Single fund or spread over multiple?

sausage_time

If you had a SIPP worth (say) £800,000, and you had no need of the proceeds for 10+ years, would you spread this over several investments or just pick one multi-asset fund?    Share your reasoning.

quirkydeptless

I think the key to long term investing is to have the most boring portfolio possible. A portfolio so boring you aren't tempted to tinker with it. No, even more boring that that. A portfoilio so boring that you aren't even tempted to look at it for 10+ years.

"One fund to rule them all, one fund to find them, one fund to bring them all and in the darkness bind them."

Hmm, or is that three funds, time to do some tinkering...

dealyboy

If it were £80k and I was not confident at building my own portfolio I would read relevant articles from Monevator and MSE with the view of investing in a well diversified world index ETF or multi-asset OEIC fund. I would come back in 10 years time.

With £800k I would see an IFA, no question. Such a sum would open new options I would not ordinarily consider and I would want to get advice rather than just relying on my own research. £800k is a level that can determine a quality life for the whole of life. 

SVaz

I think it also depends if it will be your only source of retirement income ( excluding State pension).  

A nice big DB with guaranteed income changes the picture dramatically. 

I agree about getting independent advice with a pot that size.   

I know I’d love that kind of ‘problem’.

Bostonerimus1

A single multi-asset fund with a mix of equities and bonds will work just fine for most retail investors. Firms like Vanguard, HSBC, Fidelity etc have done all the work of creating diverse portfolios in a single fund wrapper and they are good for long term, relatively hands off investors. Even for more active investors who might want to do some rebalancing or momentum investing I'd stick to single digit numbers of funds. I basically use just 3 funds ( 2 equity index trackers and a bond heavy income fund) to cover domestic and international equities and bonds. This means that I don't overweight sectors like mid and small cap and so have very little invested in those sectors, but I have seen satisfactory results.

As your pot gets larger you should be looking at investing with an even greater eye towards tax planning. I wouldn't change my investments or use of ISAs and pensions, but it might be worth considering things like Venture Capital Trusts, although don't forget  the risks involved in such funds.

artyboy

My own DC pots total about £950k and the only really notable thing is that they're spread across more platforms than actual funds (because of my carpetbagging of switch bonuses). 

I do have a bit of spread across Vanguard and HSBC funds and ETFs, but they are all globally diversified, and if I was forced to just pick one of them, it wouldn't make me uncomfortable. I've worked in financial services all my life and have no real appetite to try and beat the market...

gm0

I use more than one fund.  This is based on my investment statement which includes a strong principle around "not all eggs in any one basket".

As a consumer - I know I don't understand all the subtleties and risks of fund structures/tax wrappers, multi-asset portfolio designs (and their likely sensitivity and behaviour in different economic conditions).  Based on this ignorance - I would not put my entire pot in any single fund - multi-asset or otherwise.

In other threads I have commented on how I apply this not all eggs principle to fund managers, platforms etc.
In order to reduce the impact of a single failure to a lower % of total portfolio.  This comes at a cost in complexity (more platforms, more funds).

Second reason I use more funds is around diversification within asset class.  Yes - there could be some multi-asset options which (at a point in time) look similar to my multi fund setup.  I haven't gone and checked them all so I don't know and a trustnet comparison would show differences where people could argue over materiality in prior markets.

I want to use global developed markets passive equity index tracker as a core and to add extra stocks and also tilt the portfolio a little  then I can do that with a variety of techniques - em, small cap funds, single geographies - even factors (although i don't currently do this last one).

Reason 3 relates to drawdown access planning.   A multi-asset doesn't let you sell different components.  Only units of the whole thing.  If you want to be able to use methods which may direct asset sales to bonds or equities (or other) then clearly separate funds are required to support that.  Some methods require it.  Some don't.  Choose a poison.

Linton

10+ years seems a difficult timeframe to choose as it could include planning for a medium term need for all the money. I assume the OP was not intending that and so will consider a 20+ year timeframe.

in that case I suggest
- £600k in the minimum number of 100% equity funds to provide a fully global coverage with perhaps 40% US, and 25% small companies. 1 fund would be ideal but I don’t know of any with that allocation.  So it would probably need 8 or 9. On second thoughts 2 copies of the same allocation from different providers would reduce worry.

- £100k for fun investing. 20 years is too long to wait unable to indulge in a little tinkering and experimentation.

- £100k in cautious investments. The rules say long term, but one should not let arbitrary rules prevent one being able to handle unexpected events.

dunstonh

sausage_time said:

If you had a SIPP worth (say) £800,000, and you had no need of the proceeds for 10+ years, would you spread this over several investments or just pick one multi-asset fund?    Share your reasoning.

There are many ways to do this.

Yielding strategy - use the yield to cover the income
total return - use the total return to cover the income
bucketing - set up multiple segments to cover the varying timescales that the money will be needed (e.g. some is needed next year.  some is not needed until 10 years or more. 

I wouldn't have a single multi-asset fund for that strategy as it doesn't fit the objective unless you are using the total return method.  That method has been pretty much the best method in the post credit crunch cycle to 2021 but since then it has not.    You don't know which method is going to be optimal but yield and bucketing are doing better post 2021.      You can do some mix and match too.

Albermarle

As an absolute minimum I would split the £800K over two platforms and in each hold a different multi asset fund.
For example one with a UK bias and one without. Or one with a fixed equity % and one with a floating/risk based one.
This is to avoid 'all eggs in one basket' as explained in a previous post.
In reality I would also allocate some to investments that are not large cap equity or bonds . Something to tinker with !

g002ahe

Depending on your age (are you over 55?), I would also consider taking a portion of the fund and creating diversity by converting to a fixed income, perhaps indexed to RPI, in the form of an annuity. I see this as a kind of diversification.