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  • FIRST POST
    • funkey_monkey
    • By funkey_monkey 29th Jul 18, 9:33 PM
    • 353Posts
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    funkey_monkey
    Self Investment into Passive Fund of Funds
    • #1
    • 29th Jul 18, 9:33 PM
    Self Investment into Passive Fund of Funds 29th Jul 18 at 9:33 PM
    Hello,

    I've got the majority of my savings invested with an IFA and I'm happy enough with the preformance of the investment.

    I'd like to self invest some money in order to move some money out of a badly performing savings account with Sainsburys, but avoid going through my IFA, as I want to take some control myself.

    I'm not looking to invest directly in companies etc, but was considering using the Vanguard LS 80 and/or alternatives. I've read up a bit on passive investments and it seems to be where I want to be - although I'm uncertain about dropping money in now prior to Brexit happening (considering the state of the negotiations I can't help but feel that a dip is on the horizon).

    I'm already on the Hargreaves Lansdown platform for a LISA I opened with a nominal amount so that I would have it opened before my age ruled me out.

    I've taken a look at some funds and was considering the following:

    Baillie Gifford Managed B Acc (0.35% TER)
    Baillie Gifford Managed B Acc

    Royal London Sustainable World Trust C Acc (0.77% TER)
    Royal London Sustainable World Trust C Acc

    Vanguard LifeStrategy 80% (0.22% TER)
    Vanguard LS 80%

    Blackrock Consensus 85 (0.09% TER)
    Blackrock Consensus 85

    I know there are cross over between these, but I was considering using a mixture of these. The only things I really note at present are the TER associated with the Royal London and Blackrock offerings.

    However, Royal London (alongside Baillie Gifford) are a consistent first quartile performer and there is not much more than you can ask than that.

    I'm hoping to initiate with approx 5,000 and make some additional drops throughout the term.

    Any suggestions as to what I should do here considering that my savings account is providing terrible returns?
    I am considering purchasing a property, but I hope not to need all of my investment money for this.
Page 1
    • dunstonh
    • By dunstonh 29th Jul 18, 10:44 PM
    • 96,122 Posts
    • 63,925 Thanks
    dunstonh
    • #2
    • 29th Jul 18, 10:44 PM
    • #2
    • 29th Jul 18, 10:44 PM
    TER ishouldnt be used with UT/OEICs. It is OCF with UT/OEICs.
    I'm hoping to initiate with approx 5,000 and make some additional drops throughout the term.
    So just one fund needed wtih that amount.

    All the funds are at the medium/high risk end of the scale. (30-35% loss potential during a major downturn). Are you accepting that you could lose 1500 within weeks of your purchase?

    although I'm uncertain about dropping money in now prior to Brexit happening (considering the state of the negotiations I can't help but feel that a dip is on the horizon).
    There are always events happening. Brexit may be your current excuse to hold back but when that is out of the news there will be something else to replace it. You will never invest if you keep being concerned about events that could affect the markets.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • funkey_monkey
    • By funkey_monkey 29th Jul 18, 10:58 PM
    • 353 Posts
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    funkey_monkey
    • #3
    • 29th Jul 18, 10:58 PM
    • #3
    • 29th Jul 18, 10:58 PM
    So just one fund needed wtih that amount.
    Originally posted by dunstonh
    At what stage, can you start considering multiple funds? Which out of these would you recommend and would you consider them comparable? Or is there an alternative that I've missed which you would recommend ahead of these?

    All the funds are at the medium/high risk end of the scale. (30-35% loss potential during a major downturn). Are you accepting that you could lose 1500 within weeks of your purchase?
    I'd rather not, but I'm investing for 10+ yrs, so I hope that over time it will work in my favour.



