Funds vs individual Shares

Albermarle

kjs31 said:

Notepad_Phil said 

This is just an opinion from someone off the internet who has no idea of your personal situation, but in your shoes I would be very careful about having large amounts of assets in the same company that I worked for. If that 50k was just part of a 500k portfolio then I would be more easy about it, but if it made up a big part then personally I'd be worried that one day the company might fall into difficulties and potentially I might find myself both unemployed and with an investment that is not doing very well..

Apart from my pension I have most of my savings in cash as it’s always felt safer to me, so don’t rely on the work shares really. They have dropped so much over the last few years I kind of leave them there and forget about them in truth. I had originally intended that the dividends go towards my retirement income at some point but it’s not looking like they will do much more than fund a holiday when that point comes. I think I’ll just stick the dividends into funds and hope for the best 😉. 

Have you also studied carefully the investments in your pension? I ask this as it is quite common for people to give a lot of thought to other investments and savings, without paying much attention to their pension.
This is OK if you are lucky enough to have a DB/public sector pension, but if your pension is invested then you should look at your overall strategy.

sevenhills

kjs31 said:

Thanks all. Any suggestions of a third fund to buy into on top of the 2 noted above? I think I’ll sell the poor shares which will leave me just over £1000 to put into another fund. 

We all think differently, if it was me, I would sell the shares that had risen recently and made a profit. Some wise people on here, why not tell us what they are?

I steer clear of MF, Investors Chronicle is much better it needs to be at £6 per magazine.

kjs31

Albermarle said

Have you also studied carefully the investments in your pension? I ask this as it is quite common for people to give a lot of thought to other investments and savings, without paying much attention to their pension.
This is OK if you are lucky enough to have a DB/public sector pension, but if your pension is invested then you should look at your overall strategy.

I’m actually trying to sort my pension out now. I have about 850k in a SIPP that’s not really performing (not contributing to it but was hoping to see some growth). I have seen a Schroders Personal Wealth consultant about moving it to them and moving more into equities as it’s been quite bond heavy which has affected performance. Not sure whether to go with them or not TBH or just stick it in some DIY tracker funds. It’s all in a mix of Levitas A and Levitas B currently. I also have 180k in my current company scheme and am paying in quite a chunk of my earnings at present to reduce my tax bill and increase my pot size as I’m hoping to retire and start drawing a pension from it in 2025. I’m on personal choice rather than their life plan and I’ve moved out of the bond market entirely with this as their bonds are just dire. Their excuse is that bonds track the annuities market and annuities are cheaper now. That might be the case but you need more money to live off now. It’s with Willis Towers Watson and all of the funds on offer seem terrible IMO but I’m stuck with it if I want the 15% employer contribution. 

I do also have a smallish DB pension from my first job that should pay about 6k PA at age 60. 

kjs31

sevenhills said:

We all think differently, if it was me, I would sell the shares that had risen recently and made a profit. Some wise people on here, why not tell us what they are?

I steer clear of MF, Investors Chronicle is much better it needs to be at £6 per magazine.

Thanks. The 4 shares I bought were Glaxo, AstraZeneca, Prudential and CRH. CRH was the one I felt most positive about when I purchased them and it’s up nearly 50%. 

JohnWinder

One might then ask: if you felt most positive about one of the four you bought, why didn't you just buy CRH and not the other three less attractive ones?

kjs31

JohnWinder said:

One might then ask: if you felt most positive about one of the four you bought, why didn't you just buy CRH and not the other three less attractive ones?

Because I thought that someone who writes about shares would know much more than me and splitting it 4 ways was spreading the risk. 

I knew that the price of building materials was about to head north so felt comfortable with CRH. 

JohnWinder

As a very inexperienced investor is it better to stick with funds rather than pick individual stocks?

