Mishmashed portfolio

[wanderer]

Hi All

Long time lurker, but new poster. I would really appreciate any comments on my "portfolio" at the moment. To be honest, calling it a portfolio is probably a bit far from the truth. The reality is that I have built up a mishmash of investments across SIPPs and ISAs over a number of years through fairly random/faddy acquisitions as and when I had some cash spare. However, I need to take more decisive action to reach my financial goals and this portfolio will ultimately make up 100% of my pensionable income as I have no DB pensions to look forward to.

Essentially, if I continue to make cash contributions at the current rate and if the value of the portfoilio as a whole grows at 5% per year then I would expect to be able to semi-retire in 9 years and start taking some income.

I feel as though that ought to be something I could achieve, but I also recognise I am not be helping myself by having 26% of the portfolio in cash.



There’s nothing at all in bonds – perhaps a poor decision in the past, but I can’t see much upside in bonds now?

I would love to put more into investment trusts, but am really averse to paying for investments on a NAV premium – as others have said on here, IT’s could soon face a double whammy of declining premiums and declining NAVs as QE unwinds. I was looking at Scottish Investment Trust as a possibility - seems to trade at a 10% discount to NAV but largely sensible list of investments along with a big slug of Australian wine!

So I would like to reduce my current cash levels and also find a home for new contributions, but everything looks expensive at the moment. I have money waiting to invest but am stuck for ideas as to how to move forward. I do wonder sometimes about just chucking everything into Lifestrategy 80.

Any advice and inspiration would be very much welcomed.

[TimR]

Things to consider :-

Do you own a house and how much mortgage is there to pay off ?
How are you investing the Cash and at what rate ?
Your age do you have any dependants ?

You need to consider your age when you want to retire ?
What value of investments do you plan to have at retirement ?
State Pension Age & SP estimate ?
Income required from your investments at retirement ?
How long investment income needs to last after you retire ?
Investment income for spouse?
Do you want to leave an inheritance ?

TimR

[wanderer]

Thanks TimR

Do you own a house and how much mortgage is there to pay off ?
Will be paid off in 5 years

How are you investing the Cash and at what rate ?
The cash listed above is doing nothing and is sat in SIPPs/ISAs waiting for an investment opportunity or a big crash. I am accumulating 50k per year of which 40k is dripfeeding into JPMGI, Vanguard All World ETF, Vanguard Small Cap Global Index and Fundsmith Equity Income. The remaining 10k is accumulating as cash and doing nothing.

Your age do you have any dependants ?
I'm 44, wife the same, kids are 13 and 8. I max out their JISAs and have recently started paying into SIPPs for them too. I love doing this as they know nothing about it yet!

You need to consider your age when you want to retire ?
As I say, I'm looking to step down a few gears by the time I'm 53. My youngest will be 18 by then. I would like to have a less stressful job, maybe earn 10-20k per year doing something I can enjoy.

What value of investments do you plan to have at retirement ?
By my reckoning, with the current £730k, plus £50k for 9 years and if I can achieve 5% growth pa I should get to £1.5m assuming there is no catastrophic set back. I am thinking in terms of withdrawing at 3% per annum, so £40k pa. Probably a bit less at the start, if I am still able to earn my £10k pa or so.

State Pension Age & SP estimate ?
Despite all the money I have paid in to the system I am assuming that I will get nothing from the state pension. Anything that isn't means tested away would be a very welcome bonus.

Income required from your investments at retirement ?
As I say, I am assuming about 40k - less than that at the start

How long investment income needs to last after you retire ?
I'm not expecting to be good for much beyond 70. My wife may well live longer. But a 3% withdrawal rate and a wholly owned house should surely be enough for her needs?

Investment income for spouse?
As above

Do you want to leave an inheritance ?
Ideally, yes, and I hope they get the house and something left from the pension fund. However, because I have been saving for them in JISAs I expect they will have been given a very good start in life (perhaps £80-100k at age 18) and so I feel as though me and my wife don't need to feel too guilty if we go on to spend most of what we've saved for. If they sell the house to pay for nursing fees for my wife then so be it.

[tjh290633]

I think you are right to avoid fixed interest securities. Regarding withdrawal rate, I always feel that this is a misconception. What you really need to do is to build up a flow of income, which will hopefully exceed your needs and will also grow ahead of inflation.

How you achieve that is up to you. My preference is for equities, either directly held (in an ISA) or in ITs, and I do not like the look of ETFs, nor am I keen on managed funds. Leaving something which will allow your wife to avoid hands-on management may be a major consideration, and for that my choice will be a mixture of ITs.

TJH

[TimR]

What platform are you on ? (What are the charges for funds and ITs/ETFs)
Does it have tool so you can see how much you have invested in each region of the world (?

I group my investments under the headings Global, UK , USA, Europe, APAC, Japan and EM regardless of whether they are a tracker, ETF, share or fund so I can see how much I have in each region. Some platforms allow you to do this.

You have a number of investments covering 'Global'

You have a number investments covering UK
You have a number investments covering UK (small)

FEET has underperformed low cost Emerging Market trackers/ ETfs

Do you need Income biased funds (eg Woodford) while you are growing your pot?

The Life Strategy 100 is a tracker is growth (with UK bias) set to pay dividends out

[TimR]

ETfs are fine for long term buy and hold, just like trackers. I hold ETfs because my platform charges more to hold Trackers & OEICs

Some people Trade with ETFs which should be avoided.

[JNC3]

I would just progressively sell the ITs, shares and funds and redeploy the whole lot into a single Global tracker such as Lifestrategy or a Global ETF such as VWRL and hold for the long term.

JNC

[Hariseldon58]

A few comments,

My father would have told me that he wouldn’t make 70 when he was 45, he was very stressed, very hard working, heart condition, parents died young and the family thought 65 was ambitious .... he is still going at 93, worked to his mid 80’s...

You may live beyond 70

You are looking for a 3% Income .....it’s not an endowment, you and your wife will die , You can allow the capital to decrease over time. You will probably get a pension of sorts, your spending will probably decline as you get older , I wouldn’t sweat the details too much on spending, you’re saving hard, you’re probably not a spender , 3 or 4% will be ok , could probably be higher, provided your flexible , be prepared to adjust your plans if circumstances change.

The investment details matter far less than you think , your doing the important things correctly, saving hard, paying the mortgage down ASAP

ETF or Investment Trust will work just fine, the presence of a large uninvested cash pot with a timeframe of 9 years to go suggests indecision and caution. TJH has one approach, someone else has another , I have my approach, over a period of time, a diversified equity portfolio will do fine, keep your costs low and you’ll do very well.

Markets might crash tomorrow or next year or not, no one knows, the market might plateau for years, who knows ?

I’d suggest you work out how much cash you feel you need to hold for peace of mind, the unexpected eventuality and then invest the surplus cash over 12 months, If you want the portfolio to earn 5%, it’s much harder if ¼ of it is earning nothing , with 9 years to go you’ve got time for markets to go up and down a lot in the meantime, The dividends roll in and get reinvested over the years and this helps a lot!