Can I reduce the risk level of my investments after 10 years?

17 July 2020

Question by Lucy

Hello! I'm 22 years old and trying to navigate my finances. I have a comfortable safety buffer of £15,000, I'm contributing to my workplace pension and I'm also putting money into a cash LISA. I would now like to put £100 a month into a Stocks and Shares ISA. After exploring Boring Money, I've decided to opt for the Vanguard LifeStrategy 80% Equity Fund. I'm planning on investing this money for at least ten years. However, I wanted to know if there is any possibility of reducing risk after this time? For example, could I perhaps transfer to the 60% Equity Fund? Thanks for your help.

Answered by Holly Mackay

Hi Lucy,

Firstly, congrats! I wish I had been as organised as you when I was 22.
You sound pretty organised and like you've ticked all the main boxes:

Decent cash buffer
Paying into a workplace pension, so getting the nice employer contributions
Some cash savings in a Lifetime ISA which I presume you intend to use for a property purchase
So it's now time to think about a Stocks and Shares ISA
The Vanguard Lifestrategy funds are a very good option for newcomers to investing who aren't confident enough to pick their own funds and shares, and who want a big global brand to do the heavy lifting for them.

The benefit of setting up an ISA is that you are free to switch the funds inside this ISA, as and when you choose. So you are absolutely able to sell the 80% equity fund at a time to suit you, and switch the proceeds into a lower risk fund - perhaps nearer to the time when you think you will want to sell down your investments and take the cash.

This all sounds pretty sensible to me.
I guess one question (and it is a question, because I don't know the answer) is that, if you think this money could be for more than a 10 year period, why are you not picking the 100% equity fund?

So many people stick with the middle options because it feels intuitively safer then picking an extreme. It may be that you are fundamentally uncomfortable with the idea of owning 100% in shares, which is of course your prerogative. But you do have the cash buffers to mean that you should be able to weather any storms without needing to sell your investments when markets are going through tough times.

It could be that the 80% equity fund is the most sensible choice for you, but I'd just say have that internal dialogue and make sure you've got a logical reason for not investing these very long term savings fully in shares.

I hope that helps and good luck (not that it sounds like you need it!),


Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.