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I am a 35 year old woman working part time on a reasonably good salary. I have recently taken out a Stocks & Shares ISA with Wealthify (from reading the recommendations on Boring Money) where I pay in £40 per month. However, I am wondering if I should be doing more? Should I be diversifying and using more than just Wealthify by also investing in Vanguard or Investec, for example? Or is it better to increase the amount into Wealthify? Thanks!

Holly, Sussex

17 October 2018

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Lesley James

Dear Holly,

Well done for starting to invest. Every little helps and it’s great to hear you’ve started to do something for your future self, as well as for today.

Can you do more? That depends on your financial position of course. You don’t want to invest everything, and then find you’ve tied up so much money that either you’re having to sell when markets are down, or take on (expensive!) debt to replace, say, a washing machine that blows up or car that needs repair.

But if you have the money spare, then do, yes. The more you do now, the harder that money will be able to work over the coming years. All of which should be to your benefit…

In terms of diversification, though… I’m not sure that you need to worry about holding money with different platforms for now.

Wealthify and Vanguard use mostly passive investments to get your money into the stock market. You will therefore have gained very good market diversification at a very low cost already. Adding a second online platform to Wealthify will only increase your administration - and clog up your app dashboard on your devices.

I would therefore suggest that there is little downside in concentrating your efforts on maximising the savings in one place, certainly for now. And for probably at least the next five years. Unless something amazingly different comes along, or you get an unexpected and decent windfall, I’d get your monthly direct debit into the Stocks & Shares ISA as high as you sensibly can, and then forget it’s even there.

Consistency is by far the most important, and influential, secret to building wealth!

I am 25 and starting to seriously financially plan out my future. I would really welcome a 'sense check' on my thinking as well as some help on which investment choices to make. My current position is: Income = £100,000 (+15% annual growth) Work Pension = value £20,000 - investing £1,100 per month (£800 me + £300 Co.). Property = value £500,000 - with a £240,000 mortgage at 1.29% - 35 years (remortgage due 06/2019) + (illness & income protections in place). Rental Income = £20,000 per annum. Debt = £0 (other than mortgage) I have a separate 'emergency' fund - which will cover my expenses for 12 months Cash Lump Sum (Oct 2018) = £25,000 On-going (Sept 2019 - Sept 2024 ) annual lump sum = £40,000 On-going = £1,000 per month My goals are: To invest for 15 years - my risk appetite is very high (i.e. I could afford to lose all my money). Goal 1 - More Important: To have an investment pot of £1,500,000. Goal 2 - Less Important: To be mortgage free. My plan and questions are: For the first 10 years I'll take higher risk investing opportunities (i.e. 80-100% equities), followed by 5 years of moderate risk investing (65% Equities: 35% Bonds) 1. Open an annual Stocks and Shares ISA each of the next 15 years: Put £20,000 (of my Oct 2018 £25,00 lump sum) into the lowest cost, passive, diversified, tracker fund I can find. Vanguard seems to be the best. For example: - "Vanguard Life-Strategy 100% Equity" or - "50% Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares + 30% Vanguard Total International Stock Index Fund Institutional Select Shares + 10% Vanguard Total International Stock Index (VGTSX) + 5% Vanguard Explorer (VEXPX) Small-cap stocks + 5% Vanguard Health Care (VGHCX): Health sector" Q: Would you recommend a different (cheaper/better performing, etc) platform, fund or range of funds? Q: Should I drip-feed my £20,000 in between Oct 2018 and March 2019, or just put it in as a lump sum now? 2. Open Share trading/dealing account: I am looking at Vanguard or iWeb as the lowest cost platforms. Q: Would you recommend a different platform? From Oct 2018 - I have a £5,000 lump sum (from the original £25,000 lump sum) + £1,000/month to invest. From Oct 2019 onward I will have a £20,000 lump sum + £1,000 per month to invest. Q: I have no clear idea what to do with it. This is the area I feel I need most help with. Could you please offer any guidance as to how to structure/invest this portfolio? What products (i.e. ETF, stocks, etc). 3. Mortgage: 2019 - reduce mortgage term to 25 years 2024 - reduce mortgage term to 15 years 2025 - reduce mortgage term to 6 years Q: As being mortgage free is a second tier goal for me, would it be better to max out monthly payments into my other investments rather than pay higher monthly mortgage repayments? I appreciate the above is a lot to go though, but I'd welcome any help and guidance. Thank you!

Mo, London

15 October 2018

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Holly Mackay

Hi Mo,


Yours is a very detailed question that would benefit from a thorough revision with a financial planner – there’s a lot to go through which suggests someone needs the full picture of your position and circumstances.

Some observations from me:

  1. Ask your employer if they would match any additional contributions from you? This could be turning your back on nice additional (free) contributions from your company and you can probably afford to make the extra contributions.
  2. You don’t mention a private pension at all – as a higher rate taxpayer you get decent tax relief which effectively means £1 costs you 60p. Contributions are capped but it’s worth investigating.
  3. The Stocks and Shares ISAVanguard is a decent option for the £20,000 – it’s low cost as you say. If you like the concept of passive funds this is a decent choice. I think the LifeStrategy 100% is a decent option. Building your own combo sounds a bit over-complicated and of course would need maintaining & rebalancing/tweaking, which the LifeStrategy option does not.
  4. As to whether you go now or drip feed in – this is a near impossible question and you need to make this call. Markets are pretty volatile at the moment – there is a logic to drip feeding in to average out the entry price. But of course, I can't predict the future so I think you need to decide this one.
  5. Your general investment account - it’s going to be under £50k for the next three years (probably), and you seem to want to explore different investment choices. So Vanguard could be too restrictive. I'd suggest you have a look at AJ Bell Youinvest which is low cost at these levels, and offers choice. They have a core passive range which could be the starting point or the foundations. And as your confidence grows you may want to add a few active funds, but this is of course your decision. Have a look at the platforms’ preferred fund lists which are generally a good guide – such as Hargreaves Lansdown's Wealth 150+ or the AJ Bell favourite funds.