    Thanks for your reply.
    • Prism
    • By Prism 29th Jul 18, 11:22 PM
    • 573 Posts
    • 477 Thanks
    Prism
    • #4
    • 29th Jul 18, 11:22 PM
    • #4
    • 29th Jul 18, 11:22 PM
    At what stage, can you start considering multiple funds? Which out of these would you recommend and would you consider them comparable? Or is there an alternative that I've missed which you would recommend ahead of these?
    Originally posted by funkey_monkey
    I can't speak for anyone but myself but I moved from a single fund to multiple at around 100,000. One thing to look at is if you pay a charge per investment when you add funds. One of my platforms does and the other does not.
    • dunstonh
    • By dunstonh 30th Jul 18, 12:10 AM
    • 96,122 Posts
    • 63,925 Thanks
    dunstonh
    • #5
    • 30th Jul 18, 12:10 AM
    • #5
    • 30th Jul 18, 12:10 AM
    At what stage, can you start considering multiple funds?
    Assuming you are going to stick with multi-asset, then 85,000 should be fine.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • TheShape
    • By TheShape 30th Jul 18, 12:18 AM
    • 1,425 Posts
    • 1,299 Thanks
    TheShape
    • #6
    • 30th Jul 18, 12:18 AM
    • #6
    • 30th Jul 18, 12:18 AM
    TER ishouldnt be used with UT/OEICs. It is OCF with UT/OEICs.
    Originally posted by dunstonh
    Perhaps unhelpful that the HL At a Glance Page lists:

    Ongoing charge (OCF/TER):
    The wording suggests that they are interchangeable.

    Blackrock Consensus 85 (0.09% TER)
    Blackrock Consensus 85
    Originally posted by funkey_monkey
    Worth noting also that 0.09% is the Net Ongoing charge after the 0.13% saving from HL. The OCF is 0.22%.

    Not a recommendation for the OP but i originally invested in VLS100 in my HL SIPP but having noticed the fund saving on the Blackrock Consensus 100 Fund I chose that for my LISA and switched my regular saving instruction from VLS100 to Blackrock Consensus 100 in the SIPP.
    • dunstonh
    • By dunstonh 30th Jul 18, 11:02 AM
    • 96,122 Posts
    • 63,925 Thanks
    dunstonh
    • #7
    • 30th Jul 18, 11:02 AM
    • #7
    • 30th Jul 18, 11:02 AM
    Perhaps unhelpful that the HL At a Glance Page lists:

    Quote:
    Ongoing charge (OCF/TER):
    The wording suggests that they are interchangeable.
    That is a shame as the FCA made clear in TR14/7 that:

    3. For UCITS funds, information on charges in marketing material (including websites) must
    be presented to investors in a way that is consistent with the key investor information
    document (KIID).6
    This means using the OCF as the headline charges figure.


    4. Platforms, advisers and other intermediaries should also use the OCF as the headline charges figure for UCITS funds.

    The FCA also had a section on consistency (not flitting between them unless necessary).

    Effectively, UCITS have to use OCF and not TER or AMC. Non UCITS do not have that requirement but as the FCA wants consistency, the OCF should be used wherever it is available. Most non UCITS funds declare an OCF.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • funkey_monkey
    • By funkey_monkey 30th Jul 18, 12:48 PM
    • 353 Posts
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    funkey_monkey
    • #8
    • 30th Jul 18, 12:48 PM
    • #8
    • 30th Jul 18, 12:48 PM
    Thanks for all the replies.

    I'm now deciding for which fund to opt for.

    Baillie Gifford, Royal London and LS80 are consistent first quartile performers according to Trustnet.

    The LifeStrategy 80 and 100 outperform their Blackrock equivalents (85 and 100), however the Blackrock funds have a lower OCF by a margin of 0.13% (0.09% versus 0.22%).

    However, there will also be a 0.45% platform fee for HL for all funds. Maybe an alternative platform would be better?

    I've looked at Cavendish Online for the Baillie Gifford fund (as an example):
    Annual Management Charge (AMC) 0.4%
    Total Expense Ratio (TER) 0.44%
    Cavendish ongoing charge 0.05%
    FundsNetwork Service Fee 0.20%
    Is this 0.79% total fees or 1.19%?
    • dunstonh
    • By dunstonh 30th Jul 18, 1:06 PM
    • 96,122 Posts
    • 63,925 Thanks
    dunstonh
    • #9
    • 30th Jul 18, 1:06 PM
    • #9
    • 30th Jul 18, 1:06 PM
    The LifeStrategy 80 and 100 outperform their Blackrock equivalents (85 and 100), however the Blackrock funds have a lower OCF by a margin of 0.13% (0.09% versus 0.22%).
    When it comes to multi-asset passives and looking at performance you are really looking at asset weightings and luck. The US has been the main driver over the last 10 years. Whereas the 10 years prior to that the US was underperforming global equities. So, a multi-asset passive that was weighted heavy to the US would have likely outperformed others that had lower US in the last decade but underperformed in the previous one to that. This is largely why VLS has outperformed some of the others.

