Should I have different funds?

Cruixer

Hi all,

Background is that I am 50, married with one 8 year old child. Fairly comfortable, mortgage paid off, no debt, two salaries coming in so a fair bit of spare cash to invest towards retirement.

Just over 4 years ago, mostly through what I learned on this forum I started a S&S ISA with IWeb, and started putting my full £20k allowance into a Vanguard Life strategy 80% equity fund. I've carried on doing the same each year, and now have £80k (initial investment) placed in the same Vanguard LF 80 fund. I feel that they have done well, certainly the first on from 2019 has increased by 30% in 4 years, which I believe is about equivalent to 7% compounded interest, which I wouldn't get in any bank I know of!

I was about to do the same thing this year, then started to wonder if I should diversify. I understand that funds are already diversified, in the sense that they contain a spread of shares/bonds, but is it sensible to have different funds, rather than all in the same?

In a similar vein, is there any risk in having everything in the same platform? I have been presuming that even in the unlikely event that Iweb collapse, I would still own the funds, but this is nothing more than a presumption on my part.

If I was to choose another fund, I don't know enough about any of this to be very clever about how I invest, so my strategy is likely to just choose something similar that has a good track record. Not sure what this would be, looking at a money week list of the most popular funds, most on the list are vanguard and the other two are Fidelity Index World and Fundsmith equity.

Grateful for any thoughts/advice.

Thanks

Albermarle

What does  your pension provision look like ( and your partners ) ?

GeoffTF

What you are doing is fine. VLS 80 holds just about everything that it reasonably can.  You would not gain additional diversification by adding additional funds. Neither Vanguard nor Lloyds Bank are at all likely to go bust, and you will almost certainly be protected if they do.

Cruixer

Albermarle said:

What does  your pension provision look like ( and your partners ) ?

I have built up about £8k per year in a defined benefit portion of my works pension (presuming retiral at 65) and have about £100k in the AVC type investment portion. I came a bit late to thinking about pensions, but my strategy in recent years is to put enough into the pension to bring me down from the higher tax bracket, then the rest goes into the ISA. My wife has something similar across a couple of pensions. These will continue to build as we don't intend to stop working anytime soon, but I think between the state pension and the existing DB pensions, we already have enough for a moderately comfortable existence from state retirement age.

I also consider the house we live in to be part of our retirement planning, as the mortgage has been paid off and its a far bigger/more valuable property than we need, so we have the option of downsizing in the later years of retirement. I also have a rented out overseas property, which was previously my own when I lived abroad, and the mortgage should be paid off within the next few years so that's another asset for retirement.

Cruixer

GeoffTF said:

What you are doing is fine. VLS 80 holds just about everything that it reasonably can.  You would not gain additional diversification by adding additional funds. Neither Vanguard nor Lloyds Bank are at all likely to go bust, and you will almost certainly be protected if they do.

Thanks. This is reassuring.

How would I be protected if they went bust? I had thought that UK government protections were only for savings.

Albermarle

Cruixer said:

GeoffTF said:

What you are doing is fine. VLS 80 holds just about everything that it reasonably can.  You would not gain additional diversification by adding additional funds. Neither Vanguard nor Lloyds Bank are at all likely to go bust, and you will almost certainly be protected if they do.

Thanks. This is reassuring.

How would I be protected if they went bust? I had thought that UK government protections were only for savings.

You have up  to £85K protection for the platform. However your money is in the investment fund, so even if the platform went bust, you would not lose that money. Then you have another £85K protection per fund house ( Vanguard in your case)
As LLoyds is a bank then in theory they could go bust, but would almost certainly be taken over by the Government or another bank. No doubt a bigger platform would be happy to snap up IWebs customers.
Vanguard is not a bank, and is one of the largest investment providers in the world. If it was to go bust, most likely we would be in some kind of global Armageddon/WW3 and probably you would not be worrying about LS 80 at that point.

Albermarle

Cruixer said:

Albermarle said:

What does  your pension provision look like ( and your partners ) ?

I have built up about £8k per year in a defined benefit portion of my works pension (presuming retiral at 65) and have about £100k in the AVC type investment portion. I came a bit late to thinking about pensions, but my strategy in recent years is to put enough into the pension to bring me down from the higher tax bracket, then the rest goes into the ISA. My wife has something similar across a couple of pensions. These will continue to build as we don't intend to stop working anytime soon, but I think between the state pension and the existing DB pensions, we already have enough for a moderately comfortable existence from state retirement age.

I also consider the house we live in to be part of our retirement planning, as the mortgage has been paid off and its a far bigger/more valuable property than we need, so we have the option of downsizing in the later years of retirement. I also have a rented out overseas property, which was previously my own when I lived abroad, and the mortgage should be paid off within the next few years so that's another asset for retirement.

OK all looks good. I asked the question as we often have posters who ask about investing and savings and totally ignore their pension. Regarding income in retirement this might be of interest.
Home - PLSA - Retirement Living Standards

GeoffTF

Albermarle said:
Regarding income in retirement this might be of interest.

Home - PLSA - Retirement Living Standards

That link is ridiculous. If they think you need that much money they do not know how to budget. They came up with those numbers by asking lots of people to come up with a wish list. Plenty of people live comfortably on the state pension, but more money is better. Nonetheless, more money beyond a certain point does not make you happier.

eskbanker

GeoffTF said:

Albermarle said:
Regarding income in retirement this might be of interest.

Home - PLSA - Retirement Living Standards

That link is ridiculous. If they think you need that much money they do not know how to budget. They came up with those numbers by asking lots of people to come up with a wish list. Plenty of people live comfortably on the state pension, but more money is better. Nonetheless, more money beyond a certain point does not make you happier.

Your bolded wording is effectively just paraphrasing what they're saying, so it's not ridiculous!  There's always going to be some subjectivity involved but there's more to such studies than establishing a minimum baseline achievable - I don't know what the relative proportions are between those who survive solely on state pension versus those who have other income streams, but there's no point in studies like this focusing exclusively on the former group....

Albermarle

GeoffTF said:

Albermarle said:
Regarding income in retirement this might be of interest.

Home - PLSA - Retirement Living Standards

That link is ridiculous. If they think you need that much money they do not know how to budget. They came up with those numbers by asking lots of people to come up with a wish list. Plenty of people live comfortably on the state pension, but more money is better. Nonetheless, more money beyond a certain point does not make you happier.

It does not say you NEED any amount of money.
What it says is that if you want the sort of retirement that includes eating out regularly, getting a new car regularly, spending quite a lot on discretionary shopping, going on three foreign ( 4 or 5 star) holidays per year, renovating parts of your home at regular intervals etc then you need a joint income in excess of £50K pa after tax.
Seems the figure is about right to me, although some skilled MSE'rs/budgeteres could get that figure down
Clearly you can also have a pretty good retirement on significantly  less than that, and as documented at length on other threads over the years, some are very happy living on two state pensions, as long as there are some back up funds for one off expenses.

silvercue

GeoffTF said:

Albermarle said:
Regarding income in retirement this might be of interest.

Home - PLSA - Retirement Living Standards

That link is ridiculous. If they think you need that much money they do not know how to budget. They came up with those numbers by asking lots of people to come up with a wish list. Plenty of people live comfortably on the state pension, but more money is better. Nonetheless, more money beyond a certain point does not make you happier.

Well one thing they have got wrong is that I am not spending £56 on everyone's birthday present - no matter how snuggly I might fit into the "comfortable" zone!!