New member with 400k to invest

[GeoffF100]

(1). Index linked bonds provide a rising income and a redemption value that rises with inflation. Both index linked annuities and escalating annuities provide a rising income. You can also draw a rising income from a portfolio of fixed interest bonds (you will not live forever).

If you look at the rates available on index-linked securities they were at or close to zero. Index linking of zero income is of little help. Also most were only available at a premium, so despite index linking the capital, you can still suffer a loss in real terms

TJH

A real redemption yield of zero means that the total return exactly keeps pace with inflation. Index linked annuity rates are now also much more attractive than they were. Real redemption yield are now mostly very close to zero, but they change from day to day. The shorter dated issues track RPI inflation.

[GeoffF100]

Here is a product aimed a funding an annuity:

https://www.reassure.co.uk/uploads/RE04 ... HR-RLL.pdf

The equity percentage is tapered down from 100% to 0% over a five or ten year period. My index linked pensions provide more income than I am likely to spend. My investments will fund a charitable donation on my death. If I followed the pattern in the link, I would taper my equity exposure when my life expectancy drops to five or ten years.

But the point is that the OP is not about funding an annuity - they already have a comfortable pension sorted. Continued growth is important. That link looks at 2 "lifestyle" options, and the "Balanced" one goes to 25% "Lifestyle Deposit Fund" (short-term money market), and 75% "Lifestyle Retirement Fund", which:

"aims to achieve an annual return above the UK rate of inflation over the medium term through a combination of the returns on income and capital by gaining exposure to a diversified range of asset classes. At the same time, the Fund is managed with a focus on short-term risks posed by markets"

It appears to be this: https://www.trustnet.com/factsheets/P/P ... irement-pn
Sector: PN Mixed Investment 40-85% Shares

though it's tiny - latest size (Sept 2021) £860,000. A breakdown of how much it currently has in shares in that quite wide range is not shown.

I am just pointing out the difference between life styling and the Target Retirement Fund glide path, because someone raised that issue. The relevance to the OP is that the conventional wisdom is to hold a substantial bond allocation in drawdown. He should find out why. It may or may not be relevant to him. I am not advocating anything. I am just trying to educate.

The regulars here have lived through an extraordinary period of stock market returns. We are the successful ones. Those who were unlucky went of to lick their wounds a long time ago.

[GeoffF100]

To be fair, whilst broadly true, not everyone needs a rising real income. In the real world (pun intended) declining income accompanies general declining expenditure in older age.

Not in my experience in 25 years of retirement and approaching my 90th birthday. If you need care at some stage, your income need will rise dramatically.

Many people choose a flat rate annuity because they want the money to enjoy life while they can. They are not bothered if they need care later on and cannot fund it themselves. They are content to leave that to the state.

[gnawsome]

... declining income accompanies general declining expenditure in older age.

... but multiplies the agencies who all want a larger piece of it
(sorry)

[tjh290633]

Not in my experience in 25 years of retirement and approaching my 90th birthday. If you need care at some stage, your income need will rise dramatically.

Many people choose a flat rate annuity because they want the money to enjoy life while they can. They are not bothered if they need care later on and cannot fund it themselves. They are content to leave that to the state.

You are probably too young to remember all those widows on fixed incomes, who fell into poverty.

TJH

[GeoffF100]

Many people choose a flat rate annuity because they want the money to enjoy life while they can. They are not bothered if they need care later on and cannot fund it themselves. They are content to leave that to the state.

You are probably too young to remember all those widows on fixed incomes, who fell into poverty.

I am not speaking personally. I am just commenting on the behaviour of others. I am a rich man and could pay for care out of income without having to touch my investments.

[Backache]

I am a soon to retire with a comfortable pension and will be mortgage free. I will have £400k to invest which I want to do without any drawings for at least 5-6 years, after which I will then re-evaluate my objectives but will probably migrate to regular drawings/taking income at that stage.

I am financially literate but a novice investor. I don’t have much in the way of ISAs as I am a spender rather than a saver, I’ve been reliant on having an excellent pension.

What do you think of my planned portfolio….

OGC Model
Vanguard UK Equity Income Index 0.14% 25% 100,000
Vanguard US Equity Index Fund 0.10% 15% 60,000
Vanguard FTSE Europe ex UK ETF 0.10% 10% 40,000
iShares Japan Equity Index Fund class D 0.08% 8% 30,000
Passive. 58% 230,000

Fundsmith Equity T Class 0.94% ISA 8% 30,000
Smithson Investment Trust 0.90% ISA 8% 30,000
City of London Investment Trust 0.74% ISA 5% 20,000
Greencoat UK Wind plc. 0.87% 8% 30,000
Capital Gearing Trust 0.80% 8% 30,000
Royal London Sterling Extra Yield Bonds 0.84% 8% 30,000
Active 43% 170,000

Total Cost 0.43% 100% 400,000

One comment I would make is that you are putting Fundsmith and Smithson into ISA's. Whilst leaving CGT and a bond fund out of them.
Most of the return from The Funsmith stable is expected to be in appreciation of assets rather than income. Capital gains tax for most is lower than tax on interest or dividends so it may make more sense to tax shelter your income producing assets.

[Harry23]

A couple of pennies for my tuppence ...

Firstly, I take a simplified approach mainly due to my novice level of expertise so I can't say much about the fund choices. However, what does give me anxiety is around the timing of investing a large lump sum in the markets. Most of my investing life has involved putting a couple of hundred quid per month into the funds so market volatility hasn't been a huge issue. But investing tens or hundreds of thousands at once is a big step. Do you scan the world news for any straws in the wind about to break into big stories affecting the markets? Do you do some standard financial ratio analysis of the economy to decide if this is a good time to invest or to hang on a while? Or is any attempt at timing the markets a waste of time and potential profit?

For context, I did have a bit of money put aside in the building society a few years ago and my intuition more than anything else told me to keep it there and as fate would have it, along came the covid crash followed by a good investing window. Which more or less recouped my losses I made during the dot.com crash 20 years earlier when I made a bad market judgement! As I'm an anxious person I think I would invest a lump sum in stages rather than all together, but perhaps that's got more to do with my stress levels than any sound financial reasoning.

Secondly, a downside of investing in a relatively large number of funds is the time involved in monitoring them to evaluate whether to keep them going or change them; so it depends how much time you want to spend and how much that work interests you. It's no doubt easier the more computer savvy you are and able to computerise the number crunching! Personally I still have a manual paper file where I keep my records but not sure how common that is nowadays!

[GeoffF100]

Do you scan the world news for any straws in the wind about to break into big stories affecting the markets? Do you do some standard financial ratio analysis of the economy to decide if this is a good time to invest or to hang on a while? Or is any attempt at timing the markets a waste of time and potential profit?

It is a waste of time. Nobody knows the future. Investing is a game of chance.

Secondly, a downside of investing in a relatively large number of funds is the time involved in monitoring them to evaluate whether to keep them going or change them; so it depends how much time you want to spend and how much that work interests you.

Using a large number of funds is another waste of time. A single global tracker will do for the equity part of your portfolio. You do not add diversification by adding funds holding the same stocks.