Investment Advice??

Macka09

Nurse2047 said:

A few good videos on here if helps 
https://youtube.com/@DamienTalksMoney?si=HaoZ2Nc3avPJebAW

https://youtube.com/@TheHumblePenny?si=afBWpNvt8uHB2nXs

https://youtube.com/@JamesShack?si=fJELg2y1yrnFL6kc

They really helped me to to understand how to get started with retirement planning. 

Thank you for these recommendations. I actually already found James Shack on YouTube the other day whilst trying to gain a bit of an understanding for all this. Thank you 

Macka09

It’s really interesting trying to understand it all and at the same time very daunting. 

I actually just watched a video from a financial adviser who advises not to pay for fund managers?? More puzzling. 

I fully understand that the investments can go up and down. 

Something else that’s puzzling me, is when you reach the age you want to cash in, what are the options if your investments are majorly down? Is it a case of, as that date gets nearer the investments would be placed into a low risk investment? 

If I only have 26 years to what is classed as retirement age, should I be looking at a higher risk investment or just accept that my pot is going to be smaller than I would like and go low risk?

I need to do some more reading up about Vanguard as I keep seeing it everywhere since it’s mention. 

dunstonh

Something else that’s puzzling me, is when you reach the age you want to cash in, what are the options if your investments are majorly down?

Ideally, you should be de-risking in advance of needing the withdrawal.    Broadly speaking, if investments are down 2-3 years before you need the money, you may decide to remain invested for them to go up again.  However, if the investments are up, you may decide to de-risk at that point or in phases.

 Is it a case of, as that date gets nearer the investments would be placed into a low risk investment? 

Only if you or your adviser does it.   Otherwise they will remain where they are.  You can buy funds that de-risk automatically but they are computer based and you may not get lucky with the timing and there wont be any discretion on when they de-risk.

If I only have 26 years to what is classed as retirement age, should I be looking at a higher risk investment or just accept that my pot is going to be smaller than I would like and go low risk?

Remember, unless you are buying an annuity, you will remain invested for longer than that 26 years.   So, de-risking may not be necessary.  Although changing to a drawdown investment strategy would like be sensible.

Higher risk means high volatility.  So, losses will be greater in short term periods but gains greater as well.   Think of lower risk being upwards in a wavy line way vs higher risk being upwards but with serious zig zags.      A lot of people cannot handle their value falling by upto 50% in 12 months.   Some can.   If you can, then in the majority of periods, you would expect to gain more from having greater equity content.  If you cannot handle it, that is when you take on a degree of lower volatile investments.   In return you accept that you will likely get lower long term returns but wont get large loss periods most of the time.

I need to do some more reading up about Vanguard as I keep seeing it everywhere since it’s mention. 

Be on guard.  Vanguard are good but they are not as good as the internet makes out.  When Vanguard came to the UK, they disturbed the market and were a market leader for a period.  In more recent times, others have gone further than Vanguard and many consider those alternatives to be better.      However, Vanguard has become a brand which has a devout following.   A bit like Apple.  i.e. where people will chose to be with the brand and won't consider being with anyone else, even if the others are better.   So, Vanguard gets a lot of "influencers" posting videos promoting them.         I like Vanguard. I have one of their funds in my portfolio but the rest of my funds are other fund houses and in each case, the alternatives are less volatile and cheaper than Vanguard.   I used to have more Vanguard funds that I do at present.

So, don't get hooked on a brand.  There is more than one fish in the sea and beware of bias on the internet.

Notepad_Phil

Macka09 said:

It’s really interesting trying to understand it all and at the same time very daunting. 

I actually just watched a video from a financial adviser who advises not to pay for fund managers?? More puzzling. They are probably talking about using passive index trackers (which basically buy a bit of everything) and not using active funds (which have fund managers deciding on what specific bits to buy). Passive funds are usually cheaper and because of that tend to be have better returns (though this is not always the case).

I fully understand that the investments can go up and down. Just remember that after a down then to get back to where it was can take many years and there can be many false dawns of rising prices which then fall back.

Something else that’s puzzling me, is when you reach the age you want to cash in, what are the options if your investments are majorly down? Is it a case of, as that date gets nearer the investments would be placed into a low risk investment? If you have a specific need for cash then yes, as you get closer to needing that money you would move some or all of your investments into less volatile assets. But if you are going to use these investments for your retirement then unless you are going to buy an annuity then you will likely keep much of the investments invested for many years into the future.

