more SIPP dilemmas

Albermarle

martin7575 said:

@albemarle can i ask why you have multiple sipps providers? could you not have taken different funds through the same platform or was it the availability if specific funds.

onee other thing is that ive seen conflicting info about how much i can invest,as its my first year can i still invest 60k or do i have to max at last years profit (41k)

I have two small ones that were set up to take advantage of the 'small pots rule' ( no need for you to understand  this obscure rule) but it has enabled me just to see how they operate.
Otherwise I had four ex employer pensions, so the reason is mainly historic, which I reduced to two, and transferred the other two to a SIPP for greater choice of investments.
Normally with a workplace pension you are restricted to between 300 funds and just a handful of funds. 
With the SIPP, I am able to dabble/diversify a bit more in alternative asset classes, like precious metals, infrastructure funds, investment trusts etc that would not normally be available in a workplace pension.
In fact the average fee for my SIPP is a bit higher than the ex workplace pensions, and so far the returns are less. For the amateur investor dabbling is a temptation that often doesn't work !

At some point soon five will become three, as I cash in the two small ones, and probably will become two at some later stage. I will probably make this decision based on customer service more than anything else.

Each will have way over £85K in them. I have no worries about this as they are all mainstream providers and regulated investments.

jbrassy

In response to the above comments:

Firstly, you should invest in Acummulation funds rather than income funds as you're trying to grow your pot rather than take an income. Accumation funds mean dividends are reinvested.

Second, yes you can invest in multi-asset funds (such as Vanguard Target Retirement), but they often charge higher fees (which are a drag on returns in the long run) and you have less control over what you invest in. They also don't save much time as you only need to rebalance once a year which takes 10 minutes. Further, if you follow my suggested rule of thumb regarding the ratio of equities to bonds, you shouldn't need to spend much time deciding what you should invest in. I'm not completely dismissing multi-asset funds as it's all a matter of preference, but I prefer the more DIY approach.

Third, if you take my approach, you don't need to go down the 'Managed'/'We do it for you' route with Vanguard.

In terms of splitting funds across providers, I only have a small SIPP with Vanguard which is a pension I transferred from an old employer. Therefore I can't really advise on this.

I also saw someone mention that the Vanguard FTSE Global All Cap is 60% US equities and only 4% UK. This is not a bad thing. Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification. UK equities have performed poorly in recent years, which is why diversifying across a wide range of geographies is essential so you're not over-exposed to one country. Second, the US equity market is global in nature. Because it's the biggest equity market, many global companies choose to list in the US, even if they're not US companies, eg Spotify. Second, the largest US companies are global in nature. Companies like Apple and Microsoft make a majority of their sales outside the US. 

hewhohuntselves

jbrassy said:

In response to the above comments:

Firstly, you should invest in Acummulation funds rather than income funds as you're trying to grow your pot rather than take an income. Accumation funds mean dividends are reinvested.

Second, yes you can invest in multi-asset funds (such as Vanguard Target Retirement), but they often charge higher fees (which are a drag on returns in the long run) and you have less control over what you invest in. They also don't save much time as you only need to rebalance once a year which takes 10 minutes. Further, if you follow my suggested rule of thumb regarding the ratio of equities to bonds, you shouldn't need to spend much time deciding what you should invest in. I'm not completely dismissing multi-asset funds as it's all a matter of preference, but I prefer the more DIY approach.

Third, if you take my approach, you don't need to go down the 'Managed'/'We do it for you' route with Vanguard.

In terms of splitting funds across providers, I only have a small SIPP with Vanguard which is a pension I transferred from an old employer. Therefore I can't really advise on this.

I also saw someone mention that the Vanguard FTSE Global All Cap is 60% US equities and only 4% UK. This is not a bad thing. Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification. UK equities have performed poorly in recent years, which is why diversifying across a wide range of geographies is essential so you're not over-exposed to one country. Second, the US equity market is global in nature. Because it's the biggest equity market, many global companies choose to list in the US, even if they're not US companies, eg Spotify. Second, the largest US companies are global in nature. Companies like Apple and Microsoft make a majority of their sales outside the US. 

