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Retirement - from those that have

Investment discussion for beginners. Why you should invest your money, get help getting started
AsleepInYorkshire
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Retirement - from those that have

#260825

Postby AsleepInYorkshire » October 29th, 2019, 2:08 pm

I'm moving closer to the point of having to make decisions about where I should invest. Stocks, property, shares and funds.

I have a nagging doubt that it's irritating me currently. I suspect, but don't have [my own] proof, that the decisions I make now will have an impact upon the returns I make. This ranges from where I invest to whom I invest through.

So would you mind if I asked a really personal question please. What advice would you offer to me now, based upon your own journey into and during retirement. What, if anything could you have done differently that would have been better for you?

Thanks in advance for any responses

AiY

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Re: Retirement - from those that have

#260837

Postby Hardgrafter » October 29th, 2019, 3:18 pm

I retired 1.5 years at age 67 and the main decisions were based on how much do I need to live on? In my case the state pensions, and my wife & I's modest final salary pensions are just about enough (£24k per year) to meet both routine and discretionary expenditures (e.g holidays and birthday gifts).

So I am not concerned about running out of everyday money, but rather keeping the savings and an uncrystallised SIPP growing just they did pre-retirement.

I have simplified my savings (i.e getting rid of individual shares) and just using index funds in the last few years. Makes it easier for the executor! Mostly its Vanguard Life Strategy at 60% to 80% Global equity / bonds (hedging the Brexit uncertainties) plus Premium Bonds (one lives in hope) and IL NSC for an easily accessed cash buffer.

So basically I haven't changed my investment strategy much, because the basic living costs are met by IL pensions. I went to a company retirement planning class (by Close Brothers) where it was agreed that moving stock market savings into conservative bonds was not a good strategy if you were not going to buy an annuity.

My concerns now are on reducing the inevitable Inheritance Tax. Not wanting / able to move to Switzerland or Monaco etc, its deciding whether / when to make lifetime gifts to the off spring (some of whom are fond of spending unwisely IMHO) now or later. And of course HMG / HMRC can also be in that profligate category.

vrdiver
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Re: Retirement - from those that have

#260840

Postby vrdiver » October 29th, 2019, 3:40 pm

You are correct; it's a very personal decision as to how to manage funds for the purpose of retirement!

I retired just under five years ago. Neither Mrs VRD nor I have a DB pension.

The way I chose to manage it was to keep doing the things that I had some experience of, rather than jump ship to a whole new investment strategy.

Whilst it may be a perfect time to investigate alternative ways of investing, I didn't want to make any costly, unforced errors just at the point of killing off my salary...

We still have most of our investments sitting in a HYP, but are gradually migrating a reasonable percentage of it to ITs, mainly for the extra diversity they provide versus a FTSE=centric company based portfolio.

The natural yield of the portfolio allows us to draw a regular "salary" and to reinvest for future pay rises. Because I started HYP back in 2003 I've seen it weather a number of market ups and downs, as well as experienced RBS, Lloyds, Carillion etc. so am used to the idea that individual companies can and will implode, but sleep well in the belief that the overall portfolio will plod on, good enough for our purposes without needing too much attention from me.

What would I do differently if I could go back in time? Probably switch more money into global equities and not be limited to just FTSE stocks. (Hence the emergence of ITs in our portfolio now.)

VRD

tjh290633
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Re: Retirement - from those that have

#260841

Postby tjh290633 » October 29th, 2019, 3:45 pm

AsleepInYorkshire wrote:I'm moving closer to the point of having to make decisions about where I should invest. Stocks, property, shares and funds.

I have a nagging doubt that it's irritating me currently. I suspect, but don't have [my own] proof, that the decisions I make now will have an impact upon the returns I make. This ranges from where I invest to whom I invest through.

So would you mind if I asked a really personal question please. What advice would you offer to me now, based upon your own journey into and during retirement. What, if anything could you have done differently that would have been better for you?

Thanks in advance for any responses

AiY

First of all, if you choose your own investments from individual shares, you are almost certain to have a trauma or two along the way. Many years ago I started with Investment Trust Units. Had I known then what I know now, I would have gone into ITs direct and would probably have been a lot better off.

One of these days I shall revert back into ITs, but not yet, because I enjoy running my own portfolio. I would avoid bonds at all costs. Despite them having done relatively well as interest rates fell, they will suffer if and when interst rates rise back to more normal levels. I don't see any point in funds, although I still retain a few. I prefer ITs. I am very wary of ETFs, which I consider to be a fad.

Find a simple platform run by a major bank which has low charges. Use that as your principal vehicle and buy your ITs there. Having more than one account can be a pain. The money is never where you want it. Maximise your use of ISAs to avoid tax.

