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Dilemma

Including Financial Independence and Retiring Early (FIRE)
Clitheroekid
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Dilemma

#357934

Postby Clitheroekid » November 18th, 2020, 10:31 pm

I recently decided to move my SIPP, which had been set up years ago by an IFA with Standard Life, to Interactive Investor.

The transfer went smoothly and quickly, but in my ignorance I'd assumed that the investments would be transferred in specie, and I therefore got a shock today when I saw they'd been transferred in cash.

Which obviously means that I have to make some very big (by my standards) investment decisions, and to be honest I'm finding the prospect rather daunting.

It was invested via SL in just two funds - Vanguard Life Strategy 80, which has done very well, and a Standard Life Multimanager fund (can't recall the details) which had done rather less well.

In principle I'm inclined to put some of the cash back into the Vanguard fund, as it's performed well and so far as I can tell Vanguard are well respected. But it's what to do with the balance that's exercising my mind.

Up to now I've almost entirely invested in individual shares, my one foray into managed funds being the ill-fated Woodford Patient Capital, but I've noticed - and considered investing in - a couple of funds and IT's that seem to do well. In particular the Fundsmith fund and Scottish Mortgage IT have caught my eye.

The problem is that they both seem to have done so well recently that I'd now be worried about buying at the top of the market - SM have gained 77% this year!

I've had a look at the Morningstar website, but though it's obviously full of excellent information it's just too much, and I soon got bogged down.

I do intend to invest some of the cash in individual shares, but although I've had some great performers I've also - through greed, I’m ashamed to say - had a couple of stinkers, HUR being one of them. I recognise that I have a dangerous tendency to speculate, and while I'm happy to do that with my everyday investments I've come to the conclusion that though it pains me to say it many professional investors do better than I do, and my pension fund needs to be managed more responsibly.

I don't actually need any income from my SIPP, and I'm therefore happy to concentrate on growth, at least for the time being. My plan (though that's far too grand a term for it) is maybe to wind down my work over the next three or four years, and then perhaps start drawing the SIPP down. As I don't have any dependents I'd be quite happy in principle to draw down the whole lot, though I actually can't envisage spending anything like that amount (unless I have to go into a care home and am unable to shoot myself first!)

I realise I could ask an IFA, but my experience of them has, unfortunately, been universally negative. What I would therefore like to know is what fellow Fools would do or have done in this situation. I'm quite happy to listen to recommendations for individual funds or IT's, as I admit my knowledge of them is minimal. Incidentally, one IT that I've always seen well recommended is City of London, but I was surprised to see that they’re down about 22% this year. Is this a good buying opportunity or would it more likely be catching the dreaded falling knife?

I realise it's all a bit vague, and I'm not expecting the perfect solution, but there’s a lot of knowledge and wisdom on LF, and I'd just like to hear some thoughts, so that I can at least try to concentrate my own thoughts a bit.

TIA for any input.

tjh290633
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Re: Dilemma

#357938

Postby tjh290633 » November 18th, 2020, 11:01 pm

You have a clean sheet. I suggest you look at Luniversal's baskets of ITs, B7 and B8, as one approach. If you want to go down the individual shares route, then my suggestion would be equal weighting, like in an HYP, and enough diversification to give you some protection. 20 holdings as a minimum, I think. How you choose the shares is up to you.

Avoid IFAs, as they will dilute your income, be it taken or reinvested. Personally I do not like ETFs or funds, although I still have some OEICs. They have a tendency to merge, change their spots, or suffer from indifferent management at times.

Good luck in whatever route you decide to follow.

TJH

JohnB
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Re: Dilemma

#357940

Postby JohnB » November 18th, 2020, 11:08 pm

You've had broad index trackers and been happy with their performance, why do you now want to switch to active funds? Its always said that if you don't have the skill to pick individual winning shares, why do you think you have the skill to pick winning fund managers?

xxd09
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Re: Dilemma

#357946

Postby xxd09 » November 19th, 2020, 12:14 am

Aged 74 retd 17 years
You have already made the most serious investment decisions -index trackers ie Vanguard LS80
I would avoid Insurance Company Index Trackers
If you don’t have pressing financial need of this SIPP then go 100% Vanguard LS80 and concentrate on the day job and living
It is really not worth it at this stage to start messing about and gambling with your savings-unless you decide this is to be your retirement hobby!
One fund-simple cheap easy to understand -outperforms over 80% of equivalent active funds
That’s it
xxd09

dspp
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Re: Dilemma

#357984

Postby dspp » November 19th, 2020, 9:20 am

xxd09 wrote:Aged 74 retd 17 years
You have already made the most serious investment decisions -index trackers ie Vanguard LS80
I would avoid Insurance Company Index Trackers
If you don’t have pressing financial need of this SIPP then go 100% Vanguard LS80 and concentrate on the day job and living
It is really not worth it at this stage to start messing about and gambling with your savings-unless you decide this is to be your retirement hobby!
One fund-simple cheap easy to understand -outperforms over 80% of equivalent active funds
That’s it
xxd09


Seconded. Most succinctly explained.

