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Samual Saunders
Posted: 20 April 2018 10:39:23(UTC)
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I am very new to this and a bit late at 77yo, but have been dealing with my own Sipp with HL since investing my pensions back in 2010. I moved £100k to Drawdown in 2013 and took the 25% cash tax free and have only drawn about 35k by the odd lump sums as other assets have gradually been used and we have state pensions of £27k between my wife and self

Initially I had a selection of Invesco Perpetual, High Income, Managed, Distribution etc but although the growth has been 'conservative', I have not paid too much attention to it other than switching within the initial selection.

Looking at this forum and others, I realise that I should have given this more attention and have now just sold my present holdings and moved into 5 funds with an overall of 36% International Equity, 24% UK Equity, Int Bonds 20%, UK Bonds 12% and bits.

The new funds are with LF Lindsell Train UK Equity and their Global Equity, Artemis High Income, and their Strategic Bond and J O Hambro UK Equity.

In general I'm looking to grow the present pot (£362k in all) a little more than with the previous funds and although selling off when the values are a little lower is not wise, I hope to get the advantage of buying in to other funds at the right time, but unsure if International Equity or UK equity should be best.

Understanding that values go up and down all the time, I am not overly concerned about that but did wonder if I had either not selected enough other funds or should have fewer.

Seeing all the very helpful guidance on this forum, I thought of throwing my hat in the ring to see what may come back. Thank you
Sam
2 users thanked Samual Saunders for this post.
Michael Grimes on 21/04/2018(UTC), c brown on 23/04/2018(UTC)
Mr Helpful
Posted: 20 April 2018 15:44:46(UTC)
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To start the discussion rolling; UK Stocks are about 6% of Global cap.

Looking at the PIMFA web-site; then may be surprised to see UK Stock weightings typically in excess of 50% of Stocks.
https://www.pimfa.co.uk
The passive brigade would be choking on their trackers.
Many reasons can be marshalled to justify overweighting domestic.
Currency is a favourite.
Each investor must make an informed decision. There seems no single correct answer.

Personally comfortable with UK between 10% to 20% of Stocks.
Currently near the upper limit on valuation grounds.
1 user thanked Mr Helpful for this post.
Law Man on 20/04/2018(UTC)
Tom Bards
Posted: 20 April 2018 16:07:28(UTC)
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Probably no more than 15% personally.
King Lodos
Posted: 20 April 2018 16:09:45(UTC)
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Samual Saunders;60941 wrote:
In general I'm looking to grow the present pot (£362k in all) a little more than with the previous funds and although selling off when the values are a little lower is not wise, I hope to get the advantage of buying in to other funds at the right time, but unsure if International Equity or UK equity should be best.


Markets generally do a pretty good job of making those estimations (which will do better) and pricing in risk and return accordingly.

Active investing is a lot like betting on sports, but without seeing the odds clearly .. You might be able to predict Man City are more likely to win, but if the odds have that bet a near certainty, you might not be compensated enough for the risk of them losing – in which case it could be an awful bet, "Heads you win 10p, Tails you lose £1".

Traders will tell you money's made by discounting the obvious and betting on the unexpected .. So the question is as much "Will UK or International markets do better?", as it is "What does the market anticipate will do better?"

And that's where you have to look to fundamentals .. Earnings yields are a basic view of what stocks are paying you (for the risk of owning them) .. But it has to be contextualised against growth, risk, sectors, the quality of the companies you're buying, etc. All in all, we all go into investing underestimating how difficult a challenge it is to make right decisions.

But I think the funds you've chosen are great .. To maximise opportunities, I'd go more global (Lindsell Train Global and Fundsmith are as safe a bets as I think you'll find); but mainly: what's the plan for the money? Normally, approaching 80, you'd be more in capital preservation or drawing down mode .. For removing a layer of instability (currency) overweighting UK stocks might not be a bad idea .. Which is why I think a reasonably conservative portfolio, like yours, looks very wise.
5 users thanked King Lodos for this post.
Law Man on 20/04/2018(UTC), Samual Saunders on 20/04/2018(UTC), Peter59 on 20/04/2018(UTC), Michael Grimes on 21/04/2018(UTC), c brown on 23/04/2018(UTC)
Law Man
Posted: 20 April 2018 16:26:59(UTC)
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Samuel: on the direct question I think previous replies are good.

I am a decade younger than you and adopt a similar 'balanced' approach. The significant difference is that at present I avoid bonds other than short duration and some index linked for insurance. I hold wealth preservation funds/ ITs and infrastructure (more like equity) instead.

