SIPP Newbie Investing

[Hilly]

Dear Forum

I'm completely new to investing, never bought any shares until I created a SIPP with Vanguard last week and transferred into it an old workplace pension with Aegon that hadn't preformed very well at all. Value £5.4k

I was intending to invest in a global tracker or a S&P 500 tracker as this is where the growth seems to be. Having looked in detail at these trackers and how much they've increased in value, principally due to the big 7 tech companies, I couldn't bring myself to do it. My thinking being that I've missed the boat here. Also, with the British pound being so weak at the moment and these trackers being denominated in USD, you don't get that much bang for your pounds.

So, and I'll probably get ridiculed for this, I dumped the entire lot into a FTSE UK all share tracker. My thinking being that it's a relatively cheap index with a reasonable dividend return and I'm not subject to the exchange rate risk.

Now I'm invested in it I'm paying more attention to the stock market and reading reports about how the London stock exchange doesn't have a bright future with companies moving their listing to the US and not many, if any, new companies choosing to list on the London stock exchange.

Have I made a mistake here and should I switch to a global or US tracker before I invest more?

Thank you

[BullDog]

50% chance you are right.

[tacpot12]

My recommendation would be to move your pension to a large global tracker as per your original plan. Any fund that is focused solely on the US or UK is likely to be have greater volatility than a fund that is better diversified. This volatility may not matter, but it could be quite a problem in some scenarios, so spreading the risk is better. As you start to save more money, you will have the time to do more research.

[Dod101]

My recommendation would be to move your pension to a large global tracker as per your original plan. Any fund that is focused solely on the US or UK is likely to be have greater volatility than a fund that is better diversified. This volatility may not matter, but it could be quite a problem in some scenarios, so spreading the risk is better. As you start to save more money, you will have the time to do more research.

You could buy say Alliance Trust. It has an excellent record in recent years and if you read their Annual Report ( which as a newbie maybe you should do anyway! ) it will give you an insight into the investment world which you will not get from a tracker. It has a benchmark which is one of big global trackers and usually manages to beat it.

Dod

[Urbandreamer]

I was intending to invest in a global tracker or a S&P 500 tracker as this is where the growth seems to be. Having looked in detail at these trackers and how much they've increased in value, principally due to the big 7 tech companies, I couldn't bring myself to do it. My thinking being that I've missed the boat here. Also, with the British pound being so weak at the moment and these trackers being denominated in USD, you don't get that much bang for your pounds.

Sadly you need to do a lot more work and thinking.

It doesn't work that way at all!

Let us totally ignore the fact that you are talking a pension, or long term savings, to make a point.
Why invest?
Why not simply save money in the bank or under the mattress?

OK, hopefully you are thinking that I've lost the plot, But why?
Well of course because saving money doesn't work. You NEED to "invest" it in something that doesn't loose value.
AKA the stock market.

Missed the boat Well to be blunt, if you made it through what I wrote, you will know that boat will float. Unlike any boat metaphor it is likely to just keep rising, or rather money will lose value.

I don't know how old you are, but I'm sure that many on TLF remember buying sweets with a 3d coin that wasn't round. Why can't you buy sweets for 1.5p (after decimalization).

The simple fact is that had those sweets remained edible, they would be worth "more" now. Or rather that you would have to pay more for the same thing. Indeed you can still pay more for the same thing in many cases.

OK, now that we have established that you are NOT investing, but preserving your capital/wealth or value. What do the likes of me claim investing is?

Well I regard it as buying a share/portion in the means of wealth production.
I buy shares or investment trusts because of what they do.
I also buy bitcoin, but don't regard that as investing. Rather I regard it as a better alternative to stuffing pounds under the mattress.

What do you want to do?

Vanguard are a great, low price, platform for buying index trackers or indeed bond funds. Though as I said it's not my concept of "investment". Just about anything that you pick will serve you better than a bank savings account. FWIW, I own one of their funds so am not decrying the concept.

But again "what do you want"? At the end of the day it's up to you.

Don't accept the words of anyone who tells you that there is one RIGHT way. Maximum returns may or may not be as important as other things. They are not for me.

OH, and while you are thinking about the subject (please tell your diary to remind you once a month), simply invest in a global tracker.
They are the "nobrain" alternative to cash/savings accounts.

[Dicky99]

Dear Forum

I'm completely new to investing, never bought any shares until I created a SIPP with Vanguard last week and transferred into it an old workplace pension with Aegon that hadn't preformed very well at all. Value £5.4k

I was intending to invest in a global tracker or a S&P 500 tracker as this is where the growth seems to be. Having looked in detail at these trackers and how much they've increased in value, principally due to the big 7 tech companies, I couldn't bring myself to do it. My thinking being that I've missed the boat here. Also, with the British pound being so weak at the moment and these trackers being denominated in USD, you don't get that much bang for your pounds.

So, and I'll probably get ridiculed for this, I dumped the entire lot into a FTSE UK all share tracker. My thinking being that it's a relatively cheap index with a reasonable dividend return and I'm not subject to the exchange rate risk.

Now I'm invested in it I'm paying more attention to the stock market and reading reports about how the London stock exchange doesn't have a bright future with companies moving their listing to the US and not many, if any, new companies choosing to list on the London stock exchange.

Have I made a mistake here and should I switch to a global or US tracker before I invest more?

Thank you

Well no you haven't in the sense that you have so far only committed a very modest £5.4k and it's not set in stone. Assuming you are some way off retirement, and early in what will be a long investing journey there is plenty of time to build on your knowledge and devise a strategy.

