New to investing, worried about my 40-60% Funds

[Lootman]

There are investment trusts that specialise in protecting capital, preserving wealth whilst still providing decent returns, eg Capital Gearing Trust, Ruffer and Personal Assets Trust, take a look at them and see what their portfolios look like.

You can directly hold (most of) the investments that these funds hold, and eliminate their costs.

Have you actually tried simulating any of those ITs?

How do you deal with the delay between them making portfolio changes and you hearing about them?

How do you buy and sell some of their more obscure instruments like options, futures, foreign securities, OTC deals etc?

Then at least in a taxable account you have CGT when you make those changes, whereas an IT shields you from that liability?

[Waspfan]

WOW,

I would like to thank you all for your great input and valued advice, this will take me some time to digest and give it the attention it deserves.


I feel better now I have shared my concerns with you experts

I will shortly put together a reply that outlines my portfolio and a brief summary as to why I had to sack my IFA

Thanks so much guys

[dealtn]

I have 3 funds in my SIPP portfolio which are 40-60% and arecausing me concern.

I am really worried about the bonds part of the investment in each of the above funds.

I am truly worried about the future of Bonds in the above 3 funds in my portfolio.

This whole portfolio is for our future fall back cash and wont be required for at least 10 years.

I am hoping someone with way more knowledge than me can offer me some reassurance about bonds in the above funds please.

Thanks

If you are as worried as you appear to be with bond exposure to that degree, with those sizes of valuation changes, then you really shouldn't be invested in that asset class. Nor should you be invested in equities.

If being invested solely in much less volatile assets, such as cash, causes you concern - particularly due to the real losses as a result of inflation, perhaps - then you need to prioritise your concerns. There are no free lunches in the real world I'm afraid, and that's the world we all find ourselves living in.

Apologies if that doesn't deliver the assurance you are seeking.

[Waspfan]

After lots of searching we decided after lots of meetings in January to appoint a chartered IFA, to give advice after we discussed exactly what we wanted, for a while

We wanted to move from our Aviva personal pension which was an Aviva 20-60% mixed asset, wasn't performing very well to AJ Bell platform, which had access to many more funds. so we agreed he would transfer my whole £176,500 pension pot over top AJ Bell

We are both retired no income now just living off savings waiting for our state pension and a small joint DB pension income, have £160,000 in savings £50,000 ringfenced in cash in our sipp wrapper, £30,000 lump sum expected in 3 years time just short of £90,000 in the portfolio listed below,

Why did we sack our IFA?

I had mentioned to him several times II wanted to drawdown from my portfolio 4 annual payments including this year, to maximise my tax allowance

So what did he do? He invested the whole of my transferred pension pot into the funds you see below, there was also Scottish Mortgage and 4 other corporate bond sipps which I have since got rid of so now all my money was invested in growth sipps and I wanted to drawdown in 3 months time then each year for 3 more years. so not a good decision to invest it all when I will be drawing down very soon.

2nd reason for sacking him.

He did not tell me he when he invested my money into AJ Bell Investcentre that you MUST have an IFA to use that platform, which effectively traps me into paying for an IFA.....What if I didn't want one after a few years? so I then had to do an inspecie transfer from AJB Investcentre to AJB Youinvest, where I didn't need an IFA, I had to sell one of the funds because Youinvest dont support all of the Investcentre funds, I was lucky it was just an Allianz one.

Losses due to selling down and crystallising £5,500, but hopefully if I buy new funds which are at a loss also, hopefully will recover some of that.

3rd reason I dont trust an IFA wanting to rebalance my portfolio just 2 months after starting, looks to me like he is wanting to "uturn" so by now my confidence in him now exhausted.

