Is this a good idea?

MoneySavingAlly

I am 35 and I have 25k in the Vanguard FTSE all cap index LISA and I contribute £250 per month to a SIPP into same fund.

I also have 19k in my platform ISA account waiting to be invested.  I would like to have achieve an overall balance of 50-60% equities of my overall portfolio.  I won't touch the equities for at least 20 years (LISA & SIPP) and the remaining should I invest in bonds?  Does this sound like a good idea?

MoneySavingAlly

Maybe a global bond index fund?

Shankers

MoneySavingAlly said:

I am 35 and I have 25k in the Vanguard FTSE all cap index LISA and I contribute £250 per month to a SIPP into same fund.

I also have 19k in my platform ISA account waiting to be invested.  I would like to have achieve an overall balance of 50-60% equities of my overall portfolio.  I won't touch the equities for at least 20 years (LISA & SIPP) and the remaining should I invest in bonds?  Does this sound like a good idea?

Think about the following:
1. Will you need this money in the next 5-10 years? If so, will locking it away make much sense?
2. Are you paying into a company pension already? If it is defined benefit it might make sense to put more money into the company pension if possible rather than a LISA or SIPP. 
3. Higher rate tax payer or not? If so, then more pension contributions make sense, especially if you receive Child Benefit
4. Are you a home owner? If not, then could this money not go towards a deposit is it's usually more financially sound than renting
5. Why the 50-60% overall balance with equities if you're a) drip-feeding and b) going to lock the money away for the long term? You may wish to go higher on the equities as many bonds are equity-linked at the moment and do not have as much growth potential as some stocks.

Eyeful

Have you considered any of the following?

1. Global index fund or ETF. For example Vanguard's VWRL.

2. Global Multi Asset Fund. For example the Vanguard Life Strategy Fund (VLS) with a share/bond split you are comfortable with. 
  https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

3. Vanguard "Target Retirement Funds"
https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds

bd10

I would consider bonds only if they are inflation-linked.

MoneySavingAlly

Shankers said:

MoneySavingAlly said:

I am 35 and I have 25k in the Vanguard FTSE all cap index LISA and I contribute £250 per month to a SIPP into same fund.

I also have 19k in my platform ISA account waiting to be invested.  I would like to have achieve an overall balance of 50-60% equities of my overall portfolio.  I won't touch the equities for at least 20 years (LISA & SIPP) and the remaining should I invest in bonds?  Does this sound like a good idea?

Think about the following:
1. Will you need this money in the next 5-10 years? If so, will locking it away make much sense?
2. Are you paying into a company pension already? If it is defined benefit it might make sense to put more money into the company pension if possible rather than a LISA or SIPP. 
3. Higher rate tax payer or not? If so, then more pension contributions make sense, especially if you receive Child Benefit
4. Are you a home owner? If not, then could this money not go towards a deposit is it's usually more financially sound than renting
5. Why the 50-60% overall balance with equities if you're a) drip-feeding and b) going to lock the money away for the long term? You may wish to go higher on the equities as many bonds are equity-linked at the moment and do not have as much growth potential as some stocks.

1) Yes, I may need the money, that is why I do not want to invest in something volatile.  I am happy with a low return of between 2-3% before inflation.  I wanted to make use of the entire ISA allowance before its gone as I know in the coming years, I will be investing at least 20k per year towards ISA.

2) I have a company DB pension and I am also paying into a SIPP myself.

3) I am a higher rate taxpayer; I do not want to lock away any more money in long term investments.  I would prefer to drip feed ever month into the SIPP.

4) I am a homeowner; my LTV is below 60%.

5)  I may need the money in the future so that is why I want to keep it moderately accessible if the need arises.  I do have a separate emergency fund and I also have an offset mortgage which means I have access to 50k plus in the offset account.

I am very new to investing so any advice would be very helpful.

Thanks

AlanP_2

At 35 you seem to be in pretty good financial shape so well done on that.

Bonds are likely to provide a lower return than equities over an extended period and are heavily affected by interest rates and inflation (actual and forecast), it is no suprise that bonds have had a great run over the last few years as both have been low and been expected to go lower.

That is now starting to reverse and the likely outcome is that returns from bonds will start to fall and they will eventually get back to the point where they are able to do the portfolio role they have traditionally - slow & steady with no real suprises to counter act the higher growth equities held. How long that takes is anybody's guess but I'd hazard a guess at 10 years plus.

Between now and then those "10 years" may be a poor time to hold them though as they ease down towards that "stable" level.

For you in accumulation that is a point to consider. For me, approaching retirement I will still hold some as even as they fall they are likely to be less volatile than equities. I can plan on -3% a year on Bonds and +5% on equities for example and work out whether I have a large enough pot and what sort of ratio I should hold (made up %'ages btw). This would still be preferable to going 100% equities and taking a chance that I don't get much of a return at all due to a major crash early on in retirement.

You however, would still have 20-30 years earnings potential to overcome any such crash. In fact you would probably benefit, if you keep your job, as you will be able to buy lots of equities at lower prices than today.

george4064

On a side-note, if you are trying to achieve say 60% equities/40% bonds, it would best to target that allocation within each portfolio rather than say having your LISA 100% equities, your SIPP 90% bonds/10% equity and your S&S ISA 50% equities/50% bonds (exact splits would depend on relative £ size of each pot). 

So much better to have 70% equities/30% bonds in each portfolio, so each pot seperately is suitably invested as per your strategy,

DireEmblem

1. Similar to @Eyeful but consider VWRP - the Accumulation version.
2. Is your FTSE All Cap Fund a global fund or just UK?  If its just UK, then I would consider diversifying globally with a cheap equity Fund / ETF.
3.  What is the purpose of keeping 50-60% in bonds, if you're happy not to touch your equities for 20 years?
4.  Have you considered the Lifestrategy or myMap funds?

MoneySavingAlly

george4064 said:

On a side-note, if you are trying to achieve say 60% equities/40% bonds, it would best to target that allocation within each portfolio rather than say having your LISA 100% equities, your SIPP 90% bonds/10% equity and your S&S ISA 50% equities/50% bonds (exact splits would depend on relative £ size of each pot). 

So much better to have 70% equities/30% bonds in each portfolio, so each pot seperately is suitably invested as per your strategy,

I must be missing something, is it not better to hold 100% equities in a LISA/SIPP as they are locked away for the long term and shorter-term investments such as bond etc in ISAs etc which I can withdraw if I need.

My aim is to build a portfolio of 60% equities and 40% bonds.  Therefore, should the ISA, LISA, and SIPP each achieve this balance individually or collectively?

MoneySavingAlly

DireEmblem said:

1. Similar to @Eyeful but consider VWRP - the Accumulation version.
2. Is your FTSE All Cap Fund a global fund or just UK?  If its just UK, then I would consider diversifying globally with a cheap equity Fund / ETF.
3.  What is the purpose of keeping 50-60% in bonds, if you're happy not to touch your equities for 20 years?
4.  Have you considered the Lifestrategy or myMap funds?

1. Are you referring to Vanguard FTSE all world UCITS ETF?

2. It is a global fund.

3. I suppose it is because of my risk tolerance and I would be comfortable with 60% equities. Might be wrong in this.

4.  I was thinking of LifeStrategy 20% or 40%, but I think the LifeStratgey has a UK bias?

Thanks,