ii Selected Growth

fistfulofsteel

Is this a good set and forget option?

bolwin1

Given you won't be able to draw on this for at least another 20 years, I'd suggest 100% equity would be more appropriate for the next 15 years or so (if not longer). Maybe one of the 100% global equity trackers ? 

QrizB

The choice is yours, but if you've got at least 20 years until you retire then VLS60 might be a little cautious. VLS80 (80% equity) might be worth considering instead?

Pat38493

If you are not going to be able to access the money for more than 20 years, personally I would go 100% equities, and then look to reduce the % of equities as you get closer to being able to access the money.  To do this though, you need to understand that your investment is likely to shrink in about one in 4 years, but the growth in the other years should outweigh it over 20 years based on past history.  Only do this if you are prepared to leave it alone even in negative years until you are much closer to retirement.

For sure you should not keep the money in cash if you will not be using it for 20 years - over the long term, cash doesn't even keep pace with inflation (especially if it's just sitting in an II account as cash where they don't pay market leading interest rates anyway).

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

The other comment is - just double check that II are not going to charge you extra charges for selecting one of their chosen approach.  Some of the II canned options, mean that you pay extra charges when you could easily just purchase Vanguard Lifestrategy yourself without paying the extra.  I am not sure if that's the case with this option that you are looking at.

Secret2ndAccount

If you have the stomach for 100% equities (which ideally you would, but not everybody does), then
HSBC FTSE All World Index Class C - Accumulation (GBP) gives you a bit of everything from around the world for just 0.13% per year charges. Available on ii platform.
Cheaper and better than VLS

Madeinireland101

Pat38493 said:

If you are not going to be able to access the money for more than 20 years, personally I would go 100% equities, and then look to reduce the % of equities as you get closer to being able to access the money.  To do this though, you need to understand that your investment is likely to shrink in about one in 4 years, but the growth in the other years should outweigh it over 20 years based on past history.  Only do this if you are prepared to leave it alone even in negative years until you are much closer to retirement.

For sure you should not keep the money in cash if you will not be using it for 20 years - over the long term, cash doesn't even keep pace with inflation (especially if it's just sitting in an II account as cash where they don't pay market leading interest rates anyway).

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

The other comment is - just double check that II are not going to charge you extra charges for selecting one of their chosen approach.  Some of the II canned options, mean that you pay extra charges when you could easily just purchase Vanguard Lifestrategy yourself without paying the extra.  I am not sure if that's the case with this option that you are looking at.

Pat38493 said:

If you are not going to be able to access the money for more than 20 years, personally I would go 100% equities, and then look to reduce the % of equities as you get closer to being able to access the money.  To do this though, you need to understand that your investment is likely to shrink in about one in 4 years, but the growth in the other years should outweigh it over 20 years based on past history.  Only do this if you are prepared to leave it alone even in negative years until you are much closer to retirement.

For sure you should not keep the money in cash if you will not be using it for 20 years - over the long term, cash doesn't even keep pace with inflation (especially if it's just sitting in an II account as cash where they don't pay market leading interest rates anyway).

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

The other comment is - just double check that II are not going to charge you extra charges for selecting one of their chosen approach.  Some of the II canned options, mean that you pay extra charges when you could easily just purchase Vanguard Lifestrategy yourself without paying the extra.  I am not sure if that's the case with this option that you are looking at.

It would be my thought to - if you are going to select that option why not just it put it into Vanguard Lifestrategy yourself? At the very least ask ii what benefit they provide over you just doing it yourself.

Sarahspangles

fistfulofsteel said:

Pat38493 said:

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

Is being biased towards the UK a problem if I intend to never travel outside the UK? Also does it affect the decision that my income is in USD? (I am forced to convert it into pounds before paying into SIPP due to PayPal's withdrawal options)

The point about bias towards the UK is to do with risk and returns. Lots of people think that American technology stocks may decline in value in the medium term. By having a fund that contains fewer of these stocks, and more from UK companies, you may feel less impact on the value of your funds - if it happens. The other issue is that exchange rates come into the calculation when some of your holdings are valued in dollars not pounds, so there’s a bit more volatility that is nothing to do with how well the stocks themselves are performing.

MetaPhysical

fistfulofsteel said:

Pat38493 said:

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

Is being biased towards the UK a problem if I intend to never travel outside the UK? Also does it affect the decision that my income is in USD? (I am forced to convert it into pounds before paying into SIPP due to PayPal's withdrawal options)

What Pat means is that UK equities have been significantly outperformed by the US and some other markets.  That makes UK equities quite cheaply priced. Opportunity for a boom maybe?  It takes a brave person sometimes.....

