Good fund choices for SIPP?

Exodi

@Springfield1970  It was quite disappointing to read your last reply because it's clear you are still figuring this all out as you say. I'm sorry if this comes across as critical, but you must appreciate I could have shook my head at your reply and not bothered responding - my hope is to help you.

Springfield1970 said:

I also agree that the funds I was in were fluke, and could have just as easily gone nowhere like they did for the previous years. I got lucky.

Firstly I'm glad you acknowledge that you got lucky clawing back some of your losses by holding your current investments. If you lose money on red at a casino, the best way to get the money back is not to keep betting on red. It's gamblers fallacy and it applies to investing as well and we see this reaction all the time.

Springfield1970 said:

Re the HSBC fund, that also gives me doubt. How can it keep going up at that rate?   It seems like its had its day. Im looking for something less volatile. Less too good to be true.

This was probably the most painful thing to read. Your comments on the 'HSBC fund' are interesting (HSBC FTSE All World Index - and again, this fund was just an example, there are lots of global index funds). It is an index fund which means it tracks an index (specifically in this example the FTSE All World Index). This means it invests across the world, based on market capitalisation.

To believe that a global index fund has 'had it's day' means you believe the global economy is set for continued decline in the future. If you do believe this, I'd be interested to know why as it's counter to most other investors (or more likely you've misunderstood what the HSBC fund was). Obviously if there were significant declines in these funds, then funds like the ones you are currently invested in would likely also be significantly affected.

Likewise your comment of 'looking for something less volatile' was suprising to read, given global index funds have shares in thousands or tens of thousands of companies (the HSBC one mentioned above is invested in ~3600 companies) and are widely regarded as some of the least volatile or safest equity investments you can hold. You must appreciate the irony of your comments given your current casino portfolio (and for comparison, Aegon Gbl Sust Eq C has 43 holdings, Baillie Gifford Gbl Discovery B has 82 holdings, Baillie Gifford LgTrmGblGrwInv B has 39... you get the idea). It's certainly not 'too good to be true', you'll see many finance channels regularly promote the use of passive index funds. Another way to reduce volatility would be to consider moving from 100% equities to include some bonds in your portfolio.

Springfield1970 said:

Re the thought experiment, I would have been slightly better in cash ISA the whole time.  Luckily I didn't instruct my WA to get out a year ago.

Again I think you're confused  - nowhere did I suggest you should (or should think about if you would) have not contributed to a pension and put it in a Cash ISA instead. I was challenging the notion of staying invested in your current funds while down because you want to claw the money back. A common thought experiment to expose the flaw in this strategy is to imagine all your investments were accidentally sold and you were sitting on 100% cash in your pension account. Would you proceed to use that cash to go back and buy all your old investments or would you buy something else?

Springfield1970 said:

I also have friends whose pensions have gone nowhere in the last 10 years, so I feel like it's been an acceptable return.  The free 20% tax rebate from the government is golden and makes up for lack of return.  

I don't really think comparing to friends who may also not be au-fait with investing, or using pension tax relief (which applies to everyone) is any justification. As I said before, someone with no wealth advisor, who slapped the money in a HSBC global index fund and forgot about it for 5 years would have been up 65% compared to you at 16-17%? You have actually lost money when considering inflation is around 23% for the same period.

Springfield1970 said:
Re the WA, yes it's a snooty title, but the fact is he has made me much wealthier, when I went to see him I had zero pension, was highly suspicious of the whole industry, and he convinced me to stop paying 40% tax and take a leap of faith, and explained that because he makes .75% on me, he and his team are highly motivated to make profit...I like that.  Every year we meet for an hour and argue over my finances, fund choices, emotional decisions and tax implications.  He questions everything.  

I think 'much wealthier' is perhaps confirmation bias but he sounds like a fantastic salesman, and I appreciate he has shown you the merits of contributing to a pension, investing and becoming more tax efficient - but this is all stuff that is freely available to everyone and something you can do yourself. If it makes you feel better, he's made 0.75% for at least several years from you (which is likely £1-2k per year) so you've 'paid' him for teaching you about pension tax relief and investing (despite people on this forum teaching this stuff for free everyday). You don't owe a life debt to him. Your current portfolio is just the icing on the cake for me personally.

Springfield1970 said:
I adjusted my risk profile yesterday, and have changed the funds to a more moderate/dynamic approach.

Watch this space.  I hope we can all learn here, the whole thing is intimidating with all its jargon and elitism, and differing opinions.

I'd by interested to see what the actual funds are, 'dynamic' suggests it's still expensive. I do agree about the learning here, I learn things every day and yes there is a lot of jargon and elitism (and I guess you could interpret this response as elitist). Again I hope you can just appreciate I could have just shook my head and not bothered responding.