I think if I were starting again from scratch I'd be inclined to start with a global tracker as the core holding and add a few more funds as my knowledge and confidence increased.

What I wouldn't do, which I did, was build up a basket of too many funds and single stocks resulting in overlaps and without a clear strategy. It's an ongoing process for me to simplify my portfolio down to a few funds and one or two fun/adventurous investments.

[JohnW]

Aegon that hadn't preformed very well at all'.....'or a S&P 500 tracker as this is where the growth seems to be.'.

Firstly, t's unwise to judge the merit of an investment on recent or even longer term returns alone, which both of those statements you wrote suggest you are doing. Partly because you have apparently ignored the riskiness of the investments, and we all know one expects lower returns from lower risk investments; and partly because realised returns (not expected returns or long term average returns etc) are dominated by chance. Your Aegon pension might have been the wisest portfolio imaginable, yet have been outperformed by something lesser, simply by chance over which you have no control.
The bottom line is, you choose your investment portfolio based on your particular circumstances and sound principles like: diversifying adds safety; stocks are riskier than bonds (as a generalisation); cash returns struggle to match inflation; costs are very important etc. Don't choose based on recent returns because they aren't a prelude to future returns; just look at any long term chart of investment performances and see periods of 'great' followed by periods of 'gosh'.

Secondly, if you're half literate which you seem to be, and a quarter numerate, you only need read one book to give you the grand overview of personal investing, and how to do it yourself with confidence: Hale's book Smarter Investing. If it's not in you local library, ask them to buy it for the library; you'll be doing everyone a favour. After that, there'll be other books you might want for following up specific issues.

'Have I made a mistake here and should I switch to a global or US tracker before I invest more?'

Your age, overall financial situation, potential sources of future income eg pension, appetite for risk taking etc should be considered when choosing your investments. That's why no one here can tell you what's best for you since you didn't tell us any of that (and don't bother, just read Hale's book and you'll do a better job than most of us can do for you).

'reading reports about how the London stock exchange doesn't have a bright future '

You'll largely waste your time reading the financial press. Those writers have to write something so the publication can sell advertising space; that's their business model. You'll get a much better education from several decent books, and less likely to be pulled off course by someone with a product to sell you.
If you could live, and thus need to be concerned about your investments, for at least another 15 years then read Hale, and take your time (6-12 months) getting an understanding personal investing before you do anything dramatic based on advice here. For example, you could buy Alliance Trust, but don't. If your time horizon is less than 5 years put you money anywhere.
The Bogleheads' Guide to Investing, by Larimore et al is a 7.2MB pdf. I think it's here: https://ia803405.us.archive.org/23/item ... esting/The Bogleheads' Guide to Investing.pdf

[DrFfybes]

My recommendation would be to move your pension to a large global tracker as per your original plan. Any fund that is focused solely on the US or UK is likely to be have greater volatility than a fund that is better diversified. This volatility may not matter, but it could be quite a problem in some scenarios, so spreading the risk is better. As you start to save more money, you will have the time to do more research.

You could buy say Alliance Trust.
Dod

He's with Vanguard, only Vanguard products are available.

Has he missed the boat on the Global Fund?
https://www.hl.co.uk/shares/shares-sear ... orld-ucits

I thought that after Xmas when they went over £70 for the first time.

[ukmtk]

The 1 single investment I'd recommend newbies is V3AB.
I currently buy it myself with my monthly savings in my SIPP.
I like it because each unit is quite a reasonable price compared to some of Vanguard's ETFs (I hold 3 different ones).
So it is great for monthly savings. It gives you the world in one compact item.

[doug2500]

I have some sympathy with your idea and what you've done. What I would do now, assuming you're youngish, is put any new money into a global tracker until it's a decent size. By then you will maybe have developed a stronger sense of what you want to do and may choose to continue adding to global, or maybe start adding to something else.

[Dod101]

I cannot see a newbie learning much about investing from a tracker. In fact I would argue that buying a tracker is scarcely investing., not in the sense of researching and picking a share/ shares. I would not buy a tracker at his stage but learn and try to understand what investing entails and is about. People are now obsessed with trackers.

Dod

[ukmtk]

Personally I think that a global tracker is all that a newbie needs to start with - especially if investing for the long term.
Most trackers come with relative low management charges - something that eats into investments over the long term.

Most investors are too UK centric - hence a global tracker.
It takes a lot of time to investigate shares/companies which many people don't have.
Especially if one is supposed to build up a 10-20 share portfolio to diversify.

[kempiejon]

Having some "advice" in the 80s and 90s from smart suited fellas I took direct control after reading the Motley Fool UK book in 1999 or so. I started with a FTSE100 tracker, spent 2 decades in a selection of other thoughts and have come back to one. It's good enough and doesn't use any time nor cost much. I do not regret the 20 years learning and when I started I picked a UK tracker. My wealthy would have been similar if I'd stuck with the tracker but improved if I'd found a global equivalent in 2002 and stuck with it.

[JohnW]

I cannot see a newbie learning much about investing from a tracker.’

I think you need to know something about investing so as to pick the index tracking fund(s) suitable for your circumstances, but that aside the beauty of modern index funds is that they’ve commodified investing for ordinary folk. You just walk into any investing platform and choose one off the shelf where they’re all lined up for you; in the same way you no longer have to know how to make your own soap from solid fat and alkali, you just walk into the supermarket and all the soap is lined up for you with barely any difference between them. They’re commodities, and you don’t get a better product going to a specialty soap shop charging more. We can thank Vanguard for bringing low cost trackers to ordinary folk, even if you don’t buy their products now.
That's why folk are obsessed with trackers, bond as well as stock.