I'm in my early 20s - should I buy higher equity funds if I'm saving this money for retirement?

19 February 2021

Question by Tom


I'm 21 years old and starting to think about my finances.

I have an emergency fund, I'm contributing to my workplace pension and I'm also putting money into a cash LISA.

I recently started putting a couple of hundred each month into the Vanguard LifeStrategy 60% Equity Fund in an attempt to save for some medium term goals (5-10 years) - e.g. wedding, children etc. But I also wish to invest some more money for my retirement - would it be okay to take out another LifeStrategy fund with higher equity e.g. 80-100% which I won't touch until retirement or is not sensible to mix two similar funds on the same account.

Essentially, is it okay to have two different LifeStrategy % Funds for different goals on the same account?

Thank you for your help.

Answered by Carla Brown

Hi Tom, it’s great that you’ve already started thinking about your finances and brilliant that you already contributing to your workplace pension scheme. As you’ve already realised, pensions are a fantastic way of saving for retirement and it’s great that you’re already looking to contribute more into your pension fund now. One question I would ask, is if you were to put more into your workplace pension with your employer, would your employer be willing to increase their contributions too? Some employers will match the employees contribution so it’s always worth asking to see if you can benefit from additional matching before you look at contributing to an alternative pension fund yourself.

Assuming that they won’t, and bearing in mind that you are looking at a longer term time horizon for these funds, then in theory, it is perfectly reasonable to consider a higher equity weighted portfolio as a potential strategy for you as your timescale gives you plenty of time to ride out any volatility, and you can look to potentially reduce your risk exposure as you get closer to retirement. You do need to make sure you are fully comfortable with the higher equity approach however, and that you understand the levels of volatility that you may see. I would suggest you look at the providers website and the past performance charts, whilst obviously not a guide to future performance, they do give an indication of how much the funds can fluctuate. Alternatively, have a discussion with a financial planner who can offer tailored advice based on your own circumstances and recommend a suitable risk based portfolio. With regards to having two different lifestyle strategy funds with different goals, then that’s not a problem at all if the funds are earmarked for different objectives and time scales although you may find there is some duplication within the portfolios with their underlying holdings.

Answered by

Carla Brown

Founder and Managing Director

Carla is the founder and Managing Director of Oakmere Wealth Management Ltd which is a growing practice on the outskirts of Chester.