    As you dont know what the next decade is going to hold, you largely have to ignore the performance. You have to look at strategy, cost and asset weightings to see what you prefer.

    VLS are not risk targetted. They move around the risk profile. L&G, HSBC, Architas are risk targetted. So, if downside is a concern, they may be more appropriate for you. A couple of those include property as well.

    Deciding between VLS, L&GMI, HSBC GS, Architas MAP etc is a bit like going to the supermarket to buy apples and deciding which apple takes your fancy. They are variations of a theme. Each will have its period when it is best of the bunch and worst of the bunch. But you wont know in advance.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • rangersfc
    • By rangersfc 30th Jul 18, 1:30 PM
    • 62 Posts
    • 27 Thanks
    rangersfc
    Hello funkey monkey,
    I have Vanguard funds within the Vanguard platform, it may be worth you having a look to see if it is appropriate for your needs.
    Regards
    mrwmartin
    • funkey_monkey
    • By funkey_monkey 30th Jul 18, 9:16 PM
    • 353 Posts
    • 25 Thanks
    funkey_monkey
    How can you tell the maturity rate of the bonds in these funds? i.e how long are the terms of the bonds? My understanding is that long term bonds can be bad as rises in interest rate are missed.

    I'm thinking that my strategy is going to be opt for low funds costs. I'm in two minds about UK exposure as I don't think a Hard Brexit will come to fruition as both sides, but specifically the UK, need a deal and the border needs resolution - I can sense an extension. What are peoples thoughts on this?
    I am considering going for a more global outlook as it has more wriggle room to change tact depending on the outlook.
    • funkey_monkey
    • By funkey_monkey 6th Aug 18, 11:59 PM
    • 353 Posts
    • 25 Thanks
    funkey_monkey
    Hi,

    Looking for some feedback on my poor level of analysis on these funds.

    First thing I've noticed is that the Baillie Gifford fund (Class B) is actively managed. For 0.35% OCF and 0% initial change on HL, that seems like a good price for active management. The fund is very similar in terms of fund/sector/country percentages to the VLS80 (Class ?) - which is 0.22% OCF. However, BG is only in to USA/UK for 55% whereas VLS is sitting just over 60%.
    My thoughts here is that if you are going for either of these funds, the active management of the BG fund might be useful in the predicted turbulent time ahead due to Brexit. Plus, has VLS just performed better than the others due to a high USA weighting? BG has a yield of 1.45% and VLS80 is 1.54%. They both hold around 17% in bonds.

    In terms of the 100% funds, it is between the VLS100 and the Blackrock 100. Blackrock have and Class I and a Class A funds. The Class I takes my interest (for no obvious reason). It has 52% weighting to USA/UK. VLS100 is 63%. Yield is similar as is performance. However, HL charge 0.1% OCF on BL and 0.22% on VLS.

    The final choice entails the Royal London Sustainable World (Class C). It has a very high OCF of 0.77% and has exposure of 65% to USA/UK. The yield is the lowest at 1%. It is in the same market as the BG and VLS80 funds. It has 65% in USA/UK and bonds of 15%. On the face of it, I should not be considering it. However, there is something about it. It gets good reviews and accolades. It will have minimum 15% in bonds and 50% in /.

    It keeps catching my eye along with the BG for some reason - possibly because they are consistent first quartile performers and that level of consistency is appealing to me.

    MorningStar rate all at 5 stars - except VLS100 which is 4 stars. Trustnet rate BG, RL and VLS80 as 5 star - the BL100 and VLS100 are rated by them as 3 star.


    Now, I am aware that past performance is in the past, so all I can really control are asset allocations and fees. Based on fees alone, RL should be dropped and the BL funds brought into scope.
    In terms of risk, as this is going to be a small amount of my savings, it might be best to go for either the BL100 or VLS100. Bringing fees back into play, then the BL100 would be the winner.

    However, I'm still unsure about the class of the funds. What is the difference between A, C, D and I? All I could find stated that if you are holding for over 10yrs go for Class A, around 7 go for B, and for short term (2 - 5) go for Class C. Is this correct?

