How much to invest in index funds?

Savingforahouse123

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

dealyboy

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Linton

It is usually recommended that you keep 6 months living expenses in cash in case you lose your job, need a new boiler etc etc.

If you want to invest money beyond that the easiest option is to add it to your current VLS100 holdings.  Your current amount invested is too small to worry about niche holdings. 

Are your current non-pension investments held in an S&S ISA?  It does not matter at the moment but in the future it could be very useful to have a large sum protected from taxes.  It will also avoid the need to keep records for your investments for tax purposes.

dunstonh

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

Probably closer to around £100k and an understanding of how to build a portfolio etc.  (also probably not best to limit yourself to Vanguard as they dont have the best trackers in every area (no fund house does)

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Any reason you have chosen a managed global equity fund and not a global tracker?

Savingforahouse123

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Hi no worries.

I dont have a personal pension. Just workplace pensions. 

I sort of thought my vanguard life strategy 100 is like a personal pension since pensions are invested in stocks and I just chose to open this vanguard account myself so it’s personal. Is there a major difference between this and a SIPP? 

El_Torro

Savingforahouse123 said:

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Hi no worries.

I dont have a personal pension. Just workplace pensions. 

I sort of thought my vanguard life strategy 100 is like a personal pension since pensions are invested in stocks and I just chose to open this vanguard account myself so it’s personal. Is there a major difference between this and a SIPP? 

Where is your VLS100 though? If it's not in a pension is it in an ISA? If it's just in a General Investment Account that means you will be liable for tax on any gains. If it's in a pension or ISA then you don't need to worry about tax on gains. 

Depending on your circumstances it may be better to have your investments in a pension (either your workplace pension or a separate private pension / SIPP) than an ISA. Pensions aren't accessible until you're older but they're more tax efficient than ISAs. 

You may want to look into a Lifetime ISA as well. 

Middle_of_the_Road

Savingforahouse123 said:

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

The same investment made into a SIPP will benefit from a gov't contribution in the form of tax reief.

Best SIPP: Build a low cost DIY pension - MoneySavingExpert

"Money you invest in your SIPP will be topped up 20% by the taxman, and higher or additional-rate taxpayers can claim back a further 20% or 25% respectively.

This tax relief is limited by your annual earnings and the pension annual allowance (£40,000/year):

• Earners. You can contribute 100% of your annual earnings before tax up to a limit of £40,000 for 2022/23"

Albermarle

 I’m maximising my workplace pension.

What exactly do you mean by this?

Exodi

Savingforahouse123 said:

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Hi no worries.

I dont have a personal pension. Just workplace pensions. 

I sort of thought my vanguard life strategy 100 is like a personal pension since pensions are invested in stocks and I just chose to open this vanguard account myself so it’s personal. Is there a major difference between this and a SIPP? 

Without meaning to sound rude, I'd do a little bit more research on all of this because your comment is somewhat confused.

Vanguard LS100 is just one of the many funds Vanguard offers that you can invest in.

If you held a pension account with Vanguard (typically called a SIPP), you are free to choose whatever investments you want, including, but not limited to VLS100.

What type of account do you have? A Stocks & Shares ISA (typicalled referred to as S&S) protects you from paying tax on your returns, on contributions up to £20k per year. A General Investment Account (typically referred to as a GIA) does not protect you from paying tax on your returns, but you can invest without limits.

To be clear, VLS100 could be held in a SIPP, S&S or GIA. Nothing about VLS100 is relevant to being a good pension product. In fact Vanguard actually offers retirement funds (called Target Retirement funds).

The reason I suggested doing more research is because VLS100 is, in my opinion, one of the worse funds on Vanguard (and I think only included to complete the VLS20, 40, 60, 80 collection). It also features a large home bias, which I'm personally not a fan of.

In my personal view, VWRL or the FTSE Global All Cap Index are both superior funds.

The above is my personal views and I'd always recommend you do your own research.

dealyboy

Savingforahouse123 said:

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Hi no worries.

I dont have a personal pension. Just workplace pensions. 

I sort of thought my vanguard life strategy 100 is like a personal pension since pensions are invested in stocks and I just chose to open this vanguard account myself so it’s personal. Is there a major difference between this and a SIPP? 

May I just say you have had replies from the two most esteemed contributors in my view.

Again I like your style.

A workplace pension is a type of personal pension and you can contribute up to your gross earnings in a tax year as a combination of your taxed income and tax relief of 25% as a standard rate tax payer (relief at source RAS). A SIPP provider will most likely give you a wide range of investment options, more than a workplace pension provider, indeed Vanguard have their own SIPP. Whatever your employer is contributing for you as the employee's contribution will have 25% tax relief added and will be included in your earnings limit total.

Of course as I'm sure you appreciate you would be tying the money up until you are 55 (57...58) and it is worth researching for your general knowledge.

ISAs are very useful as they are tax free on withdrawals (at the moment), definitely worth researching the different ISAs and platforms/providers. I would always invest in an ISA before a general investment account and they have almost the same range of investment options (stocks, funds, ETFs, indexes etc etc).

I will of course defer to the experts.

Savingforahouse123

El_Torro said:

Savingforahouse123 said:

dealyboy said:

Savingforahouse123 said:

I’m on a £21k salary due to a career change (£1500 per month take home).

I’m 28 years old with £19k left to pay on my mortgage. No debts and very low expenses as I live frugally (£700 per month outgoings).

I have £12k in savings. I’m maximising my workplace pension.

How much do you think I should put into vanguard index funds as a lump sum / how much of my monthly earnings?

I have a life strategy 100.  I have £2370 in there currently & I'm moving in £300 per month into it. Due to my age I don’t mind risk.

Hi @Savingforahouse123 ...

Sorry I'm not going to answer your question ... there will be some wise words following.

I just thought what a sensible question, do you have a personal pension such as a SIPP? and an investment ISA?

Hi no worries.

I dont have a personal pension. Just workplace pensions. 

I sort of thought my vanguard life strategy 100 is like a personal pension since pensions are invested in stocks and I just chose to open this vanguard account myself so it’s personal. Is there a major difference between this and a SIPP? 

Where is your VLS100 though? If it's not in a pension is it in an ISA? If it's just in a General Investment Account that means you will be liable for tax on any gains. If it's in a pension or ISA then you don't need to worry about tax on gains. 

Depending on your circumstances it may be better to have your investments in a pension (either your workplace pension or a separate private pension / SIPP) than an ISA. Pensions aren't accessible until you're older but they're more tax efficient than ISAs. 

You may want to look into a Lifetime ISA as well. 

Hi yes it is in an ISA so no tax on gains.

I've only recently opened this Vanguard account as I'm dipping my toes into investing so I'd rather not open lots more accounts. Having said that, if it makes/saves me money opening more then I guess I should (as we're all investing to make more money right?!). 

I'm thinking of moving £2-3k from my savings and investing that into my VLS100. Does that sound like too much/too little to you based on my finances in my OP?

My monthly outgoings are usually £1000.