The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Ds306 on August 15, 2017, 06:43:20 AM
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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
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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!
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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!
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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.
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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.
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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.