Noob investment strategy - help please!

[cillitbang]

Hi all,

Thanks for all your helpful advice last month when I posted my noob Q about LifeStrategy 80% fund.

In the end I decided to go with HSBC FTSE All-World Index Fund Accumulation C as my first fund purchase. This of course was mainly down to it's low fee of 0.13% (I am on ii, so with their flat fees this should work out nicely for me)

As I said before, I had £350,000 cash in my SIPP after my transfer over to ii, so far I have bought £50,000 of the HSBC fund.

As a reminder, I am 45 years old I am in a position to make a company contribution of £60,000 each year into my SIPP. I am happy to be invested in 100% equities to hopefully get gains in my portfolio. At this stage I don't want to bother with bonds, etc.

My question was, do you lovely lot feel it would be reasonable for me to invest the remaining £300,000 of my cash-pot into this same fund?

Or would I be better off considering some other funds to complement it? (even active funds such as Fundsmith, etc)

I would value any advice you could offer, not that I want to copy this verbatim. I guess I just want to be sure that I am not missing something obvious here, or playing it too safe only investing in passive index tracker funds such as this.

Thanks in advance.
CB

[JohnW]

Blackrock has form when it comes to changing a broad index fund to a broad index fund with a ESG or ‘green’ flavour, without consulting its fund holders.
If you were worried HSBC might do something undesirable for you to your fund, you might want to spread your money around similar global trackers from Vanguard and Blackrock et al. Otherwise, I doubt you can improve it if you want all equities.

[kempiejon]

[

My question was, do you lovely lot feel it would be reasonable for me to invest the remaining £300,000 of my cash-pot into this same fund?

Or would I be better off considering some other funds to complement it? (even active funds such as Fundsmith, etc)

If you've done some research and thinking, have decided HSBC global tracker is the right fund for you why not. You're all equities, it's low charging and as a tracker you know you'll only just miss that global benchmark - dealing/spread and charges.
It can be daunting to go all in though. I transferred a similar sum when I consolidated my pensions into 1 SIPP and although I bought basket of ETFs I made quarterly purchases for about 2 years, turns out I would have been a bit better off having done the big bang at the outset but I was scared of getting it wrong by a few months so for reasons of my personality type I preferred that 2 year drip. I have stuck by that original ETF choice I made and so far I see no reason to look at other providers thou other providers might protect specify party risk. I suppose I could add an alternative provider like ishares or HSBC to compliment my Vanguard choice.

[swill453]

Similarly I put a lot of thought into my investments in my SIPP over the years, and am not unhappy with how it's gone.

However if I'd simply invested/reinvested every penny in a world tracker ETF all along, I'd be significantly better off now.

Scott.

[Urbandreamer]

My question was, do you lovely lot feel it would be reasonable for me to invest the remaining £300,000 of my cash-pot into this same fund?

Or would I be better off considering some other funds to complement it? (even active funds such as Fundsmith, etc)

CB

Well, we can't really say can we?

There is nothing wrong with the fund you have chosen and it would make perfect sense (from one point of view) to invest the rest into it. On the other hand, to me it's a bit beige. Some would argue that you should put all your investments in such funds. Others that you should make such your core holding, investing smaller amounts in more interesting options. Yet others that greater pleasure can be found by seeking out funds that interest you.

For example I shall shortly be making a small investment in an investment trust that invests in space exploration. IT's are interesting, in that you can pay over the odds for a share and be happy, or get your share at a cut price cost, but they may be cheap for a reason. Currently the "sale" price of SSIT is 40% of their "value"!
Hopefully you are also paying for people who research and understand the field. It's not for no reason that managers of biotech IT's have such experience in the field that they get seconded into government posts come pandemics (to the cost of their share holders).

Will my purchase pay off? Who can say, but I expect great pleasure in finding out.

You are just starting your journey, but experienced investors will argue that the most difficult thing to get even partially right is "asset allocation". 100% in space exploration would be .. lets say adventurous. There is much debate about the cockroach or permanent portfolio. Personally I think that it would do well to read up about it EVERY YEAR, then decide how much you want to differ from it that year.

