LISA investment advice please??

RajSSingh9

Hi there everyone.
This is my first post so any advice would be much appreciated!
Basically I already save into a Stocks&Shares ISA and pay for the Lifestrategy 80 (ACC) fund. I pay £4000 annually. Now I also pay into a cash LISA and now I want switch over to an investment LISA (with the intention of investing into the LISA for 25 years plus). Now after some research it appears it would be ideal to invest into a Global Tracking fund (for total coverage). I have narrowed down my options as to the following funds:
- HSBC FSTE ALL WORLD FUND (Downside is no small cap investment)
- FIDELITY INDEX WORLD FUND (Downside is no emerging market investment)
- L&G INTERNATIONAL INDEX FUND (Downside is no UK investment)
- Vanguard FSTE GLOBAL ALL CAP FUND (Downside is reviews not so positive as other 3 aforementioned funds)
Now all 4 mentioned funds would be accumulation funds and I would ideally like to invest £4000 annually into only one of the funds listed above. 
My question to you all is which would be the best fund to choose, invest and stick with for 25 years plus? I am not totally convinced on investing in a too risky fund (even if I have time on my side as I couldn't bare to see significant losses in the search for greater gains). I would ideally like at least a 10% return annually from the fund.
Thanks for reading and I look forward to seeing your responses, your help is much appreciated!

Albermarle

I am not totally convinced on investing in a too risky fund (even if I have time on my side as I couldn't bare to see significant losses in the search for greater gains). I would ideally like at least a 10% return annually from the fund.

Before worrying about which of the four funds might be best , I think you need to be a bit more realistic about possible investment outcomes.

10% a year 'at least' is an unrealistic ambition .It is quite possible over the next few years that you could lose money or see little growth . Hopefully not but it is a possibility . Probably more of a possibility than making 10% pa consistently.

The funds you have mentioned could drop up to 50% in a bad crash . Again hopefully not, but a 20 or 30% slide every few years is normal. It happened this year in fact .

RajSSingh9

I see thanks for your swift response! I was noticed the 4 funds mentioned had annualised returns of 10% or more across 5 years (from researching the funds on iWeb) so I based my returns assumptions around this figure. To be honest even if I could receive a 7% return, this amount (along with continuous yearly investment and compounding) should easily beat the return if I kept investing into a cash Lisa. 
Is there any funds which you suggest instead of the ones I mentioned?  Thanks

Alexland

RajSSingh9 said:

I see thanks for your swift response! I was noticed the 4 funds mentioned had annualised returns of 10% or more across 5 years (from researching the funds on iWeb) so I based my returns assumptions around this figure. To be honest even if I could receive a 7% return, this amount (along with continuous yearly investment and compounding) should easily beat the return if I kept investing into a cash Lisa.

The past decade of returns has been exceptionally good for investors by historical standards as the reducing interest rates have increased the valuations on income producing assets such as equities and bonds. It seems unlikely that interest rates can continue to reduce at the same rate for the next decade so my medium term planning assumption for a 100% equities global tracker would be an average of around 2% pa growth above inflation and fees but it very much depends on how sensible valuations are at the end of that period.

RajSSingh9

Hi Alex @Alexland, thanks for your response, much appreciated! Is the 4 global funds I listed above likely to achieve the 2% pa growth you mentioned? I just want one fund I can just invest within my LISA for the years to come and be assured that I'll receive a good amount of return on my investment come the end of the 25 years of investment in the fund. Thanks

Alexland

RajSSingh9 said:

Hi Alex @Alexland, thanks for your response, much appreciated! Is the 4 global funds I listed above likely to achieve the 2% pa growth you mentioned? I just want one fund I can just invest within my LISA for the years to come and be assured that I'll receive a good amount of return on my investment come the end of the 25 years of investment in the fund. Thanks

Seems reasonably likely. Out of those 4 my preference would be the HSBC All World or Vanguard Global All Cap as they contain the complete geographic exposure including UK and emerging markets. Our LISAs are with AJ Bell and to benefit from platform charges capping we switched to investing in LCWL Lyxor World ETF so are holding more in an EM fund via a workplace pension to compensate. Expect to see drops of around 50% in bad market crashes and remember to derisk as you approach withdrawal.

RajSSingh9

@Alexland, that's good to know! I think the HSBC one appeals a bit more than the vanguard one as it is larger (in £) and had preformed better (despite the vanguard one being newer). Do you reckon holding a global tracker index fund and a Lifestrategy fund is enough and reliable enough to maintain for the foreseeable future? I don't want to have to keep splitting funds into several different funds hence the question. Also what sort out fund do you recommend when you mention "derisk as you approach withdrawal"? Would this be along the lines of transfering the fund into a fund which features bonds (such as a global bond or UK based bond)? Thanks by the way for your advice so far, it means a lot! I am still new to investing and your help is appreciated.

Thrugelmir

RajSSingh9 said:

I would ideally like at least a 10% return annually from the fund.

Then you are likely to be disappointed over an extended period of time. 

El_Torro

If you like the look of the HSBC All World Fund but you want some exposure in small caps you could always put some of the investment in a global smaller companies fund. Sure, two funds is more complicated than one fund, but it's adding diversification to your portfolio so it's not a case of adding complication for the sake of it.

As mentioned already all the funds you are looking at are volatile. If you want good returns (even an average of 7% a year in the long term is considered optimistic by some people) then unfortunately you need to accept the volatility though. Since you're investing for more than 10 years the end result should still be very good for you.

Alexland

RajSSingh9 said:

Do you reckon holding a global tracker index fund and a Lifestrategy fund is enough and reliable enough to maintain for the foreseeable future? I don't want to have to keep splitting funds into several different funds hence the question.

The VLS80 in your ISA will be less volatile than a global tracker maybe only dropping 35-40% in a bad market crash due to the 20% bonds but then it is also likely to generate a slightly lower long term return. Both VLS80 and the global tracker you select should be fine in the long term provided you accept the volatility but once the accounts get big enough you might want to take advantage of fixed or capped price platforms to keep your costs down.

RajSSingh9 said:

Also what sort out fund do you recommend when you mention "derisk as you approach withdrawal"? Would this be along the lines of transfering the fund into a fund which features bonds (such as a global bond or UK based bond)? Thanks by the way for your advice so far, it means a lot! I am still new to investing and your help is appreciated.

Yes you might switch to a less volatile multi asset fund or start moving to cash etc as you approach withdrawal. It depends on if you intend to spend it all in one go or if you might stay invested at a lower risk profile gradually draw an income from it in retirement, etc.

If using a LISA for retirement then you might also want to consider if you are making the most of any pension options you may have.