Have I invested in too many products?
29 July 2021
Question by Sue
Have I in invested in too many products? I'm new to investing and after inheriting around 250k got a little trigger happy! I opened a Halifax 40k isa (managed funds risk 4 and 6) then 80k in Nutmeg split into various products and risk. I now also have an I.I account with 112k invested in several funds although a big chunk 70k is in LS 60 but the others include Scottish mortgage Fundsmith Baillie Gifford LS 80. I also now have a SIPP with Vanguard split between an ETF and a global index fund.
My question is am doing anything wrong in this? Someone said I would be much better investing in one global tracker as I will be paying lots of fees but surely the more adventurous funds gains would counter the added expense of fees? I plan to move away from Nutmeg when my fee free period ends probably to I.I. I'm 51 hoping to retire at 55 and start to draw down at this point. Thank you Sue
Answered by Dale Kirkpatrick
Firstly, well done for starting to get into investing and knowing to spread the money around across various funds.
When we talk about investing, we always talk about spreading your investments to manage the risk that you take - we call it investing in a diversified portfolio. It all goes back to the old adage of "Don't put all your eggs in one basket." You won't have done yourself any harm by investing in "too many products" but it might just be a bit more complicated to manage and to make sure that it is working hard for you.
Investing in different funds will help to spread the risk, it just depends on exactly which funds you are in. Generally, the Vanguard Lifestrategy funds are a very good place to start. You might just want to look into the funds you have invested in, to make sure that they aren't all investing in the same underlying companies, but at different investment management costs. Where the Vanguard Lifestrategy charges are competitive at around 0.22%pa, you may find some of the other fees could be more expensive.
The theory is that the more risk you take, the greater your expected return should be. Therefore, the adventurous funds should provide a gain which will counter their expensive fees, but it completely depends on the fund. There is lots of research which shows both the good and the bad outcomes of these fees, so just because they are more expensive, don't automatically assume they produce a bigger return. I would suggest you aim to keep your costs as low as possible.
Another thing to consider is that by investing all of your money on one provider/platform (eg. all on Halifax or all on Vanguard) quite often these providers will charge lower fees for larger accounts. By having all of your money on one provider, you might benefit from a lower platform charge - it might be worth looking into. You could potentially have the exact same investment but at a lower ongoing fee.
The funds you're invested in will all have different risk levels. The LS funds manage this, but the other funds (the ETF, Fundsmith, Baillee Gifford, Vanguard global tracker) may be 100% in shares and therefore at the top end of the risk level. You may well be comfortable with this, but it might be worth considering, especially if you are planning to retire in 4 years.
If you have never spoken to a financial planner, this could be a great time as you begin to prepare for retirement. Have you thought about what you want your retirement to look like, and if you have "enough" to fund your desired lifestyle? This could be the time to make sure that you are doing everything you can do to set yourself up for a comfortable retirement, and that you are aware of the risks you are taking. If you do want to retire soon, you won't have much time to recover should you be invested in a portfolio which is riskier than you initially thought.
Most financial planners/advisers will have an initial meeting for free, and will often do a second opinion "sense check" on your investments so that you are aware of what you are invested in. If you like them and what they offer, then they can manage your investments for you, so that you don't have to worry about them. Then they should help you get on with enjoying your hard earned retirement, instead of doing all your own research and investment management.
Let me know if this has been of any help, and please do feel free to come back to me with any further questions.
Director & Chartered Financial Planner
I’ve been working in Financial Planning since I graduated in 2012. I’ve worked my way up from shadowing a financial planner, working in the admin and paraplanning roles, to being a planner in 2014. After taking a break from exams and starting to work on everything else which is needed to be a financial planner, I then restarted my studies and achieved Chartered Financial Planner status in 2018.