Which Fund(s)

[UKstache]

Hi all, please be gentle its a first post...

I'm wanting to apply the new found knowledge from reading this forum and convert the contents of a tax efficient wrapper (ISA, i'm in the UK) from cash to funds. The amount is quite a chunk on money for me, but I'm trying to become less risk averse.

I have already started using Vanguard lifestrategy for the automatic rebalancing in another account but am thinking of avoiding bonds this time and therefore going for funds with a lower cost. These would a UK all share fund and a US all share with Vanguard. Probably a 50/50 split.
 
Tell me why this is a bad idea & why? Thanks!

[SeattleCPA]

OK, if I understand the idea (which boils down to you coming up with your, home-brewed asset allocation formula), I'd say it's a bad idea because you know the asset allocation formula used in something like a target retirement fund or a life strategy will be better thought out than what you come up with yourself (or what I come up with on myself).

[UKstache]

Thanks, I'm sure you're right. I was thinking of my main asset allocation decision as funds or bonds and therefore that a lifestyle fund was a bit redundant if 100% in stocks.

Sent from my HTC Desire 510 using Tapatalk

[cerat0n1a]

I don't think it's a bad idea, provided you're comfortable with the volatility/risk of a 100% shares approach.

Could be argued that the state pension is a pretty good bond proxy in any case? It's government backed and it's going to provide a fixed amount of income at some future date.

If you go down the 100% equity route, why go for a 50/50 UK/US split? What's wrong with Europe, Japan, Asia-Pac, emerging markets? I think it makes sense to have some home bias because you're earning and spending pounds rather than dollars, euros or yen, but the UK is less  than 10% of the world economy, so having 50% of your portfolio there seems high to me.

[UKstache]

Thanks, I am only considering 100% stocks because I have some property and cash to balance it out.

The theory I was going for with just 2 funds was that they have big companies which are multinational. I believe jl Collins explains this view.

I'm already coming around to getting a fund of funds and just paying the extra due to my very amateur status!

Sent from my HTC Desire 510 using Tapatalk

[UKstache]

It's also a good point about other pensions, this wouldn't be my whole stache. Just the only part available pre age 55.

I should probably do a whole case study but it seems intimidatingly complex to outline all the details of my situation!

Sent from my HTC Desire 510 using Tapatalk

[cerat0n1a]

I'm already coming around to getting a fund of funds and just paying the extra due to my very amateur status!

No need - you're paying money for nothing. You could just go with Vanguard's world index tracker (which is approxx 50% US, 50% rest of the world anyway) or do the 50/50 UK/US thing if you like. Monevator's passive investment stuff is worth a read to get a good handle on the options within an ISA or SIPP.

http://monevator.com/category/investing/passive-investing-investing/