Advice on first S & S ISA opened with Vanguard

isayhello

I've opened my first S&S ISA with vanguard at the end of the last tax year and have a few questions. I invested the full allowance into the following funds roughly as follows:

70% - life strategy 100%
15% - FTSE all world high dividen yield
15% - S&P 500

I didn't have any specifically strong reasons for this split, it was just how I decided to go after reading other threads and information online. Any advice or feedback on this allocation would be great thanks.

I'm looking to invest this years allowance in as well now and wondered if people would recommend going all in or is it better to contribute over the year to ride out any fluctuations in the price?

george4064

As many others will say, best practice is to invest as much as you can afford to as soon as you can. 

This means that overall you have more money invested earlier and statistically over the long-term you will get better performance if you invest a cash lump sum in one go rather than drip feeding it over a 12 month period.

Alexland

I wouldn't touch a passive high yield fund with a barge pole and don't see why you need the S&P500 fund when you already have heavy US exposure in the VLS100 fund. I would just go VLS100 or perhaps Vanguard Global All Cap if you don't want the UK bias but it's looking good value at the moment. @coastline posted a good graph earlier on another thread which addresses US stock outperformance periods so be careful if only looking at data from the last 5-10 years.

isayhello

So @george4064 the idea of investing it all in one go is better even if prices dropped later on and if you drip fed then you would buy cheaper? I know there might be different views on this, was just curious while trying to decide which approach to take.

isayhello

@Alexland Can I ask the reason for avoiding the high yield fund? I'd seen on many other posts and videos people were investing in this one.

Alexland

isayhello said:

@Alexland Can I ask the reason for avoiding the high yield fund? I'd seen on many other posts and videos people were investing in this one.

Companies with high dividend yield tend to have low share prices because the market has less faith in their future prospects. Going passive into high yield risks buying into all the dividend traps and while the diversification will help smooth the return such funds tend to have a noticable performance lag. If investing for dividends it's best not to be too greedy on yield and remember that the quality and growth prospects are also important.

JohnWinder

I'm not sure that high dividend, widely diversified equity funds are a hanging crime unless you believe they're immune to downturns in a downturn and thus pin your faith on them for retirement. However their returns might turn out to be, they seem to offer nothing that a probably cheaper all cap fund would.

Here are a couple of discussions: https://www.bogleheads.org/forum/viewtopic.php?t=258240

https://earlyretirementnow.com/2019/03/06/yield-delusion-swr-series-part-31/

george4064

isayhello said:

So @george4064 the idea of investing it all in one go is better even if prices dropped later on and if you drip fed then you would buy cheaper? I know there might be different views on this, was just curious while trying to decide which approach to take.

That’s only visible in hindsight though, so not much use when deciding to invest or not. Some people decide to drip feed rather than invest lump sum for psychological reasons, which is fine but statistically speaking this approach will most likely result in lower returns than if the cash was invested as soon as possible as a lump sum.

Statistically speaking markets go up, and that when you ‘increase’ the length of time in the market it improves your chances of receiving positive returns on your portfolio. This is assuming you are invested in a properly diversified portfolio, i.e. not Bitcoin or something!