Vanguard FTSE Global All Cap Is a good fund and I hold it.  But I think a better option is HSBC FTSE All-World.  It’s cheaper, has better historic performance and is available more widely.

ColdIron

jbrassy said:

Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification.

I'm not sure that's true.The all cap has more than 10% of its value in just four companies (of over 7,000). That doesn't strike me as very diverse

jbrassy

ColdIron said:

jbrassy said:

Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification.

I'm not sure that's true.The all cap has more than 10% of its value in just four companies (of over 7,000). That doesn't strike me as very diverse

You might not think it's diverse, but it is based on those companies' valuations. At one point, Apple was worth more than the entire FTSE 100: https://www.theguardian.com/technology/2020/sep/01/apple-value-ftse-100-iphone-coronavirus

ColdIron

jbrassy said:

ColdIron said:

jbrassy said:

Firstly, many investors suffer from 'home bias' meaning they invest too much in domestic shares which defeats the purpose of diversification.

I'm not sure that's true.The all cap has more than 10% of its value in just four companies (of over 7,000). That doesn't strike me as very diverse

You might not think it's diverse, but it is based on those companies' valuations. At one point, Apple was worth more than the entire FTSE 100: https://www.theguardian.com/technology/2020/sep/01/apple-value-ftse-100-iphone-coronavirus

Yes, we all know what it's based on but I suppose it depends upon what you mean by diverse

I'd struggle to justify a claim that having a high proportion in one geographic region was diverse while having a high proportion in another 'defeats the purpose of diversification'. It's just the allocations and not the breadth or depth of the coverage

If Apple was worth the same as the FTSE100 does that make one or the other more or less diverse? Is a cap weighted index more or less diverse than an equal weighted one? Allocation is not the same as diversification

Just musing on a cold and grey day

artyboy

martin7575 said:

@artyboy

Part of the problem here is that, aside from wanting to get some tax efficiency out of company funds, it's not clear what your investing objective actually is. You've bounced around from SJP (barge pole...) to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?), and then to an IFA - which may actually be a good investment if you're not sure what you actually want here, or what your attitude to risk is.

Re vanguard target funds, probably because  in my discussion with sjp, they discussed de risking closer to retirement and  just seemed practical so that its less likely to lose value at that point. As i say in the post though advice i had on an earlier thread educated me  a little on why that might not be a good idea.

im not trying to beat the market, just to have some tax effieciencies and try to preserve the value of the cash ive earned

For me, I just stick the vast majority in HMWO or a similar global equity fund. My risk tolerance is high as I expect to be invested for the rest of my life and beyond, plus I'm not trying to beat the market. Maybe that's your outlook as well, maybe not...

Ok, so just by putting money in a pension you get tax efficiency. "Preserve the value" though is entirely subjective and depends on your risk appetite.

As I said, a cheap diversified 100% equity fund that seeks to reflect global market performance - well over the 40ish year period I hope to still be invested (and likely longer thinking about the inheritance aspect), that's good for me. Short term ups and downs are fine because statistically it is all but certain to outperform other asset classes over that time period...

martin7575

ColdIron said:

martin7575 said:

@ColdIron i thought that apart from. these suggested earlier which seem to be all bond or all equities

Vanguard's FTSE Global All Cap fund is a good example of a Global Equity Index fund: https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc/overview

And Vanguard's Global Bond Index fund is a good example of a Global Aggregate bond fund: https://www.vanguardinvestor.co.uk/investments/vanguard-global-bond-index-fund-gbp-hedged-acc/overview

Those two are index trackers, they track a single index. The Vanguard LifeStrategy multi-asset funds already include them, plus maybe 10 more trackers to fine tune their allocations

what is your view on the merits of a  managed option vs picking a global fund as already discussed

Using individual trackers would require you to build something where you would make decisions regarding the allocations and require you to rebalance occasionally as those allocations get out of kilter amongst other management tasks

Something else you might consider is that the global tracker will have something like 60% US and 4% UK. Some people think that's too much in one geography and too little in the other. There is no right answer but if you agreed you would need more than one equity tracker to balance it out. It starts to become more involved than just banging two trackers together

At your stage of your investment journey do you think you have the knowledge, or the inclination, to do this well?

