Where to invest for long term

[Dumbfool]

Hi All,

My wife has just received a lump sum payment of 30k and as she is in hers mid 50’s and still actively working we are looking to invest it for 5-10 yrs. My wife is more risk weary than me but knows it needs investing rather than saving.

After spending much of the last week reading up I believe an etf maybe an option but which one....

I also have 1k which I would like to use to invest in individual stocks for growth but will ask separately about that...

[JohnB]

I suggest you start at monevator.com where there are lots of articles about investing. Two things your wife will need to decide 1) her attitude to risk, 2) active or passive funds. A book like Lars Krojer;s Investing Demystified will help on both counts.

[Dod101]

I would simply buy three generalist Investment trusts, Scottish Mortgage, Alliance Trust and say Law Debenture. If feeling less adventurist, then substitute Monks for Scottish Mortgage. End of.
DYOR though.

She is presumably more risk wary though. If risk weary she has already been through the mill. If risk wary, I think my three choices are fine over the period you mention.

Dod

[Mike4]

I would simply buy three generalist Investment trusts, Scottish Mortgage, Alliance Trust and say Law Debenture. If feeling less adventurist, then substitute Monks for Scottish Mortgage. End of.
DYOR though.

She is presumably more risk wary though. If risk weary she has already been through the mill. If risk wary, I think my three choices are fine over the period you mention.

Dod

I have a similar 'problem' to the OP and I'm weary of investing in property. So on a practical note, how in practical detail does one go about 'buying' investment trusts, please?

Much obliged.

[Dod101]

Buying investment trusts is just like buying any other equity because that is what they are. The regulator makes them sound complicated for some reason and you may need to tick a couple of boxes to do with KIDs whatever they are. You may prefer to buy them at or around Net Asset Value (NAV in IT jargon) but I think those that I mention are probably around or maybe below that. The significance is that (the NAV is calculated with most trusts daily) if you buy below NAV, you are getting £1 of assets for the discounted price and or are paying a bit more than the NAV if they are trading at a premium.

Dod

[JohnW]

After spending much of the last week reading up I believe an etf maybe an option but which one....

Nothing to criticise there. One of many good options. You might now be better off doing some more reading, to the point where you come back with some sensible suggestions for people's comments which you'll then be in a very good position to critically evaluate.

I have a similar 'problem' to the OP and I'm weary of investing in property. So on a practical note, how in practical detail does one go about 'buying' investment trusts, please?

I'm pretty sure I got a lot out of reading around a bit when I was asking similar questions. Can't think of a good analogy, but something like where to buy a horse before knowing a bit about horses when one is wary of bike riding?

[Mike4]

Buying investment trusts is just like buying any other equity because that is what they are.

Thank you, but you miss my point. How does one go about "buying any other equity" please?

As I said, the only class I've ever invested in is property. I've not bought an equity for 25 years and it didn't go well, which is why I've since stuck to property. I never see equities out and about with "For Sale" boards nailed to the front garden wall

I think nowadays one first needs to open an account with some sort of on-line platform, yes?

[Dod101]

Well if you are serious, then nowadays it is best to buy via an online platform. There are still a few old style 'full service' stockbrokers around so far as I know , although I have not used one for many years. The practical way is to open an account with some platform like HL, Interactive Investors, one of the several Lloyds Bank's platforms, AJ Bell or so on. Just check the charges and go. I think it best to go with a flat fee platform but it depends how much you want to hold in it and how much you value 'service'. You can hold the shares in an ISA (up to £20,000 per year) or directly through a trading account (which is the modern equivalent of a certificate account with an old style stockbroker. Well not quite but that will do for now.)

Any further questions?

Dod

[Mike4]

Well if you are serious, then nowadays it is best to buy via an online platform. There are still a few old style 'full service' stockbrokers around so far as I know , although I have not used one for many years. The practical way is to open an account with some platform like HL, Interactive Investors, one of the several Lloyds Bank's platforms, AJ Bell or so on. Just check the charges and go. I think it best to go with a flat fee platform but it depends how much you want to hold in it and how much you value 'service'. You can hold the shares in an ISA (up to £20,000 per year) or directly through a trading account (which is the modern equivalent of a certificate account with an old style stockbroker. Well not quite but that will do for now.)

Any further questions?

Dod

Thanks. Having sold about a third of my property portfolio over this last five years I have a bit of a lump in the bank needing a home, and some well chosen investment trusts seem a good place to start. But I'm blocked from doing that until the mechanics of how are put into place and this thread just prompted me to ask!

