Investment Profile Plan

cmundo

So, I’m transferring circa £200k to new SIPP provider.  I’m 9 years away from likely drawdown at 60 and thinking of splitting across LS60, HSBC Global Dynamic, Vanguard Global All Cap and Royal London Money Market Fund.  I was thinking of starting with most in MMF and drip feeding about £4k a month from this into the others (so £12k per month) over next 12 to 18 Months? Does this sound like an good idea or just split all at outset? I’m trying to balance initial benefits and stability of MMF initially but migrate out as rates drop 😬 any views for a cautious to moderate investor looking for growth and not interested in annuity ? 

dunstonh

I was thinking of starting with most in MMF and drip feeding about £4k a month from this into the others (so £12k per month) over next 12 to 18 Months?

Statistically, it is more likely to lower investment returns.  So, any particular reason you are doing this?
Research has varied over the years but it typically finds around 75-85% of the time, phasing results in lower returns

any views for a cautious to moderate investor looking for growth and not interested in annuity ? 

VLS60 is above that risk profile and HSBC GS Dynamic even higher.   How do you plan to balance the portfolio to match your risk level?

cmundo

dunstonh said:

I was thinking of starting with most in MMF and drip feeding about £4k a month from this into the others (so £12k per month) over next 12 to 18 Months?

Statistically, it is more likely to lower investment returns.  So, any particular reason you are doing this?
Research has varied over the years but it typically finds around 75-85% of the time, phasing results in lower returns

Really? I thought a drip feed approach might smooth out highs and lows to provide more of an average.  Thanks for this insight.

any views for a cautious to moderate investor looking for growth and not interested in annuity ? 

VLS60 is above that risk profile and HSBC GS Dynamic even higher.   How do you plan to balance the portfolio to match your risk level?

Yes I understand what you are saying.  I suppose keeping a buffer in MMF was my way of reducing volatility in the short term.  I'm clueless with bonds, and the drops last year after the mini budget shook my confidence around these further.

May have to go down the financial advice route .......

Thanks for your input.

JohnWinder

If investment returns are positive over the longer term, which they have been, then they spend more time going up than down. Would you rather be invested in such a market for more time or less time? Clearly, more time, so you’d invest it all now. But, that’s a comparison with zero gain from being out of the market, whereas you’re getting ?4%/year out of the market. That changes the consideration by size of benefit, but leaves the basic argument as still valid. So the difference for you might be less than is often imagined.

The other aspect is that there are many considerations other than the theoretically better return of 'all in at once'; some of which are more or less important depending on personal circumstances and personality. There’s nothing new on this subject, and it’s all be discussed at length, before, here and elsewhere. Put this in your search engine for endless discussions to help you: dollar cost averaging site:bogleheads.org

‘I'm clueless with bonds, and the drops last year after the mini budget shook my confidence around these further.

 We feel for you. Having separate bond funds and equity funds displays the full drama of such bond (or equity) drops. At least with VLS60, although 40% bonds, a big bond drop won’t appear as dramatic. Lesson to learn: don’t be distracted from good investing habits by focusing on a bad short term result in one asset; rather, look at the portfolio as a whole since that’s what really counts to pay your living expenses. Lesson #2: there’ll always be some part of your portfolio not doing as well as the others, that’s part of diversification, and commonplace.

May have to go down the financial advice route …….

May yes, but read one or two things first as you might find it’s just not that difficult to DIY. Tim Hale’s book Smarter Investing might be in your local library, or they’ll get it for you. It’s all you’ll need to decide if you need an advisor. Or something similar for free online: https://ia803405.us.archive.org/23/items/the-bogleheads-guide-to-investing/The Bogleheads' Guide to Investing.pdf
Or https://rickferri.com/wp-content/uploads/Serious-Money-Straight-Talk.pdf
Or https://archive.org/details/common-sense-investing

Bostonerimus1

VLS60 will give you an automatically rebalancing equity and bond portfolio and the MMF can be a buffer you can draw on when the markets are down. However, VLS60 will not allow you to choose when to sell bonds or equities so you could just buy an equity index fund and a bond index fund if that's important to you. The other stock funds you mention will increase your equity allocation and the risk associated with your portfolio, which seems to contradict your comment about being a "cautious to moderate" investor.

cmundo

Thanks for your input and reference links - I'll have a good look at these!

gm0

Suggest you model these on trustnet in the % you intend. 

And examine the overall portfolio and its history vs various indices or well known "one and done funds eg VLS series).  And the Investment Association "risk tiers".  How different is it ? More volatile ? Less volatile ? How did it behave in the last few crises ?  Did it do what you expect of it.  Are the blended returns acceptable. 

How do these fund choices add up and "overlap". e.g.  Portfolio analyser.  Are you holding a more or less US mega cap tech stocks than you expected or intended (vs global market weight being "neutral").  

And in the end - does it seem to make a material difference over something simpler - across a range of conditions in visible history - which we may not see again.

My view on backtesting is that it obviously doesn't tell you what will happen.  But it can show you that plan A failed harder than plan B already - for a range of regularly and already commonly encountered conditions.  So B holds up better than A.  If a less volatile plan delivers enough returns for income - I may forgo some potential return that comes with higher volatility and speculative risk - and bigger and deeper drawdowns.   But I also don't want to pay a big lost return insurance premium - and not receive any benefit from it in a crisis.  So if it has already failed to work a couple of times since 2008.  I won't find that insurance offer that attractive. 
Which is not to say there are not conditions where it "could have worked".  There probably are.

On lump sum vs trickle

Lump sum is statistically demonstrably better than trickle *more* of the time.  Except those times when it isn't. For quite a few years after an illtimed event.  Time in market.  But it is emotionally difficult if you feel you may be buying near an overvalued "top" - and the big revaluation immediately happens. And it's a long wait to see 0 again.  Can't sell - locking in 50% capital losses. And cashflow for income if at the drawdown stage needs to come from somewhere. Trickling will of course have the effect of costing money in lost returns depending what it is in instead.  If the correction and the buying units cheap doesn't come along - and you should have done lump sum at the start.

cmundo

gm0 said:

Suggest you model these on trustnet in the % you intend. 

Thanks so much for this info, wasn’t even aware of Trustnet and how I could utilise in this way - such a powerful analysis resource!

Bostonerimus1

cmundo said:

gm0 said:

Suggest you model these on trustnet in the % you intend. 

Thanks so much for this info, wasn’t even aware of Trustnet and how I could utilise in this way - such a powerful analysis resource!

Doing some analysis can be useful, but for most people it's not really necessary when there are "all in one" multi-asset funds available. They provide diverse portfolios with all the analysis available on the company/platform website. You can make this as simple or complicated as you want, but you won't necessarily do any better by making things complicated.