    I admit I do not know much about this and am only going on a my limited knowledge, so please correct me if you disagree on my rationales.
    • bostonerimus
    • By bostonerimus 7th Aug 18, 1:08 AM
    • 2,454 Posts
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    bostonerimus
    Nothing wrong with your analysis, but it's probably worthless. Buy VLS80 or the Blackrock equivalent etc and do something more rewarding than fund analysis.
    Misanthrope in search of similar for mutual loathing
    • Alexland
    • By Alexland 7th Aug 18, 6:30 AM
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    Alexland
    Try not to get caught up on short term quartile performance. Have a deep think about your volatility tolerance and the types of assets you want to be invested in for the long term.

    Alex
    • funkey_monkey
    • By funkey_monkey 7th Aug 18, 10:46 AM
    • 353 Posts
    • 25 Thanks
    funkey_monkey
    Try not to get caught up on short term quartile performance. Have a deep think about your volatility tolerance and the types of assets you want to be invested in for the long term.

    Alex
    Originally posted by Alexland
    RL and BG are consistent first quartile performers over 5 year period according to Trustnet. Is that not considered an indication of a well managed fund?

    I intend to leave this in and to a certain extent 'forget about it'. Hence why I was initially looking at the VLS as they perform rebalancing etc within the cost.

    I like the thought of sustainable investing. Although, I can't see where the value is in RL Sustainable World Trust.
    Can someone please explain to me where the value is in it? Compared to the others, the yield is low and the OCF is high. I accept that as part of a balanced portfolio it will have a place.

    I've taken a quick look at the L&G Multi-Index 7. It has only 40% in UK/USA and a larger amount in emerging markets.
    • bostonerimus
    • By bostonerimus 7th Aug 18, 1:07 PM
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    bostonerimus
    I'm a big index fund advocate, but whatever multi-asset fund you go with you've made the most important decision and that's to invest something....so just do it. Make sure you are comfortable with the equity to bond ratio, make regular contributions and make some strategic adjustments every few years. So write the funds you like on pieces of paper, put them in a hat and pull one out.

    FYI I've followed a roughly 60/40 Vanguard index fund strategy for the last 30 years and average 8.5% annual return. I rebalance and actually adjusted my equity holding to around 75% when I retired because I have enough invested so that even large losses won't require me to lower my withdrawal rate. I got to that position without any complex planning, just early, consistent and aggressive saving into a simple portfolio of index funds....so what you do is probably more important than the funds you choose....within reason of course and the funds you have mentioned are all within reason.
    Misanthrope in search of similar for mutual loathing
    • funkey_monkey
    • By funkey_monkey 7th Aug 18, 10:36 PM
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    funkey_monkey
    Interesting diversion on this thread. My IFA has advised me that I have not fully invested my ISA allowance for this year - so I still have about 4.5k of my allocation.

    I've opened a LISA with 100 last year in order to register before the age cut-off. I've now got just over 4,000 of my annual ISA amount still to invest.
    My options are:
    1. Place it into my IFA managed portfolio - where the majority of my money is
    2. Put it into the LISA

    I won't be needing this money for a property - so it would just be for retirement. My LISA currently holds the 100 in a Vanguard LS80 fund within HL.

    I am aware that I cannot contribute to it after I am 50yo and nor can I draw down on it until I am 60yo.

    What should I do with this LISA? 25% top up from the Gov is a very healthy incentive. I can access the IFA managed ISA if needed and I do have additional savings elsewhere.

    I have just realised that instead of placing this money into a new fund that I could fund the ISA/LISA with it instead.

    I know the LISA has gotten a bad press and has plenty of clauses in relation to exit penalties, etc. However, is it an option for me here? I'd avoid tax on the money and I'd also get a 25% top up.

    I could examine the performance of the LS80 and decide if I wanted to move it, but I could simply add the 4k to it and that would get the money into the system - which is my stumbling block at the minute.

    If I contributed 4k per year from now, I'd have 40k plus an additional 10k from Gov and then plus any rises in the fund.

