Four Year Investment Plan

TJB24 · 20 March 2019 at 1:27PM

Dear all,

I'm a 24 year old Civil Servant on a secure £30k salary + pension. Three years ago my parents generously gave me a gifted deposit of £57k to help me onto the property ladder. Now that I've been promoted a couple of times, I would like to pay them back by the time I come to remortgage four years from now. This will give them a good nest egg to cushion their retirement, and is a point of pride for me.

I try to live fairly frugally and save as much as I can each month. I have a lodger who pays me £550 pcm tax-free, plus £100 pcm from renting out my flat's parking space. It is quite possible that my lodger will move out this year, so I will need to decide wether to get another one, go solo, or move my girlfriend in (though I don't think we're quite ready for that yet).

My take-home salary is £1,888 pcm. I have no car (don't need one!), no student loans and no credit card debt. I have an £85k mortgage on a 1.99% fixed rate.

I have roughly £17.5k in savings and add to this by £800pcm. In addition I add £50pcm into a Lifetime ISA as an added retirement vehicle. All of my savings are invested into the stock market, breakdown as follows (minus LISA):

Scottish Mortgage Investment Trust - £1.4k
Fundsmith Equity - £3.3k
Lindsell Train Global Equity - £3.5k
AXA Framlington Global Tech - £2.1k
LF Blue Whale Global - £1.2k
Baillie Gifford Global Discovery - £1.1k
Baillie Gifford Long Term Global Growth - £1.1k
Amazon - £1.3k
Google - £0.9k
Facebook - £0.8k
Netflix - £0.8k
Cash - £1.2k (I'm looking at Fideltiy China Special Situations IT for next month's buy)

My portfolio is equity and US tech heavy so I'm potentially looking to diversify. If I can continue to save at my current rate, I should be nearing my £57k target (not factoring in growth/loss) in four years.

What I'm looking for really is advice on what I'm doing, wether I should start to taper savings into cash as I go on, or wether I should seek to restructure my portfolio in any way.

Any thoughts, comments or advice warmly appreciated. Thank you!

bostonerimus · 20 March 2019 at 1:51PM

I would get rid of all the individual shares and make sure you have at least 6 months of spending/emergency cash in the bank. The rest of your portfolio is a "greatest hits". I would then sell at least 4 or 5 of your remaining funds. I have no idea which because I have no idea how any of them will perform in the future, but maybe do it from an asset allocation stand point, and replace them with a single multi-asset fund that has some global equities and bonds.

AlanP_2 · 20 March 2019 at 2:30PM

If these investments are to pay back the £57k then you are taking a risk as values could be low at the point you need cash.

Typically investments are suggested for 5+ year time horizons as a minimum.

Maybe start building a large cash pot alongside a reduced, as suggested by Boston, investment range?

dunstonh · 20 March 2019 at 2:42PM

Four Year Investment Plan

An economic cycle is around 10 years. You are looking to invest for less than half of that. So, with just 4 years, I wouldnt invest. Far too risky.

Scottish Mortgage Investment Trust - £1.4k
Fundsmith Equity - £3.3k
Lindsell Train Global Equity - £3.5k
AXA Framlington Global Tech - £2.1k
LF Blue Whale Global - £1.2k
Baillie Gifford Global Discovery - £1.1k
Baillie Gifford Long Term Global Growth - £1.1k
Amazon - £1.3k
Google - £0.9k
Facebook - £0.8k
Netflix - £0.8k
Cash - £1.2k (I'm looking at Fideltiy China Special Situations IT for next month's buy)

Perhaps you are happy with risk as that spread is around risk 10 on a 1-10 risk scale.

Malthusian · 20 March 2019 at 4:33PM

dunstonh wrote: »

An economic cycle is around 10 years. You are looking to invest for less than half of that. So, with just 4 years, I wouldnt invest. Far too risky.

I was on the verge of saying I would, because it's a gift to his parents and it might not matter to them so much if he gives it to them in six years' time or more rather than four, due to the market crashing and the OP having to wait for recovery.

On the other hand, if the OP's parents need the money to retire on in four years, that's very different.

OP - have you asked your parents whether they actually want your money? It would be unusual to give your child 57 grand if you weren't already in a comfortable retirement position.

TJB24 · 20 March 2019 at 5:58PM

Malthusian wrote: »

I was on the verge of saying I would, because it's a gift to his parents and it might not matter to them so much if he gives it to them in six years' time or more rather than four, due to the market crashing and the OP having to wait for recovery.

On the other hand, if the OP's parents need the money to retire on in four years, that's very different.

OP - have you asked your parents whether they actually want your money? It would be unusual to give your child 57 grand if you weren't already in a comfortable retirement position.

Thanks to all replies so far. No, my parent's don't immediately need the money, so if it was a bad time there would be nothing to stop me delaying until a better point in the market. They have a private loan of 18k to another family member, otherwise zero debt and mortgage paid off. Both in their mid 50s. It's more a point of principle.

My current portfolio is on a high risk profile, but that's on the basis that I'm 24 and can withstand it without issue. I did speak to my mum about taking a mortgage advance, but she was against it as it would expose me to higher interest rates in the future.

bostonerimus · 20 March 2019 at 7:38PM

TJB24 wrote: »

My current portfolio is on a high risk profile, but that's on the basis that I'm 24 and can withstand it without issue. I did speak to my mum about taking a mortgage advance, but she was against it as it would expose me to higher interest rates in the future.

You'll generally get the best rates and the most understanding lender if you can use the "Bank of Mum and Dad". As long as your Mum and Dad agree I would not let this load influence your investing style too much, at 24 you should be pretty heavily biased towards equities and I'd keep doing that. The biggest decision you have is how much to put into a pension and how much to put into ISAs and regular accounts to pay off the loan. You also might want to pay down the debt on a regular basis from your paycheck or in installments form your investments.

Malthusian · 21 March 2019 at 1:06PM

TJB24 wrote: »

Thanks to all replies so far. No, my parent's don't immediately need the money, so if it was a bad time there would be nothing to stop me delaying until a better point in the market. They have a private loan of 18k to another family member, otherwise zero debt and mortgage paid off. Both in their mid 50s. It's more a point of principle.

If they don't need your money in 4 years or beyond it's more a point of Inheritance Tax inefficiency.

TJB24 · 21 March 2019 at 1:08PM

bostonerimus wrote: »

You'll generally get the best rates and the most understanding lender if you can use the "Bank of Mum and Dad". As long as your Mum and Dad agree I would not let this load influence your investing style too much, at 24 you should be pretty heavily biased towards equities and I'd keep doing that. The biggest decision you have is how much to put into a pension and how much to put into ISAs and regular accounts to pay off the loan. You also might want to pay down the debt on a regular basis from your paycheck or in installments form your investments.

Thank you, I do currently pay them £300 pcm as it is, didn't list this in the OP.

Thanks to all comments, looks like I'm on the right track and perhaps shouldn't worry too much. Appreciate the insights.

Four Year Investment Plan

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