SIPP fund choice

noclaf

I am close to concluding the transfer of an old DC pension into my Fidelity SIPP.
Total value represents just under 15% of all my investments ( currently 100% in Equities and I am 40 for context).
My intention was to invest in HMWO, it's a cheap global ETF (Dev world) and the ETF platform charges are capped on Fidelity. Using a HSBC fund also gives me some variety as all my other investments use Vanguard funds/ETF's.

However I came across HSBC Global Strategy Dynamic fund and whilst the fund fee is higher (0.19 Vs 0.15 for HMWO + uncapped platform charges as the value increases), its better diversified as it's investing in a basket of funds across Global Equities Inc EM, Bonds and Real estate.

So I need to make a decision and accept that this is not a forum for 'advice' but would value input from the more experienced investors.....is the extra diversification of the fund worth considering Vs ETF cheaper fees and platform charges?
This will be a fire and forget but will continue ongoing review alongside my other investments.
Thanks

El_Torro

Have you had a look at HSBC FTSE All-World Index? Sounds like it might be what you're looking for. The fund fee is also 0.13, so lower than what you've looked at. 

There's nothing wrong with HSBC Global Strategy Dynamic, I use it myself. If you want a multi asset fund (i.e. a fund that includes bonds) then it's worth considering. You seem happy to be 100% equities though.

I'm not a fan of funds that only invest in the developed world. I don't see a reason for excluding non developed world regions. 

noclaf

El_Torro said:

Have you had a look at HSBC FTSE All-World Index? Sounds like it might be what you're looking for. The fund fee is also 0.13, so lower than what you've looked at. 

There's nothing wrong with HSBC Global Strategy Dynamic, I use it myself. If you want a multi asset fund (i.e. a fund that includes bonds) then it's worth considering. You seem happy to be 100% equities though.

I'm not a fan of funds that only invest in the developed world. I don't see a reason for excluding non developed world regions. 

Thanks for the suggestion.
Regarding the need for Bonds....this is exactly what I am trying to grapple with...do I now introduce bonds albeit will only be a small proportion of my overall investments or do I just stick to 100% Equities and then review again in 5/10 years etc

Edit: most of my other investments barring my S&S ISA, are in Dev world funds. Primary reason was political concerns e.g: West-China relationship and how this might impact the EM-exposed elements of the funds. EM markets can be quite choppy then add in the political uncertainties.....could be worrying over nothing but last few years and current events for example have made.me.hesitant on EM.

Albermarle

Regarding the need for Bonds....this is exactly what I am trying to grapple with...do I now introduce bonds albeit will only be a small proportion of my overall investments or do I just stick to 100% Equities and then review again in 5/10 years etc

It is entirely a personal decision, largely linked to your risk appetite/tolerance.

Your average investor is not 100% equity invested as the potential large drops would be too scary .

In any case this small % of bonds is not going to make much difference in the context of your total investments, if the rest is all equity .

noclaf

Albermarle said:

Regarding the need for Bonds....this is exactly what I am trying to grapple with...do I now introduce bonds albeit will only be a small proportion of my overall investments or do I just stick to 100% Equities and then review again in 5/10 years etc

It is entirely a personal decision, largely linked to your risk appetite/tolerance.

Your average investor is not 100% equity invested as the potential large drops would be too scary .

In any case this small % of bonds is not going to make much difference in the context of your total investments, if the rest is all equity .

Thanks Albermarle, I still consider myself an average/amateur investor however over the last few years have built some tolerance to the volatility of Equities markets i.e: close the curtains, do nothing.....and wait it out.

As you mentioned, if no meaningful value of using a small % of Bonds, I will probably stick to 100% Equities for now as still very much in the 'building' phase of my investments.

noclaf

My Fidelity SIPP has now received the cash from my former work pension.