The multi asset funds do this all for you. They are intended to be one stop shop, fire and forget, professionally constructed solutions. A good choice for both novices and more experienced investors who just want to get on with their life

Sometimes it's more important to make a start with something you can have confidence in, you can worry about portfolio construction further down the line

thanks for sticking with the thread, yes I definitely dont have the experience or time at the moment, your reply is reassuring and helpful.

My only question now is the style of investment with vanguard - one is diy and one is managed. My instinct is managed given my lack of experience but using a single multi asset fund also seems  'managed' im not sure what else is gained? I also found their attitude to risk difficult to answer, how much would i be prepared to lose every year for 4 years, but it intended to be a longer term investment  and  so the answer is as long as it doesnt evaporate and eventually bounces back im ok with that. instinctively i know im cautious and dont have as many years as many but just found it hard to give confident amounts of loss per year.

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/investment-choice

then I read this and wonder if thats ahead for us the way the world is

hewhohuntselves said:

» show previous quotes

My Aviva target drawdown will go to 50/50 on current plans.  It’s a little low, but my other investments will hopefully balance it out (or, if not, I can obviously change it).  I’m relaxed about it.  I don’t think I would want more than 65% equities in retirement.

You'll only know what your comfortable with when you experience a full on bear market first hand. Markets have been benign for so long now. Likely to be a sobering experience for many investors. 

martin7575

artyboy said:

martin7575 said:

@artyboy

Part of the problem here is that, aside from wanting to get some tax efficiency out of company funds, it's not clear what your investing objective actually is. You've bounced around from SJP (barge pole...) to a very specific set of funds within the Vanguard range (unless you're planning on buying an annuity at a specific date, why would you want one of their target funds?), and then to an IFA - which may actually be a good investment if you're not sure what you actually want here, or what your attitude to risk is.

Re vanguard target funds, probably because  in my discussion with sjp, they discussed de risking closer to retirement and  just seemed practical so that its less likely to lose value at that point. As i say in the post though advice i had on an earlier thread educated me  a little on why that might not be a good idea.

im not trying to beat the market, just to have some tax effieciencies and try to preserve the value of the cash ive earned

For me, I just stick the vast majority in HMWO or a similar global equity fund. My risk tolerance is high as I expect to be invested for the rest of my life and beyond, plus I'm not trying to beat the market. Maybe that's your outlook as well, maybe not...

Ok, so just by putting money in a pension you get tax efficiency. "Preserve the value" though is entirely subjective and depends on your risk appetite.

As I said, a cheap diversified 100% equity fund that seeks to reflect global market performance - well over the 40ish year period I hope to still be invested (and likely longer thinking about the inheritance aspect), that's good for me. Short term ups and downs are fine because statistically it is all but certain to outperform other asset classes over that time period...

makes sense. my timeline is shorter, probably 25 years. I do have a lot in cash and ISAs as well as a second property but forsee needing to drawdown some when i slow down with work. my industry is unpredictable too so this is a factor

martin7575

Albermarle said:

martin7575 said:

@albemarle can i ask why you have multiple sipps providers? could you not have taken different funds through the same platform or was it the availability if specific funds.

onee other thing is that ive seen conflicting info about how much i can invest,as its my first year can i still invest 60k or do i have to max at last years profit (41k)

I have two small ones that were set up to take advantage of the 'small pots rule' ( no need for you to understand  this obscure rule) but it has enabled me just to see how they operate.
Otherwise I had four ex employer pensions, so the reason is mainly historic, which I reduced to two, and transferred the other two to a SIPP for greater choice of investments.
Normally with a workplace pension you are restricted to between 300 funds and just a handful of funds. 
With the SIPP, I am able to dabble/diversify a bit more in alternative asset classes, like precious metals, infrastructure funds, investment trusts etc that would not normally be available in a workplace pension.
In fact the average fee for my SIPP is a bit higher than the ex workplace pensions, and so far the returns are less. For the amateur investor dabbling is a temptation that often doesn't work !

At some point soon five will become three, as I cash in the two small ones, and probably will become two at some later stage. I will probably make this decision based on customer service more than anything else.

Each will have way over £85K in them. I have no worries about this as they are all mainstream providers and regulated investments.

thanks @albermarle