Vanguard life strategy 80% or S&P 500

[User1979289]

I have £1500pm to invest over the next 12 months, I am 50 with a £140K pension pot and no mortgage. I am struggling to decide which product is better for me. Any advice massively appreciated.

Following

anyone?

Do you mean that over the next year you can put aside 1.5k/month and then leave it to continue to grow? Or that you will need the money after a year?

How risk- averse are you? Is it important to keep this money for growth or can you afford to lose some? The vanguard charges are low but the 80% scheme is medium-high risk; returns might be better than the 40 or 60% vanguard schemes but losses might be greater.

I have found the meaningful money community on FB v helpful along with the podcasts

I have the Vanguard 80% and all I can say is a year is a very short time.

I've had mine about 7 years and during that' there have been times when there is less in it than the original investment Liz Truss I mean you

If I wanted my money back in a year, I think I might pick a different type of investment. It's great but you have to be in for the long haul.

How many years before you will need to withdraw funds from the investment? This is they key to deciding how much risk is appropriate. I assume you already have 3 - 6 months' of living expenses to deal with any emergencies.

This .

A very helpful site where an awful lot of people invest with Vanguard myself included .
My ISA is split LifeStrat 100 and Global FTSE All cap

If the 12 month time limit is hard set then I'd stay away from equity-based funds altogether. Stock markets can easily drop double-digit percentages over a year and there is a lot of things brewing right now that could trigger a correction or bear market - middle east conflict, war in Ukraine, uncertainty over US interest rates, US presidential election. Sure, the markets might continue to rise and you could miss out on a bit of profit but when people state a fixed term like 12 months it usually means they have a clear need for the money at the end of that period in which case a very low risk tolerance is usually advisable. Maybe look at a high interest savings account or bond.

How much do you hold in cash savings?

If you are single, or the sole earner, I would ensure at least 6 months to a year’s salary before taking on any investments.

Agree with some of the comments above. These sort of funds are for medium to long term investments, say 5+ years. If you’re not going to need to access the capital then you can ride out any significant market crash over time, but if you might need to access some or all of it over the shorter term then either savings accounts or a fund with a higher % of bonds would be more appropriate.

The Vanguard LS funds come in different types ranging from 100% equities to (I think) 20% equities / 80% bonds, which is much more conservative. They are good funds with low charges. Fidelity also does a 100% equity global market tracker.

I like to think about separating assets into time horizon buckets: 40 to 50% in longer term investments that are more equity heavy, 30% or so in bond heavy funds, and the balance in cash savings accounts (which by the way you can still lock some away for a couple of years and get 5% pa on). Some might consider this overly cautious, but you can dial up your risk as suits your own appetite.

Yes, I have a contract to earn an additional £1500 a month and I want to pretend it does not exist and lock it away for retirement - thanks so much

I have £20K in cash savings and £90K in a cash isa for DC uni fees/next car etc.

Apologies, I wrote my OP badly. I will have £1500 per month for one year so £18K total and it can stay there for 15 years. Thank you SO SO MUCH

I have very bad dyslexia and find it all incredibly muddling when I read on reddit/facebook/MSE etc

I really appreciate your help

Thanks for replying @hattie43 What made you decide to split this way? Thank you

It sounds like you have a healthy cash reserve.

Here’s my thoughts - I’m not an FA, so undertake your own research.

The Vanguard Life Strategy is weighted towards UK investments. UK stocks have performed relatively poorly over the past decade. This is because there is little exposure to growing markets such as tech, and the FTSE 100 is home to a lot of slow-moving businesses that are facing structural challenges and costs, such as the oil and tobacco industry.
In addition, many large investors in these companies (such as pension funds) prefer consistently high dividends, which again limits their capacity for growth.
There are moves to try to address these issues such as the launch of the UK ISA to encourage more investment.

Analysts are often trumpeting how FTSE companies are at rock bottom prices and due for a revival.
So it’s not a straightforward choice.

No investments are without risks, but
a low cost global tracker or S&P 500 index fund would seem to provide a more diversified option to me, with greater exposure to growing markets.

@User1979289 15 years? Honestly, I'd stick it in an ISA in VWRP then. VWRP is the accumulator equivalent of VRWL (FTSE All World equity etf which includes emerging as well as developed markets).

Only ever choose accumulator variant in a tax wrapper, and if in an ISA you'll avoid the hassle/cost of getting divs converted to GBP then sliced twice to reinvest via GBP into what's actually a USD based fund that's just getting constantly traded in multiple currencies. It's weighted by market cap so you'll be tech heavy with about 55% US. All divs will be autorolled. Make sure.platform fees low and hae free or low regular investing option...investing each month is a good idea now given the world is going nuts. Just something to consider and whatever you decide, good luck.

Thanks so much - I am very well at the moment so pushing my income to the max I can. I have a very serious health condition which will, at some point, become debilitating so keen to stock pile and make hay whilst the sun shines, so to speak.
I massively appreciate this, thanks so much

I’m sorry to read about your health condition and I hope things progress as favourably as possible for you.

In light of your update…I think your health condition would become the key component of your financial planning and might well change your financial strategy.

With such an unpredictable situation, I think your instinct to stockpile sounds prudent, and I would be inclined to regard ‘cash as king’. It sounds as if you might need minimal to no risk with your additional income, and unfettered access to your assets as and when the need arises.

Continuing to build your cash ISA would seem to provide greater financial security and certainty - which is perhaps more of a priority for you than future growth. The volatility of stocks and shares would make me wary.
Investing in safer pension options such as fixed income bond funds might also be worth exploring.

Excellent advice above.
I would also split the monthly investment into two - £750 in each.
If one underperforms, the other might balance it out or even do better.