Portfolio review request

[fca2019]

I am a beginner investor and would be grateful for any comments on my portfolio.

Current portfolio:
Cash ISAs £68k + ISA/SIPP total £21k (Fidelity Index World £18k + Fundsmith £1k + Other £2k) = £89k

I'm planning of increasing the amount in my Investment ISA and SIPP by cashing in some cash ISA and transferring from a small pension pot.

Amount to invest:
Cash ISA withdrawl £24k + (SIPP) tax relief £6k + small pot pension transfer £4k = £35k

This would increase the portfolio to the following:

Target portfolio:
Cash ISAs £44k + ISA/SIPP total £56k = £100k

My objective with the portfolio is to grow over the next 10 years. However I am risk averse and want to build it up slowly.

I am in my 40s and married. My investing history started in 2003 with an offset mortgage. Previous to this I had no/little savings. I then got into a savings habit and repaid the mortgage in 2012. The next 5/6 years carried on basically the same, saving into cash ISAs.

Scratching my head wondering why I was losing money after inflation in cash. I looked around at investing. I started just over a year ago investing with world index fund opening a ISA and SIPPs. I don't want to put in solely an index tracker, this seems too boring for me.

I'd be grateful for advice on what to do next, and what to invest in next.

[Alaric]

I'd be grateful for advice on what to do next, and what to invest in next.

Whatever you decide to do, transfer rather than cash in your cash ISA when transferring to a Stocks & Shares ISA. The process is that you tell the provider of your Share ISA how much you want to transfer and where to transfer it from and they do the rest.


At some risk to your capital should interest rates increase, a Corporate Bond ETF or OEIC will give a higher return than cash, 4% say rather than 1%.

With a Stocks & Shares ISA you have an extremely wide if confusing choice of investment opportunities.

[swill453]

Whatever you decide to do, transfer rather than cash in your cash ISA when transferring to a Stocks & Shares ISA. The process is that you tell the provider of your Share ISA how much you want to transfer and where to transfer it from and they do the rest.

The OP mentions increasing the amount in the investment ISA. However the calculation shows £6K tax relief, which implies all the £24K cash ISA money is actually going to the SIPP.

Scott.

[fca2019]

Apologies, to clarify. I am looking to withdraw £24k from one of my cash ISAs. Then invest this in my SIPP and obtain tax relief of £6k. Separately to this, I plan to transfer a small pension pot of £4k into my SIPP.

The total to invest is £24k + £6k + £4k + rounding 1k = £35k.

I am after advice on what to invest in, apart from a global index tracker, aiming to get a sensible allocation of investments.

[Alaric]

Apologies, to clarify. I am looking to withdraw £24k from one of my cash ISAs.

I know the 25% "PCLS" can make a difference. But in general terms, does it make sense to move money from an environment where it can be withdrawn free of tax at any age to one where withdrawals are taxed and you have to wait to age 55 anyway?

[Urbandreamer]

Like a number on these boards, I have been investing for quite some time.

What I can tell you is that your opinions and attitudes will change over time.

Index trackers or ETF's are an easy way to get decent or at least not very bad returns (over the long term). Many would argue that they should be a core holding. What to do for "fun" that's "risk averse"? Well I would argue that the two can't really be combined.

I'm a fan of Scotish Mortgage (SMT), but you should expect volatility from a investment trust with so few holdings.
Templton Emerging Markets might be interesting (though many might choose JP Morgan since the top people left TEM). I hold some TEM.
I hold Henderson Far East (HFEL) for income and exposure to the far east, however I would regard it as fairly boring.
Even more boring is the recent investment that I have made in a Renewable infrastructure trust. Basicly it owns windfarms and makes money selling electricity. Dull, but that was what I was looking for.

If you want more fun then shares in individual companies may be for you, but it's not for the risk averse. Even the likes of Unileaver (which makes soaps and stock cubes) can go through interesting times. It was front page news and a national scandle when they tried to put up the price of Marmite and the shares took a drubbing when the managment tried to drop the dual listing.

You do have to be a bit careful as well. Too many colective investments and you might as well save money and just buy a tracker.
Likewise You can get quite exposed to individual shares without realising it. Ie all UK income funds/trusts WILL hold Shell and BP, then you might also own Shell as an individual share. Ok if you are happy being heavily exposed to Shell's future, but don't get into that situation without deciding to do so.