I expect you have done so, but ensure you have delivered a signed Memorandum of Wishes to HL; and left guidance to the beneficiaries as to what they should do with the fund.
geoffrey Walton
Posted: 20 April 2018 17:21:39(UTC)
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[quote=Law Man;60958

I expect you have done so, but ensure you have delivered a signed Memorandum of Wishes to HL; .[/quote]


Why would one do that please Law Man. I could understand it with a death in service benefit that my old firm had.
Would not the executors just close the account and get the money? I am not much younger!!

Does it only apply for Pension Investment?
1 user thanked geoffrey Walton for this post.
sarah b on 20/04/2018(UTC)
sarah b
Posted: 20 April 2018 17:52:14(UTC)
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I am also curious as to why Law man made these comments relating to H_L
Apostate
Posted: 20 April 2018 17:57:09(UTC)
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Mr Helpful;60950 wrote:
To start the discussion rolling; UK Stocks are about 6% of Global cap.

Looking at the PIMFA web-site; then may be surprised to see UK Stock weightings typically in excess of 50% of Stocks.
https://www.pimfa.co.uk
The passive brigade would be choking on their trackers.
Many reasons can be marshalled to justify overweighting domestic.
Currency is a favourite.


UK stocks will only help with currency risk if you avoid the huge companies with predominately overseas investments that dominate the FTSE 100. That index goes up and down with UK based S&P 500 trackers when the pound moves against the dollar.
paul armstrong
Posted: 20 April 2018 18:39:54(UTC)
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Despite the fact that they are very expensive, I anticipate putting a fair amount of my drawdown fund into a direct holding in a IL gilt. Haven't done it yet so this is all bluster but I was thinking if 20% 10 to 12 years to maturity. Another option.
Tim D
Posted: 20 April 2018 19:34:42(UTC)
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geoffrey Walton;60965 wrote:
Law Man;60958 wrote:

I expect you have done so, but ensure you have delivered a signed Memorandum of Wishes to HL; .


Why would one do that please Law Man. I could understand it with a death in service benefit that my old firm had.
Would not the executors just close the account and get the money? I am not much younger!!

Does it only apply for Pension Investment?


My understanding from a CFP is that pension freedoms have made SIPP funds such a brilliant tool for passing on funds IHT free that you should really make sure there's an Expression of Wish form on file so that it's clear that the pension should stay a pension and not just be "cashed in" by the executors. (However, I've lost track of whether this thread was about pensions or not now).
1 user thanked Tim D for this post.
bill xxxx on 20/04/2018(UTC)
Samual Saunders
Posted: 20 April 2018 19:39:31(UTC)
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Mr Helpful;60950 wrote:
To start the discussion rolling; UK Stocks are about 6% of Global cap.

Looking at the PIMFA web-site; then may be surprised to see UK Stock weightings typically in excess of 50% of Stocks.
https://www.pimfa.co.uk
The passive brigade would be choking on their trackers.
Many reasons can be marshalled to justify overweighting domestic.
Currency is a favourite.
Each investor must make an informed decision. There seems no single correct answer.

Personally comfortable with UK between 10% to 20% of Stocks.
Currently near the upper limit on valuation grounds.



Thank you for your reply, but you have totally lost me! I am not really into investments other than the sort of funds I have chosen and believe in being reasonably cautious, as with the initial funds I chose. I expect and hope to gain a little more knowledge in reading more and perhaps one day I will know what you are trying to tell me.
Sam
King Lodos
Posted: 20 April 2018 19:41:38(UTC)
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I'm still on the fence with index-linked gilts ..

What puts me off is extremely low coupons on anything short of very long dated .. and how much duration risk there actually is, considering inflation and rates tend to move together.

Do they protect any better than regular gilts? (which, if you held laddered, would be offering higher rates as inflation rose) .. Ruffer take fairly large positions on IL Gilts, but they do protect the capital with options – they evidently see that that may be necessary, despite adding quite a bit to expenses

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Tim D on 20/04/2018(UTC)
Samual Saunders
Posted: 20 April 2018 19:44:29(UTC)
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King Lodus,

[i]But I think the funds you've chosen are great .. To maximise opportunities, I'd go more global (Lindsell Train Global and Fundsmith are as safe a bets as I think you'll find); but mainly: what's the plan for the money? Normally, approaching 80, you'd be more in capital preservation or drawing down mode .. For removing a layer of instability (currency) overweighting UK stocks might not be a bad idea .. Which is why I think a reasonably conservative portfolio, like yours, looks very wise.

Thank you for your comments, which is what I was really looking for. With my limited knowledge and understanding, I have kept with funds and looked at a number that were in the HL wealth 150, then at past performance ( I know I shouldn't) but it helps. Then the mix to get a wider spread with different managers.

