Investing in Funds

Norlye

My wife & I are lucky enough to have NHS DB pensions which we both can take this year at 55 without penalty.

We both plan to carry on working part time so no hit in income, but less work hours.

We hope to invest some of out lump sums for later life.

I like the look of the Target Retirement Funds from Vanguard as they seem to re balance overtime.

My question is-Is it unwise for us both to use the same funds I.e Target Retirement 2035 as, I guess, we will get the exact same performance, & risks Would it make more sense for one to go through, say Hargreaves Lansdown so we do get diversity, Downside we have to mange the fund more or would, it make much difference  if one of us invested 6 months after the other in Vanguard. Would that then get a different make up of fund & growth/loss over time.

Hope this makes sense & Thank you for any responses.

msallen

What do you envisage using this money for. Is there something planned in 2035 which you will need to sell investments to raise cash for, or is it going to be used to top up your income (from now or a later date), or will it just sit there as a "nest egg" with no particular plans, or something else?

You need to decide what you want from the investment before you can choose an appropriate one.

GeoffTF

Norlye said:

My wife & I are lucky enough to have NHS DB pensions which we both can take this year at 55 without penalty.

We both plan to carry on working part time so no hit in income, but less work hours.

We hope to invest some of out lump sums for later life.

I like the look of the Target Retirement Funds from Vanguard as they seem to re balance overtime.

My question is-Is it unwise for us both to use the same funds I.e Target Retirement 2035 as, I guess, we will get the exact same performance, & risks Would it make more sense for one to go through, say Hargreaves Lansdown so we do get diversity, Downside we have to mange the fund more or would, it make much difference  if one of us invested 6 months after the other in Vanguard. Would that then get a different make up of fund & growth/loss over time.

Hope this makes sense & Thank you for any responses.

Target Retirement is a very conservative and sensible choice. It is hugely diversified. There would not be much point in one of you paying higher costs or taking more risk. You can hold Target Retirement with HL, by the way, but they will charge you lots of money to do that.

Norlye

msallen- I picked 2035 as I will correspond with SP age  Both jobs we are moving to have DB pensions which we will pay into. So we will hopefully be working less/ not at all by 67 & won’t need any income top up with DB’s & SP’s Also crucially we will be mortgage free.

We will, if healthy aim to enjoy it

The question is more about using same funds. We will be very well provided for, thankfully, in our later years.

jimjames

If you don't need income top up and don't need the money at a specific date then the target funds might not be the best option. You might want to stay fully invested and sell up a portion of the funds when you need the cash but holding sufficient cash for any short term needs

AlanP_2

Target Retirement, in the same way as many workplace DC schemes, gradually move money from (volatile) equity investments across to (theoretically less volatile) bond and Fixed Interest investments as the chosen date approaches.

The basic theory behind this is that the investor will take the pot and buy an annuity so they get something akin to your DB pensions and hence taking a chance on a 10-40% drop in value in the few months before cashing in is too high a risk.

That isn't what you want to do by the sounds of it. 

You want a pot that you can use for larger one off costs post-retirement and to have as a comfort blanket. That isn't meant to be condescending, my wife and I are in the same position although through LGPS rather than NHS, and are doing something similar.

Assuming one of you lives for 30 years post-65 then having a large proportion your pot in low growth assets such as Fixed Interest is probably not in your best interests. It might be better to look at something like the Vanguard Lifestrategy or HSBC Global Srategy ranges and choose one aligned with your risk level.

This will have similar investments under the hood as the Target funds and won't move you down the risk / return ladder over time.

Thrugelmir

If you've comfortable secure pension provision. You could always consider use a longer dated TR fund (or even more than one). Thereby reducing your equity exposure at a later stage of life. 

JohnWinder

Ah yes, diversification; goodness at a price.

I don't think it's unwise to hold the same funds; and whether to buy them contemporaneously or 6 months apart is the never resolved matter of investing all at once or stringing it out.

But do consider diversifying between two financial institutions, or going all in with one. If you both go Vanguard and it falls over or someone there goes rogue, or their computer systems blow up for a fortnight, you'd be glad half you money was somewhere else. But those risks, at least the significant ones (not the 'moving a call centre to India' ones) are vanishingly small. But at least give it some consideration if no one else is going to mention it.

I don't think going with 2 businesses would necessarily improve the investment diversification.

Albermarle

My question is-Is it unwise for us both to use the same funds I.e Target Retirement 2035 as, I guess, we will get the exact same performance, & risks Would it make more sense for one to go through, say Hargreaves Lansdown so we do get diversity, Downside we have to mange the fund more or would, it make much difference  if one of us invested 6 months after the other in Vanguard. Would that then get a different make up of fund & growth/loss over time.

You are possibly a bit confused about the difference between platforms and investments .An investment platform is somewhere you can buy and sell investments . They will operate the website and admin and deal with tax issues.

The actual investments are separate from the platform , even though in some cases they may even be owned by the same company.

Vanguard Investor is a platform , a so called restricted one because it only offers Vanguard funds. Your delaings are with the platform , but your money is in the funds.

Hargreaves Lansdown is a 'whole of market ' platform . They offer thousands of funds , shares, ETF's etc from hundreds of different companies ( including Vanguard) . They also offer some 'hands off' in house HL branded funds/solutions. There are a number of ( cheaper) competitors offering a similar package .

All platforms allow you to invest within a pension or ISA tax wrapper. It is usually better to do it this way as it is more tax friendly but there are some restrictions .

Basically the Vanguard platform is fine and low cost , as long as you are happy to be restricted to Vanguard investments. As others have said in your situation , it probably does not makes sense to target your investment strategy to a date when you do not need the money anyway.

JohnWinder

As others have said in your situation, it probably does not makes sense to target your investment strategy to a date when you do not need the money anyway.

But wouldn't it make perfect sense if you wanted to leave your investments on 'auto pilot' and have them reduce their riskiness the older you got?  Can someone clear this up for me?

Albermarle

JohnWinder said:

As others have said in your situation, it probably does not makes sense to target your investment strategy to a date when you do not need the money anyway.

But wouldn't it make perfect sense if you wanted to leave your investments on 'auto pilot' and have them reduce their riskiness the older you got?  Can someone clear this up for me?

I think these comments are usually made because these funds start  reducing the equity content from age 40 ( assuming a retirement age of 65) and keep reducing it until 75, down to 30% .
As I understand it the general advice would be to maintain a higher equity % until at least 50, and with  drawdown funds is to keep a minimum of 50% equity .
So autopilot is good as long as it is set correctly .