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  • FIRST POST
    • MatthewAinsworth
    • By MatthewAinsworth 23rd Jul 17, 7:11 AM
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    MatthewAinsworth
    ISAs should be more aggressive than sipps
    • #1
    • 23rd Jul 17, 7:11 AM
    ISAs should be more aggressive than sipps 23rd Jul 17 at 7:11 AM
    I think we're less likely to breach tax brackets if sipps have all the bonds and ISAs have all the equities, although before the sipp can be accessed the isa needs some bondage

    Bear in mind lifetime allowance too

    The overall picture can be balanced even if individual accounts arent
Page 3
    • bowlhead99
    • By bowlhead99 25th Jul 17, 2:28 PM
    • 7,987 Posts
    • 14,526 Thanks
    bowlhead99
    Bowl - since 2011, granted over my timescale it should be alright
    Originally posted by MatthewAinsworth
    Yes, you are looking at a tiny period in the grand scheme of things. The whole point of investing with diversity is to have assets that produce good long term returns while not being fully correlated with other assets.

    but combined with how wild it is and how slow mutual funds are to sell I'd be losing sleep
    a) if you use an investment trust or ETF you can usually sell instantly through an app on your phone, website on your PC, or a call to your broker. If you use a "mutual fund" as you term them (unit trust / OEIC) there will always be a dealing point in the next business day.

    b) why would you be losing sleep when you are investing with a thirty year time horizon. The process of investing for the long term inside a pension doesn't require you to be reactive and sell up at a moment's notice if the market dips or rises.
    But I am seriously considering giving 10% to EM just for kicks and diversity. More than that and I'm not comfortable.
    Rule one of investing is not to invest for "kicks" but for returns. Rule two is invest with diversity.

    Most people don't invest more than about 10% in emerging markets. The $3.8 trillion of market capitalisation covered by the FTSE emerging index is about 9% of the $41.35 trillion covered by FTSE All World.

    Although as those indices are done on a cap weighted free float basis they exclude some stocks into which it's hard to invest as a foreigner and so EM would really make up a larger proportion of the world markets if you had better access to all share classes and entities in markets such as China as an outsider. 9% of a global equities portfolio in EM would be a little low on a total "true" market basis or on a GDP or population basis, but it's a level that a lot of investors would be happy with. So, it's not a problem putting no more than 10% in EM ; most people wouldn't advise you do that.

    Though fretting about not wanting to go over 10% emerging is a bit strange from someone who is going all out for max performance and willing to have 100% of his pension in global smallcap.

    The s&p 500 is of course not majorly EM but I like that multinationals can swoop down on it quickly and have the resources to do it, without the same illiquidity or volatility, it seems like a good way to do it
    To do what? If you buy Vodafone or Verizon or AT&T or Sprint you aren't selling to China Mobile's customers, for that you would buy a stake in China Mobile.

    China had a huge surge in GDP but it's equities didn't do so well
    Over five years the Shanghai (SSE composite] index is up 49.6% not including dividends while GDP is up between about 6.7 and 10.6% a year since 2010. So, both have been growing. If you go back to 1990 when the index started you will see a huge increase to today's value which is over 3000. It has fallen back from a "bubble" peak when Chinese domestic markets went crazy. Just like other indexes do from time to time.

    Remember China is not the only emerging market, there are plenty others, and there are other lesser developed markets that will move from "frontier" to "emerging" over time. Korea used to be "emerging" now it is developed depending which index set you use. Greece has gone in the other direction.

    I've read that correlation between GDP and stock markets is very weak
    It can be because stock prices are forward looking and change ahead of the GDP.

    Some GDP contribution comes from private or government entities rather than listed stocks; the fortunes of GDP indexes and market indexes are related/linked but there is a difficult to anticipate time lag.

    But you'd be kidding yourself to think emerging markets will not be a significant part of global equity markets over the decades to come.

    , I don't know why but I suspect the s&p pinching it may be somewhat a factor
    It seems like you're just stringing random words together so I won't bother to try to guess what's going on in your head

    It's fine to say you don't know what will happen to markets. That's why people invest with diversification.

    Stoozie - it's be a possibility if I aimed for it, and cashed in dB pension, but I can just put equities into isa, not cash in dB, prioritise ISA and retire earlier to completely avoid it
    Remember the potential DB pension relies on you staying employed by the employer for years to come and them continuing to offer the scheme. At your age surely you haven't accrued your 40/80ths or whatever to hit your early retirement targets just yet.

    Rather than just looking at ISA, consider investing some family money in your wife's /partner's pension if she's still not earning ; relatively lower risk of hitting lifetime allowances restrictions if one is taking time out from employment to have kids etc.

    As an aside, obviously LISA is more efficient than plain ISA for a youngster such as yourself (or partner) if the money can be left until age 60+
    Last edited by bowlhead99; 25-07-2017 at 3:41 PM.
    • MatthewAinsworth
    • By MatthewAinsworth 25th Jul 17, 4:54 PM
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    MatthewAinsworth
    LISA for a homeowner is a bit like a sipp, without LTA, access later. For me on the tax credits a sipp is superior at the mo

    At the moment I'm focusing on ISA for our wedding in a few years time, vls20 for that... After that ISA will be for pre sipp access retirement

    I definitely won't cash in dB pension while still accruing, the accrual is the most rewarding stage by far. I'm not decided whether I will cash in later, but on the face of it I don't expect to live more than 25 years over state pension age, I'd like to leave something and I could remain cautiously invested in flexible drawdown. But the safety of dB may make me brave, then again if pension credit exists maybe I can be brave anyway

    All world for whole portfolio is a reasonable way to do it that I'm almost becoming, although direct EM allows me to maintain a tilt, I'll review how beneficial I expect that tilt to actually be

    10% max because diversification/ risk reduction is all I'm trying to do. The small (5%?) EM exposure in the s&p doesn't seem sufficient to smooth it from tables I've seen, and the small fund probably has no exposure
    • bowlhead99
    • By bowlhead99 25th Jul 17, 6:06 PM
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    bowlhead99
    LISA for a homeowner is a bit like a sipp, without LTA, access later.
    Originally posted by MatthewAinsworth
    It is a *bit* like a SIPP as access is only from later life; but once you hit 60 you have complete freedom to take out as much as you like in any year without tax, whereas with pension income you may have to manage it carefully to avoid tipping over into higher marginal rates of tax on what you draw.

