How is a smallish DC pot managed without an IFA

Albermarle

Start early to get the benefit of compound interest; save as much as you can; keep some ready funds for a rainy day take advantage of pension tax relief , Isa's etc where possible ;invest the rest in a mix of assets to suit your risk capacity; diversify broadly within those assets; keep costs down; use cap weighted indexing for stocks; match your assets to your liabilities

Maybe the forum could use the above,  as a kind of mission statement ( I added my own bit ) 

JohnWinder

Brilliant, wasn't it? Sadly, not a word of it my own. Shamelessly copied from Bernstein's book The Investor's Manifesto. It's a good read too.

cfw1994

Thrugelmir said:

cfw1994 said:

Thrugelmir said:

OldMusicGuy said:

Thrugelmir said:

I'd not recommend DIY for someone who has retired and has no previous experience. Unless they've no concerns with regards to permanent loss of capital. To the uninitiated the choice of investments is totally bewildering and confusing. That's before one even starts to comprehend the worlds of business, economics and political events that influence market behaviour. Plenty of low cost options are available for those who are looking for actively managed passive investments. 

I take a different view. There's different types of DIY. I manage a fund significantly in excess of the OP's and I have no prior experience. It is my only retirement fund. It need not be complicated unless you want to try to build a multi-sector portfolio like an IFA might. You don't need experience but you do need to educate yourself, which is why books like the John Edwards one are very helpful, as are sites like Monevator and Pensioncraft.

Not suggesting that investing is complicated. It's little different to picking a winner for the Grand National after studying the form guide in the Sporting Life for a few hours. Then staking your money. To quote Warren Buffet. "If past history was all there was to the game, the richest people would be librarians".  

Behavioral finance studies are an interesting read. Biases such as overconfidence, recency, confirmation and hindsight become very apparent as markets mature. Then there's herd mentality as people get sucked into the trends. Having the benefit of experience allows one to recognise and control ones own behaviour. 

As for my personal experience I'm fortunate to have started learning at a young age. On Saturday mornings attempting to comprehend the then multiple back pages of the pink paper when in my late fathers office in the City.  My fascination has never died, it never will. 

Your comments make it sound like you have to “pick the winner”.  Also that they need to become as skilled as you clearly are, requiring perhaps decades of experience.

I would argue that picking the average is good enough!

OP, maybe also have a listen to Lars Kroijer videos, on a well known video sharing service or at https://www.kroijer.com. Zero cost to listen, might also give you some ideas!

 I referenced horse racing for good reason. People generally err on the side of caution and follow the money , herd betting. Doesn't make the outcome anymore certain, simply narrows the odds of a decent return. The fact that you reference a book a written a decade ago for the US investor says it all. In a similar vain the "Intelligent Investor" was written decades earlier. Contains pearls of wisdom but doesn't make it a bible that should be followed religiously. 


I'm not a skilled investor. Just a pragmatic one.  Made plenty of poor decisions over the years. Just makes me chuckle when people celebrate the fact that they think they've found the holy grail of investing. That's a clear sign of inexperience. 

Referencing a book written a decade ago....shock horror!   

You can follow Lars on YouTube for very up to date thoughts: the basic premis remains as solid now as it did then, I would suggest.   You disagree, I assume?

Other views are of course valid, & I agree absolutely that one should not follow them religiously: I never suggested it was a “holy grail of investing”, that would be crazy talk!

For a “novice” investor, I do think his ideas are a very solid start: in a nutshell, don’t chase the mythical market-beating fund manager, invest regularly in low cost global tracking funds inside tax-efficient wrappers where possible.  What’s your advice to a newbie?

As others said, make the most of pension investments and ISAs (including LISA & IFISA where appropriate).

As you get wealthier and more experienced, maybe diversify a little.  Heck, I even have a couple of thousand in P2P & “private investing” startups.....nothing I would miss if they disappeared, but a bit interesting!

atush

I came out even on the Grand National today, but our pensions and investments are up )

bostonerimus

Investing can be made as simple or as complicated as you want. Financial professionals have a vested interest in making it seem complicated and some people like to think that by applying models and stochastic processes they can squeeze out some better risk adjusted return. Maybe the folks at DFA can do that, butI 'm not convinced. Anyway the regular investor does not need to worry about Emerging Markets or constructing a portfolio as there are many multi-asset funds that give solutions that will be just fine. Too much emphasis is placed on finding the holy grail of asset allocation.

The first rule of personal finance is nicely put by Mr. Micawber in David Copperfield

"Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

So first of all do a budget and find ways to save and control you spending to be less than your income...put the credit cards away if you have to.

Then save 6 months to a years spending in the bank for emergencies. After that use all the tax advantaged investments you can like iSAs, SIPPS and workplace pensions. Once you have maxed those out (pretty difficult) keep investing in regular accounts.
You should invest in a few low cost tracker funds or a multi-asset fund like the VLSxx series. For the OP a simple solution would be to put the money into a Date Retirement fund which would have a mix of investments appropriate for the recent retiree. Then I would do some research on withdrawal rates, but bottom line would be keep it below an inflation indexed 4% and you should be ok.

This is not rocket science. All you need to do is see the woods for the trees. 99% of the stuff put out in the financial literature is useless to the average investor and the trick is to ignore it and use the simple funds and tools available on the mainstream platforms to solve your problem.

TVAS

UFPLS is tax free cash and income. If you are taking max TFC this is under Flexi Access drawdown. 1% Ongoing adviser charge is daylight robbery. If they are in cautious funds why do you need an IFA to manage it anyway? 

I have never understood why people adopt a Cautious investment risk strategy unless they have already built up a large fund and want to protect that large sum.

Pension is a long term savings plan so it is reasonable for people to start at Medium Risk.

You have missed out on remarkable growth since 2008. 

However from what you say you plan to deplete this modest fund so I cannot see if you continue to invest in Cautious funds why you need the assistance of an IFA at all.

Albermarle

I have never understood why people adopt a Cautious investment risk strategy unless they have already built up a large fund and want to protect that large sum.

A lot of people are naturally cautious about money, so they automatically think that a cautious investment strategy is for them .

It is only when you start to understand how long term investing works ( and the large majority do not) that being too cautious is counterproductive, and actually more risky to your long term financial health .

So it is just down to a lack of understanding. 

[Deleted User]

Albermarle said:

I have never understood why people adopt a Cautious investment risk strategy unless they have already built up a large fund and want to protect that large sum.

A lot of people are naturally cautious about money, so they automatically think that a cautious investment strategy is for them .

It is only when you start to understand how long term investing works ( and the large majority do not) that being too cautious is counterproductive, and actually more risky to your long term financial health .

So it is just down to a lack of understanding. 

Not altogether so, Albermarle.

The lower the expectation, the easier it is to meet for the financial services industry. That's why "risk profiling" will commonly question the client's attitude to a 50% correction but not a corresponding opportunity cost. Cautious investors depend on advice longer too.  A risk averse client is a pearl to be cultivated by the industry.