So as you can see, I am DONE with IFA's from now on

My intention is to nurture what I have invested in the funds below, as to be honest I have no actual "need" for the cash, it will be there for our much older age 70 onwards purely as supplementary to our state pension, and DB pension and cash savings

So I guess investing it in equities will be good seen as I can live without the money for at least 10 years...but then we never know whats on the horizon, if my wife or I pass then the surviving spouse loses the deceased's state pension

I have listed what I currently have in my SIPP portfolio, as I know some of you requested this info

I would be grateful for your input, I am however aware that with the exception of, Liontrust MA Passive Interm S Acc, Royal London Sustainable Div, C Acc, and Vanguard LifeStrategy 60% Equity A Acc all others are more or less 100% Equity

Theres a pretty even split between UK and US with some Asia, but not much in Europe or China

I would be grateful for any input, please shout up if I didnt add enough info.

Thanks everyone for your excellent help and feedback so far





Baillie Gifford International B Acc

Baillie Gifford Pacific B Acc

HSBC Pacific Index Accumulation C

iShares Pacific ex Jpn Eq Idx (UK) D

JPM Emerging Markets C Net Acc

L&G US Index I Acc

Liontrust MA Passive Interm S Acc

Royal London Sustainable Div C Acc

Royal London Sustainable Leaders C Acc

Vanguard FTSE 250 UCITS ETF ADDED BY ME

Vanguard FTSE Dev Wld ex-UK Eq

Vanguard FTSE Glb All Cp Idx £ Acc ADDED BY ME

Vanguard LifeStrategy 60% Equity A
Acc

[mc2fool]

Hi there. A few odd questions:

Can you clarify "I wanted to drawdown from my portfolio 4 annual payments including this year, to maximise my tax allowance" vs "My intention is to nurture what I have invested in the funds below, as to be honest I have no actual "need" for the cash, it will be there for our much older age 70 onwards purely as supplementary to our state pension, and DB pension and cash savings" please.

Also, if you can try and express, quantify if possible (it's difficult I know) your attitude to risk.

And how often you intend/prefer to be reviewing and possibly (depending on the review) tweaking your porfolio? Weekly/monthly/quarterly/annually?

[Waspfan]

Hi there. A few odd questions:

Can you clarify "I wanted to drawdown from my portfolio 4 annual payments including this year, to maximise my tax allowance" vs "My intention is to nurture what I have invested in the funds below, as to be honest I have no actual "need" for the cash, it will be there for our much older age 70 onwards purely as supplementary to our state pension, and DB pension and cash savings" please.

Also, if you can try and express, quantify if possible (it's difficult I know) your attitude to risk.

And how often you intend/prefer to be reviewing and possibly (depending on the review) tweaking your porfolio? Weekly/monthly/quarterly/annually?

Hi certainly, happy to clarify, sorry after teading it back it does look a little vague.

Here goes

I need £16,760 to be drawn down from my Sipp portfolio each year to live off, why £16,760, well £12,570 is what I am allowed to earn tax free, but I need to drawdown £16,760 because I have to have 25% tax free at the same time, they call it ups.

In order to have my £16,760 per year kept safe and uninvested, in case of any possible losses, I have kept the remaining 3 years which is 3 x £16,760 = £50,280 uninvested in my Sipp account, so I can access it over the next 3 years.

So when the 3 years is up I will be at state pension age, so won't need anymore drawdowns from my invested £90,000 in my sipp portfolio, as listed earlier. And in fact I won't have any actual need for it as living expenses, so the portfolio invested £90,000 is our nest egg for our 70 plus age span.

Attitude to risk, thats a tough one, but I would hate the idea of physically loosing any money with no prospect of ever recovering it again, but as for ups and downs, which I appreciate will occur the more risk you take then so be it.

Because I have taken care of the years up to state pension age, then really I could say that the £90,000 still invested can sit there making money. My brief to the now sacked IFA was, I want to cover inflation and make just a small amount on top.

So we have always been 5/10 risk wise, but knowing that profile won't let us realise our requirements for meeting inflation with a bit on top I would say 7/10, but only because I don't actually require the investment to live off for at least 10 years.

