Thoughts for simple investment ISA?

truescot

Hi, 51 years old. Never invested before. All savings and ISA in cash. I would like to dip my toes into investing but no huge ambitions other than hoping to outperform cash over next 5-10 years.  Planning for next years iSA allowance and current intention is to put 20k into HSBC Global Strategy Balanced portfolio ISA. I want things to be as passive, sinple and low cost as possible, as up until recently I would have gone for a higher interest cash ISA.

Thoughts?

masonic

There's a lot to like about the HSBC Global Strategy series of funds, so if you want a simple multi-asset fund at that level of risk it would seem a good choice. Strictly it isn't a passive fund, as it is volatility managed, but that doesn't come at a premium price. Obviously it will behave quite differently to a cash ISA.

mebu60

50% of my SIPP is in that and the other half in the Dynamic. Both accumulation. The Dynamic has performed slightly better so far (2 years). 

kempiejon

truescot said:

Hi, 51 years old. Never invested before. All savings and ISA in cash. I would like to dip my toes into investing but no huge ambitions other than hoping to outperform cash over next 5-10 years.  Planning for next years iSA allowance and current intention is to put 20k into HSBC Global Strategy Balanced portfolio ISA. I want things to be as passive, sinple and low cost as possible, as up until recently I would have gone for a higher interest cash ISA.

Thoughts?

With decades of only saving in cash you might need to think about the mind set for investing in equities. Are you ready to see you balance lower than the total you've paid in?
Things like your HSBC fund will not behave like cash where the balance is always what you've paid in and interest is added periodically. Fund prices go up and down. 
Over 10 years you have a good chance of doing a fair bit better than cash but there is also a non zero chance of doing much worse. In those first few years will you throw up your hands in despair when what was £100 is now only worth £60?
Your Global Strategy Balanced isn't passive, it may be simple and it's not as low cost as possible, there are cheaper, simpler passive global stock market vehicles out there. I am not deriding that particular fund just a casual observation of the market place.
I think you're right that over 10 years cash isn't the place to be, especially if you have a few decades of cash ISAs just make sure your eyes are open to risks in the market and the products available.

truescot

@kempiejohn, I don't really have decades of cash saving experience as I've always had to live pretty hand to mouth but in the last 2 or 3 years my financial situation has changed a little and I have more cash to decide what to do with and more regular saving potential too. 

I've done alot of reading around investing and I am prepared for the volatility but I would like to give something the (not guaranteed) chance of better growth in advance of retirement. I have an NHS pension.

And thanks for the comments on the HSBC funds. Out of interest, what are some of the passive vehicles which would be similarly structured asset-wise, but lower cost?

masonic

truescot said:

And thanks for the comments on the HSBC funds. Out of interest, what are some of the passive vehicles which would be similarly structured asset-wise, but lower cost?

See https://monevator.com/passive-fund-of-funds-the-rivals/ for a rundown of the main contenders. There have been one or two others since this article, but you can see HSBC GS beats the passive ones on cost. To get any cheaper, you'd need to hold separate equity and bond funds and rebalance, and even then you'd not be shaving much off the cost.

kempiejon

@truescot I think HSBC want 0.25% ongoing fund charges plus the same again for platform fee?
I use Vanguard ETFs, fund charges generally between 0.07% - 0.2%.
https://www.vanguardinvestor.co.uk/what-we-offer/etf-products
I use iWeb so there are dealing costs of £5 per fund but no further custody fees for holding ISAs. I make a couple of funds purchases each year.
To make something similarly structured asset wise as your HSBC fund you can mix your own, cheaper and truly passive. Using a handful of ETFs you can cover different geographies and mix with gilts or bonds however suits you.

There are many ways to skin this particular cat and I have tried a few. This year I like a cocktail of Vanguard Global Developed etf VEVE (0.12% charges) with a dash of VAGP a global, hedged aggregate bond fund (0.10% charges). I could add some VFEM for emerging markets, more expensive at 0.22%. 

A bit more complex than picking a pre packed HSBC off the shelf, which could be a good enough solution.

masonic

kempiejon said:

@truescot I think HSBC want 0.25% ongoing fund charges plus the same again for platform fee?

OCF is 0.18%, but as you say you definitely don't want to hold at HSBC when there are cheaper options such as iWeb which seems to be waiving its usual £100 opening fee until the end of the year.

I'm also a fan of multiple ETF portfolios that can even be held free of additional holding and trading charges these days somewhere like Trading212 or InvestEngine, but that's probably a bit too advanced.

kempiejon

masonic said:

kempiejon said:

@truescot I think HSBC want 0.25% ongoing fund charges plus the same again for platform fee?

OCF is 0.18%, but as you say you definitely don't want to hold at HSBC when there are cheaper options such as iWeb which seems to be waiving its usual £100 opening fee until the end of the year.

Well I do them a disservice. That Moneyvator article is interesting too, makes a couple of interesting points about home bias, a reason I've not been sold on the Vanguard LifeStyle products and suggest passive is better.

We could move the focus from fees down at this level and look at volatility and performance. I assume fund of funds with management may well smooth out volatility. Over 5 and 10 years have these sorts of plans outperformed say my global tracker approach? Even if they didn't doing so without swings in valuation is useful to some investors.

masonic

kempiejon said:

We could move the focus from fees down at this level and look at volatility and performance. I assume fund of funds with management may well smooth out volatility. Over 5 and 10 years have these sorts of plans outperformed say my global tracker approach? Even if they didn't doing so without swings in valuation is useful to some investors.

The impression I got was that there wasn't any significant effect, but I would have looked during a period of relative calm. I think it is still possible to use the portfolio tool at Trustnet to generate a comparison report against your existing portfolio with comparative measures, such as Sharpe Ratio, which would show whether there was better risk adjusted return.

I've previously used the Cautious version as a bond proxy, since the ~20% equities can be beneficial in terms of risk and return when investing in a 'bucket' strategy. But I removed bonds completely when inflation started to bite and ahead of interest rates surging upward and have yet to move back into conventional bonds.

I would think if you already have a multi-fund strategy you are happy with managing yourself, and are not concerned about a bit of extra volatility, there is probably not much of a case to switch to something like this. But I could see myself returning to a simple multi-asset fund in my twilight years when I no longer have the interest or aptitude to take a hands on approach. These funds are also a great place to start for a newbie. For more experienced and interested investors, perhaps not so much.

kempiejon

masonic said:

I would think if you already have a multi-fund strategy you are happy with managing yourself, and are not concerned about a bit of extra volatility, there is probably not much of a case to switch to something like this. But I could see myself returning to a simple multi-asset fund in my twilight years when I no longer have the interest or aptitude to take a hands on approach. These funds are also a great place to start for a newbie. For more experienced and interested investors, perhaps not so much.

Just to pick up a bit on this. I concur a great place to start for a newbie. Starting can be the hard bit, then there's sticking at it, then let time do its work. For me it's been profitable diversifying away from cash any surplus.
Farming the work out isn't my thing, I also buy single company stocks, bonds etc. and I hold myself more responsible than a fund manager may be.
My return to a simpler strategy when interest or skills wane is a capital weighted global replicator, like the previously mentioned Vanguard Developed Global.
Non scientifically, I eyeballed a chart and my global looks better than that HSBC in the Adventurous breed. So far. And cheaper.