Portfolio Advice - UK SIPP & ETFs for regular saving?

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ejo87
Posts: 1
Joined: Fri Sep 11, 2020 3:02 am

Portfolio Advice - UK SIPP & ETFs for regular saving?

Post by ejo87 »

Hi! New investor (18 months in, new to this community, 32 years old, recently started reading Bogleheads Guide To Investing).
Country of Residence:UK
International Lifestyle: UK based, no plans to move.
Currency: GBP

I'm a regular investor into a UK SIPP and a Stocks & Shares ISA. Just started learning about the pros and cons of ETFs. Initially, I was keen to have an ETF-heavy regular investing strategy but have slowly been discovering that the transaction fees might negate any returns if I use this approach. Below is the allocation I had designed, but now having second thoughts.

Questions:
(1) Is it wise to include ETFs as part of regular (monthly) investing strategy (dollar cost averaging) with such low monthly investments?
(2) What do you think? Have I overcomplicated things?


Proposed retirement assets

Retirement savings account UK SIPP, tax deferred
Gross Monthly Contributions (incl tax relief): £1,000
0% cash
50% ETFs 50% funds:
25% VTIVX (Target Retirement 2045)
20% VUAG (0.07% expense ratio)
20% VUKE
10% VFEM
9% L&G US Index Trust
9% L&G International Index Trust
6% Rathbone Global Opportunities

Sheltered investment account, UK ISA tax free
Total Monthly Contributions: £300
33% VUSA
33% VWRL
23% VFEM
10% VGOV

Note: Separately also saving regularly in a high interest online account for a house deposit.
TedSwippet
Posts: 3166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Portfolio Advice - UK SIPP & ETFs for regular saving?

Post by TedSwippet »

Welcome.

A couple of quick thoughts, then I'll leave it to others to chime in with more detail.
ejo87 wrote: Fri Sep 11, 2020 6:56 am (1) Is it wise to include ETFs as part of regular (monthly) investing strategy (dollar cost averaging) with such low monthly investments?
Not necessarily. Some platforms have cheap charges for regular investing, where they might batch up your and other clients' trades, so that you pay £1.50 rather than (say) £8 or £10. And Vanguard's own direct-to-customer platform offers free trading in both ETFs and unit trusts, provided the 0.15% platform fee doesn't put you off.

Which platform(s) do you currently use? Hargreaves Lansdown are popular, but can be expensive depending on what you hold. Less costly options may exist.
ejo87 wrote: Fri Sep 11, 2020 6:56 am (2) What do you think? Have I overcomplicated things?
A little, probably. For example, target retirement funds are designed to be a 'portfolio-in-a-box', so mixing and matching other funds with that makes it hard to see what you actually own, how to rebalance, and so on. For your SIPP, maybe either go all-in with target retirement or lifestrategy, or use only individual components.

On lifestrategy, perhaps a better choice than target retirement, since this fund range does not shift from stocks to bonds as you age, so you can tune things better for your own personal circumstances.

Likewise, in your ISA you have VWRL, which will currently be around 50-60% US stocks, and also VUSA, so a big chunk of overlap there, leaving you well overweight on US stocks. Maybe that's where you want to be, but if so then again, trying to balance the overlaps of all-world funds and regional funds leads to rebalancing headaches.
Valuethinker
Posts: 41152
Joined: Fri May 11, 2007 11:07 am

Re: Portfolio Advice - UK SIPP & ETFs for regular saving?

Post by Valuethinker »

ejo87 wrote: Fri Sep 11, 2020 6:56 am Hi! New investor (18 months in, new to this community, 32 years old, recently started reading Bogleheads Guide To Investing).
Country of Residence:UK
International Lifestyle: UK based, no plans to move.
Currency: GBP

I'm a regular investor into a UK SIPP and a Stocks & Shares ISA. Just started learning about the pros and cons of ETFs. Initially, I was keen to have an ETF-heavy regular investing strategy but have slowly been discovering that the transaction fees might negate any returns if I use this approach. Below is the allocation I had designed, but now having second thoughts.

Questions:
(1) Is it wise to include ETFs as part of regular (monthly) investing strategy (dollar cost averaging) with such low monthly investments?
(2) What do you think? Have I overcomplicated things?


Proposed retirement assets

Retirement savings account UK SIPP, tax deferred
Gross Monthly Contributions (incl tax relief): £1,000
0% cash
50% ETFs 50% funds:
25% VTIVX (Target Retirement 2045)
20% VUAG (0.07% expense ratio)
20% VUKE
10% VFEM
9% L&G US Index Trust
9% L&G International Index Trust
6% Rathbone Global Opportunities
Why so many funds? Either the Target Retirement fund, or Vanguard does a FTSE World index fund? Why so much UK - overweight?
Sheltered investment account, UK ISA tax free
Total Monthly Contributions: £300
33% VUSA
33% VWRL
23% VFEM
10% VGOV

Note: Separately also saving regularly in a high interest online account for a house deposit.
I don't know the ticker codes.

I recognise VWRL - that's the world index. So fine, done and dusted - you don't need to overweight USA. VWRL has Emerging Markets already?

On bonds. Well. 10% is neither here nor there. I believe everyone should have at least 20% bonds (and also at least 20% stocks). When equities drop 50% (as they do: in 2008/09; in 2000-03 they only dropped 35% but over 33 months; in October 1987 they dropped 22% in one day) then knowing that you have not been nearly totally wiped out is a good feeling.

One bond fund is much as a muchness (investment grade government bonds). I happen to hold global bonds, hedged back into GBP. The peculiarity of the gilt index is very long duration (15 years nearly) so high sensitivity to falls or rises in interest rates (roughly +1% interest rates => -15% in value). The equivalent global index, sterling hedged, is c 7-8 years. It can be argued that you *want* deflation protection then long duration is good - if we are in another Japan that would do quite well.

(in the 1970s, in the UK, inflation was over 20% pa many years and in 1973-74 (?) over the course of about 18 months the UK index droppedby about 80% in real terms. Straight gilts dropped by more. Only index linked gilts (which didn't exist before the 1980s) would have done better. Of course the market then rose by +100% in the next year (but from 100 down to 20 +100% only takes you back to 40)).
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