New investor [UK portfolio help]

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Limoncelo
Posts: 2
Joined: Wed Jul 23, 2014 7:56 pm

New investor [UK portfolio help]

Post by Limoncelo »

Hello everybody,

I have been reading the forum this last months but never wrote a thing since there is not much I can offer. I am trying to lear from all of you guys anyway, so thank you for that.

The money I have made on my life is stuck on the bank, where it makes very little as you can imagine. I decided last year to jump on to investing during 2014, so here I am at the moment. I read some books and came up to the conclusion that I should try to do it for myself instead of looking for a “professional” to look after my bussines.

Data:

-Age: 27
-Debts: None
-Emergency fund: Yes
-Single
-Residence: UK
-Actual Savings: 400k$
-Actual Investment:

*HSBC S&P 500 UCITS ETF (GBP): 12K GBP
*HSBC FTSE 100 UCITS ETF (GBP): 12K GBP
*Crypto Currencys: 20K$

-Property: 200k$ (paid)



What do I look for?

I will not need the money invested any time soon (10yr+). Currently work and make enough money every year to pay for my living and expenses. My main goal is to reach and mantain whichever distribution on the market I decide from the begining over the years.

On this basis I look forward to make a good distribution of my savings. I am a risk tolerant person. I am used to economic swings and should be capable of mantaining head cool on the “bad days”.

I will be capable of making adjustments via new deposits to rebalance my portfolio to its original percentages.


What I ask for?

Thoughts on 100% stock allocation. Looking for big international diversification.
Isn't it a very bad moment to hold bonds?
Any thoughts on US stock market P/e ratio? Should it make the international investment weight higher?



Sorry if I mess up stuff, I receive too much info and have too little experience.

Thank you all in advance for any help I might receive.
User avatar
LadyGeek
Site Admin
Posts: 95702
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: New investor [UK portfolio help]

Post by LadyGeek »

Welcome! I retitled your thread to draw the attention of our UK experts.

The wiki can provide some background info: UK investing

I'm not a UK expert, but holding 100% stocks is not a good idea - regardless of where the bond market is. Consider starting at 80% stock / 20% bonds. See: Asset allocation ("Rules of thumb" and "Ability, willingness, and need")
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: New investor [UK portfolio help]

Post by TedSwippet »

Have you looked at the Vanguard LifeStrategy funds, held on a fixed fee platform like Interactive Investor? Simple, low cost and fully diversified portfolio in a single fund.

For more ideas and discussion specific to the UK, perhaps visit fool.co.uk or monevator.
magneto
Posts: 1060
Joined: Sun Dec 19, 2010 9:57 am
Location: On Chesil Beach

Re: New investor [UK portfolio help]

Post by magneto »

Limoncelo wrote: The money I have made on my life is stuck on the bank, where it makes very little as you can imagine.
Not clear about this as you list some investments

I read some books and came up to the conclusion that I should try to do it for myself instead of looking for a “professional” to look after my bussines.
Take your time before making investment decisions. Have you read yet 'Smarter Investing' by Tim Hale? Suggested as a must read for UK investors. The title is a little misleading as it is actually about passive investing as practised by Bogleheads, not trying to beat the market

I am a risk tolerant person. I am used to economic swings and should be capable of mantaining head cool on the “bad days”.
Don't be overconfident. None of us know for certain how we will behave in a savage bear market

Thoughts on 100% stock allocation.
Bad idea, as pointed out by Lady Geek

Looking for big international diversification.
Think about Vanguard Exchange Traded Fund VWRL

Isn't it a very bad moment to hold bonds?
Maybe, but bonds and cash are safer alternatives compared to upping the stocks holding


Any thoughts on US stock market P/e ratio? Should it make the international investment weight higher?
Don't know/understand. US stocks certainly appear expensive, but US growth could exceed rest of world. VWRL does in any event give quite high exposure to US.
What are your thughts about the Vanguard LifeStrategy funds as highlighted by Ted above?