Good luck! Please remember that I'm not qualified or regulated to give financial advice, so the above are my opinions only.

You earn a decent wage and you’re in a really strong position. So you could do worse than try to see a financial adviser for a few hours, at least to check your planned approach.


Holly

I am a 30 year old British expat living and working in the Netherlands. I worked in the UK for 5 years (2010-2015), but it was at the start of my career and to my knowledge I did not have a work pension of any sort. I've been working in the Netherlands for the last 4 years, and again have no pension (my company does not provide anything). I'm getting increasingly worried about my future retirement and my lack of any kind of pension. Firstly, I am not sure what - if any - state pension I could receive (either from UK or Netherlands) but I assume not much. Secondly, I'm ready to start investing on a monthly basis into a private pension fund, but I have no idea what the best option for me would be. I'm definitely turned on by the likes of Nutmeg and Wealthify, but given these are all UK based, I am not sure tying my assets into GBP is the best decision given Brexit. Furthermore I wouldn't benefit from UK government contributions anyway so maybe it's not the best idea. The only silver lining to my situation is that I bought a flat this year, and I have some stock options in my company which is a very large and fast growth tech company. Really lost and confused, and would really appreciate any advice you might have.

Lucinda, Kent

09 October 2018

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David Stone

Hi Lucinda,

 

Good to see that you’re focusing on your retirement planning - your thirties are a great time to get on top of this, as it can be a bit late to catch up if left to one’s forties!

 

I can’t advise as to the Dutch state pension, but you will have earned some National Insurance “credits” towards the UK state pension from your 5 years of employed work. However you do need a minimum of 10 years to qualify for the minimum pension, so they’ll be wasted if you don’t work in the UK again.

Paying into a UK pension is almost certainly not advisable, as you wouldn’t qualify for tax-relief which is the main benefit.

Equally you cannot contribute to a UK ISA unless you are tax-resident, so that option is out also.

 

I think your two options are either to;

  • Look at a regular premium offshore investment to create a “pseudo-pension”.

Although the offshore market is not as highly regulated as the UK so I would suggest you take advice as to which provider to go with.

  • The other option is to seek out advice in the Netherlands.

They may well have the local equivalent to a UK pension, that could prove suitable for your needs if you plan to remain resident there for some time to come - but to be honest, its all Dutch to me! 😉

 

Great news on the flat and stock options though. Best of luck with your future!

David

I shall have £10k to invest shortly, and I want to use an actively managed portfolio in a quality company. How would you rate - Investec Click & Invest/True Potential Investor/Nutmeg on the basis of ROI/customer relationship/quality/risk factors etc? I would class myself as a mid-grade risk-taker/reasonably adventurous if appropriate, with a high quality company. I presently use Hargreaves Lansdown and Wealthify but feel the need to diversify. What do you recommend?

Richard, Shropshire

03 October 2018

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Holly Mackay

Hi Richard, 

 

The first thing I’d challenge is the need to diversify.

Diversification is really important in terms of the actual investments themselves. So we don’t just buy a few blue-chip UK shares, for example.

However this doesn’t apply to the actual service providers, platforms, ISA managers or robo advisers that we use. To put it more simply, we need a good spread of investments in our baskets but we don’t need to visit lots of different supermarkets or shops.

The risk you are presumably concerned about is any of these providers (or shops) going bust.

Investment companies need to have capital so they can cover administration costs if they stop trading. But if the administrator can’t recover fees from company assets, it’s legally allowed to do so from client assets instead. But this is just the fees for the administrator. 

In this instance, from April 2019 we’re also all covered to the tune of £85,000 by the Financial Services Compensation Scheme.  

 

Client money is held separately and can't be used by an investment company to pay their debts or to pay any creditors.

This link from Hargreaves Lansdown explains it well - www.hl.co.uk/security-centre/how-safe-is-your-investment

 

So my sense is that you are over-complicating your administration life here more than you need to.

However if that’s what you want to do, then let’s have a look at the three options you suggest...

 

Investec is a big global bank and assets manager - them of the zebra!

Click & Invest has a minimum of £10k, so I haven’t tested it personally. It’s actively managed as you say, so not as cheap as some but could deliver more. Costs will be about 1.4% in total every year. From Jan 17 – June 18 their middle portfolio did 10.6%. To me it looks like a good and solid option.

 

True Potential Investor is a firm of financial advisers which have built out tech solutions and gone direct to clients.

I have a test account there – there’s an average annual fee of 1.16%. Their mid portfolio did 4.2% from Oct 17 – Sep 18. And 7.9% the year before that. I like the app and I think it’s quite easy to use.

 

And Nutmeg is the oldest standing of the UK robos, which is well reviewed by clients and does well enough in performance charts.

But this is a passive choice, so the investments are managed a bit differently and it’s correspondingly cheaper with all-in costs of about 0.95%. To be honest, if you’re already with Wealthify, I'm not sure what else you’d get from coming here.

 

I don’t know if that’s been helpful. All three options you mention are solid, I think.

They’re also all quite new, so it’s hard to look back at long track records and make definitive calls about who runs the money best. And comparing like with like is very hard!

My sense is that if you really are keen to diversify providers, then I would pick either True Potential Investor or Investec Click & Invest depending on their customer reviews, and also which website and app you find the best.

 

Good luck!