Regards, dspp

dealtn
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Re: Dilemma

#358012

Postby dealtn » November 19th, 2020, 10:06 am

xxd09 wrote:It is really not worth it at this stage ... gambling with your savings.

One fund...

That’s it...


So no gambling there then?

jonesa1
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Re: Dilemma

#358014

Postby jonesa1 » November 19th, 2020, 10:10 am

You've mentioned concerns about buying at the top of the market, the problem is that buying any investment on past returns is a leap of faith that those returns will continue. If you want to be fairly hands off, global passive (funds or ETFs) or possible broadly diversified global active funds / ITs are likely to be the simplest approach for the bulk of your portfolio.

What-ever you buy, it's important to dig under the headline claims and reputation. For example, you mention City of London. Its reputation is for reliable and increasing dividend payments, if you're interested in capital growth CTY has not been a great investment in recent years.

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Re: Dilemma

#358025

Postby kempiejon » November 19th, 2020, 10:36 am

Vanguard offer a global ETF product VWRL, 50 countries and over 3000 companies 0.22% annual fees from within the fund.
It's 60% USA, 15% Europe, 12% Pacific and 11% Emerging markets the balance mopped up with other and Middle East. That was my starting point for my own weightings. There is an accumulating version VWRP if you're not needing to extract a natural yield.
Vanguard Lifestyle stable have a UK bias. You mentioned the SMT growth this year - I think a lot of that is down to their US shares, America is a big market VLS has about 25% in it.
In my SIPP with Hargreaves Lansdowne I use Vanguard ETFs, I aim for a global coverage, roughly weighted 45% USA, 20% Europe-exUK, and 10% in each of Japan, Asia Pacific-exJapan, Emerging Markets and about 5% UK Gilts. I exclude UK stocks as in my ISAs I directly invest in FTSE shares. Each quarter I add new money and reinvest any dividends and have used that to keep the balance.

I gathered all my pension pots together a couple of years ago and like you had a large sum to invest, to ease the psychological worry I told myself I would dribble in over 2 years, I bought quarterly.

ReallyVeryFoolish
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Re: Dilemma

#358028

Postby ReallyVeryFoolish » November 19th, 2020, 10:44 am

It seems the OP wants some of the portfolio in international growth assets. My approach to this as I neared retirement was to use a basket of three investments that in my opinion are very complimentary and during this year have proven pretty defensive. I have used an equal allocation for the growth part of my portfolio between Fundsmith, Smithson IT and Blue Whale growth fund. I have been very happy with the performance of this basket of three. To avoid buying market tops/bottoms you could drip feed into those three monthly. You need to check, but I "think" Interactive Investor offer free monthly contributions if set up as a direct debit. That basket of three amounts to almost exactly half my combined ISA/SIPP portfolio. Hope that helps.

RVF

AleisterCrowley
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Re: Dilemma

#358033

Postby AleisterCrowley » November 19th, 2020, 10:49 am

jonesa1 wrote:
What-ever you buy, it's important to dig under the headline claims and reputation. For example, you mention City of London. Its reputation is for reliable and increasing dividend payments, if you're interested in capital growth CTY has not been a great investment in recent years.


I bought some CTY and SMT many years ago. I put the majority of cash in CTY with a smaller amount in SMT
SMT has increased by >>600%
CTY has been totally flat.....
tis always so

Unless you think you can consistently beat the market*, or pay someone to do so on your behalf, you are probably better off in passive trackers


*hint - nobody can: todays star fund managers may well become tomorrow's Woodfords

JohnW
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Re: Dilemma

#358203

Postby JohnW » November 19th, 2020, 8:40 pm

dealtn wrote:So no gambling there then?

I think a lot would make a distinction between choosing a single mixed fund, comprising a wide ranging collection of stocks and bonds which will return you a fair share of the good or bad fortunes of the economies they're drawn from, and choosing 20 individual stocks any old which way for half your holdings.

