Which of these Vanguard options is best for a first-time investor?

user67340348

So I'm planning on investing with Target Date Funds as per Ramit Sethi's advice, for those who just want the most straightforward approach.

I'm thinking of just choosing a 5-year option for now to test the waters a bit.

I was originally thinking of picking this one:

https://www.vanguardinvestor.co.uk/investments/vanguard-target-retirement-2030-fund-accumulation-shares/overview

...but then I found another page where I open the S&S account first, and there are a load of questions for me to fill out:

https://www.vanguardinvestor.co.uk/open-an-account/isa/investment-choice

I'm a little confused about which route to go down. Ultimately I just want the easiest option but I also don't wanna be paying a load of fees.

Am I better off just proceeding with that 2030 option above? Or do I choose either Self-Managed / Managed from the 2nd link?

eskbanker

It's not either/or - you first need to open the S&S ISA itself, which is just a wrapper, and then within that account you pay in money and purchase units of your preferred fund.

Note that you can buy the Vanguard fund on a different platform, i.e. you don't need to use Vanguard's platform to buy into their funds, these are widely available elsewhere, including various cheaper alternatives if fees are important to you.

What do mean by 'testing the water' by the way, in the context of a five year investment?

user67340348

eskbanker said:

It's not either/or - you first need to open the S&S ISA itself, which is just a wrapper, and then within that account you pay in money and purchase units of your preferred fund.

Note that you can buy the Vanguard fund on a different platform, i.e. you don't need to use Vanguard's platform to buy into their funds, these are widely available elsewhere, including various cheaper alternatives if fees are important to you.

What do mean by 'testing the water' by the way, in the context of a five year investment?

Thanks, I was a little confused because if I open the account first then it asks me a load of questions to determine risk level etc.

I wasn't sure if it's better to just go straight ahead and choose the 2030 investment fund

By 'testing the waters' I mean that I'm basically just choosing a shorter time period incase things don't go very well really

eskbanker

user67340348 said:

By 'testing the waters' I mean that I'm basically just choosing a shorter time period incase things don't go very well really

Not sure that's a particularly sensible proposition - the point of those funds is to balance risk and return over a fixed period, which, in the context of a short five year timeframe, basically means low risk and correspondingly low returns.  What are you actually trying to achieve by investing, and over what sort of timeframe?  What are you taking from "Ramit Sethi's advice", i.e. how does it apply to your situation?

dunstonh

So I'm planning on investing with Target Date Funds as per Ramit Sethi's advice, for those who just want the most straightforward approach.

There is no individual in the UK authorised to advise under the name Ramit Sethi.

I'm thinking of just choosing a 5-year option for now to test the waters a bit.

What do you mean by 5 year option?
Investments are open ended and do not mature.
An investing cycle is closer to 15-20 years.   So, 5 years means you are only getting a third to a quarter.  Will that be the good period, the bad period or the indifferent period?

How does 5 years fit with your objectives?  i.e. is this saving towards something in 5 years or 30 years or what?

Am I better off just proceeding with that 2030 option above? Or do I choose either Self-Managed / Managed from the 2nd link?

The funds you are looking at are niche and for most people unsuitable (or sub-optimal).   You do not appear to be wanting to use them for their intended purpose and I think you misunderstand how they work.

Thanks, I was a little confused because if I open the account first then it asks me a load of questions to determine risk level etc.

They do that if you don't want to self select and want an off the shelf multi-asset solution.

By 'testing the waters' I mean that I'm basically just choosing a shorter time period incase things don't go very well really

Investing for just 5 years is unlikely to result in a loss but you don't know if you are going to get a bad period or good period or something in between.  Risk is diluted by timescale and duration.   The longer you invest, the closer you get to the long term average.   5 years is not good enough for that.

You need to link your investments to your objectives.  What is this money for?  How far away is it?  How is the maturity going to work (is it for a fixed purchase with 100% withdrawal on "x" date or gradual withdrawal over many years or decades)?

