Investing newbie

Sandra97 · 2 May at 9:53AM

Hi all long term lurker here looking for some feedback on investments please. Long story short, no debts, home owner looking to relocate to part of country where property is more expensive in about 10 years. Obligations mean can't relocate before then. Have savings and these are now at risk of incurring tax so I need to do something.

My appetite to investing risk is on the lower side of medium and I'm aware of decreasing value risks. I don't want to have to keep eye on complex financial markets so my thoughts are put in £20k each year for the next 8 or so years into a managed fund stocks and shares ISA. Then final two years do cash ISA so I can keep eye on the performance of the stocks and shares then pull it when performance seems reasonable and I need the funds.

My view on this is a managed fund should be diverse enough to smooth potential losses, the level of investment will prevent me incurring a tax bill, the length of time is enough to be considered long term, I will still have access to other savings in emergency.

Does anyone have feedback in any of this, or can think of anything I haven't mentioned that I should be looking out for? I'm definitely open to platform suggestions as there's a decent choice out there and I'm not quite sure what to look for in a platform provider other than low fees and good past performance.

Thanks

masonic · 2 May at 10:07AM

Low to medium risk investments are certainly appropriate for the suggested holding period. Based on what you say, you could consider funds with a wealth preservation mandate, perhaps some exposure to bricks and mortar property funds could be worth considering too if you are planning to use some of the proceeds to buy a more expensive home. It would make most sense to choose the best investments for your plan first of all, and then decide on the best platform to hold these funds.

Daliah · 2 May at 10:15AM

I don‘t believe a managed fund can smooth out ups and downs any better than a passive global fund. It would just be more expensive.

Albermarle · 2 May at 10:19AM

I'm not quite sure what to look for in a platform provider other than low fees and good past performance.

The platform /S&S ISA do not perform as such . Only the investments held with the platform/in the ISA perform .

£20k each year for the next 8 or so years into a managed fund stocks and shares ISA

It may sound a bit pedantic but many newbie posters are confused on this point . What would be clearer to say is ' I want to hold a managed investment fund within a S& S ISA' The ISA itself is not managed . Some platforms offer S&S ISA's with their own funds , so it seems like the ISA is 'managed ' but it is still the funds within the ISA that are managed , not the ISA itself.

I'm not quite sure what to look for in a platform provider other than low fees and good past performance.

Low fees are good but whilst you are building up your funds a small difference in platform fees will not have a great impact. However paying a higher price for a managed investment fund compared to a passive one will have more of an an impact.

Here are some suggestions for platforms offering S&S ISA's

Stocks & shares ISAs: find the best platform - MSE (moneysavingexpert.com)

Thrugelmir · 2 May at 10:25AM

Stock markets are a roller coaster ride. If you are prepared for the volatility and can be flexible as to timescale. Take a seat, buckle yourself in and see what the future holds. Past performance provides no guarantees. Time your entry wrong and potentially totally the reverse could occur.

A broad diversified investment should be at the core of your portfolio. Let the investment managers decide the asset allocation for you.

masonic · 2 May at 10:27AM

Daliah said:

I don‘t believe a managed fund can smooth out ups and downs any better than a passive global fund. It would just be more expensive.

A managed fund can smooth out ups and downs, but at a cost. It probably isn't desirable to someone who understands that the underlying investments fluctuate in value and funds without smoothing are likely to have better performance at times other than the extremes.

Image: https://us-noi.v-cdn.net/6031891/uploads/editor/6h/lsmx1cec1tb6.png

Sandra97 · 2 May at 10:34AM

Good feedback thanks so far I'm just trying to digest it. @Albermarle thanks, you've mentioned being potentially pedantic - I'll be honest I'm not sure I really understand what you're trying to describe to me. I get stocks and shares ISA is where you put money then within that wrapper you have a platform and from what I understand it's up to me whatever I want to do within that wrapper, I really am new to this world and trying to understand it fully before venturing out.

It's been mentioned a global unmanaged fund but could someone explain how this is less risky or similar risk to a managed spread? As a newbie a managed spread seems to make much more sense to me but again I'm totally open to feedback.

masonic · 2 May at 10:42AM

Sandra97 said:

Good feedback thanks so far I'm just trying to digest it. @Albermarle thanks, you've mentioned being potentially pedantic - I'll be honest I'm not sure I really understand what you're trying to describe to me. I get stocks and shares ISA is where you put money then within that wrapper you have a platform and from what I understand it's up to me whatever I want to do within that wrapper, I really am new to this world and trying to understand it fully before venturing out.

That was just Albermarle describing his clarification as potentially pedantic, but as he says, it is important to understand it is the investments within the ISA rather than the ISA itself that drives performance.

Sandra97 said:

It's been mentioned a global unmanaged fund but could someone explain how this is less risky or similar risk to a managed spread? As a newbie a managed spread seems to make much more sense to me but again I'm totally open to feedback.

There are a few separate issues here to be unpicked. An actively managed fund will have a manager picking individual companies to invest in. This introduces 'manager risk', as the manager might not make the right calls, it takes continual effort and an element of luck to pick the right manager for the time. An index tracker removes this risk by simply buying the whole market. Then there are multi-asset funds, where multiple different asset classes are combined to form a portfolio with a particular risk level - these can be either built from index trackers or actively managed. Someone who wants to be hands-off would tend to go for a multi-asset fund.

dunstonh · 2 May at 10:49AM

My view on this is a managed fund should be diverse enough to smooth potential losses

A managed fund has a defined remit and it doesn't mean that it will attempt to smooth potential losses. It's remit could be more defensive than an index fund or more aggressive than an index fund. Long term returns, will generally reflect that stance.

the level of investment will prevent me incurring a tax bill, the length of time is enough to be considered long term, I will still have access to other savings in emergency.

You say long term but then earlier in your post you say you are moving to an area that is more expensive in 10 years time. Will you need this money then? if so, it is not long term.

I don't want to have to keep eye on complex financial markets so my thoughts are put in £20k each year for the next 8 or so years into a managed fund stocks and shares ISA.

This could be impacted by the term as money invested on day 1 whereas money invested in year 8 will have a shorter term.

Then final two years do cash ISA so I can keep eye on the performance of the stocks and shares then pull it when performance seems reasonable and I need the funds.

This again, hints at a 10 year term. And if it is 10 years, then your strategy is flawed.

Sandra97 · 2 May at 10:53AM

@dunstonh thanks for your take on it. To me a 10 year take is what I'd consider long term, I know I won't need access to the money in that time. So to avoid any doubt the 10 year period is my window to work in. If you feel my strategy is flawed could you give me an idea how it is flawed exactly and how you would consider a better way please?

mears1 · 2 May at 10:54AM

Thrugelmir said:

Stock markets are a roller coaster ride. If you are prepared for the volatility and can be flexible as to timescale. Take a seat, buckle yourself in and see what the future holds. Past performance provides no guarantees. Time your entry wrong and potentially totally the reverse could occur.

A broad diversified investment should be at the core of your portfolio. Let the investment managers decide the asset allocation for you.

So, is the time for entry wrong now for Sandra97, for the funds suggested by other posters, whilst taking into her objectives?

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