Property is for living in. Leave it that way, although nothing wrong with the odd REIT or two.

TJH

AleisterCrowley
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Re: Retirement - from those that have

#260853

Postby AleisterCrowley » October 29th, 2019, 4:37 pm

tjh290633 wrote: .... I am very wary of ETFs, which I consider to be a fad....

TJH



Why ? (Genuine question)

SalvorHardin
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Re: Retirement - from those that have

#260869

Postby SalvorHardin » October 29th, 2019, 5:52 pm

Key questions: How much income do you need / want? Attitude to risk (what happens if you lose one-third overnight due to share price falls?). Any future pensions?

I retired in 2003 at 39 with no future pensions of any worth and a chunky portfolio that was 99% operating companies (roughly 50% small and medium oils, 50% strong moat companies (e.g. Berkshire Hathaway, Diageo, Unilever, Union Pacific)) and 1% cash. Within a few months I'd purchased sufficient investment trusts to produce a basic subsistence income. Hindsight tells me that I put too much into investment trusts.

Nowadays it's 60% operating companies, 36% investment trusts, 4% cash, 0% bonds. I avoid bonds, trusting to my stockpicking skills (which let me retire early in the first place, +17% p.a. since 2000). For property I stick to property companies rather than direct investment (too illiquid, time consuming and too much work). Managing the portfolio is fun; investing is a hobby for me.

Retiring at such a young age meant that I had plenty of time left so real assets made much more sense than fixed interest. I live fairly cheaply and a 50% fall in income and capital would have no effect on my living standards.

I'm not sure that my asset allocation is a good idea for the typical early retiree as they're retiring much later than me. They probably don't have my aversion to fixed interest, caused by growing up in the 1970s and seeing inflation eat away at my building society account.

They also don't have the capital buffer that I have/had, nor the temperament to cope with big falls. In 2008 my return was a 50.2% loss and I didn't start looking for a job, nor did I panic. Lots of people vanished from TMF in 2008 due to their losses. If anything 2008 has made me much more able to cope with losses (I don't suffer from loss aversion anymore).

People should look at overseas assets to diversify. If anything I should have put more overseas; IMHO sterling is a weak currency long-term against the US dollar.

My three largest shareholdings (20% of total assets) are foreign companies: Union Pacific, Disney and Brookfield Asset Management. Brookfield is a real asset owner and manager (mostly infrastructure and commercial property), the sort of investment that's ideal for long term holders to buy and forget (I think of it as a smaller version of Berkshire Hathaway with better prospects).

hiriskpaul
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Re: Retirement - from those that have

#260874

Postby hiriskpaul » October 29th, 2019, 6:10 pm

AleisterCrowley wrote:
tjh290633 wrote: .... I am very wary of ETFs, which I consider to be a fad....

TJH



Why ? (Genuine question)

The first ETF was launched 26 years ago and all by itself is bigger than the entire IT sector. Quite some fad ;)

tjh290633
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Re: Retirement - from those that have

#261001

Postby tjh290633 » October 30th, 2019, 9:48 am

hiriskpaul wrote:
AleisterCrowley wrote:
tjh290633 wrote: .... I am very wary of ETFs, which I consider to be a fad....

TJH



Why ? (Genuine question)

The first ETF was launched 26 years ago and all by itself is bigger than the entire IT sector. Quite some fad ;)

It's just a feeling in the water. I am comparing it with the rush of the Gadarene swine. They are fashionable and have lower charges than the old versions of mutual funds. I am happier with the concept of ITs.

TJH

hiriskpaul
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Re: Retirement - from those that have

#261015

Postby hiriskpaul » October 30th, 2019, 10:44 am

tjh290633 wrote:
hiriskpaul wrote:
AleisterCrowley wrote:

Why ? (Genuine question)

The first ETF was launched 26 years ago and all by itself is bigger than the entire IT sector. Quite some fad ;)

It's just a feeling in the water. I am comparing it with the rush of the Gadarene swine. They are fashionable and have lower charges than the old versions of mutual funds. I am happier with the concept of ITs.

TJH

Most mutual funds are actively managed and very few ETFs are, so overall it is true to say that ETFS are cheaper. Comparing like with like though, ETF charges are similar to mutual fund charges. For example, UK available S&P 500 funds are available for around 0.06-0.07%, similar to ETFs.

hiriskpaul
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Re: Retirement - from those that have

#261028

Postby hiriskpaul » October 30th, 2019, 11:24 am

Getting back to the original question, I guess I probably have retired, but in my case I slowly moved into it, doing decreasing amounts of paid work. Although I do still have £5k income as a NED. I do have a friend who is constantly dangling Brexit related work in front of me, but I have resisted because, despite what he says, I know it would end up full on 12+ hours per day plus weekends and I really cannot be bothered with that sort of thing any more.