Etchergifts

Go with the Vanguard Target Retirement 2030 fund through the S&S ISA for simplicity and low fees (~0.15%). Ignore the Self-Managed/Managed options unless you want more control or advice, which costs more.

EthicsGradient

Etchergifts said:

Go with the Vanguard Target Retirement 2030 fund through the S&S ISA for simplicity and low fees (~0.15%). Ignore the Self-Managed/Managed options unless you want more control or advice, which costs more.

The thread starter has not told us remotely enough about their circumstances for you to be able to say that. The questions that dunstonh has posed must be answered before anyone can say. It sounds like they will not be retiring around 2030, but some time later, since they talk about "testing the waters". But we don't know when they do plan (or would like) to retire, whether this money is purely for retirement or for something else too, if they have other ways of getting a pension, how much this is relative to their needs and existing savings, whether it's a lump sum to put in now, or regular investment over several years, and so on.

The notable thing about Vanguard Target Retirement funds is that they change their balance towards bonds as the target date approaches - the 2030 fund is currently about 40% bonds, 60% shares, and this will change to about 50-50 by 2030. Investing in this now is basically a decision if they want that.

GeoffTF

user67340348 said:

So I'm planning on investing with Target Date Funds as per Ramit Sethi's advice, for those who just want the most straightforward approach.

I'm thinking of just choosing a 5-year option for now to test the waters a bit.

I was originally thinking of picking this one:

https://www.vanguardinvestor.co.uk/investments/vanguard-target-retirement-2030-fund-accumulation-shares/overview

...but then I found another page where I open the S&S account first, and there are a load of questions for me to fill out:

https://www.vanguardinvestor.co.uk/open-an-account/isa/investment-choice

I'm a little confused about which route to go down. Ultimately I just want the easiest option but I also don't wanna be paying a load of fees.

Am I better off just proceeding with that 2030 option above? Or do I choose either Self-Managed / Managed from the 2nd link?

That fund is intended to be a pension fund for people who plan to retire in 2030. It is not a "5 year option". Do you intend to retire in 2030? Why do you want to put a pension fund in an ISA? What is the purpose of your investment?

tacpot12

If you aren't looking to purchase an annuity in 2030, then a retirement fund targeting this date would be a very bad idea.

GeoffTF

tacpot12 said:

If you aren't looking to purchase an annuity in 2030, then a retirement fund targeting this date would be a very bad idea.

Vanguard does not have separate retirement funds for buying an annuity and drawdown. It is one size fits all. The Vanguard funds make sense for a young average Joe putting modest amounts into a pension each month. They are more problematic for those who are nearing retirement or who have already retired.

Vanguard markets Target Date Funds in the US, but not in the UK. Target Date Funds and Target Retirement Funds look similar though. I expect the different regulatory environment is the reason why Vanguard does not sell Target Date Funds here. Financial advisors here are required to assess an client's risk tolerance and capacity to absorb risk, and recommend an appropriate fund. They cannot just say "Want the money in five years time, take one of these."

Eyeful

I'm a little confused about which route to go down. Ultimately I just want the easiest option but I also don't wanna be paying a load of fees.

Your post suggests that you are new to investing. You should understand before investing:

1. Investing means putting your money at risk, so you may lose it all.
2. You should leave your investments untouched for a minimum of 5 years.
3. The longer you invest for, the higher are the odds of your wining the game.
There are no guarantees you will come out a winner.

4. Watch this:  https://www.kroijer.com/

5. Read these:
https://www.biglawinvestor.com/meet-the-gotrocks-family/
https://monevator.com/passive-fund-of-funds-the-rivals/
https://monevator.com/best-global-tracker-funds/

6. On YouTube take a look at the following channels:
James Shack
Meaningful Money

7. To put it simply, consider:
Low cost Multi-Asset Funds with a share/ bond split you should be comfortable with.
They give you a ready made portfolio with a risk level you can live with.