Best place for stocks and shares ISA

Nurse2047

Hi Steve i have a Vanguard S+S ISA, very new to me and i use the target retirement funds as it re-balances the equity/bond balance for me as time progresses. I have the 2030 Target Retirement fund however they all give you access to thousands of individual bonds and shares in one package which helps spread the risk. As time goes on Vanguard gradually start moving the money into bonds as these are more stable but offer lower potential returns.

eskbanker

SteveSilva said:

So will it make sense to open a couple of multi asset funds with vanguard, a safer fund with lower exposure to equities and then a separate fund with a higher exposure which means greater risk and potential reward?

Or is it best to just stick to one fund?

There's no right or wrong answer to this but that sort of approach may be suitable if you effectively have two distinct pots that are likely to be needed at different times in the future, but when buying multi-asset funds (where there is a range offered to suit different risk profiles) it would typically be more conventional to buy one medium risk product rather than a high one and a low one.

Alexland

MFW2026 said:

Hi Steve i have a Vanguard S+S ISA, very new to me and i use the target retirement funds as it re-balances the equity/bond balance for me as time progresses. I have the 2030 Target Retirement fund however they all give you access to thousands of individual bonds and shares in one package which helps spread the risk. As time goes on Vanguard gradually start moving the money into bonds as these are more stable but offer lower potential returns.

Asset allocation glidepaths depend on what you intend to do with the money at the point of retirement.

If you are going to withdraw all the money to buy an annuity then a target date fund such as the VTR series might be suitable as the valuation when the investment is sold determines how much annuity income you can buy.

But if you are going to stay invested for a further 20-40 years in drawdown then VTR takes you down to 50% equites on retirement day when a drawdown portfolio would probably need at least 60% equities to provide a stable income rising with inflation.

SteveSilva

Thanks guys....what if I wanted to have an income fund as well as an accumulation fund. Would that be best then two funds with in the same ISA?

eskbanker

SteveSilva said:

Thanks guys....what if I wanted to have an income fund as well as an accumulation fund. Would that be best then two funds with in the same ISA?

It's unlikely to be worth holding these in two separate ISAs if that's the alternative you'd be comparing this with, but the broader question would be what are you trying to achieve by holding both inc and acc units?

SteveSilva

eskbanker said:

SteveSilva said:

Thanks guys....what if I wanted to have an income fund as well as an accumulation fund. Would that be best then two funds with in the same ISA?

It's unlikely to be worth holding these in two separate ISAs if that's the alternative you'd be comparing this with, but the broader question would be what are you trying to achieve by holding both inc and acc units?

So the thinking is that the accumulation will be for the longer term fifteen years plus to help fund retirement and children's uni costs.

Income fund will be to help pay for shorter term expenses like towards a Mediterranean holiday or pay the council tax.

eskbanker

SteveSilva said:

Income fund will be to help pay for shorter term expenses like towards a Mediterranean holiday or pay the council tax.

Wouldn't that be best accomplished by saving rather than investing?

SteveSilva

eskbanker said:

SteveSilva said:

Income fund will be to help pay for shorter term expenses like towards a Mediterranean holiday or pay the council tax.

Wouldn't that be best accomplished by saving rather than investing?

Thinking is that the savings will go towards investing in companies which will pay out dividends which will hopefully be higher than savings accounts.

Alexland

SteveSilva said:

Thinking is that the savings will go towards investing in companies which will pay out dividends which will hopefully be higher than savings accounts.

It might take a while to get the £5k pot big enough to pay your council tax out of dividends. A well balanced global investment trust pays around 2% divis and a similar UK trust pays around 4% divis so it would require a global pot of £100k or a UK pot of £50k to pay around £2k pa in council tax from smoothed IT income.

SteveSilva

Alexland said:

SteveSilva said:

Thinking is that the savings will go towards investing in companies which will pay out dividends which will hopefully be higher than savings accounts.

It might take a while to get the £5k pot big enough to pay your council tax out of dividends. A well balanced global investment trust pays around 2% divis and a similar UK trust pays around 4% divis so it would require a global pot of £100k or a UK pot of £50k to pay around £2k pa in council tax from smoothed IT income.

So unless I'm missing something a 4% return from a UK trust is still far better than any savings account isn't it?