SoBo65
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Re: Dilemma

#358224

Postby SoBo65 » November 19th, 2020, 9:49 pm

With II you can set up to invest in chosen funds/shares/IT's monthly at no cost around the 18th of each much (and vary the amounts). I have been using this facility recently to drip feed into a number of existing funds. If there was a big fall in the market you could make additional purchases.

terminal7
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Re: Dilemma

#358587

Postby terminal7 » November 20th, 2020, 8:28 pm

CK

I note that you state that your investment was not transferred from SL to ii 'in specie', but 'cashed in' before transfer.

I also recently set up SIPP accounts with ii and AJ Bell and transferred a number of holdings from Hargreaves Lansdown. I took the liberty of just checking whether ii deal in Vanguard Life Strategy 80 and In fact they do and therefore your holding could have been transferred 'in specie'. It is the case that some of my erstwhile holdings at HL were not traded by ii and/or AJB - hence these were 'cashed in' and the monies transferred. However, I was informed in advance that certain funds could not be transferred 'in specie' and hence given the opportunity to leave them at HL.

Of course you may have inadvertently ticked a box in the transfer forms - if not you may consider any extra cost you have incurred and have a word with SL.

T7

Howard
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Re: Dilemma

#358626

Postby Howard » November 21st, 2020, 12:09 am

CK

In my view, your decision really should be influenced by your attitude to investing.

If you don’t like taking a few risks and it causes concerns then the advice to invest in ETFs and trackers and ignore them sounds good.

However, if you enjoy investing and are happy with its ups and downs then my view would be to invest a significant part of your SIPP in ETFs and trackers which have an international coverage but invest say 30% in companies or ITs which you select yourself.

I have managed my own investments for forty years or more and in the last twenty years of retirement have looked at the markets most days. This has given me an interest in companies and market trends. Almost every day, there is a comment on the news or from a friend about some financial activity and I find I have an informed view (but not necessarily the correct one!) For me, the mental activity is better than doing a crossword.

If after a few years you really don’t enjoy managing the 30% or you feel it is underperforming, you can transfer the funds to your “boring” and safer ETFs.

If you are successful at generating more than you need, to avoid being too money-orientated, you can always find a cause to support with the surplus income your canny investing strategy produces. This can be even more enjoyable than investing!

Whatever you choose - good luck!

regards

Howard

Clitheroekid
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Re: Dilemma

#358830

Postby Clitheroekid » November 21st, 2020, 5:05 pm

Many thanks for all the very helpful replies.

I instinctively have a high risk appetite, and I'm perfectly happy to take significant risks with my `everyday' investments. However, I feel a duty to treat my pension fund a bit more conservatively. There's no real logic to this, as I'm never going to turn it into an annuity, and even if I adopted an approach that was reckless rather than what I'd term as high risk I can't see me exhausting it in my lifetime, but I think I just want the reassurance of having it there.

Nevertheless, I do enjoy the investment process, and I don't want to hand everything over to a passive tracker.

So my inclination is to place 60% in the Vanguard 80 fund, which has served me well and seems to be well managed, and divide the balance as to 20% in self-selected managed funds / IT's and 20% in self-selected equities.

I'm quite happy to opt for the `adventurous' options in funds / IT's, but with equities I'm going to aim for rather less speculative ones than those I've invested in with my everyday investments. Although some of these have done very well others have flopped, and I don't want the excitement / stress that such investments produce where my pension fund is concerned.

In my wanderings I came across the II `Super 60' and I'd very much appreciate people's views on the selection - https://www.ii.co.uk/ii-super-60 I appreciate that there are a lot to look at, and I don't expect anyone to say which are the best or worst - I'm just looking for views as to the overall quality (or otherwise) of the selections, and views as to whether they would provide a good starting point. One of the problems I've faced is the sheer number of funds / IT's on offer, and the difficulty in sorting the wheat from the chaff, so I'm hoping that this is a reasonable way of filtering them to a manageable number. However, I'm very open to alternative ways of doing this.

Another difficulty is that almost every one I've looked at is at or near the top of their chart, and I always feel that buying at the top has far more potential for loss than gain. I realise that this is also illogical, as I could have said the same at any time during the recent rises, but instinct is a powerful influence.

