Author Topic: A good First time ISA portfolio UK based  (Read 1285 times)

Ds306

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A good First time ISA portfolio UK based
« on: August 15, 2017, 06:43:20 AM »
Hi all,

I've been a long time reader of the forum and Mr monevator but have only just got the courage and funds together to start an investment.

I'm 27, UK based and looking at a long term investment that could probably be used as an early retirement fund. I'm starting with 5,000 and will probably contribute 5,000 each year or perhaps a little more as my pay keeps progressing as a teacher.

At the moment I've picked this portfolio:

Vanguard UK Government Bond Index Acc VAUKA - 20%

Ishares FTSE 100 ETF XCFTA - 15%

Vanguard Emerging markets stock index VNEMA - 25%

HSBC American index fund acc C HCAIA - 25%

HSBC FTSE 250 index fund acc C HCITA - 15%

The basis for my choices was an 80-20 split of equities to bonds. I guess I have slight home country bias with 30% UK equities but I did evenly split them over FTSE 100 and FTSE 250.

My plan is to keep rebalancing 2-3 times a year and slowly move up to a 70-30 split by my mid 30s.

I have a few questions and would appreciate any thoughts;

1) I picked my choices all based upon their current TERs. Should I monitor these changes carefully and switch in the future? Or are these changes small enough to never really be a concern?

2) Is my portfolio diverse enough?

3) Any other factors I may have overlooked?

Appreciate any advice I can get, sorry mods if this is posted in the wrong section.

Thanks,

Dave
« Last Edit: August 15, 2017, 08:33:34 AM by Ds306 »

AnswerIs42

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Re: A good First time ISA portfolio UK based
« Reply #1 on: August 15, 2017, 07:10:27 AM »
Thoughts:

You seem to be missing Europe (ex. UK). Worth including some of that too?

Government bonds give a pretty crappy return over the long term, and you're relatively young. If you feel confident enough, then you'll be better off going 100% equity. If you don't, then maybe consider corporate bonds rather than government ones (you'll get a slightly better return), or high interest bank accounts for that 20% portion instead.

Maybe consider 5% in property funds too.

But don't let perfect be the enemy of good, as long as you're getting started, that's the main thing!

Ds306

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Re: A good First time ISA portfolio UK based
« Reply #2 on: August 15, 2017, 08:32:30 AM »
Thanks for the thoughts. I was thinking about a European index, but wasn't sure if it was worth the complications will look into it along with property and perhaps shrink my bond holdings to 5%. I already have money in a LISA and have a few thousand maxing out my high interest bank accounts.

I've never considered corporate bonds I'll do a bit of further reading on them before I take the plunge.

Thanks!

Chuck Ditallin

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Re: A good First time ISA portfolio UK based
« Reply #3 on: August 15, 2017, 08:55:25 AM »
Hi Dave,

I am certainly not an expert, but if you're paying 10 a trade (for example) for each of 5 funds, you're spending 1% of your investment each year in commission. Have you thought about sticking with the allocation that you're happy with, but investing the whole 5k in one fund, then next year, the whole 5k in the next? That way, you achieve (more or less) your desired allocation over a period of five years and save maybe 200 in the process.

runewell

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Re: A good First time ISA portfolio UK based
« Reply #4 on: August 15, 2017, 08:56:53 AM »
At your age I would recommend 0% bonds.  Bonds are generally low risk, low return - at your age and with a long investment time horizon, you want the opposite.

And yes, avoid home-country bias.  That's a big problem everywhere, this forum included.  VTSAX is a popular recommendation here (and rightly so), but many United Statesians neglect the international component.

VT is a good ETF to cover the entire world.  Then you would only have to pay one set of commissions.
« Last Edit: August 15, 2017, 09:00:30 AM by runewell »

Ds306

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Re: A good First time ISA portfolio UK based
« Reply #5 on: August 15, 2017, 11:04:05 AM »
I am certainly not an expert, but if you're paying 10 a trade (for example) for each of 5 funds, you're spending 1% of your investment each year in commission. Have you thought about sticking with the allocation that you're happy with, but investing the whole 5k in one fund.

I was thinking about that however, with a Cavendish ISA I believe I only pay 0.1% dealing fee. Unless I'm missing something?

I was thinking about a world ETF, however the expense ratio is higher than my average expense ratio when separate. I am of the understanding that the commission fees should be considered minor one-off fees when compared to accrued management expenses?

I am definitely going to reduce my.holding in bonds though and maybe consider corporate bonds too.