In regard to your question, how often do I plan on tweaking, well to be honest, as little as possible, my dream would be to stick it into one fund then leave it there, such as multi asset set it forget it

Timeline:

2026
My state pension, £10,000 plus my DB £3,000 per annum
Wife DB pension £ 3,500 per annum joint tax free lump sum approx £30,000, this £30,000 will be used to live off

2029 Wife receives state pension £9,500
All of the above will be within our tax allowance, meaning no income tax payable
We can cover our annual living costs easily with the above

Hope this helps.

Thanks for your kind attention.

[Waspfan]

I have 3 funds in my SIPP portfolio which are 40-60% and arecausing me concern.

I am really worried about the bonds part of the investment in each of the above funds.

I am truly worried about the future of Bonds in the above 3 funds in my portfolio.

This whole portfolio is for our future fall back cash and wont be required for at least 10 years.

I am hoping someone with way more knowledge than me can offer me some reassurance about bonds in the above funds please.

Thanks

If you are as worried as you appear to be with bond exposure to that degree, with those sizes of valuation changes, then you really shouldn't be invested in that asset class. Nor should you be invested in equities.

If being invested solely in much less volatile assets, such as cash, causes you concern - particularly due to the real losses as a result of inflation, perhaps - then you need to prioritise your concerns. There are no free lunches in the real world I'm afraid, and that's the world we all find ourselves living in.

Apologies if that doesn't deliver the assurance you are seeking.

Thanks, I suppose when I say worried I am meaning not so much the loss, but more like, am I doing the right thing investing in bonds in the first place, as I don't want to lose money if I can help it.
But if I knew the losses were only going to be temporary, then so be it.
Hope that explanation came across OK

[mc2fool]

I need £16,760 to be drawn down from my Sipp portfolio each year to live off, why £16,760, well £12,570 is what I am allowed to earn tax free, but I need to drawdown £16,760 because I have to have 25% tax free at the same time, they call it ups.

Well, you start by saying you need £16,760 each year to live off but then make it clear that that figure is entirely derived by what you can get tax free! Either that's an incredible coincidence or it's a case of the tax tail wagging the dog!

You don't have to use either your full personal allowance or the personal allowance amount derived tax free lump sum. You could just take out what you actually need to live on and leave the rest in, (hopefully) growing for the future.

I suppose there could be a case made for taking out the full whack from the SIPP and putting anything you don't spend into a stocks & shares ISA, but then you end up with two portfolios and some faffing around. In any case, I'd suggest you start by figuring how much you'll actually need to live until your pensions start kicking in, rather than going by the shiny lure of what you can do tax free.

In regards to attitude to risk, yes, it's a tough one, but your answer of OK with volatility but don't want a permanent loss is going to be a pretty common one around here.

In regards to tweaking as little as possible, with your dream being to stick it into one fund then leave it there: sounds like everything into one of the Vanguard LifeStrategy funds or similar to me.

[dealtn]

I have 3 funds in my SIPP portfolio which are 40-60% and arecausing me concern.

I am really worried about the bonds part of the investment in each of the above funds.

I am truly worried about the future of Bonds in the above 3 funds in my portfolio.

This whole portfolio is for our future fall back cash and wont be required for at least 10 years.

I am hoping someone with way more knowledge than me can offer me some reassurance about bonds in the above funds please.

Thanks

If you are as worried as you appear to be with bond exposure to that degree, with those sizes of valuation changes, then you really shouldn't be invested in that asset class. Nor should you be invested in equities.

If being invested solely in much less volatile assets, such as cash, causes you concern - particularly due to the real losses as a result of inflation, perhaps - then you need to prioritise your concerns. There are no free lunches in the real world I'm afraid, and that's the world we all find ourselves living in.

Apologies if that doesn't deliver the assurance you are seeking.

Thanks, I suppose when I say worried I am meaning not so much the loss, but more like, am I doing the right thing investing in bonds in the first place, as I don't want to lose money if I can help it.
But if I knew the losses were only going to be temporary, then so be it.
Hope that explanation came across OK

Well you didn't just say worried, but "really" worried and "truly" worried. Now I'm not really any wiser.