As to whether I would have invested differently, I would have put more into investments that did well and skipped those that did badly. Flippancy aside, your question is incredibly difficult to answer, as the answer is bound to be biased by knowledge of which risks were worth taking.

One thing I did right and would do again was to take pension fixed protection in 2012, freezing my LTA at £1.8m. It was a tough decision at the time because I had no idea how far the LTA would come down and I did not know how well my investments were going to do. It turned out that the my investment growth was at the upper end of the estimates I made by the time I crystallised in 2017 and I would have been well over the LTA had I continued contributing and not taken FP 2012. The looming drop in the LTA forced me to think properly about whether I should continue paying into my SIPP. So the one thing I would say is get your head round the pensions system and try to work out how much to put in to pensions while you can.

Gan020
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Re: Retirement - from those that have

#261041

Postby Gan020 » October 30th, 2019, 12:13 pm

I appreciate your question is probably aimed at folks who have been retired longer than me but I hope my reply is of some help.

I retired at 50, a few years earlier than I was planning mostly because the monetary reward I got from working didn’t outweigh the work I was expected to do for it.

My advice would be to construct your portfolio in a way that let’s you sleep at night and can live your life without worrying about it. This has been brought home to me with our political uncertainty as many of my holdings were “linked” in that they all move the same way as I have too many Brexit stocks. I’ve spent many hours worrying about this because the impact of a no-deal Brexit would be large enough to significantly change my lifestyle.

Slowly as the opportunity arises I’ve been reducing my Brexit exposure and transitioning to a number of core holdings which I consider safe and may well keep for very many years. Some of these safe investments are bonds, some bond funds and a number of shares paying around 4-5% dividends.

I guess in summary it’s taken me time to realise that’s what’s important to me is that I don’t want to be worrying about money if the market falls 20%. I’d rather take a lower return and ensure my lifestyle is secure than chase the mathematically optimal return.

dubre
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Re: Retirement - from those that have

#261091

Postby dubre » October 30th, 2019, 3:36 pm

It has been said many times that everybody has different circumstances.

We do all have one thing in common.It is that we do not know what the future holds.Investment in stocks,property,bonds,cash etc. may be a good thing but could equally be a complete disaster.

Brexit stocks,whatever they are,may be good or bad.Brexit may be good or bad because of dependency on so many things.

I retired, many years ago,from most work other than managing my investments and put a lot of effort into the early years.Now that I think I know what I am doing every stock purchase or sale made has every likelihood of being a bad mistake.Do whatever lets you sleep at night.In my case it is the knowledge that my pension income will suffice if necessary.

You can over invest.Amongst my own circle of friends the prevailing problem is not that of insufficient income and capital but one of leaving their offspring with ridiculous ammounts of IHT to pay.

Rest assured that if you do invest in a serious way some serious mistakes will be made.If this will upset unduly don't do it.

TUK020
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Re: Retirement - from those that have

#261145

Postby TUK020 » October 30th, 2019, 7:30 pm

dubre wrote:You can over invest.Amongst my own circle of friends the prevailing problem is not that of insufficient income and capital but one of leaving their offspring with ridiculous ammounts of IHT to pay.

Rest assured that if you do invest in a serious way some serious mistakes will be made.


What!!! You didn't get the Porsche?

djbenedict
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Re: Retirement - from those that have

#261164

Postby djbenedict » October 30th, 2019, 9:15 pm

dubre wrote:Amongst my own circle of friends the prevailing problem is not that of insufficient income and capital but one of leaving their offspring with ridiculous ammounts of IHT to pay.


This is what is known as a high quality problem, but can be described mainly as one of perspective: it is generally the estate of the deceased which pays the IHT, not the legatees.

scrumpyjack
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Re: Retirement - from those that have

#261166

Postby scrumpyjack » October 30th, 2019, 10:00 pm

Yes it is all a matter of what you are comfortable with.
I took enhanced protection back in 2006 even though I was nowhere near the limit. Very lucky that I did in retrospect.

re ETFs it is simply a wrapper. Many ETFs are index trackers but they don't have to be. The trackers must be inherently less risky than an IT as with an IT what it invests in is purely based on the judgement of one or two people whereas an index tracker with give you the same result as a broad index.