Once again, thank you to everyone who's posted, it's very much appreciated.

dealtn
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Re: Dilemma

#358968

Postby dealtn » November 22nd, 2020, 9:55 am

Clitheroekid wrote:Another difficulty is that almost every one I've looked at is at or near the top of their chart, and I always feel that buying at the top has far more potential for loss than gain. I realise that this is also illogical, as I could have said the same at any time during the recent rises, but instinct is a powerful influence.



I can't remember the source, and might try and find it later, but it is remarkable, and perhaps to many intuitively strange, the percentage of time the market is within say 10% of its all time high. Obviously that won't be as true for individual stocks, but for funds, and clearly trackers, that will also generally hold true too.

Waiting for that "drop" to invest can be a long time, and usually unprofitable too as the income returns will be missed out on.

Instinct is as you say powerful, but logic is a handy tool to utilise in overcoming it.

Drip-feeding or "pound cost averaging" is a technique that sits between the two, and always has an emotional positive. If the market rises, you at least started and had something invested that benefitted from the rise. If the market falls you held back and progressively added more at lower market levels. Assuming you're not an overly pessimistic individual that "regret" always has an offsetting positive to tame it with.

Arborbridge
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Re: Dilemma

#358980

Postby Arborbridge » November 22nd, 2020, 10:39 am

Clitheroekid wrote:I recently decided to move my SIPP, which had been set up years ago by an IFA with Standard Life, to Interactive Investor.

The transfer went smoothly and quickly, but in my ignorance I'd assumed that the investments would be transferred in specie, and I therefore got a shock today when I saw they'd been transferred in cash.

Which obviously means that I have to make some very big (by my standards) investment decisions, and to be honest I'm finding the prospect rather daunting.

It was invested via SL in just two funds - Vanguard Life Strategy 80, which has done very well, and a Standard Life Multimanager fund (can't recall the details) which had done rather less well.

In principle I'm inclined to put some of the cash back into the Vanguard fund, as it's performed well and so far as I can tell Vanguard are well respected. But it's what to do with the balance that's exercising my mind.

Up to now I've almost entirely invested in individual shares, my one foray into managed funds being the ill-fated Woodford Patient Capital, but I've noticed - and considered investing in - a couple of funds and IT's that seem to do well. In particular the Fundsmith fund and Scottish Mortgage IT have caught my eye.

The problem is that they both seem to have done so well recently that I'd now be worried about buying at the top of the market - SM have gained 77% this year!

I've had a look at the Morningstar website, but though it's obviously full of excellent information it's just too much, and I soon got bogged down.

I do intend to invest some of the cash in individual shares, but although I've had some great performers I've also - through greed, I’m ashamed to say - had a couple of stinkers, HUR being one of them. I recognise that I have a dangerous tendency to speculate, and while I'm happy to do that with my everyday investments I've come to the conclusion that though it pains me to say it many professional investors do better than I do, and my pension fund needs to be managed more responsibly.

I don't actually need any income from my SIPP, and I'm therefore happy to concentrate on growth, at least for the time being. My plan (though that's far too grand a term for it) is maybe to wind down my work over the next three or four years, and then perhaps start drawing the SIPP down. As I don't have any dependents I'd be quite happy in principle to draw down the whole lot, though I actually can't envisage spending anything like that amount (unless I have to go into a care home and am unable to shoot myself first!)

I realise I could ask an IFA, but my experience of them has, unfortunately, been universally negative. What I would therefore like to know is what fellow Fools would do or have done in this situation. I'm quite happy to listen to recommendations for individual funds or IT's, as I admit my knowledge of them is minimal. Incidentally, one IT that I've always seen well recommended is City of London, but I was surprised to see that they’re down about 22% this year. Is this a good buying opportunity or would it more likely be catching the dreaded falling knife?

I realise it's all a bit vague, and I'm not expecting the perfect solution, but there’s a lot of knowledge and wisdom on LF, and I'd just like to hear some thoughts, so that I can at least try to concentrate my own thoughts a bit.

TIA for any input.


Just one point about being at the top of the market: presumably you wouldn't have worried about it if the funds hadn't been liquidated, so why is it different now? I'm guessing you would have carried on with those funds quite as happily as before, even though you think it might be the market top - which we won't know anyway for a year or two.

Arb

monabri
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Re: Dilemma

#358982

Postby monabri » November 22nd, 2020, 10:42 am

Clitheroekid wrote:
The transfer went smoothly and quickly, but in my ignorance I'd assumed that the investments would be transferred in specie, and I therefore got a shock today when I saw they'd been transferred in cash

TIA for any input.


Has a mistake been made or were they acting on your instructions?


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