You also say your dream is to be invested in one fund, but you appear to have at least 13, in addition to other income sources such as state pensions. To me, and I could be wrong, this suggests someone risk averse, and not wanting to do the wrong thing.

My risk profile appears to have very little in common with yours, so feel free to dismiss me, but were I you, with my perception of your risk profile, I would focus more on what lets you sleep easily at night, and you and your wife's health, than concerning yourself about knowing the (unknowable) right thing to do.

[Waspfan]

I have 3 funds in my SIPP portfolio which are 40-60% and arecausing me concern.

I am really worried about the bonds part of the investment in each of the above funds.

I am truly worried about the future of Bonds in the above 3 funds in my portfolio.

This whole portfolio is for our future fall back cash and wont be required for at least 10 years.

I am hoping someone with way more knowledge than me can offer me some reassurance about bonds in the above funds please.

Thanks

If you are as worried as you appear to be with bond exposure to that degree, with those sizes of valuation changes, then you really shouldn't be invested in that asset class. Nor should you be invested in equities.

If being invested solely in much less volatile assets, such as cash, causes you concern - particularly due to the real losses as a result of inflation, perhaps - then you need to prioritise your concerns. There are no free lunches in the real world I'm afraid, and that's the world we all find ourselves living in.

Apologies if that doesn't deliver the assurance you are seeking.

Thanks, I suppose when I say worried I am meaning not so much the loss, but more like, am I doing the right thing investing in bonds in the first place, as I don't want to lose money if I can help it.
But if I knew the losses were only going to be temporary, then so be it.
Hope that explanation came across OK

Well you didn't just say worried, but "really" worried and "truly" worried. Now I'm not really any wiser.

You also say your dream is to be invested in one fund, but you appear to have at least 13, in addition to other income sources such as state pensions. To me, and I could be wrong, this suggests someone risk averse, and not wanting to do the wrong thing.

My risk profile appears to have very little in common with yours, so feel free to dismiss me, but were I you, with my perception of your risk profile, I would focus more on what lets you sleep easily at night, and you and your wife's health, than concerning yourself about knowing the (unknowable) right thing to do.

Yes really worried about the performance of the Bond element in my 3 multi asset 60/40 funds, in the sense that I don't want to keep my money invested in bonds which look as though they won't even cover inflation, really worried that in 7 years they will probably be worthless, I still can't understand why anyone would wish to invest anything which could quite easily be worthless in 7-+0 years time.

Reason why I have all these funds is due to my idiot IFA who I trusted to act in a suitable way.

I would be quite happy to just lock the whole fund into a global tracker which will cover inflation

Reason why I am suggesting a different approach to what I have in place now, is lessons learned I now see the pitfalls and before I started didn't have any knowledge of funds.

A single multi asset global fund to me sounds like the answer, but which one I dont know, which one would give me some bond exposure with bonds that have a good chance of not losing over the next 10 years

[Waspfan]

I need £16,760 to be drawn down from my Sipp portfolio each year to live off, why £16,760, well £12,570 is what I am allowed to earn tax free, but I need to drawdown £16,760 because I have to have 25% tax free at the same time, they call it ups.

Well, you start by saying you need £16,760 each year to live off but then make it clear that that figure is entirely derived by what you can get tax free! Either that's an incredible coincidence or it's a case of the tax tail wagging the dog!

You don't have to use either your full personal allowance or the personal allowance amount derived tax free lump sum. You could just take out what you actually need to live on and leave the rest in, (hopefully) growing for the future.
.

I know what you are saying but I have worked out a cashflow forecast, and coincidentally £16,760 is perfect for my annual needs, and as I said earlier I have savings which supplement this. So saving over £3,000 per year in tax is what I want, because when I get to state pension age I would be over my threshold.
I would be happier just having one high quality global multi asset tracker, for the whole sipp fund, but I realise I need some bonds for a shock absorber as everyone seems to recommend, but what I just can't get my head around is everyone says bonds will make nothing, and likely to have lost in 7 to 10 years, so why would someone want to put money into bonds if they are almost guaranteed to lose?

