Where to invest SSAS - global market newbie

pam74

We are both about 70 years old. We need to invest our reasonably large SSAS pension pot which at the moment is sitting in the bank with virtually zero interest. A friend has invested with S Jmes Plce for a number of years and has averaged 10% interest per year. We were initially very keen to do the same. We are just nervous of putting all our money in one investment company. We just wondered if any of you foramites could advise us what would be the best place for hassle free whole of market investment. Would you split between various investment companies? Looking at the charts Vanguard is well rated but this might require more participation than we are knowledgeable to give. My family have invested with Rathbones with good results. Just really don’t know what to do. We are completely clueless of the stock market etc. Thank you. 

Thrugelmir

pam74 said:

 A friend has invested with S Jmes Plce for a number of years and has averaged 10% interest per year. 

Has been an exceptionally good period of time for those with a high US weighting in their portfolios. When investing in stocks and shares there are no guaranteed returns. Markets do suffer downturns. Only invest what you can afford to lose. There's absolutely no comparison to the safety of savings accounts. The Vanguard website provides a good simple explanation as to the potential volatility you are exposed too when investing in their VLS range. 

pam74

It is so very difficult to know what proportion to invest and how much to leave in the bank. It would be so nice to have some of our money pot grow / take interest. What I would like to ask is what ethical firms to use to invest that don’t extort high charges? Would you invest with S Jms Plce? We are truly clueless.  We would really like to use a company that arrange the investment for us with medium risk. 

jamesd

Ten percent growth per year over recent years isn't especially good though it does depend on how the money is invested. The firm they are using is one you could benefit from reading up on before using, given that they are noted for high prices.

To get some initial idea of what might be suitable, you might give us some idea of how big a temporary drop might cause you to sell and give up, then we could suggest a mixture of shares and bonds that is expected to stay outside that. That mixture could then be purchased with just one fund from the Vanguard Lifestrategy range being used, since it comes with varying equity:bond mixtures. To do that we might assume a 40% equity drop and 10% bond drop. If that happened here's the drop for some mixtures

80% equities: 34%
60% equities: 28%
40% equities: 22%
20% equities: 16%

Another way to look at it is to ask you whether you need to take any investment risk. Just cash can be fine for some people, or a lot of it for others. Someone in this sort of position might keep half of their money in cash accounts and half in one of the mixtures above. Combined that'd have half of the drop potential and provide ample cash for years of day to day living.

jamesd

It's not so much the investment company as the investment that matters. All three of the companies you mentioned offer many different investments. Initially, sort out roughly where you want to invest. Something like Lifestrategy is an easy way to invest in a mixture of equities and bonds and most firms will have something similar, often called balanced managed funds.

Beyond that, firms offer many funds that concentrate on particular parts of the market and those are useful for people who want to do that. Unless you want this you can ignore almost all funds from almost all providers just because you're not interested.

pam74

Thank you very much for your observations, we are most grateful. Given that we are inept as investors- which investment company would you use? We will try and invest in a Lifestrategy / balanced managed fund as you suggest. 

Thrugelmir

jamesd said:

Ten percent growth per year over recent years isn't especially good though it does depend on how the money is invested.

The real boost to investment returns was made 3-5 years ago. These returns are now progressively going to unwind from the performance figures of many popular investments. 

jamesd

pam74 said:

Thank you very much for your observations, we are most grateful. Given that we are inept as investors- which investment company would you use? We will try and invest in a Lifestrategy / balanced managed fund as you suggest. 

Vanguard is very highly regarded for their range of funds, though very slightly cheaper prices can be found elsewhere for very similar things. For people who want to keep things simple they are a good choice.

Because of valuations in some stock markets at the moment there's reason to anticipate a drop but the problem with such anticipation is that you can't tell when it'll happen. I've reduced my equity holdings as a result and you might like to consider one step lower in risk tolerance than you'd otherwise pick. I've done very well from the portion still invested so it's not a case of staying out, just adjusting a bit based on circumstances. Meanwhile, huge government spending and low interest rates have been helping markets so such adjustments can easily leave you thinking "if only" while forgetting that it was prudence and firm statistics which caused the decision in the first place...

jamesd

Thrugelmir said:

jamesd said:

Ten percent growth per year over recent years isn't especially good though it does depend on how the money is invested.

The real boost to investment returns was made 3-5 years ago. These returns are now progressively going to unwind from the performance figures of many popular investments. 

Hmm, I'd say there's some merit in that view but I'd pay a good deal of attention to government stimulus programs along the way, which can delay things. Regardless of stimulus, my own equity holdings are a good deal lower than usual because medium term I agree with you.

Thrugelmir

jamesd said:

Thrugelmir said:

jamesd said:

Ten percent growth per year over recent years isn't especially good though it does depend on how the money is invested.

The real boost to investment returns was made 3-5 years ago. These returns are now progressively going to unwind from the performance figures of many popular investments. 

Hmm, I'd say there's some merit in that view but I'd pay a good deal of attention to government stimulus programs along the way, which can delay things. Regardless of stimulus, may own equity holdings are a good deal lower than usual because medium term I agree with you.

There's an excellent article in the Investors Chronicle in which Microsoft's meteoric share price rise over the past decade is dissected. How much is in essence simply attributed to an increased valuation rather than any supporting fundamentals. It's retail investors (certainly the case in the US) that are underpinning current prices while institutional investors will be quietly and discreetly lowering their exposure and moving their funds elsewhere. 

kidmugsy

@pam74, did either of you reach your state pension age before 6th April 2016?  If you did it might be worth considering suspending your state pension for a few years so that it grows in value (10.4% p.a.) while filling the gap with income from your SSAS.  This manoeuvre would be the equivalent of buying an index-linked annuity at a much better return than a commercial annuity could pay you.

The pension service prefers the term "deferring" to "suspending" probably because it expects most people to defer straight from their State Pension Age rather than starting a few years afterwards.

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/825396/state-pension-deferral-if-you-reached-state-pension-age-before-6-april-2016-extra-information.pdf