Ps, I can't leave it at that without a song link.
https://www.youtube.com/watch?v=s4iC7ZL9XkQ

[doug2500]

Well it wouldn't be wrong to go all in on an all world tracker because it's a tough benchmark to beat if 100% equities. Personally even if I went this route I'd choose a couple of different physically replicated versions rather than just one. Just being cautious for virtually no extra cost.

Whether it's right for you is a decision for you only. I enjoy the challenge of beating an all world ETF even though I'm currently slightly behind.

[cillitbang]

Blackrock has form when it comes to changing a broad index fund to a broad index fund with a ESG or ‘green’ flavour, without consulting its fund holders.
If you were worried HSBC might do something undesirable for you to your fund, you might want to spread your money around similar global trackers from Vanguard and Blackrock et al. Otherwise, I doubt you can improve it if you want all equities.

That's an interesting point which I hadn't considered. I would be so annoyed if HSBC watered down this fund with ESG funds which might not perform as well.

Perhaps I will put the next £50k in a different index fund to spread my bets a bit... even if it means 99.9% replication!!

It can be daunting to go all in though. I transferred a similar sum when I consolidated my pensions into 1 SIPP and although I bought basket of ETFs I made quarterly purchases for about 2 years, turns out I would have been a bit better off having done the big bang at the outset but I was scared of getting it wrong by a few months so for reasons of my personality type I preferred that 2 year drip. I have stuck by that original ETF choice I made and so far I see no reason to look at other providers thou other providers might protect specify party risk. I suppose I could add an alternative provider like ishares or HSBC to compliment my Vanguard choice.

It is hard to know what to do for the best. I have read a lot about DCAing the money over time, and to be honest it goes against my nature. I tend to be impulsive. But even I don't have the balls to do the full £350k at once! Even if I am mostly convinced about my new passive low fee approach to investing.

Similarly I put a lot of thought into my investments in my SIPP over the years, and am not unhappy with how it's gone.

However if I'd simply invested/reinvested every penny in a world tracker ETF all along, I'd be significantly better off now.

Scott.

Would you mind sharing which ETF you like the best? I am already dabbling with Vanguard ETFs for my 2023/24 ISA on InvestEngine and it's not going well so far (early days thou hey!)

There is nothing wrong with the fund you have chosen and it would make perfect sense (from one point of view) to invest the rest into it. On the other hand, to me it's a bit beige. Some would argue that you should put all your investments in such funds. Others that you should make such your core holding, investing smaller amounts in more interesting options. Yet others that greater pleasure can be found by seeking out funds that interest you.

For example I shall shortly be making a small investment in an investment trust that invests in space exploration. IT's are interesting, in that you can pay over the odds for a share and be happy, or get your share at a cut price cost, but they may be cheap for a reason. Currently the "sale" price of SSIT is 40% of their "value"!
Hopefully you are also paying for people who research and understand the field. It's not for no reason that managers of biotech IT's have such experience in the field that they get seconded into government posts come pandemics (to the cost of their share holders).

Yes, there is no doubt this index fund is beige. The Ford Focus of funds! I am tempted to have a bit of a flutter with at least 10% of my portfolio!!

Well it wouldn't be wrong to go all in on an all world tracker because it's a tough benchmark to beat if 100% equities. Personally even if I went this route I'd choose a couple of different physically replicated versions rather than just one. Just being cautious for virtually no extra cost.

Whether it's right for you is a decision for you only. I enjoy the challenge of beating an all world ETF even though I'm currently slightly behind.

Tempting, very tempting. Do let me know which alternatives you think might be suitable? I almost went with Fidelity Index World Fund instead of HSBC this time around.

