Is there a Robo Investor who provides both income and growth for those who are retired? (There must be a large market for this?) It seems to me that at the moment all the Robos focus on long term growth and reinvesting dividends - which is fine if you are younger. Have I got this right? Any comments / thoughts? P.S. I think your website / service is very good
19 March 2018
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Thanks for getting in touch, and for the nice feedback on our site.
You’re right – many robo-advisers are focusing more on investors building up assets rather than those taking income. Most don’t offer pensions yet, and those that do typically don’t offer income drawdown for retirees. The only one I know of which has specific drawdown functionality is PensionBee: https://www.pensionbee.com/drawdown
In terms of the actual investments that robo-advisers make, they’d typically reinvest dividends rather than focus specifically on generating income – they would look at the total return of a portfolio and let investors draw down from that.
Dear Holly, I am post-divorce with a good settlement which I have only partially invested. I completely empathise with the masculine nature of the investment market. I am very new to it and am working hard to understand the jargon and concepts. I am concerned to make sure that I invest the balance with an emphasis on income generation. Are there any courses you can recommend? I have sat in a number of meetings with accountants and financial advisers feeling somewhat patronised! I am sure that there are plenty of women in a similar position to me (aged 55!). Many thanks!
14 March 2018
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Nice to hear from you.
Sorry to hear about your situation – divorce is always more cumbersome than I think anyone anticipates.
Your question is really interesting to me as you are so right – you are not alone. We are weighing up ideas at this end about how to help this very specific need – and audience. Actually it’s also women in their 60s too which is a fairly recent development.
I do think a financial adviser would help – you can just pay for a block of time and see someone to talk through this stuff. You don’t have to sign up for life!
If you don’t want to then I’d say don’t overlook the tax benefits of pensions for investment. Read up on ‘Equity Income’ funds. Hargreaves Lansdown has good content. Charles Stanley will also have lists of ‘Equity Income’ funds. Or Fidelity is also quite helpful.
Take advantage of your ISA allowance – end of tax year coming up. You can always stick the money into your ISA in cash and then work out where to invest it later.
As for courses……………..I don’t know of any which have been recommended.
I would suggest that you start by understanding the SIPP (self invested personal pension) landscape. The Pensions Advisory Service is a free Govt helpline which takes general questions but wont tell you where to invest. And read up on Equity income funds which can pay out about 3% - 4% a year in income. I’d be very wary of newer schemes such as peer-to-peer lending which promise higher returns. Don’t lose your head – no such thing as a free lunch and all that! And make sure you have enough in a cash buffer to tide you over if markets head south for a bit – you only lose money when you are a forced seller in down turns.
Hope that is a temporary partial help and you have inspired me to pick up discussions about running workshops/webinars for the 1000s of women in your situation.
Thanks and hope it all works out
I am very keen to introduce my 20 year old son to funds and the potential that they can offer over the long term, he is only 20 but I have managed to get him to start investing with Nutmeg; he has a LISA and a Robot savings account. He’s paying £100 a month into the LISA and £50 a month into the savings account. I read Holly's piece in the Sunday Times and was reassured that I have monies in all the funds that she recommended. I am thinking of suggesting to [my son] to open up a Vanguard 100 % Equity and a Lindsell Global Equity Fund and drip feed monies in each month with a 'DD'. I use H&L and although they are a bit 'plumy' on the phone I quite like their website and the costs are OK. So I was thinking of H&L for [my son]. I would be telling him to open these two funds and regularly invest and forget about them for 10 years !
R, Greater London
19 January 2018
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Hi. The first thing to make clear is that I am not regulated to give financial advice. And I don’t know your full circumstances. This means you have no recourse if I tell you things which lead to poor outcomes and you have no comeback. And if your son is carrying expensive debt for example then investing is a bad idea……you get the picture. So with all that in mind – here is what I would say if it were a cousin of mine. Happy to help but important to set the scene!
He could just put it all into the Nutmeg LISA- -but he does have to be very sure that he will buy a house. Or we won’t need it till he retires! So it’s a bit of a risk to put all his eggs into this basket at such as young age.
However if he is dead set on buying a house, paying more into his existing LISA makes sense as he’ll get the Government top ups too.
If he isn’t sure then he can keep paying the £100 into the LISA and pay the other £50 a month into an ISA as he is, which gives him access to the more flexible robo savings if he needs them. But again – that £100 a month has to be for a first property OR retirement.
You have identified an allocation of £25 a month to the Vanguard and £25 to Lindsell Train Global Equity. I think both are strong options.
Fees are a thing to watch. Given that he will ‘set and forget’ I would suggest he uses Charles Stanley not Hargreaves. They are not as good overall IMHO BUT he will pay 0.25% not 0.45%. And they are certainly good enough! He can buy these two funds here. If you prefer to stick with the service you know, Hargreaves are great and the service is very good and they are a FTSE 100 company. So as strong as they come. This is your choice to make.
The final thing I’d say is that the Vanguard fund has professionals looking over it and constantly tweaking and adjusting. So you can truly set and forget. With the Lindsell Train fund, you need to check in every 6 months to 1 year to make sure that they haven’t lost their way. A simple way of doing this is to leave this to the experts – and check that it remains on the Hargreaves Lansdown preferred funds list (or any other platform’s preferred funds lists). If it heads South, they will remove it. I personally like the fund and I rate it – but things change so with this option you do need to keep an eye on it. An alternative is to see how it is doing compared to the average or index but this can be difficult to assess as ‘underperforming’ for 6 months or so doesn’t always mean a rushed decision to sell up is the right one. These are long-term plays.
