Buying a tracker fund

Uplander1111

Thanks Albermarle.  We have two state pensions (or will do in 12 months - my wife was one of those who had her retirement date deferred by HMG) and a modest work pension.  We have no mortgage and approximately £125k available; our thinking had been a split between premium bonds, cash and some sort of tracker fund (ratio undecided).

JohnWinder

The ratio is quite important, and can be the basis for much arguing. Get ready.
But might as well get the jargon clear first: We know what you mean, but a ‘tracker’ tracks an index. There can be bond indexes. You’re talking about a stock market tracker, I think. 
You get the most ‘safety’ with the most diversification; hence, a global stock tracker is usually a better choice than a single country or regional stock tracker.
The ratio: have a look at https://www.portfoliovisualizer.com/backtest-asset-class-allocation
Create a pretend asset allocation eg 50% US stocks and 50% rest of world, and look at 35 years of history. What part of your £125k are you comfortable in a fund that starts dropping and 12 years later has lost 30% of its value (which is now worth even less because of inflation)? Because that’s what did and could happen.

Albermarle

Uplander1111 said:

Thanks Albermarle.  We have two state pensions (or will do in 12 months - my wife was one of those who had her retirement date deferred by HMG) and a modest work pension.  We have no mortgage and approximately £125k available; our thinking had been a split between premium bonds, cash and some sort of tracker fund (ratio undecided).

In these types of ' asset allocation' ( some jargon for you !) discussions, cash is basically anything you have in your current account+ any savings accounts ( fixed term or easy access) + items like Premium Bonds.
They are all safe in that your capital is not at risk, but generally the returns are less than inflation.
Of course you may choose to keep your cash in different places, but it is all cash ( as opposed to say property or shares etc )