    What am I missing here - it seems too good to be true - as long as I live until 60yo!?!
    • Thrugelmir
    • By Thrugelmir 7th Aug 18, 11:06 PM
    • 61,363 Posts
    • 54,612 Thanks
    Thrugelmir
    I'm in two minds about UK exposure as I don't think a Hard Brexit will come to fruition as both sides, but specifically the UK, need a deal and the border needs resolution - I can sense an extension. What are peoples thoughts on this?
    Originally posted by funkey_monkey
    As with any investment. You should justify to yourself the reason behind the purchase (or indeed sale). As there'll be both pros and cons. Well managed cash generative /profitable companies will survive. Selection therefore is key. Don't get bogged down in the politics. Business is far more fleet footed.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • funkey_monkey
    • By funkey_monkey 8th Aug 18, 10:47 PM
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    funkey_monkey
    Just checking - does anyone have thoughts on the LISA option I have described in post #17 above?

    Thanks.
    • bowlhead99
    • By bowlhead99 9th Aug 18, 12:49 AM
    • 8,314 Posts
    • 15,205 Thanks
    bowlhead99
    Just checking - does anyone have thoughts on the LISA option I have described in post #17 above?

    Thanks.
    Originally posted by funkey_monkey
    I don't think you mentioned anywhere what tax bracket you are in.

    You can hold basically the same investments in LISAs as in 'normal' S&S ISAs or pensions.

    If you are high rate taxpayer (which perhaps we might infer by the fact you employ an IFA, which is something only usually afforded by relatively wealthier people, so if you have enough money to need an IFA before the age of 40, maybe you have a high salary...) then extra pension contributions can be more lucrative in terms of tax relief than using a LISA. Simplistically if you put 100 in a pension as higher rate taxpayer it will cost you 60 of net pay. If you put 60 of net pay into a LISA you will get 25% bonus and only end up with 75 in the LISA.

    So it is 100 plays 75,and whether it doubles or trebles or quadruples over the next couple of decades, that extra in the pension will persist (33% more money than in the LISA). Although the ISA can be withdrawn very flexibly without any tax consequences once aged 60, while the pension will be taxable (apart from a 25% tax-free lump sum).

    So in retirement, of the 100 pension, 75% of it would be taxable at your marginal rate. That might be higher rate tax (75% of higher rate is 30%)... but for most it is only basic rate tax (75% of basic rate is only 15%, leaving 85 for yourself out of the 100) and for a lot of people it can be no tax or something less than basic rate because it might be drawn out within your personal allowance - e.g. after you have stopped getting paid for going to work but before you start drawing your state pension or other pension provision that you were building up.

    So, if you aren't able to use LISA for a house purchase and will be using it to fund retirement or later life: iinvesting with higher rate tax relief in a pension usually beats investing with LISA. Whereas if you only pay basic rate tax at the moment, pension doesn't beat LISA because 100 of pension investment costs 80 and is potentially taxable in retirement. while 100 of LISA investments costs 80 is not taxable in retirement even if you were to draw out the entire balance on one day (as long as you're age 60).

    So whether it makes financial sense to use LISA rather than other forms of investment to create a pot of money to draw out age 60+, probably depends more on your tax bracket now and your potential tax bracket in retirement, than anything else.There are some other factors such as a pension being outside your estate for inheritance tax and means-testing, and of course the LISA is accessible pre-60 (with a penalty) if you have screwed up your planning and really really need the money early ; a pension is not.

    If you aren't a high rate taxpayer now but might be in a few years time it would make sense to invest via conventional ISA now, take it out penalty-free in a few years time, and use it to fund pension contributions with higher rate tax relief in due course.

    But to be honest, the LISA penalty for early withdrawal is not so terribly severe that you couldn't invest in LISA now and just take the penalty charge on the chin later if it should happen that you need the money back to fund pension contributions or just generally for other things like car, house upgrade etc. Obviously it's preferable to avoid a penalty and use your other ISA funds for that sort of thing instead. But worth considering the full range of options.


    Personally I would probably use a LISA if I had access to one (even though I am higher rate taxpayer who isn't at their annual or lifetime pension contribution limit) as it is good to have flexibility even if it i not necessarily the most MSE thing to do in terms of the most amount of bonus or tax relief possible. .If you already have 16k in a conventional ISA for this year, 4k into similar investments within LISA is unlikely to be a major problem.
    Last edited by bowlhead99; 09-08-2018 at 12:52 AM.
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