Once he has more than £500 saved he could always just open up an ISA with Vanguard directly and save the whole £50 a month here. It would be easier and the overall costs would be lower. You remove the potential outperformance of the Lindsell Train fund BUT you get simplicity, and also remove the risk of a more expensive fund underperforming. So that’s a choice he’ll have to make – the certainty of lower fees and average performance against the potential for higher performance alongside the risk of paying more for duff performance.
Hope this helps.
I am in the very lucky position of just having received a gift of £800k which I want to invest for our retirement. My husband and I are in our late 40s and aim to retire in around five years. Our other assets (shared with my husband) are: property - c. £1.5m stock and share ISAs - 250k shares - 40k pension - 200k trust - 170k Kids' investments. We plan to give these to them when they are 25 or sooner if they are ready to buy their first property. They are currently 7 and 9. trusts -250k bonds - 250k After tax, our current annual income (from work, not including investment income) is around 70k, but last year we spent around 115 (27 of which went on school fees). I'm trying to reduce our frittering, but we still need to keep some cash accessible to fund some overspend. We have 11 more years of school fees to fund, then hopefully university fees for two after that. So my questions are: - how does this sound as a breakdown between term of investment: cash - 100 short term (2-5 years) - £100 medium term (5-10 years) 250 long term (10-20 years) 350? - would it be crazy to put all the medium and long term sums into the stock market at this time, given it is so high? - I'm thinking of choosing a tracker fund for all or part of the medium/long term investments - do you have recommendations? - what sort of thing should I be considering for the short-term? - is there a good argument for buying gilts or other government bonds to hedge against the stock market? - I've been toying with the idea of buying a small investment property to let in the long term and give a small short-term income. Would it make sense to invest the £350 long term income in this way to protect myself against a stock market crash? What else should I be considering?
18 January 2018
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Gosh. There’s a lot here!
Firstly I would suggest you see a financial adviser. There’s a lot to unpack and digest and I suspect peace of mind is valuable to you. There’s investment, retirement, trusts, cash and property all rolled up into your questions.
I can share some thoughts.
Rather than jump into the shares or cash question, I think we need to start by thinking about what sort of a life we want. What income we need to support this. And then what time frames and ‘life chapters’ these broadly fall into.
Many advisers offer cashflow modelling services and I think this would help. You have about 5 more years on employment income ahead and an overspend of about £45,000 a year in this period. The Working and School Fees chapter. You’ll then lose employment income and be living off investment income whilst funding school fees. The Retired and School Fees Chapter. So let’s say 6 further years where you’ll need £115,00 a year to support your family (at current burn rates and not including inflation!) And then they’re off to uni (maybe) which will impact your cost base again as you enter the Empty Nester chapter.
So your income needs are quite lumpy and variable. You may also want to add renovations. Holidays. Hobbies.
Once you have mapped out your income needs then you can think about the various ‘buckets’ of cash and savings and investments which will fund these. I think you’re right to split these into timeframes. Cash and cash-based products make sense for the short-term – no point in looking at the stock market for this.
Once you’re looking at more than 5 years then I think it makes sense to consider the stock market yes.
There is no single right time to invest and yes markets are high. But you and your husband could have 50 years ahead of you! So why sit on the sidelines agonising? Markets could fall this year – yes. But they might also climb this year as you sit on the sides and watch. We don’t know. The main thing is that they tend to come back over the long-term so frankly you may as well get on with it with the long-term pot of money.
If you want a tracker fund then I’d suggest you have a look at Vanguard where you can invest directly online at a very low cost and pick a very simple ‘multi asset’ Life Strategy fund. These will blend in a dollop of the bonds or gilts you mention – and so someone is making these decisions and doing all the blending for you. The longer-term the pot of money, the larger the chunk of equities you need. So the LifeStrategy 100 fund could be a good choice for the long-term pot.
Two things you don’t mention which it’s worth thinking about are pensions and ‘equity income’ funds. Pensions should absolutely be a part of your planning and you get tax relief from the Government which boost the coffers. And you guys can afford to set money aside until your mid 50s so it’s a no brainer. You’re still a long way off the maximum ‘Lifetime Allowance’ so you should be OK.
Secondly equity income funds are collections of shares managed for you which pay quite nice chunky dividends. So you invest in these because you hope they’re going to go up BUT also because they can pay you an income of about 3% a year (rough rates on some good ones today but not guaranteed. Have a fossick about on Hargreaves Lansdown for some info).
For the short-term cash assets it’s a trade off between security of your assets and the interest rate. NS & I for example is as safe as they come (Government backed) but the rates aren’t the highest. But be careful about rate chasing in an age where cyber crime is on the rise. It’s a balance. Savings Champion is a good website with some useful Best Buy tables.
When it comes to the kids, there’s an awfully long time between now and their 25th birthdays so again, just be sure that this money is working hard enough for them now and avoid the common temptation to stick to cash-like stuff because “I don’t want to take any risk with the kids’ money”.
As for an investment property, speaking from experience, these can be a real pain to manage. There’s stamp duty. You’ve lost a lot of the tax perks. And boilers pack up and roofs leak and there’s Council Tax and blah blah. You’re also quite overweight on property already? These can be a good option for some people but almost everybody underestimates the pain the bum factor of buy-to-lets.
A collection of thoughts from me. But I really would suggest seeing a Certified Financial Planner for a spot of cashflow modelling and some advice – you can ask for this as a one-off piece of work rather than signing up to an ongoing fee. For this much money I think the peace of mind that brings is well worth it?