Welcome to the forum.
'There is a tide in the affairs of men ...', Brutus (Market Timer)
Topic Author
Limoncelo
Posts: 2
Joined: Wed Jul 23, 2014 7:56 pm

Re: New investor [UK portfolio help]

Post by Limoncelo »

magneto wrote:
Limoncelo wrote: The money I have made on my life is stuck on the bank, where it makes very little as you can imagine.
Not clear about this as you list some investments

I read some books and came up to the conclusion that I should try to do it for myself instead of looking for a “professional” to look after my bussines.
Take your time before making investment decisions. Have you read yet 'Smarter Investing' by Tim Hale? Suggested as a must read for UK investors. The title is a little misleading as it is actually about passive investing as practised by Bogleheads, not trying to beat the market

I am a risk tolerant person. I am used to economic swings and should be capable of mantaining head cool on the “bad days”.
Don't be overconfident. None of us know for certain how we will behave in a savage bear market

Thoughts on 100% stock allocation.
Bad idea, as pointed out by Lady Geek

Looking for big international diversification.
Think about Vanguard Exchange Traded Fund VWRL

Isn't it a very bad moment to hold bonds?
Maybe, but bonds and cash are safer alternatives compared to upping the stocks holding


Any thoughts on US stock market P/e ratio? Should it make the international investment weight higher?
Don't know/understand. US stocks certainly appear expensive, but US growth could exceed rest of world. VWRL does in any event give quite high exposure to US.
What are your thughts about the Vanguard LifeStrategy funds as highlighted by Ted above?

Welcome to the forum.

Thank you guys for the welkome.

1. I have read the Vanguard Lifestrategy funds:

Pros: Long term as I want. Big diversification. Not much to worry about once you buy it.
Cons: Weight on US market too much IMO. Higher comission. I will have to pay more taxes doing it this way.

I have been thinking in the following distribution:

30% US
40% Developed Countries
25% Emergent
5% Frontier


2. Bond issue:

I have read opinions and past year tendencys. Seems like history says that 100% stock distribution and 80-20 is not very different on the long run. No clue on how to attack bond distribution. Any guidelines?
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: New investor [UK portfolio help]

Post by TedSwippet »

Limoncelo wrote:Cons: Weight on US market too much IMO. Higher comission. I will have to pay more taxes doing it this way.
You can certainly beat LifeStrategy commissions by slicing it yourself. The 'dilution levy' to cover UK stamp duty is a particular bugbear -- over time you should get that back in lower charges and closer tracking relative to funds that have to conjure stamp duty out of other charges, but even so... Single fund portfolios are also hard to balance against if you have other holdings. Not sure how you get a higher tax bill though. Perhaps some of your investments are in ISAs or SIPPs and so tax sheltered?
Limoncelo wrote:I have been thinking in the following distribution: 30% US, 40% Developed Countries, 25% Emergent, 5% Frontier
Might that not underweight the UK? Around 3.5% in ones home country is notably low (not saying it is wrong, just well away from the norm). A couple of years ago Vanguard published a report on international allocations. That might be worth a read.
Limoncelo wrote:No clue on how to attack bond distribution.
A perennial problem for UK investors. There are few gilt tracker funds or ETFs, and none that I know of are short or intermediate term. Personally I split bonds to half index linked and half not, and then use Vanguard or Legal & General funds, Vanguard ETFs (VGOV), or iShares ETFs (IGLT, INXG) to make up that portion.
magneto
Posts: 1060
Joined: Sun Dec 19, 2010 9:57 am
Location: On Chesil Beach

Re: New investor [UK portfolio help]

Post by magneto »

Just to add to what Ted has said, there is one short gilt tracker IGLS (0-5year gilts), with a modified duration of 2.38 years. However in my opinion it compares poorly with cash, since the distribution yield is currently 0.65%, and the total expense ratio 0.2%. I suppose it might conceivably produce some capital appreciation should stocks decline, but equally if interest rates rise it could lose capital value.

If it is any help, we use VWRL as the core of our stock porfolio.
As an alternative/supplement, the higher yield VHYL does reduce the US exposure but is a deviation from total market allocation, and raises the contentious issue of yield seeking.

1/3rd of our stocks are UK, mostly VUKE and MIDD, but the 1/3rd allocation is just a personal preference. Others have different views on domestic allocation, and the link that Ted gave is fascinating, particularly fig 1.
'There is a tide in the affairs of men ...', Brutus (Market Timer)
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: New investor [UK portfolio help]

Post by TedSwippet »

magneto wrote:Just to add to what Ted has said, there is one short gilt tracker IGLS (0-5year gilts)
Thanks, I always forget that one. Mostly because, as you note, it's no real improvement over cash. Also IEGE (0-1year treasuries).
Post Reply