mark85 wrote:Have read other similar posts but was wondering what people’s thoughts are on how this portfolio I am planning to hold long term will fair.
Key Points
- Secure engineering job in early 30s
- £100,000 currently invested in S&S ISA with ii
- Total yearly contribution going forward - £20,000 ISA limit thus monthly - £1667
- Interactive Investor Platform Yearly Fees total £120
- Transaction fees as regular investor £0 for purchases – monthly investment
- Yearly rebalancing of portfolio asset allocation
- 100% equity
Initial Portfolio Allocations
Based on VRWL/ VRWP Allocations
North America 62.60%
Europe 16.30%
Pacific 10.80%
Emerging Markets 10.10%
Middle East 0.20%
Investment forecasts seems to suggest that EM/EU excluding UK more likely to outperform over the course of next 5 years. US despite dominating over the course of the past significant number of years with elevated valuations estimated to underperform.
VHVG VANGUARD FUNDS PLC FTSE DEVELOPED WORLD UCITS ETF 0.12% cost – 80% allocation
VFEG VANGUARD FUNDS PLC FTSE EMERGING MARKETS UCITS ETF 0.22% cost - 15% allocation
FTSE Developed Europe UCITS ETF 0.10% cost - 5% allocation
Total fees – inclusive of platform/ investments with £2000 addition throughout the year approximately - £289. Equivalent 1% IT/Fund fees would equate to approximately £1320 – I appreciate that there are cheaper options but 1% didn’t seem unduly unfair.
Based on a 5% annualised return: Portfolio will be worth very approximately £408,820. (~£5627 will have been spent on fees, with £108200 interest accrued). Not inflation adjusted.
I pay less than 1% on my S&P 500 holding in my Standard Life Pension. I pay a little more on my fund in small UK companies.
May I suggest you think laterally about your long term future with regard to investments and savings. And please don't think I am criticising your progress to date. We have a 14 year old daughter and we've been encouraging her to think about saving from an early age. We have been supporting her with her JISA, which is financially tough on us, but it's what we want to do.
I wonder if you should review your options with regard to investing in a pension. Noting of course that there's a timeline restriction which could be increased by future governments. Investing is a personal journey. We all have to choose the route which we feel the most comfortable and suitable for our needs. I won't ask what your income is or what your personal circumstances are. Not my business.
There are some advantages of investing in a pension. They may not be for you though. If you are earning above £50K then your tax advantages are very good. Below that there may still be some tax advantages.
I'm not selling pension investing by the way. Merely and Foolishly just nudging you to think about how they may fit your investing strategy. Upon my death my pension will pass to my good lady. And upon her death "our" pensions will pass to our daughter. Upon receipt she has no IHT to pay on them. She can draw down from them immediately and pay tax as if the drawdown amount is an earning.
If you earn say £40K per year you could (by example) take £20K out of your ISA and put it into a pension. It would attract a 25% tax rebate at source or the equivalent of £5K. Which is a significant increase on your projected 5% growth which on £20K would be £1K. Again noting that the money is locked in until you are 57 currently. But the 5K will attract compound interest.
The distinct advantage of a pension is it has a tax free allowance (currently) of £1.07M.
I am not putting forward an argument for pensions. That's for you to decide
AiY(D)