Can I buy investment trusts in an ISA? This seems the obvious thing to fill up first, now you mention them.

[Dod101]

Absolutely. Up to £20,000 for you and the same for a spouse now, and repeat after 5 April.

Dod

[Dod101]

Mike4. Now that you have had a crash course on investment trusts, all you have to do now is chose two or three. The ones I mentioned I stand by but they suit my circumstances and it depends very much what you and your wife want from them. Scottish Mortgage as you may know is rather high octane. It has dome particularly well during 2020 but of course there is no guarantee that that performance will be repeated this year and by the nature of its investments it can and probably will be volatile.

Alliance is to me a good middle of the road trust with a good spread of investments, geographical and otherwise. It has good exposure to the US and had a good year last year.

Both of these trust are very much worldwide growth with but modest dividends, in the case of Scottish Mortgage, very modest.

Law Debenture is a little different with a trading company alongside its investment trust. Some will say that provides more stability and helps underpin the dividend.

I hold the first two but you ought to take a look at the Annual Reports before you buy as these are intended to be Long Term Buy and Hold investments.

Good luck.

Dod

[Urbandreamer]

Can I buy investment trusts in an ISA? This seems the obvious thing to fill up first, now you mention them.

I think that Dod may be failing to explain just how easy it is. You will need your National Insurance number if setting up an ISA or SIPP. Standard ISA or Pension rules apply.

Once you have your account set up and funded you search for the investments you have chosen and hit deal. Take your time and don't get flustered, though it will mean that you have to make a few attempts. Because the price of things changes fairly quickly, you will be given a quote and only have a short time (15 seconds in the case of A J Bell) to confirm that you wish to proceed. It's likely that time will expire on your first few attempts, but that's not an issue. Just try again.

If you are buying the likes of Investment Trusts, regulations require that the broker check that you have made some minimal research. It's a bit mad as if you are taking higher risks by buying shares in individual companies you won't be asked to read any "KID". It is worth reading the "Key Investment Document" on the IT you selected, just treat it with caution. In my opinion it contains nothing that you should not have found out from other places and some misleading estimates on risk. For example, while Dod and I both hold SMT and agree it's high octane, the KID claims it's not that risky. You could just lie and tick the box saying that you have read the information, but I wouldn't.

Back to the OP's question. Mainstream ETF's are all fairly similar, so it's not easy to pick a bad one. Remember investment is mostly NOT about choosing a winning horse. The also rans will also provide good returns.

[TUK020]

Hi All,

My wife has just received a lump sum payment of 30k and as she is in hers mid 50’s and still actively working we are looking to invest it for 5-10 yrs. My wife is more risk weary than me but knows it needs investing rather than saving.

After spending much of the last week reading up I believe an etf maybe an option but which one....

I also have 1k which I would like to use to invest in individual stocks for growth but will ask separately about that...

One question is what to invest in, ETFs & ITs are mentioned here.

The other question relates to what tax wrapper you invest in - ISA would be the default. If your wife is working and in mid 50s, then the other thing that you ought to consider is a SIPP - self invested pension plan. Whether this is advantageous depends largely on her tax rate now, and likely tax rate when she wants to draw the money. The mechanics for investing are muych the same - people like HL offer both SIPP and S&S ISAs on their platform.

[Bubblesofearth]

The equity investment with the lowest risk is a low cost Global tracker such as VRXXA.

I have 2 accounts with online platforms, Youinvest and Halifax. Both are easy to set up, just follow the instructions online.

ISA route to avoid tax. £20k this tax year and the other £10k next tax year.

BoE

[Urbandreamer]

The equity investment with the lowest risk is a low cost Global tracker such as VRXXA.

With respect, while a global tracker may be a great choice for the OP to make, I strongly disagree with your statement "lowest risk".

For example Ruffer and Capital gearing both actively manage risks. Ignoring them and looking at a passive approach Vanguard do "lifestyle" funds that combine a global tracker with bonds to achieve a lower risk product. IF risk is the highest concern, which might be the case with the OP's wife, surely the lifestyle fund might be a better choice than a pure tracker.

Ruffer's returns are not great, but they have achieved returns and greatly minimised losses. Indeed the share price of Ruffer didn't really drop when the global index did due to Covid.

