Best Option for Cash Lump Sum

GeoffTF

Collyflower1 said:

All world ucits ETF or VLS80?

VLS 80 is intermediate in risk between VLS 60 and 100% equity. Even 20% bonds greatly softens the blow in a mighty stock market crash.

P933alilli

How is that diversifying from VLS60? Unless youre suggesting i transfer from VLS60 to VLS80?

eskbanker

Collyflower1 said:

How is that diversifying from VLS60? Unless youre suggesting i transfer from VLS60 to VLS80?

There's already huge overlap between the equity content of VLS60/80 and FTSE Global All Cap and All World UCITS ETF, so any interchanging between these won't make significant impact on diversification (although they're obviously not identical and the geographical mix varies), but what is it that you're actually trying to achieve?

GeoffTF

Collyflower1 said:

How is that diversifying from VLS60? Unless youre suggesting i transfer from VLS60 to VLS80?

You wrote:

"I'm also just debating whether or not i could take more risk with the FTSE global all cap fund as an isa from the new tax year and going halves with the VLS60!"

Buying 50% FTSE Global All Cap and 50% VLS 60 is not a good way of achieving 80% equities. If one or other of the funds grows more than the other, you will become out of balance. It would be much better to buy VLS 80, which will stay in balance.

Buying FTSE Global All Cap and VLS 60 does not increase diversification significantly. The All-cap will contain a small amount of smaller stocks, and the weights will be a little different, but that is about it. It is not worth the trouble. The whole point of VLS is that you just have to buy one fund and be done with it.

P933alilli

Hi,   

    i think my initial choice of VLS60 is probably best for me at the moment. I was intending to put 40k in my S&S isa in the next couple of years and leaving it for between 5-10 years. I'm drip-feeding £500 each month, i may up it to £1000 per month! I wouldnt like to lose anything but worse case scenario would hope to get 40k back at the end as though its been under the mattress while hoping for it to match inflation at best.
    I would then have another £120k or so just in cash. I'll need less than that to sustain me for the next 7 years to take me up to state pension age. I read somewhere on thursday that the hope was for inflation to undershoot 2% by the middle/end of 2023?  So potentially the best 5 year fix of 2.2% atm in those circumstances wouldnt be too bad in terms of damage limitation. But initially i'll probably fix £80k for a monthly income for 1-3 years!
   By 2028  my state pension will kick in so i'll need to work out the best way of accessing my DC pension and state pension and any cash savings to keep the tax bill low as possible.!

GeoffTF

Collyflower1 said:

Hi,   

    i think my initial choice of VLS60 is probably best for me at the moment. I was intending to put 40k in my S&S isa in the next couple of years and leaving it for between 5-10 years. I'm drip-feeding £500 each month, i may up it to £1000 per month! I wouldnt like to lose anything but worse case scenario would hope to get 40k back at the end as though its been under the mattress while hoping for it to match inflation at best.
    I would then have another £120k or so just in cash. I'll need less than that to sustain me for the next 7 years to take me up to state pension age. I read somewhere on thursday that the hope was for inflation to undershoot 2% by the middle/end of 2023?  So potentially the best 5 year fix of 2.2% atm in those circumstances wouldnt be too bad in terms of damage limitation. But initially i'll probably fix £80k for a monthly income for 1-3 years!
   By 2028  my state pension will kick in so i'll need to work out the best way of accessing my DC pension and state pension and any cash savings to keep the tax bill low as possible.!

You are not very clear about your cash flow, but it looks as though at least 50% is going into cash. At 2.2% savings accounts much better than you will get on Gilts. That does mean, however, that with VLS 60, you will have at most 30% in equities with the remaining 70% in cash/bonds. You could go for 100% equities in the ISA, which would result in at most 50% equities overall, which is reasonable for 5-10 years.

P933alilli

Is it wise to go all in with VLS100 though in a major downturn? Potentially what would be the worse that could happen to 40k in VLS100 over 10 years?

GeoffTF

Collyflower1 said:

Is it wise to go all in with VLS100 though in a major downturn? Potentially what would be the worse that could happen to 40k in VLS100 over 10 years?

Suppose that you have 50% in VLS 100 and 50% in cash, and want to put money in each month. You can put each month's savings from whichever is the least, cash or VLS 100. That way, if the stock market is down, you put the money into VLS 100 and if it is up, you put the money from cash. That is call cash flow rebalancing.

If the stock market halves in value, your portfolio will fall in value by a quarter. The worst that can happen is that VLS 100 is completely wiped out, in which case your cash deposits probably will not be honoured either. If that happens we are all toast. Nonetheless, as a generalisation, it is fair to say that if you have half your money in the stock market, half your money is at risk. If you cannot take that, hold less equities.

dunstonh

Is it wise to go all in with VLS100 though in a major downturn? 

The question could be whether it is wise to have VLS100 full stop.   A global tracker is cheaper and doesn't have the management decisions of VLS100.

Potentially what would be the worse that could happen to 40k in VLS100 over 10 years?

The worst?  returning to zero value is possible.     A more reasonable poor period would be that it is £35k after 10 years.  (something that has happened in the last 25 years)

the post-credit crunch period has been abnormally good.   Look at the decade before if you want to see how global equity can put you in a negative position for a decade.

GeoffTF

Here is the worst that HAS happened in the most successful market:

https://www.fool.com/investing/stock-market/basics/crashes/

Other markets, e.g. the Japanese market have had worse crashes. The US market dominates the global market. "When America sneezes, the whole world catches a cold," as the old saying goes.