You’ve probably answered your own question there as well as anyone could. It’s about spreading the risk.
For a moment think of risk as a deviation from average returns; not just doing badly, but also getting higher than ‘average’ returns. When you own funds that cover the whole market, or parts of the market, you get market (or ‘average’) returns; when you own single stocks you add the chance of getting better or worse returns than the market.
The gurus use the labels ‘market risk’, and idiosyncratic risk which are the risks particular to individual shares, eg a pandemic hits and no one flies for a while, or a pandemic hits and your company makes the only drug that cures people. Those are idiosyncratic risks which won’t affect supermarkets. But be aware, all shares carry market risk as they can be affected when the whole market moves, eg interest rates change, war etc. When you own a fund you have market risk but not idiosyncratic risk.
So I suppose you have to decide if you’re happy to take market returns or want to chance your hand on better or worse returns.
And just to note that the theoreticians believe one is not rewarded for taking idiosyncratic risk, whereas you are for taking market risk. The reason being that investors don’t have to take idiosyncratic risk if they own the whole market, and if you don’t have to take a risk when you invest in something, the person you’re investing in does not need to pay you extra for taking a risk you don’t need to take. One is not rewarded for taking diversifiable risk, so the theory goes.
Here’s concrete example: You and I have decided to invest most of our money in stocks. I buy a fund of all stocks, you’re going to buy one stock. I don’t care if your stock, which I also will own does badly so I can pay top price for it. For you however it is more risky having only one stock, and so you’re less happy to pay as much for it as I am, ie the stock has a lower value for you than me. I set the market price since I’m happy to pay more for it; you have to pay more than the value you put on it. It’s a bad deal for you.
The gains of the whole US stock market since 1926, above the returns of one month government bonds, is accounted for by only 4% of all stocks. Good luck with that.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447

Albermarle

kjs31 said:

Albermarle said

Have you also studied carefully the investments in your pension? I ask this as it is quite common for people to give a lot of thought to other investments and savings, without paying much attention to their pension.
This is OK if you are lucky enough to have a DB/public sector pension, but if your pension is invested then you should look at your overall strategy.

I’m actually trying to sort my pension out now. I have about 850k in a SIPP that’s not really performing (not contributing to it but was hoping to see some growth). I have seen a Schroders Personal Wealth consultant about moving it to them and moving more into equities as it’s been quite bond heavy which has affected performance. Not sure whether to go with them or not TBH or just stick it in some DIY tracker funds. It’s all in a mix of Levitas A and Levitas B currently. I also have 180k in my current company scheme and am paying in quite a chunk of my earnings at present to reduce my tax bill and increase my pot size as I’m hoping to retire and start drawing a pension from it in 2025. I’m on personal choice rather than their life plan and I’ve moved out of the bond market entirely with this as their bonds are just dire. Their excuse is that bonds track the annuities market and annuities are cheaper now. That might be the case but you need more money to live off now. It’s with Willis Towers Watson and all of the funds on offer seem terrible IMO but I’m stuck with it if I want the 15% employer contribution. 

I do also have a smallish DB pension from my first job that should pay about 6k PA at age 60. 

If you feel you want financial advice then better to find a local IFA, than a 'personal wealth consultant' .
Almost for certain will be cheaper and probably you will be less tied to them.
Decumulation of a pension pot ( means withdrawing from it English) is a bit more complicated than the accumulation phase. Some knowledge of safe withdrawal rates, sequence of returns risk, tax efficiency etc is helpful.
A few years before retirement is often when people start to increase their knowledge ( one way is by regularly reading this forum ) or get professional help.
Although most just try and blunder their way through !

kjs31

Albermarle said:

If you feel you want financial advice then better to find a local IFA, than a 'personal wealth consultant' .
Almost for certain will be cheaper and probably you will be less tied to them.
Decumulation of a pension pot ( means withdrawing from it English) is a bit more complicated than the accumulation phase. Some knowledge of safe withdrawal rates, sequence of returns risk, tax efficiency etc is helpful.
A few years before retirement is often when people start to increase their knowledge ( one way is by regularly reading this forum ) or get professional help.
Although most just try and blunder their way through !

Thanks. The Schroders consultation was free and I pay a preferential fee of £750 if I choose to take their advice. There will be platform and fund charges and an ongoing advice fee although I don't need to pay that - I can just pay for advice when I decide to take it. An IFA will be a lot more expensive but might be worth paying for if they are good. I had an IFA before when the SIPP was set up (funds were from a CETV from a DB scheme). My DB scheme was capped significantly below my current salary so it was a no brainer for me to withdraw from the scheme. I have no regrets on that score, other than possibly where the funds are sitting. I chose not to take ongoing advice as a work colleague who had paid for ongoing advice with the same IFA told me that she had failed to have her annual review with the IFA as 'he was too busy doing transfers', so I decided not to sign up to it. I will start a thread on the pensions board I think to avoid this getting very pensions focussed. 

sevenhills

kjs31 said:

Thanks. The 4 shares I bought were Glaxo, AstraZeneca, Prudential and CRH.

Glaxo - no information

AstraZeneca - buy

Prudential - buy, but with 2 pundits suggesting it will underperform.

CRH - buy

I assume they are the correct shares, I am often confused when more than one share is listed. I did think someone with more knowledge might post.

https://markets.investorschronicle.co.uk/data/equities/tearsheet/forecasts?s=83GI:LSE