Try a comparison between RICA and Vanguards all world tracker. Over 5 years the world tracker outperforms (ruffer does so over 1 year), however the tracker lurches down by 25% through March this year, unlike Ruffer.

[jonesa1]

Hi All,

My wife has just received a lump sum payment of 30k and as she is in hers mid 50’s and still actively working we are looking to invest it for 5-10 yrs. My wife is more risk weary than me but knows it needs investing rather than saving.

After spending much of the last week reading up I believe an etf maybe an option but which one....

I also have 1k which I would like to use to invest in individual stocks for growth but will ask separately about that...

For a risk averse spouse one option could be to split the investment between funds which aim to capture equity growth and those which prioritise trying to preserve wealth. Equity growth funds range from passive index trackers (such as VWRL, Vanguard's Global ETF) through relatively conservative ITs (such as Alliance Trust or Bankers), pushier growth funds (such as Monks) to full-on growth funds (such as Scottish Mortgage). Two of the most popular ITs with a wealth preservation mandate are Personal Assets and Capital Gearing Trust. Another option could be the Vanguard Life Strategy funds which combine passive equity and bond trackers in varying combinations (ranging from 100% equity 0% bonds to 20% equity 80% bonds, designed to match risk tolerance), these may be a good "hands off" option. There are plenty of other IT, ETF or fund options with a variety of approaches, being clear on what you require could help home in on suitable choices. My partner's ISA is 35% Personal Assets, 35% Capital Gearing and 30% VWRL, chosen on the basis that maintaining value is more important to her than growing it.

Andrew

[Adamski]

I'd second that. If you're looking for an ETF, can't go much wrong with the Vanguard All World one, VWRL. It's popular as a passive investment and as a benchmark to see how you're doing.

[Bubblesofearth]

For example Ruffer and Capital gearing both actively manage risks. Ignoring them and looking at a passive approach Vanguard do "lifestyle" funds that combine a global tracker with bonds to achieve a lower risk product. IF risk is the highest concern, which might be the case with the OP's wife, surely the lifestyle fund might be a better choice than a pure tracker.

Yes, a lifestyle product which has a mix of equities and bonds is lower risk than all equities. Which is why I was careful to say that a Global tracker is the lowest risk equity option.

The theory behind this is probably beyond the scope of this thread. Models to look at would include the efficient market hypothesis and Capital asset pricing. If risk is being managed below that of the Global market then that will come at either higher cost or reduced expected return. An example would be the use of derivatives to reduce risk where there will necessarily be a sacrifice in terms of potential return.

The Global market is the sum of all portfolios within it. So whilst some of these portfolios will outperform, and/or be less risky, others will be the opposite. Unless this performance/risk profile can be predicted then the Global market remains the lowest risk option for equivalent expected return. I've never seen any evidence to suggest that such prediction is possible.

BoE

[Urbandreamer]

The theory behind this is probably beyond the scope of this thread. Models to look at would include the efficient market hypothesis and Capital asset pricing. If risk is being managed below that of the Global market then that will come at either higher cost or reduced expected return. An example would be the use of derivatives to reduce risk where there will necessarily be a sacrifice in terms of potential return.

I can entirely agree with that. But it exactly shows why I felt such a strong need to disagree with your original statement. Market risk is NOT the lowest risk that can be achieved, as you originally claimed by stating that an index tracker was the lowest risk.

We should all think carefully about our risk tolerance. If watching the value of your holding drop by a quarter fills you with dread, you should not put it all in a global index tracker. Some are in a position to take greater risks and still sleep at night. Others are not and must accept lower returns.

[Dumbfool]

Well I think my handle is very appropriate lol. Dumb.....

Thx all for your contributions. My initial thoughts were to split between different Vangaurd ETF’s with different weighting’s based how far down the investment term we were and also adjusting for market conditions.

I intend to use an ISA from T212 as the wrapper so should have mentioned this in the beginning, apologies for that. (Easy access and fee free)

My initial choices were

VGOV - 5%
VFEM - 10%
VMID - 15%
VUKE - 50%
VEVE - 20%

I was hoping that in the short to medium term (0-5yrs) VUKE would offer the greatest growth potential due to the FTSE 100 currently being so low after Covid (hopefully bottoming out tomorrow/ this week..... if I buy them) with any divs/income being reinvested automatically.

I haven’t worked out the income from dividends yet so if any one could easily advise I would appreciate that.

Equally if the above is totally wrong then some constructive criticism would be welcomed.

Thx in advance.