[GeoffF100]

There are investment trusts that specialise in protecting capital, preserving wealth whilst still providing decent returns, eg Capital Gearing Trust, Ruffer and Personal Assets Trust, take a look at them and see what their portfolios look like.

You can directly hold (most of) the investments that these funds hold, and eliminate their costs.

Have you actually tried simulating any of those ITs?

How do you deal with the delay between them making portfolio changes and you hearing about them?

How do you buy and sell some of their more obscure instruments like options, futures, foreign securities, OTC deals etc?

Then at least in a taxable account you have CGT when you make those changes, whereas an IT shields you from that liability?

I am not suggesting that you try. The delay in making changes will not matter unless there is a better than even chance that they are worthwhile, which is not likely. You can buy most of those investments through a broker, but I am not suggesting that it would be worthwhile. The best way of avoiding CGT is not to trade.

[GeoffF100]

I would suggest that what you have got is over the top in terms of complexity. IFAs often make it look complicated, so that you do not DIY. Just one fund would do the job. The most popular packaged fund is Vanguard LifeStrategy. You can pick the LifeStrategy fund with the bond allocation nearest to what you have now. You then have essentially what an IFA would provide, but at a much lower cost.

Keeping pace with inflation may be an unrealistic objective over the next ten years, but nobody knows what will happen.

[Waspfan]

I would suggest that what you have got is over the top in terms of complexity. IFAs often make it look complicated, so that you do not DIY. Just one fund would do the job. The most popular packaged fund is Vanguard LifeStrategy. You can pick the LifeStrategy fund with the bond allocation nearest to what you have now. You then have essentially what an IFA would provide, but at a much lower cost.

Keeping pace with inflation may be an unrealistic objective over the next ten years, but nobody knows what will happen.

Thanks Geoff a single set it and forget it fund is what I know will be good for our physical health but that problem of bonds in the fund is what I just can't understand.

OK I get the equity part, fully, I understand global allocations, weightings whatever. BUT I understand bonds are important to have in the lifestrategy fund, and understand 20% 40% bonds depending on attitude to risk. BUT the bond itself in one of these mutual funds, long dated, may even also lose money
So if a bond is supposed to be there as a shock absorber, why is it likely to lose value?
Please pardon my ignorance here, but I did come here to learn, and you're all great at advising

[GeoffF100]

OK I get the equity part, fully, I understand global allocations, weightings whatever. BUT I understand bonds are important to have in the lifestrategy fund, and understand 20% 40% bonds depending on attitude to risk. BUT the bond itself in one of these mutual funds, long dated, may even also lose money
So if a bond is supposed to be there as a shock absorber, why is it likely to lose value?
Please pardon my ignorance here, but I did come here to learn, and you're all great at advising

Here is a Monevator article written before the current inflation surge:

https://monevator.com/are-bonds-a-good-investment/

Here is a Vanguard article written more recently:

https://www.vanguardinvestor.co.uk/arti ... nvironment

You can use separate equity and bond investments:

https://www.kroijer.com/

Short dated bonds are less sensitive to interest rate changes, as are inflation linked bonds. International bonds are usually hedged into sterling, but unhedged versions are available. Nonetheless, LifeStrategy is a reasonable option.

[Waspfan]

OK I get the equity part, fully, I understand global allocations, weightings whatever. BUT I understand bonds are important to have in the lifestrategy fund, and understand 20% 40% bonds depending on attitude to risk. BUT the bond itself in one of these mutual funds, long dated, may even also lose money
So if a bond is supposed to be there as a shock absorber, why is it likely to lose value?
Please pardon my ignorance here, but I did come here to learn, and you're all great at advising

Here is a Monevator article written before the current inflation surge:

https://monevator.com/are-bonds-a-good-investment/

Here is a Vanguard article written more recently:

https://www.vanguardinvestor.co.uk/arti ... nvironment

You can use separate equity and bond investments:

https://www.kroijer.com/

Short dated bonds are less sensitive to interest rate changes, as are inflation linked bonds. International bonds are usually hedged into sterling, but unhedged versions are available. Nonetheless, LifeStrategy is a reasonable option.