If I only have 26 years to what is classed as retirement age, should I be looking at a higher risk investment or just accept that my pot is going to be smaller than I would like and go low risk? I would say that 26 years is ample time to be in higher risk equity funds. I'm early retired and the majority of my investments are still in globally diverse 100% equity funds as I've hopefully still got another 20 to 30 years of income needed. These are what I would term as higher risk investments. During my lifetime of investing I've seen some of my funds nearly half in value at times, before recovering and going even higher than they were before. If you think you would likely sell up those funds when prices seem to be free-falling and the news is full of stock markets crashing then you may want to aim more towards 60% equity funds (which I would term as medium risk). 

I need to do some more reading up about Vanguard as I keep seeing it everywhere since it’s mention. They are okay, but there can be better choices out there. It will very much depend on what you are thinking of investing in and how much you will be investing (the latter is if you are considering holding your funds on the Vanguard platform itself).

See answers inline above.

Albermarle

I need to do some more reading up about Vanguard as I keep seeing it everywhere since it’s mention. 

Possibly because they advertise a lot. Also they kind of pioneered lower cost investing, but as said already they are just one provider of many.

Make sure you realise they are an investment platform ( Vanguard Personal Investing) offering S&S ISA's and a pension and also they offer Vanguard investment funds. You can buy these funds on the Vanguard platform, or you can buy them on the other platforms as well.

There is nothing specifically wrong with the Vanguard platform or funds, but for sure they will not magically produce better results than any other platform or funds.

I actually just watched a video from a financial adviser who advises not to pay for fund managers?? More puzzling.

There are actively managed funds and passively managed funds. The former has a manager who by analysis, skill? etc tries to pick and choose investments for their fund to try and beat the market. The latter largely just follow markets.

Actively managed funds are more expensive and there is no real proof that they perform any better on average. So I guess in the video you watched they were saying not to buy actively managed funds.

Hoenir

Albermarle said:

I need to do some more reading up about Vanguard as I keep seeing it everywhere since it’s mention. 

Possibly because they advertise a lot. 

Vanguard used to do very little marketing. Instead relied on the "Jack Bogle legacy" to self perpetuate the company's image.

jamesd

You can avoid paying fund managers, which typically means companies not individuals, by buying shares in companies and bonds directly. Being able to do this instead of having to use funds is one of the key differences that a SIPP offers over a basic PP.

It's also possible that they meant avoiding paying for active fund managers. That tends to be a good approach for investments with lots of US goldings, so say a global equity tracker. For other things, for UK investors a study commissioner by the FCA found that active usually beat passive and that funds which outperformed generally continued to. That is, past performance usefully did persist vs others of the same type.

If you go back to around 2008 you'll find an investigation of what was then called the Global Growth sector. It turned out that the top ten tended to stay in the top ten unless the human manager changed, which usually prompted a fall out of the top ten.

jamesd

26 years is a long time so you can freely pick whatever you're comfortable with. Preferably 80%+ equities if and only if you can handle that much.

When it comes to withdrawing, you usually are going to be withdrawing the income you need. You might keep a bit of cash, counted as part of your bonds percentage. If equities are down you can sell some bonds. If up you can sell some equities to top up the bonds. There's very extensive research into drawdown strategies that I introduce at Drawdown: safe withdrawal rates.

If you're going to be spending a 25% tax free lump sum you can either be flexible about timing or do some shifting into lower volatility investments and cash in advance.

jamesd

When it comes to Vanguard I've used them but the global tracker that was for has been replaced by one offering another feature I wanted, currency hedging.

Vanguard are useful for discussions here because their range is widely known and understood so it can reduce the need for discussion. A few years ago I pointed out that Lifestrategy could be replaced by a superior and cheaper combination of other brand global equity and global bond tracker funds. One advantage of that split is that you can choose when to rebalance and that can improve performances. But for a beginner without a lot of money at stake the difference is quite small.

It's good to be familiar with the Vanguard range for discussions just as in drawdown it's good to be familiar with the "4% rule" (a guideline) even if not planning to use it. It's a handy tool for quick and approximate broad planning.

jamesd

Retirement age varies a lot. For me it was 55 after only about ten years of about 60%+ of income investing. For you? Depends on the balance you strike between the spending and lifestyle of your current and future selves.

Luck matters too: my accumulation period was mostly the long largely bull market that started in 2009. You probably won't be as lucky.