Springfield1970 said:
I hope to be as 'low fees' as you are one day when I figured this all out.  At the moment I'm happy to pay the higher percentage as on my own I would have still been giving half my higher income bracket to the government in taxes and NI, not paying off my mortgage until 2037 (instead of 2030), and having 0% pension instead of the nice nest egg I have now.  I feel like I made a great decision 7 years ago.

You can pay low fees and make pension contributions that keep your pay in the basic rate band. I, along many others on this forum, are very proactive with salary sacrifice to maximize our tax efficiency.

No-one is debating that setting up a pension or increasing contributions to stay in the basic rate tax band were bad ideas, but you don't need to pay a wealth advisor a grand or two every year to do these things, they are not mutually exclusive. 

Bostonerimus1

Springfield1970 said:

Bostonerimus1 said:

Springfield1970 said:

MeteredOut said:

Just because the funds achieved 16% growth does not mean that they were suddenly the correct funds to be in. Have you checked what a basic tracker fund would have returned over the same time period of time?

Exactly, that's why I've instructed my advisor to get out of them and find something safe.  He was about to move 3 of the 5 anyway.  We found some other funds that are not tech heavy.

What is your strategy here? Do you really want 4%, why the changes and to what? You have a while to retirement and hopefully a long time after that so is there an overall plan?

I applaud your IFA for using a relatively small number of funds in your portfolio, but the fund choices have overlap and seem to be more about hype than a long term strategy. I have a big bias for index funds because they are inexpensive and I would never hold a portfolio of such active funds preferring a couple of index equity funds that cover the global stock markets.

Hi, thank you for your reply.

I need 4% growth to achieve my goals.  We've changed my plan to a moderate/dynamic plan, and the goal is 5% growth and 2.5% inflation.  I'll reassess annually. The high risk funds aren't for me, and I was lucky to get a good return, but that only happened in the past year.

We discussed index funds and he doesn't think the time is right for them.  As he is making a percentage from me, I trust that his self interest makes him motivated to choose well.

I would like to be far more informed before I start making decisions on my own.

It's good that your WA encouraged you to contribute to a SIPP to get the tax benefits, but, to be brutally honest, your portfolio's performance over the last 7 years means that your WA has done a pretty bad job - IMO. As a comparison my simple index portfolio is inexpensive and has returned 11.9% annual average over the last 7 years. Index funds are an option at any stage of your life, there are arguments about whether index funds or active funds are best for some asset classes or in things like income generation, but the comment that "he doesn't think the time is right for them" does not inspire my confidence.

MeteredOut

Bostonerimus1 said:

Springfield1970 said:

Bostonerimus1 said:

Springfield1970 said:

MeteredOut said:

Just because the funds achieved 16% growth does not mean that they were suddenly the correct funds to be in. Have you checked what a basic tracker fund would have returned over the same time period of time?

Exactly, that's why I've instructed my advisor to get out of them and find something safe.  He was about to move 3 of the 5 anyway.  We found some other funds that are not tech heavy.

What is your strategy here? Do you really want 4%, why the changes and to what? You have a while to retirement and hopefully a long time after that so is there an overall plan?

I applaud your IFA for using a relatively small number of funds in your portfolio, but the fund choices have overlap and seem to be more about hype than a long term strategy. I have a big bias for index funds because they are inexpensive and I would never hold a portfolio of such active funds preferring a couple of index equity funds that cover the global stock markets.

Hi, thank you for your reply.

I need 4% growth to achieve my goals.  We've changed my plan to a moderate/dynamic plan, and the goal is 5% growth and 2.5% inflation.  I'll reassess annually. The high risk funds aren't for me, and I was lucky to get a good return, but that only happened in the past year.

We discussed index funds and he doesn't think the time is right for them.  As he is making a percentage from me, I trust that his self interest makes him motivated to choose well.

I would like to be far more informed before I start making decisions on my own.

It's good that your WA encouraged you to contribute to a SIPP to get the tax benefits, but, to be brutally honest, your portfolio's performance over the last 7 years means that your WA has done a pretty bad job - IMO. As a comparison my simple index portfolio is inexpensive and has returned 11.9% annual average over the last 7 years. Index funds are an option at any stage of your life, there are arguments about whether index funds or active funds are best for some asset classes or in things like income generation, but the comment that "he doesn't think the time is right for them" does not inspire my confidence.

Done a pretty bad job for the OP, yes, but not for himself (or herself).

Springfield1970

Thank you all for taking the time to reply.  It is what I needed to hear. I realise as the pension gets bigger I am getting more fearful and motivated to figure out what everything means.  It is dawning on me that the obvious choice is the low fee index funds, I'd forgotten about inflation making the gains seem bigger and 'too good to be true'.

I now have to figure out how to find these funds within my platform Aegon and wean myself away from the WA. I'm going to study more.

I also now have more of an idea why the index funds option is not being pursued.  

xylophone

What kind of Aegon pension do you have?


https://monevator.com/low-cost-index-trackers/