The plan for the money is to make sure there is enough, not knowing how long we may wish to keep up with the holidays and cruises each year. Although we still have other capital available, it's nice to think that if I drop off my perch before my dear wife of 55 years, who is almost the same age, there will be still plenty for her not to worry and keep the house until it's too big for her and my son, who is still at home.

I have taken care of Wills and Trusts so that IHT can be met before probate if we haven't spent it all and appropriate Powers are also in place, so no worries about it all passing on in the right direction. HL also have documentation regarding the Sipp.

I do appreciate your help.
Sam
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King Lodos on 20/04/2018(UTC)
Samual Saunders
Posted: 20 April 2018 19:57:15(UTC)
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Law Man;60958 wrote:
Samuel: on the direct question I think previous replies are good.

I am a decade younger than you and adopt a similar 'balanced' approach. The significant difference is that at present I avoid bonds other than short duration and some index linked for insurance. I hold wealth preservation funds/ ITs and infrastructure (more like equity) instead.

I expect you have done so, but ensure you have delivered a signed Memorandum of Wishes to HL; and left guidance to the beneficiaries as to what they should do with the fund.



Thanks Law Man,
Ten years ago I had Bonds in the Sipp and other investments as part of the 'back up' plan, but have come away from them over the years. As this change over was something new, I though a sufficient 'hedge' in place may be suitable but once I had more information (possibly for god folk like yourself) I can adjust the selection.

As mentioned in another answer, all the Memorandum etc is taken care of and as I did have a grounding in Wills and Trusts many years ago, I was very much aware of IHT strategy and putting enough information in place for when I pop off. Unfortunately too many people don't give enough time to that area of planning, which is so very important when you have built up a bob or two.
Sam
Samual Saunders
Posted: 20 April 2018 20:06:49(UTC)
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Tim D


But I think the funds you've chosen are great .. To maximise opportunities, I'd go more global (Lindsell Train Global and Fundsmith are as safe a bets as I think you'll find); but mainly: what's the plan for the money? Normally, approaching 80, you'd be more in capital preservation or drawing down mode .. For removing a layer of instability (currency) overweighting UK stocks might not be a bad idea .. Which is why I think a reasonably conservative portfolio, like yours, looks very wise.

Thanks for your comments. As mentioned in an earlier reply, it is important to let people like HL what you would like to happen if you suddenly fall off your perch. Also, I have had several sessions with my wife and my children, explaining how it all works and what can happen within my Will should they choose to adopt the setting up of the Nil Rate band Trust. It is written into the will to be agreed and it could be helpful.

On Trusts, We also have a good Loan Trust that has been growing well for many years and has the benefit of all growth being out of the estate, as well as ,if needed, the ability to have the loaned capital returned. A good back-up if appropriate.

Sam
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c brown on 23/04/2018(UTC)
King Lodos
Posted: 20 April 2018 20:35:34(UTC)
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Samual Saunders;60976 wrote:
King Lodus,

Thank you for your comments, which is what I was really looking for. With my limited knowledge and understanding, I have kept with funds and looked at a number that were in the HL wealth 150, then at past performance ( I know I shouldn't) but it helps. Then the mix to get a wider spread with different managers.

The plan for the money is to make sure there is enough, not knowing how long we may wish to keep up with the holidays and cruises each year. Although we still have other capital available, it's nice to think that if I drop off my perch before my dear wife of 55 years, who is almost the same age, there will be still plenty for her not to worry and keep the house until it's too big for her and my son, who is still at home.

I have taken care of Wills and Trusts so that IHT can be met before probate if we haven't spent it all and appropriate Powers are also in place, so no worries about it all passing on in the right direction. HL also have documentation regarding the Sipp.

I do appreciate your help.
Sam


My pleasure.

Here's one way to look at it .. You can buy the whole market (with Vanguard Lifestrategy 100, or a World Index), or slices of it, with funds like Lindsell Train .. But regardless, stocks tend to go up and down together – especially when it comes to big moves.

So if having enough is important, I'd always start by considering worst case scenarios .. A realistic worst case in stocks could be something like a 70% loss .. I think, had the financial crisis run a little longer before we intervened, a 70-80% loss would've been quite possible.

And the problem with losing money is that a 50% loss takes a 100% gain to get even; an 80% loss takes a 400% gain .. So if you were to lose 70%, you might not see it back within your investing timeframe .. And I consider *that* the constant risk of owning stocks – and really why the market pays you .. It's compensation for risk of a perhaps irrecoverable (in one's timeframe) loss of capital.