[cillitbang]

If anyone is interested, here is how my 'active' portfolio used to look before I cashed it out and moved to ii:

abrdn Global Smaller Companies P1 (Acc) GB00B7KVX245
CT Responsible Global Equity Class 2 (Acc) GB0033145045
Fundsmith Equity Fund Class I (Acc) GB00B41YBW71
HSBC Pacific Index C (Acc) GB00B80QGT40
Invesco UK Smaller Companies Equity Z (Acc) GB00B8N46H36
J O Hambro UK Dynamic Class Y (Acc) GB00BDZRJ101
Jupiter Asian Income Fund I (Acc) GB00BZ2YND85
Jupiter Gold and Silver GBP I (Acc) IE00BYVJRH94
Legal & General US Index Trust I (Acc) GB00B0CNGT73
Rathbone Global Opportunities Inst (Acc) GB00B7FQLN12
Sanlam Global Artifical Intelligence I GBP (Acc) IE000IKG3JC0
Schroder Tokyo Z (Acc) GB00B4SZR818
Schroder US Mid Cap Z (Acc) GB00B7LDLV43
Vanguard FTSE Developed World ex-UK Equity Index Fund (Acc) GB00B59G4Q73
Vanguard FTSE UK All Share Index Unit Trust (Acc) GB00B3X7QG63

While I have neglected to list the percentages here, you get the idea of what I was dealing with. High fund fees, advisors fee of 1% and their chosen platform... it all added up to 2% - so you can imagine what a chunk of my portfolio I losing in fees every year!

So with ii my platform fees are £19.99 a month and I aim to keep the fund fees low.

I was always a fan of Fundsmith fund however, but I am struggling to justify jumping back in active funds such as this with ongoing charges of 0.94%

[Mike4]

It is hard to know what to do for the best.

And with that short sentence, you encapsulate the whole problem with investing. We all wring our hands over this, exactly.

Given your username lets hope you don't get taken to the cleaners

[DrFfybes]

or playing it too safe only investing in passive index tracker funds such as this.

Firstly, there is nothing 'safe' about index trackers. They're safer than some funds, but they're not 'safe''.

You're prepared to be 100% equities, and that's fine, but just because the HSBC fund is a global tracker it can still be very volatile. Having said that, it is the fund I make monthlies into for my own SIPP and the JISAs of my great nieces and nephews.

You could try a few slightly more concentrated Funds/iTs, VHYL is skewed towards the larger dividend paying companies, ATST is another that has good Global exposure, although both have underperformed the All-World Index Fund over 5 years. I also like Berkshire Hathaway in an unsheltered account as there is no divi to pay tax on although there is a currency risk, and FCIT is another good Globally diverse IT, although the discount to NAV is quite low at the moment so I'd hang off purchasing until it widens.

I put about £30k in every few days when I got an inheritance last year. If I'd put it all in on day 1, I'd have had a lot fewer shares than I ended up with, as the market was moving 1% or so a day. Then I hung on a bit at the end and finished buying at a 3 month high, but I still won out over buying everything on day 1.

Paul

[Urbandreamer]

I was always a fan of Fundsmith fund however, but I am struggling to justify jumping back in active funds such as this with ongoing charges of 0.94%

I think that you may be obsessing about charges, without thinking about them.

What do I mean by that? Well why do index trackers charge as much as they do and why the different charges? Sure, historically there were some who ripped people off on charges, but it's rare today.

Today the main cost is the fee to the index provider for the detailed information about the index. There are different providers, who charge different sums for information that is different leading to different performance following the "same" target.

Active funds? Well, why Fundsmith, rather than F&C or Scottish Mortgage who both have lower charges? Doesn't what they are attempting to do matter?
Such funds don't pay an index provider, so what do they spend their charges upon? Could it be the salaries of researchers and managers.

International Biotech has a ongoing charge of 1.3%, but think for a bit about the skills of the people that they must employ to select investments. As an investor I hope (and know) that they are not employing dart throwing chimps and paying in peanuts.

Could I get the same results by investing in Fundsmith? No, it's simply not what Fundsmith does. They do something else.

[cillitbang]

or playing it too safe only investing in passive index tracker funds such as this.

Firstly, there is nothing 'safe' about index trackers. They're safer than some funds, but they're not 'safe''.

Fair comment!

[JohnW]

Or would I be better off considering

What sort of measures of ‘better off’ did you have in mind?

[LooseCannon101]

If I were in your position I would transfer the whole £300k into the All-World Equity Tracker, re-invest dividends, and watch it grow for 20+ years. No tinkering is necessary.

Simplicity makes it easy to keep track of your investment, and the fund will beat 90% of active investors.