    And also if your planning has gone wrong you can simply pay a penalty and get the money back out early from a LISA which you can't do with a SIPP ; whereas if you are able to keep it in the LISA product to age 60 you get a bonus that you don't get with a normal ISA. So, quite a handy product.

    But yes the (up to) 61% relief from doing SIPP to improve tax credits is definitely superior to the LISA bonus if you're not likely to be a 40%+ taxpayer in retirement or at risk of hitting lifetime or annual limits and don't value the crutch of early access or freedom of timing of withdrawals.

    10% max because diversification/ risk reduction is all I'm trying to do. The small (5%?) EM exposure in the s&p doesn't seem sufficient to smooth it from tables I've seen, and the small fund probably has no exposure
    The small cap fund has no direct exposure at the "country of listing" level because it's specifically a developed markets smallcap tracker. Similarly the SP500 will have no exposure from country of listing (100%USA). Both will have some assets and incomes in emerging countries ; though largecap companies with their scale advantages have their fingers in more pies and are more likely to trade across borders.

    However, US is physically more distant, so in a smallcap tracker you'll find a company in Hong Kong or Singapore that has a very mainland China customer base while the S&P 500 company based out of Texas might not have any Chinese customers at all. If you want "proper" EM exposure - and there's no reason not to want it - there is no substitute for buying a fund that buys companies listed in (or geographically near to) that region.
    Last edited by bowlhead99; 25-07-2017 at 6:17 PM.
    • MatthewAinsworth
    • By MatthewAinsworth 25th Jul 17, 9:24 PM
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    MatthewAinsworth
    An insurance against the world changing, the developed world indexes might add new countries but would miss the rise

    I imagine the volatility could give a good rebalancing bonus...
    • coyrls
    • By coyrls 26th Jul 17, 12:20 PM
    • 992 Posts
    • 1,043 Thanks
    coyrls
    An insurance against the world changing, the developed world indexes might add new countries but would miss the rise

    I imagine the volatility could give a good rebalancing bonus...
    Originally posted by MatthewAinsworth
    Often your posts are like cryptic crossword clues that I can't solve.
    • stoozie1
    • By stoozie1 26th Jul 17, 12:34 PM
    • 555 Posts
    • 497 Thanks
    stoozie1
    Stoozie - it's be a possibility if I aimed for it, and cashed in dB pension, but I can just put equities into isa, not cash in dB, prioritise ISA and retire earlier to completely avoid it
    Originally posted by MatthewAinsworth
    Yes. So you are going to maximise your partner's pension then?
    • MatthewAinsworth
    • By MatthewAinsworth 26th Jul 17, 12:52 PM
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    MatthewAinsworth
    Coryls - having some em covers you in case em countries get big and the developed world falters
    And em is better than bonds for rebalancing bonus - em is highly volatile, good historical yields, low correlation

    Stoozie - maybe, but retiring before we get pension access might be more desirable - what's efficient financially isn't necessarily what's efficient with the limited time we have to live - yolo
    • hoc
    • By hoc 29th Dec 17, 3:06 PM
    • 246 Posts
    • 145 Thanks
    hoc
    Many of OP's replies were a difficult read, I admit I skipped most. This "pearl of wisdom" makes no sense, it is bad advice and/or bad theory. A SIPP is pre-tax. As a basic general rule, it is always preferable to make losses on accounts to be taxed, not one like ISA that has already been taxed. On top of this, an ISA allows ability to access at any time hence it is better to take risk on SIPP, etc. that can not be accessed for years to maximise loss recovery time.

    My SIPP lost several thousand this year on 2 very risky investments. The loss is approximately the size of the tax relief I received, so not a net loss as had I not invested it as SIPP I would have paid it as income tax. Gross nature of SIPP minimises losses and gains are at worst neutral, possibly amplified depending on specifics.
    • MatthewAinsworth
    • By MatthewAinsworth 10th Jan 18, 10:13 PM
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    MatthewAinsworth
    Hoc - over the long term I'm planning this around growth, not losses, want that growth to be tax free
    • hoc
    • By hoc 11th Jan 18, 1:13 AM
    • 246 Posts
    • 145 Thanks
    hoc
    Hoc - over the long term I'm planning this around growth, not losses, want that growth to be tax free
    Originally posted by MatthewAinsworth
    Shame on me for taking this thread seriously and taking the time to reply. Looking at the more recent comments this is all one big wind up with nonsense replies.
    • MatthewAinsworth
    • By MatthewAinsworth 11th Jan 18, 6:29 AM
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    MatthewAinsworth
    Hoc - why are you making losses?
    • TheTracker
    • By TheTracker 11th Jan 18, 10:55 AM
    • 1,213 Posts
    • 1,198 Thanks
    TheTracker
    If there is a gene for trolling then MA has it in a pure form.
    MA, have you ever thought of donating your DNA for science?
    • MatthewAinsworth
    • By MatthewAinsworth 11th Jan 18, 1:23 PM
    • 3,079 Posts
    • 1,224 Thanks
    MatthewAinsworth
    How is this trolling?
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