It's unlikely there will be further transfers or cash added into this SIPP for a few years so trying to work out how much cash to maintain on the account to cover fees:

SIPP value - £22,600.00
I intend to use ETF 'HMWO' as my sole investment, platform charges should be capped at £45 per year+ fund charges ( 0.15 for HMWO). 

To avoid having to sell down ETF units and be hit with the £10 transaction charge per trade, considering putting a small amount into a cheap fund (e.g: VUAG @ 0.07) and maybe maintain a small cash balance.
I also need to take into account future growth of the ETF and dividends (as HMWO is not accumulating).

Any suggestions on what might be sensible amounts to allocate for the cash and fund balances respectively?

NedS

Don't forget HMWO pays a dividend of around 1.4% which will more than cover your fees so it may be a case of just leaving sufficient in cash to cover fees for the first quarter and then allow the dividend income to cover fees, reinvesting the remainder in a cheap fund as it's not worth paying £10 transaction charge to reinvest £100 dividend payment into HMWO. Your costs for HMWO will not exceed £45/year so £15-20 should cover you until the dividends start rolling in. However, most funds likely have a minimum £100 investment so in reality you'll probably need to put £100 into your cheap fund and sell to pay fees. I'm not sure with Fidelity, but you may also be able to make small cash deposits to cover your fees if that is preferable to selling investments, enabling you to stay fully invested in HMWO (although still doesn't address how best to reinvest dividend income from HMWO)

noclaf

Thanks NedS, this is helpful....maybe I go with just above £100 for the cheap fund. Then move the remaining cash into HMWO, leaving a small balance to cover first QTR as you suggested. I will likely invest in HMWO using a single transaction to keep trading costs to a minimum rather than use drip-feeding, expect a small balance will remain as only whole ETF units can be purchased.

regarding total annual charges I'm wondering if they will exceed £45/annum due to HSBC's ETF charges, 0.15% for HMWO?
Not certain but I think the dividends can be reinvested for 1.50 per transaction if using the regular investment service.

NedS

noclaf said:

Thanks NedS, this is helpful....maybe I go with just above £100 for the cheap fund. Then move the remaining cash into HMWO, leaving a small balance to cover first QTR as you suggested. I will likely invest in HMWO using a single transaction to keep trading costs to a minimum rather than use drip-feeding, expect a small balance will remain as only whole ETF units can be purchased.

regarding total annual charges I'm wondering if they will exceed £45/annum due to HSBC's ETF charges, 0.15% for HMWO?
Not certain but I think the dividends can be reinvested for 1.50 per transaction if using the regular investment service.

The 0.15% fund changes for HMWO will be deducted from either capital or income within the ETF, so this will be transparent to you and you will never see this happening (ths reflected in either the capital gain or dividend paid). The only fees you will 'see' and be responsible for paying is the Fidelity platform fee, capped at £45/year for the ETF plus a small fee to cover the cost of the fund you stick £100 into (0.35% per year, so 35p or around 3p per month if you have £100 in the other fund).

Albermarle

Fidelity first looks to the 'Cash Management Account ' to pay fees.
This is a separate account from ISA or SIPP . You can make a direct debit payment into it .
If there is not enough money there, then they look to the SIPP ( in your case ) and see if there is any cash there .
If not they will sell a small part of one of your investments.

Probably easier just to deposit £50 pa by debit card into the cash management account.

noclaf

Albermarle said:

Fidelity first looks to the 'Cash Management Account ' to pay fees.
This is a separate account from ISA or SIPP . You can make a direct debit payment into it .
If there is not enough money there, then they look to the SIPP ( in your case ) and see if there is any cash there .
If not they will sell a small part of one of your investments.

Probably easier just to deposit £50 pa by debit card into the cash management account.

Thanks Albermarle, was not aware but makes sense now.....I have a SIPP and JISA with Fidelity....did wonder why a 'Cash Mgnt' account appeared. If I hold cash balances on the SIPP and JISA, assume these cannot be transferred to the Cash Mgnt a/c?