So I'd always start by thinking about the worst case – and make sure you've got enough in cash-like assets, so that if and when stocks find themselves down 50, 60, 70% again, you won't be tempted to sell .. Rather, you'll have enough money on the sidelines to buy.

Jack Bogle, for example, at 88, has 50% in stocks, 50% in bonds .. Every year, he'll rebalance back to 50:50 (so stocks fall -> he sells some bonds at the end of the year, and buys stocks, back to the 50:50) .. I like 50:50 .. It obviously lags when markets are going up, but markets don't always go up, and it massively reduces the risk of large losses of capital, which you might not recover



3 users thanked King Lodos for this post.
Tim D on 20/04/2018(UTC), Samual Saunders on 20/04/2018(UTC), c brown on 23/04/2018(UTC)
Samual Saunders
Posted: 20 April 2018 21:23:28(UTC)
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Thanks again,

General information like that helps. The fact that I have these investments with HL, by selecting funds, managed by someone who knows far more than me, I am better off that the man who buys individual shares in companies.

The fund managers use their skill to put a selection of shares together with a balance effect, so some may go down but not necessarily all. That's how I see it.

I have never invested in individual stocks, although some 40 years ago I lost over £30k in 3 months with advice on gold futures. Never again!

Spread it around and trust that a few cherries will keep popping up!

Sam
King Lodos
Posted: 21 April 2018 01:10:49(UTC)
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Samual Saunders;60990 wrote:
The fund managers use their skill to put a selection of shares together with a balance effect, so some may go down but not necessarily all. That's how I see it.


Well a lot of people think that .. and with certain funds, it may be the case.

But when the market goes down, usually everything goes down together .. You can have a look on Trustnet Charting – if you wind the date back to include the Financial Crisis, or earlier, and you'll find Lindsell Train UK, for example.

https://www2.trustnet.com/Tools/Charting.aspx

Here, for example, Lindsell Train UK vs the FTSE 100

https://i.imgur.com/E8Cixi4.png

In fact, on average, managed funds don't do any better than the market – nor any better than monkeys picking stocks at random – when it comes to downside protection .. If the market fell 60%, I would expect the average loss in my managed funds to be 60%, and in my individual stocks .. What you can never tell is how long these downturns will last – they don't always bounce back as quickly.

Now a bond fund might fall less .. But only because it's a different asset class.

Hedge Funds focus on protecting capital when markets go down, but they generally do it by holding things other than stocks – like cash/currencies, gold and bonds .. And they've not had a good run in recent times.

So I wouldn't put unwarranted faith in active management .. The risk of large losses, and prolonged losses, is a property of stocks in general
3 users thanked King Lodos for this post.
Julian W on 21/04/2018(UTC), Tim D on 21/04/2018(UTC), paul armstrong on 22/04/2018(UTC)
Samual Saunders
Posted: 21 April 2018 06:11:53(UTC)
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Thank you again for that.

When I look at the various funds on the HL system, I do look at the Asset allocation and where the fund is invested, as well as the performance over the last 5, 3 and 1 year in order to compare it with others.

Whilst I appreciate that all the funds are down at present, my feeling is that they will soon be returning and the ones selected this time have a better track record than the ones I picked for the last 8 years, so I am hopeful that the future may have some sunshine above the horizon.

I will continue to study this forum and others and try building my knowledge a little more, but doubt that I will ever venture into individual stocks at my time of life.

The ups and downs of the markets are part of investing and like the 'China crash in August 2015, recovery did not take too long and was not a concern as I dont 'need' the Sipp as much as some would.
Thanks again for your help.
Sam
Tim D
Posted: 21 April 2018 07:57:54(UTC)
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Samual Saunders;60994 wrote:
When I look at the various funds on the HL system, I do look at the Asset allocation and where the fund is invested, as well as the performance over the last 5, 3 and 1 year in order to compare it with others.


The problem with looking at anything less than 10 years is that basically you're looking at the raging bull market after the 2008 crash. This gives a bit of a false sense of security IMHO. I like to use trustnet's charting (what KL is using above) to look back to the record since pre-2008 (and ideally back to the '90s to include the 2001 bust) to get a more realistic picture of what's the worst might happen.

Samual Saunders;60994 wrote:
Whilst I appreciate that all the funds are down at present...


This is just a return to normal volatility after an abnormally smooth ride recently; hardly worth mentioning (despite all the "Market Correction" thread angst). Hang on tight...
2 users thanked Tim D for this post.
Samual Saunders on 21/04/2018(UTC), King Lodos on 21/04/2018(UTC)
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