Pat38493

fistfulofsteel said:

Pat38493 said:

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

Is being biased towards the UK a problem if I intend to never travel outside the UK? Also does it affect the decision that my income is in USD? (I am forced to convert it into pounds before paying into SIPP due to PayPal's withdrawal options)

Unfortunately there are a couple of ways of looking at it.

UK equities have underperformed in the last decade or two compares to a lot of other markets, especially the US.

If you think that will continue, it doesn't really make sense to invest in a fund that is artificially highly invested in UK equities.

If you think it won't, you could take the view that UK equities are underpriced and Vanguard LS is a very good option.

If you have no clue (which is generally my position), to me it makes sense to just have a fully diversified portfolio equally spread across the world (in my opinion, but Vanguard may not agree on that and they should know more about it than me!).

That said, Vanguard Life strategy funds have a pretty good reputation so it certainly wouldn't be a "bad" choice - it's just that personally I don't see a strong case for having a UK bias on equities. Others might disagree though.

You mean your employment earnings is in USD?  I would have thought that if you are going to live in the UK in retirement, and therefore your retirement costs will be in GBP, you will be forced to convert your money into GBP at one point or another.  I am not aware of a UK pension provider that allows you to pay the money into the account in USD, albeit that some of them allow you to hold USD funds inside the account, but I could be wrong there.

In any case, the bigger point I think is that if you are looking at a 20 year + investment timeline, 60% of equities is a pretty low figure - for that timeframe personally I would go for minimum 80% equities probably 100%.  The default company scheme for my employer is about 85% equities unless you are close to retirement if I remember correctly. 

poseidon1

Pat38493 said:

fistfulofsteel said:

Pat38493 said:

I think that Vanguard Lifestrategy funds are biased towards the UK i.e. they have more UK assets than a pure global tracker would have.  This means they have not performed as well as other similar funds over the last decade, but that doesn't necessarily mean that this will continue in future.

Is being biased towards the UK a problem if I intend to never travel outside the UK? Also does it affect the decision that my income is in USD? (I am forced to convert it into pounds before paying into SIPP due to PayPal's withdrawal options)

Unfortunately there are a couple of ways of looking at it.

UK equities have underperformed in the last decade or two compares to a lot of other markets, especially the US.

If you think that will continue, it doesn't really make sense to invest in a fund that is artificially highly invested in UK equities.

If you think it won't, you could take the view that UK equities are underpriced and Vanguard LS is a very good option.

If you have no clue (which is generally my position), to me it makes sense to just have a fully diversified portfolio equally spread across the world (in my opinion, but Vanguard may not agree on that and they should know more about it than me!).

That said, Vanguard Life strategy funds have a pretty good reputation so it certainly wouldn't be a "bad" choice - it's just that personally I don't see a strong case for having a UK bias on equities. Others might disagree though.

You mean your employment earnings is in USD?  I would have thought that if you are going to live in the UK in retirement, and therefore your retirement costs will be in GBP, you will be forced to convert your money into GBP at one point or another.  I am not aware of a UK pension provider that allows you to pay the money into the account in USD, albeit that some of them allow you to hold USD funds inside the account, but I could be wrong there.

In any case, the bigger point I think is that if you are looking at a 20 year + investment timeline, 60% of equities is a pretty low figure - for that timeframe personally I would go for minimum 80% equities probably 100%.  The default company scheme for my employer is about 85% equities unless you are close to retirement if I remember correctly. 

Another aspect everyone should consider ( not just the OP ) is that the UK universe of stockmarket listed companies is steadily shrinking year by year, which militates against adopting a UK equity bias when investing over the long term.

It is not exactly a secret and anyone who pays attention to the financial news should have sat up and taken notice over the past 15 to 20 years as quoted 'household' names together with lesser known names on the junior and aim markets disappear into the hands of foreign entities and private equity.

The article below should make sobering reading for anyone intent on tying their future investment returns largely to the UK market.

https://www.schroders.com/en-gb/uk/institutional/insights/how-should-investors-respond-to-the-stock-market-s-dwindling-status-/

The fact that the UK market is trading at something like a 40% discount to its peers is no reason to suppose that will  present sparkling opportunities for the small UK retail investor. The reality is it has enabled profitable and possibly transformative UK  businesses to be picked off  by predators cheaply, with virtually no government intervention.

 Arm Holdings was a particularly terrible example. Picked off cheap by Softbank, then to add insult to injury they subsequently spun off an IPO of the business on the NYSE. One of the UK's few cutting edge  ftse 100 tech companies, gone forever from the LSE.

It really has to be said that the private equity industry ( benefiting the ultra wealthy  ) in particular, are hoovering up quoted companies at an alarming rate, and keeping companies private far longer, that would ordinarily seek capital via IPO listings on the public markets. 

The problem is of course  not UK specific, but the erosion here is probably far noticeable.