ISA v SIPP?

All of my new funds are going into a SIPP, but I'm 56. When I was in my 40's I didn't have a personal pension (though was/am in a company scheme) and my funds went into an ISA because if I actually needed the money before 55, I could get it. I don't have any cash ISA's but I have found that I can fund things from income or if necessary the cash generated from dividends.

[tjh290633]

My thoughts are that what you have in an ISA should stay there. Keep it in the tax shelter, because being there may keep you out of higher rate taxes, or reduce the amount that is liable to them.

The other thing is the importance of saving regularly. Certainly use a SIPP if that is money that would otherwise be subject to higher rates of tax. Otherwise put money that has been taxed at standard rate into an ISA.

What you invest in is another matter, but one of the global ITs will almost certainly outperform a tracker fund, after charges have had their effect.

TJH

[scrumpyjack]

ISA or SIPP?

Ideally both, but a couple of other factors to consider:-

A pension fund is always likely to be more politically acceptable and less likely to be attacked by a future hard left government.

Also a pension fund, at present at least, has IHT advantages compared to an ISA.

[PinkDalek]

Also a pension fund, at present at least, has IHT advantages compared to an ISA.

At present at least, it depends on what one holds in your ISA.

[XFool]

Also a pension fund, at present at least, has IHT advantages compared to an ISA.

At present at least, it depends on what one holds in your ISA.

Don't tell us you hold all AIM shares.

[PinkDalek]

Also a pension fund, at present at least, has IHT advantages compared to an ISA.

At present at least, it depends on what one holds in your ISA.

Don't tell us you hold all AIM shares.

I shan’t then, as I don’t hold all AIM shares nor do all AIM shares qualify for IHT Business Relief, as I’m sure you know.

[fca2019]

Thank you for all your comments. There is plenty for me to think about.

I shall add a global IT to my portfolio, and will think some more about the comments.

[XFool]

At present at least, it depends on what one holds in your ISA.

Don't tell us you hold all AIM shares.

I shan’t then, as I don’t hold all AIM shares nor do all AIM shares qualify for IHT Business Relief, as I’m sure you know.

Yes. "hold all AIM shares" means/meant: "hold in your ISA shares that are all shares currently listed on AIM"

[PinkDalek]

Yes. "hold all AIM shares" means/meant: "hold in your ISA shares that are all shares currently listed on AIM"

Roll your eyes all you like but, yes, that is my intention. Unfortunately (or fortunately, looking on the bright side) a couple of CGT related events have got in the way in 2018-19 and 2019-2020 but the mission should be accomplished come 2022-23.

All subject to:

Office of Tax Simplification Inheritance Tax Review
viewtopic.php?f=49&t=18387

Happy to discuss elsewhere but I don't want to digress further from the OP's OP.

[Aminatidi]

This thread may be worth a read as there are some parallels between you and I

viewtopic.php?f=8&t=18122

[XFool]

Thanks. I'll have a look Aminatidi.

[jonesa1]

If your marginal tax rate is 20%, then the tax relief benefits of a SIPP are quite small, you get a 25% uplift, but pay tax on 75% of the total at withdrawal - it nets out at a one-off 6.25% uplift (once in withdrawal you could keep recycling the same £2880 each year, making £180 pa), unless you will be a zero rate payer at withdrawal. The benefits for a higher rate payer, especially one who will be within the basic rate band during retirement, are more significant.

A SIPP has some other potential advantages (mainly to the people featured in your will), with a significant restriction on when you can access the funds. As already mentioned, it doesn't seem to make sense to use money already sheltered in a ISA for a SIPP.

[fca2019]

I have taken the comments on board. Thanks, all. I've decided to leave the amounts in the cash ISA alone.

I've added £2k into my SIPP today (Fidelity Index World £1k and Scottish Mortgage IT £1k).

Its my first venture into Investment Trusts. I liked this one because of the low fees. I looked at others but the relatively high charges/fees put me off. Its a tricky one. It seems as much of an art as a science.

I have been investing past year in ISAs but think I should be placing more in SIPPs for tax reasons. Our expenditure is about £25-30k p.a., so the plan would be to benefit from tax relief now, and future income would be largely tax free (s.t. risk of a hard left government!).

I'm only just into the higher rate tax band so don't think I'd benefit further from additional higher rate tax relief. I already claim a small amount back on my tax code.