment, similar to VLS.

Some  prefer these type of risk based multi asset funds to the fixed allocation types like VLS.

I think its a mistake. They are relying on the fund manager to not screw up. But that happens. Quite regularly. We’ve seen many an active fund perform wonderfully for 10 years and then underperform for decades. Maybe the manager changed.  Could be 100 other reasons. 

[Deleted User]

“With VLS the fixed allocation causes the risk profile to vary across the economic cycle “

Reference? I seriously doubt this claim. For one thing, you don’t know where you are in a cycle until later, so you can’t make adjustments in advance of a downturn.