Best Option for Cash Lump Sum

DoneWorking

Update 
I've been giving my options even more thought and been reading other threads in this group.

I don't feel confident enough to go DIY

I'm also concerned that I could be starting my investment journey at a time when investments seem to be falling

Am I likely to be able to find an IFA who will simply set me up a series of Vanguard or Similar Investment Options without doing the full in-depth analysis of my financial circumstances

Put simply I want to protect my £400k funds from inflation as best I can with medium risk

A return of 5% minimum would be acceptable after any fee for setting up the investment plan

What kind of fee would an IFA charge for this service

What would be the other associated costs

I would be prepared to start of with say half the funds invested and drip feed the remainder over time if that was beneficial

GeoffTF

DoneWorking said:

Update 
I've been giving my options even more thought and been reading other threads in this group.

I don't feel confident enough to go DIY

I'm also concerned that I could be starting my investment journey at a time when investments seem to be falling

Am I likely to be able to find an IFA who will simply set me up a series of Vanguard or Similar Investment Options without doing the full in-depth analysis of my financial circumstances

Put simply I want to protect my £400k funds from inflation as best I can with medium risk

A return of 5% minimum would be acceptable after any fee for setting up the investment plan

What kind of fee would an IFA charge for this service

What would be the other associated costs

I would be prepared to start of with say half the funds invested and drip feed the remainder over time if that was beneficial

If you go with an IFA, you will have to pay lots of money to set things up and and a fat percentage every year after that. 5% return after those costs is not realistic for a medium risk portfolio, starting from here. Alternatively, you can just buy Vanguard LifeStrategy 60 yourself. 5% return may still not be achievable, but at least you will have a better chance of achieving that.

Thrugelmir

DoneWorking said:

A return of 5% minimum would be acceptable after any fee for setting up the investment plan

Market returns unfortunately aren't like cash deposit accounts. They can gyrate wildly year to year. Only over your given timeframe can you assess whether the choosen investment strategy was successfull. At the current time when markets such as the SP500 are moving down 4% then back up 5% in a single trading session one knows that there's far more going on than meets the eye. As there'll be no end of derivative positons that are being closed out. Resulting in sharp short knee jerk movements. 

DoneWorking

GeoffTF said:

DoneWorking said:

Update 
I've been giving my options even more thought and been reading other threads in this group.

I don't feel confident enough to go DIY

I'm also concerned that I could be starting my investment journey at a time when investments seem to be falling

Am I likely to be able to find an IFA who will simply set me up a series of Vanguard or Similar Investment Options without doing the full in-depth analysis of my financial circumstances

Put simply I want to protect my £400k funds from inflation as best I can with medium risk

A return of 5% minimum would be acceptable after any fee for setting up the investment plan

What kind of fee would an IFA charge for this service

What would be the other associated costs

I would be prepared to start of with say half the funds invested and drip feed the remainder over time if that was beneficial

If you go with an IFA, you will have to pay lots of money to set things up and and a fat percentage every year after that. 5% return after those costs is not realistic for a medium risk portfolio, starting from here. Alternatively, you can just buy Vanguard LifeStrategy 60 yourself. 5% return may still not be achievable, but at least you will have a better chance of achieving that.

Thanks for your comment

Would I be better off going with a range of Vanguard Products to spread the risks

I have a total of £400k to invest 

If so which ones should I consider to obtain a minimum 5% return

Who is best provider for Vanguard products

Are there alternatives to Vanguard investments

GeoffTF

DoneWorking said:

GeoffTF said:

DoneWorking said:

Update 
I've been giving my options even more thought and been reading other threads in this group.

I don't feel confident enough to go DIY

I'm also concerned that I could be starting my investment journey at a time when investments seem to be falling

Am I likely to be able to find an IFA who will simply set me up a series of Vanguard or Similar Investment Options without doing the full in-depth analysis of my financial circumstances

Put simply I want to protect my £400k funds from inflation as best I can with medium risk

A return of 5% minimum would be acceptable after any fee for setting up the investment plan

What kind of fee would an IFA charge for this service

What would be the other associated costs

I would be prepared to start of with say half the funds invested and drip feed the remainder over time if that was beneficial

If you go with an IFA, you will have to pay lots of money to set things up and and a fat percentage every year after that. 5% return after those costs is not realistic for a medium risk portfolio, starting from here. Alternatively, you can just buy Vanguard LifeStrategy 60 yourself. 5% return may still not be achievable, but at least you will have a better chance of achieving that.

Thanks for your comment

Would I be better off going with a range of Vanguard Products to spread the risks

I have a total of £400k to invest 

If so which ones should I consider to obtain a minimum 5% return

Who is best provider for Vanguard products

Are there alternatives to Vanguard investments

No. LifeStrategy 60 has a huge spread of risk by itself. There is NO investment that will give a minimum 5% return. LifeStrategy 60 is 60% equities and 40% bonds. The distributions are taxed as dividends.

Here are Vanguard's 10 year expectations for market returns:

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/misstep-by-policymakers-key-risk-to-markets-2022

"In sterling terms, we think UK shares over the next ten years are likely to return between 4.6% and 6.6% on an annualised basis. For unhedged, non-UK shares the projected range is between 2.8% and 4.8%."

"We see UK bonds offering returns of between 0.8% and 1.8% on average over the next ten years, while international (non-UK) bonds will offer returns of between 0.7% and 1.7%, which is slightly up on our expectations from last year."

On that basis, for a 60 / 40 portfolio, we might expect a return of about 0.6*3.8% + 0.4*1.3% = 2.5%. That is well under 5%, and that return is VERY VERY uncertain. It could be much more or much less, or there could even be a loss. That return is before costs and taxes. If Vanguard's expectation is right, IFA fees would leave you with very little, if anything.