Thanks Geoff, I already googled the moneyvator link last week, but wasn't sure if that article was still relevant as it was last year but the other 2 links you posted I haven't yet seen, thankyou for going to the trouble of posting them, much appreciated.

I guess what I am still unsure of is the expected progress the bond element will make over 10 years, does it get refreshed by fund managers for example, given its in a mutual investment pool.

Thanks

[mc2fool]

I know what you are saying but I have worked out a cashflow forecast, and coincidentally £16,760 is perfect for my annual needs, and as I said earlier I have savings which supplement this. So saving over £3,000 per year in tax is what I want, because when I get to state pension age I would be over my threshold.

Ah, I see, so your actual spending needs are more than £16,760, and you'll be topping up your income needs from your savings, as you'll be taking that much from the SIPP 'cos you can do so tax free and save £3,000 in tax.

Well, if you took less from the SIPP and used more from your savings then more would be left to grow in the SIPP and, at some point in the future, could save you over £6,000 in tax. May not fit with your situation but just giving you something to ponder...

I would be happier just having one high quality global multi asset tracker, for the whole sipp fund, but I realise I need some bonds for a shock absorber as everyone seems to recommend, but what I just can't get my head around is everyone says bonds will make nothing, and likely to have lost in 7 to 10 years, so why would someone want to put money into bonds if they are almost guaranteed to lose?

Bonds being "almost guaranteed to lose" is an opinion, and not one of "everybody". "Everybody" is the market so, are you of the opinion that the market has got the price of bonds wrong?

[Waspfan]

Bonds being "almost guaranteed to lose" is an opinion, and not one of "everybody". "Everybody" is the market so, are you of the opinion that the market has got the price of bonds wrong?

Basically it's just what I keep hearing and reading
So if a bond allocation in say a VLS fund is currently losing value does that mean that's the end for that bond, or will the bond allocation start to go up in value again?
I know its a basic newbie question....but I am that Newbie

[NotSure]

So currently the bond elements of my 3 funds seem to be a liability rather than a lifesaver.

Your funds are down by considerably less than say a 100% equity global tracker, YTD?

A 100% equity global tracker (e.g. VWRL) is up over one year. A global bond tracker (e.g. VAGP) is well down.

The bond element of my portfolio is almost entirely savings accounts and RPI index linked, so I have not been hit hard. I can invest like that. Vanguard cannot invest $ trillions like that.

I am no fan of bonds, but the OP said:

Liontrust MA Passive Interm Passive S Acc
£9,325 invested ( Currently down by 4.48% since January)

Royal London Sustainable Div C Acc
£9,312 Invested
( Currently down by 9.27% since January)

Vanguard Lifestrategy 60%
£17,060 Invested ( Currently down by 1.88% since January)

So YTD, as I quoted, to match to OP time frame, e.g. WWRL has done much worse than LS60 (a 60/40 trust). Hence I didn't really understand the OP question (as opposed to me saying bonds are good!)

[GeoffF100]

So if a bond allocation in say a VLS fund is currently losing value does that mean that's the end for that bond, or will the bond allocation start to go up in value again?

The bond allocation in a VLS fund is not currently losing money. It has already lost it. If interest rates go up to what has historically been normal (as the market expects) and do not go back down to the artificially low levels that we have had since 2008, then the money that bonds have lost will not be recovered. Nonetheless, maturing bonds within the fund will be replaced with bonds with higher yields (higher than nothing or negative in some cases). In nominal terms (i.e. not allowing for inflation) the interest paid will eventually recover the loss, but that is besides the point, the recent capital loss will not be recovered in that scenario. Of course, interest rates could go back down again. Nobody knows. The market has its opinion, and that is already priced in.

It is worth noting that if equity prices fall relative to bonds VLS rebalances by selling bonds and buying equities. If equities go back up again, VLS rebalances by selling equities and buying bonds. VLS will have made a profit in the process.