My strategy many years ago was to put one third into ETFs (VWRL, ISF, VMID etc), one third into ITs and one third into individual shares. That way if all the individual shares went belly up I should still be OK. Fortunately they haven't and overall have outperformed the ETFs and ITs.

Having lived through the '70s inflation I put nothing into fixed interest.

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Re: Retirement - from those that have

#261176

Postby greenrobbie » October 31st, 2019, 1:54 am

I retired 5 years ago at the age of 57. During the latter part of my working life, I switched from investing in unit trusts to a HYP portfolio of individual UK shares. Although this reduced costs and generated more income, I realised that I'm not very good at stock picking, and despite detailed research I managed to pick more than a few duds, some out and out duds like Carillion, some in relation to the time and price I paid.

I had moved out of unit trusts because of opaqueness in their holdings and costs, and delays in selling: it reminded me a little of endowment policies, which had also bitten me on two separate occasions. I don't feel comfortable with the idea of ETFs either: there's something about the simplicity of owning shares, or shares in a company whose only business is holding shares of other companies, that appeals to me and I believe that I understand it.

So over the past few years I've switched to just 7 investment trusts, keeping the dregs of 8 individual shares that would not be cost-effective to sell. We have enough income from pensions, any investment income is just icing on the cake, so a lower level of income and slightly higher costs are an acceptable trade-off for smoothing returns. An additional factor is simplicity for my family in administering my estate at some indeterminate future date.

I wish I had started my investing career with a small basket of investment trusts, and not traded my way through a variety of unit trusts and individual shares. At least the experience I have gained over the years makes me feel comfortable with my current investment strategy, which I have no plans to change in the future.

Hope this helps

sloth
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Re: Retirement - from those that have

#261177

Postby sloth » October 31st, 2019, 2:58 am

greenrobbie wrote:So over the past few years I've switched to just 7 investment trusts...

Hope this helps


Do you mind me asking which ones?

I'm trying to decide whether to go with ETFs or ITs, but I'm a novice and would appreciate knowing what works - I'm about the same age as you, but without your investment experience.

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Re: Retirement - from those that have

#261322

Postby Barleycombe » October 31st, 2019, 3:49 pm

I am 76 and been investing in Investment trusts since I retired at 67.
Here are my choices just 6
RIT Capital partners RCP
Scottish Mortgage SMT
Finsbury Growth and income FGT
Fidelity European Values FEV
Henderson Far Eastern Trust HFEL
and more recently BMO Global small companies BGSC

These to my mind give me global coverage and a good mix of asset classes.
I hope this helps. However this is not a recommendation just my personal preference.

Barleycombe

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Re: Retirement - from those that have

#261336

Postby greenrobbie » October 31st, 2019, 5:10 pm

Sloth asked:
"Do you mind me asking which ones?

I'm trying to decide whether to go with ETFs or ITs, but I'm a novice and would appreciate knowing what works - I'm about the same age as you, but without your investment experience."


Wealth warning: these are just the investments of an untrained amateur, any knowledge I have has been gained from my own mistakes, reading here, and on The Motley Fool previously. I build on the shoulders of giants, although it would be invidious to single out individuals. Can I suggest perusal of the Investment Trusts board here on Lemon Fool for further information especially discussion on the Basket of Seven and Basket of Eight Investment Trusts.

I do not hold these seven in equal amounts, and the total direct international exposure is about 25% to 30%. Indirectly much more, as FTSE 100 companies derive much of their earnings abroad. I think I have the proportions I want invested abroad, and in mid-sized and smaller UK companies. Although some of these investment trusts fish in the same pond, I have exposure to different managers and reduction of risk from using a variety of different investment companies.

I do not purchase ITs at a premium to their Net Asset Value. When funds are available I select on the basis of which has the best feel (from reading annual reports), the highest return, and the lowest costs.

After that preamble, here are the 7 investment trusts I hold:

City Of London Investment Trust
Dunedin Income Growth Investment Trust
Edinburgh Investment Trust
Mercantile Investment Trust
Merchants Trust
Murray International Trust
Temple Bar Investment Trust

I hope that this is helpful, or at least informative.
greenrobbie

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Re: Retirement - from those that have

#261486

Postby Barleycombe » November 1st, 2019, 1:44 pm

When I retired in 2010 I withdrew my cash free lump sum from my small work pension, which after
clearing a few outstanding debts amounted to around £4000. I recall I buying four investment trusts
in equal amounts, two of which were mentioned by the previous contributor namely City of London
CTY. and Murray International MYT. Both have performed well in the interim.
My question is: If you were retiring today with £4000 what four investment trusts would you buy and why?
The only rules being they must give global coverage and three must contain different asset classes.
I look forward to your replies
Barleycombe


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