You can use Vanguard's own platform, but iWeb (which is owned by Lloyds bank) is cheaper for all but the smallest accounts. There are lots of alternatives to Vanguard products, but LifeStrategy is the most popular choice for people who just want to buy a packaged fund without doing lots of studying.

You can get a certain 2.12% from a 5 year savings account:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

Nonetheless, there is tax to pay on that, and your money will be gradually eaten away by inflation. It is a horrible choice.

P933alilli

Hi,
    a couple of quearies i have about the Life strategy funds! Do they contain unhedged shares in the allocations? Do the non-UK assets and bonds automatically mean that theyre unhedged?
I also was wondering about your workings above? Your expected return calculation is slightly wrong!
  But also if UK shares & bonds are used i get 0.6*5.6% + 0.4*1.3% = 3.88%. If non-UK: 0.6*3.8% + 0.4*1.2% = 2.76% Presumably averaging at 3.32%?
Dont mean to be pedantic and i realise there is much uncertainty! Hopefully high inflation wont persist for the next decade!

eskbanker

Collyflower1 said:

I also was wondering about your workings above? Your expected return calculation is slightly wrong!
  But also if UK shares & bonds are used i get 0.6*5.6% + 0.4*1.3% = 3.88%. If non-UK: 0.6*3.8% + 0.4*1.2% = 2.76% Presumably averaging at 3.32%?

Two wrongs don't make a right - the previous version of the calculation didn't seem to take account of the difference between UK and non-UK holdings, but your averaging effectively assumes that it's a 50/50 split between these!  Even with VLS's home bias, the UK component is some way less than 50%, but, while it would be possible to calculate a more mathematically accurate figure from Vanguard's projections (or even a best/mid/worst range), it's futile to do so, given the (un)likelihood of their estimates proving to be realistic - if you look back at their previous forecasts, they haven't had any sort of track record of accuracy, so trying to work out a notional percentage return (to multiple decimal places) over the next ten years isn't likely to be a particularly productive exercise....

GeoffTF

Collyflower1 said:

Hi,
    a couple of quearies i have about the Life strategy funds! Do they contain unhedged shares in the allocations? Do the non-UK assets and bonds automatically mean that theyre unhedged?
I also was wondering about your workings above? Your expected return calculation is slightly wrong!
  But also if UK shares & bonds are used i get 0.6*5.6% + 0.4*1.3% = 3.88%. If non-UK: 0.6*3.8% + 0.4*1.2% = 2.76% Presumably averaging at 3.32%?
Dont mean to be pedantic and i realise there is much uncertainty! Hopefully high inflation wont persist for the next decade!

LifeStrategy contains only unhedged equities. Vanguard does not provide hedged equity funds. Hedging equities is expensive an does not measurably reduce the risk. Overseas bonds will be hedged. That does reduce the risk, and is worth the cost. The bonds would not do their job of stabilising the portfolio if they had exchange rather volatility. Vanguard's 10 year expectations should be on the same basis.

Yes, thank you for that. It was late at night. The mid point estimate for non- UK bonds is indeed 1.3% rather than 1.2%, so we do get 0.6*5.6% + 0.4*1.3% = 2.76% for non-UK equities and bonds.

I used the non-UK numbers for a 60 / 40 portfolio because the UK market is only about 4% of the global market. LifeStrategy has 25% equities in the UK. I have not checked the bond percentage, but on the basis of a 75 / 25 split for both equities and bonds, we get 0.75*2.76% + 0.25*3.88% = 3.04%. (There is a big chorus here that LifeStrategy's home bias is wrong. I doubt whether that would be the case if the UK market had done well in recent years. Nonetheless, the current low valuation is the result of the recent UK underperformance.) You will get a bit chopped off that expected return by costs and taxes. Nonetheless, you have a good chance of keeping up with inflation, but the actual outcome is, of course, very unpredictable.

If you are outside a tax shelter, you can do better by using an equity fund and a ladder of 5 year savings accounts, but there is more tax to pay outside a tax shelter.

GeoffTF

eskbanker said:

Collyflower1 said:

I also was wondering about your workings above? Your expected return calculation is slightly wrong!
  But also if UK shares & bonds are used i get 0.6*5.6% + 0.4*1.3% = 3.88%. If non-UK: 0.6*3.8% + 0.4*1.2% = 2.76% Presumably averaging at 3.32%?

Two wrongs don't make a right - the previous version of the calculation didn't seem to take account of the difference between UK and non-UK holdings, but your averaging effectively assumes that it's a 50/50 split between these!  Even with VLS's home bias, the UK component is some way less than 50%, but, while it would be possible to calculate a more mathematically accurate figure from Vanguard's projections (or even a best/mid/worst range), it's futile to do so, given the (un)likelihood of their estimates proving to be realistic - if you look back at their previous forecasts, they haven't had any sort of track record of accuracy, so trying to work out a notional percentage return (to multiple decimal places) over the next ten years isn't likely to be a particularly productive exercise....

Hopefully, my last attempt is mathematically correct. (Actually, VLS is likely to make a rebalancing profit, but that is not a material issue here.) Yes, you are right, of course, we cannot expect even one significant figure accuracy here. Nonetheless, I was responding to a demand for a minimum return of 5%. Even Vanguard does not expect a return of 5%, and that certainly is not the worst outcome that is possible.

DoneWorking

Thanks guys 
I find this all so interesting

I'm yet another person new to retirement and trying to protect a lifetimes savings from inflation

I also suffer from anxiety and I must admit this gives me a few problems getting back to sleep if I wake up too early

I'd really appreciate any further advice 

And thanks for not giving me a hard time