Author Topic: UK based investing in government ISA (20k per year tax free). Sell everything?  (Read 679 times)

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Hi all,
pretty new to all of this so sorry if this has been done to death.... I have decided to ask opinion rather than spend 6 months reading and going in circles (I have been doing alot of this over the last month).....

I'm UK based, our tax free government tax free structure is called an 'ISA', you can put 20K a year into stock/share/EFT/bonds per year tax free.

Wonder what the general opinion is on selling rental property now and dumping it ALL into vanguard VUSA or similiar? the throught of it/risk scares the crap out of me, as I am new to this concept. I do understand that in 15-20 years current buy prices dont matter that much and just get in now.....struggling with it though....!

Baz


never give up

  • Handlebar Stache
  • *****
  • Posts: 1409
  • Location: UK
Hi. Thereís lots of UK specific info on the UK tax board. We donít just talk about tax there. Itís worth having a read through some of the posts there. Itís great to ask people on here but there is no substitute for doing your own research. No one cares more about your finances than you.

You donít mention your goals or what you are trying to achieve. The fund you refer to is 100% US stocks. Iím not aware of too many UK based people that would have their investments structured like that. Generally we tend to invest globally to diversify and add a bond element to the mix too. Your asset allocation between stocks, bonds, cash should be set so you feel comfortable. There is no point in having a strategy that scares you. Thatís the wrong strategy. You can of course invest over time. You donít need to invest all at once if that doesnít feel good to you.

I would recommend reading the JL Collins stock series and Monevator is an excellent UK resource too.

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Will do. Thanks.

Vanguard UK element do vusa and some global diverse options....It's their lowest cost eft.

Will get good run thru those references


never give up

  • Handlebar Stache
  • *****
  • Posts: 1409
  • Location: UK
Great stuff. The LifeStrategy funds are popular on here but generally have a UK bias. Funds such as Global All Cap invest based on market weightings so lose the UK bias. If you are new to investing the LifeStrategy funds are great. They come in a variety of stocks, bonds allocations to suit your attitude to risk.

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Will check out life strategy funds...That's new to me. Ta.

Trying to avoid UK market/ftse 100 based investment with brexit looming. They say it could take a decade to recover..it really is a economic disaster..

I wonder is there any need to go beyond vanguard UK? Also does 0.25 percent management fees sound big ish for their 'all world large caps'?...their charge for sp500 is only 0.07 percent....

Baz

never give up

  • Handlebar Stache
  • *****
  • Posts: 1409
  • Location: UK
The charges are slightly higher here as itís rebalancing geographically or in the case of LifeStrategy itís rebalancing between stocks and bonds for you. You are paying very slightly for the simplicity. You can achieve the same thing going for separate index funds e.g. US, Europe, Asia, Uk, Emerging Markets if minimising costs is your goal but then you have to rebalance between them yourself. See the Monevator slow and steady portfolio for example.

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
thanks for advice....will do a bit of homework on that

Andy R

  • Stubble
  • **
  • Posts: 171
the throught of it/risk scares the crap out of me

If it scares you then you don't understand the nature of the stock market.
If you don't understand the nature of a type of investment, you should not invest in it.

You need to spend time reading a little each day until you understand it deeply enough to make a decision based on the understanding that volatility in the stock market is normal and that you should have an allocation that is tailored to your risk tolerance.

Don't invest in things you do not understand. Learn it first even when it could take 6 months or a year or more for you to properly understand enough to make an educated decision on whether it is right for you.

frugledoc

  • Pencil Stache
  • ****
  • Posts: 591
Hi all,
pretty new to all of this so sorry if this has been done to death.... I have decided to ask opinion rather than spend 6 months reading and going in circles (I have been doing alot of this over the last month).....

I'm UK based, our tax free government tax free structure is called an 'ISA', you can put 20K a year into stock/share/EFT/bonds per year tax free.

Wonder what the general opinion is on selling rental property now and dumping it ALL into vanguard VUSA or similiar? the throught of it/risk scares the crap out of me, as I am new to this concept. I do understand that in 15-20 years current buy prices dont matter that much and just get in now.....struggling with it though....!

Baz

1) Shold you sell the rental property - Almost definitely yes.  The government has made the tax and beaurocratic environment very unfavourable to the amateur landlord.  Watch out for capital gains tax.

2) Should you dump it all into VUSA - No, go for the the whole world. Personally I use Vanguard All World ETF, VWRL for my one fund portfolio.  If the thought of it scares the crap out of you then you need to carefully consider your asset allocation and have an IPS.

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
frugledoc,
thanks for the reply.  vwrl is on my list.

I suppose the idea of investing in the markets using index EFTs is quite new to me, I'm used to old style investments ideas like the bricks and mortar....bit of an emotional leap learning this and trying to evolve with it.

I find anything like this requires alot of reading until the knowledge plateau is reached...


frugledoc

  • Pencil Stache
  • ****
  • Posts: 591
frugledoc,
thanks for the reply.  vwrl is on my list.

I suppose the idea of investing in the markets using index EFTs is quite new to me, I'm used to old style investments ideas like the bricks and mortar....bit of an emotional leap learning this and trying to evolve with it.

I find anything like this requires alot of reading until the knowledge plateau is reached...

 Keep it simple.

Watch these videos. Easy peasy

https://www.kroijer.com

bthewalls

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Fees on vwrl pretty high compared to vusa?

never give up

  • Handlebar Stache
  • *****
  • Posts: 1409
  • Location: UK
High fees are generally associated with actively managed funds that will often charge over 1% and sometimes 1.5% and higher. 0.25% is not an expensive fund. I appreciate it is higher than a fund that charges 0.07%. However you are not comparing like for like here. VUSA is invested in approximately 500 US stocks while VWRL is invested in more than 3000 globally. Given the choice I would rather pay the 0.25% and have exposure all around the world.

I believe most US based people would not solely invest in an S&P 500 fund because it would limit them to the largest US corporations and they would miss out on some of the smaller and mid sized companies that may go onto become giants in the future. The US Equity Index fund (0.1%) is a better choice here than VUSA as it invests in over 3500 US companies, spreading the risk and the types of companies you are invested in. This one is a bit more similar to the US Total Market Fund (VTSAX) that US forum members will discuss on here, or that JL Collins mentions in his stock series. However as good as the UK version of this fund is, I don't personally think a UK person should be invested 100% in the US.

So to go the global route you really have two choices. Pick the cheaper Europe, US, UK, Emerging Markets, Japan and Asia Pac trackers and allocate to them in the proportions that a global tracker would i.e. usually based on market cap, or just go for simplicity and pick a global tracker such as VWRL.

You are completely correct that fees are important but we are not talking about the difference between a 2% fund and a 0.07% fund here.