Journey begins , UK , advice please

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Topic Author
Welsh84
Posts: 4
Joined: Wed Jul 28, 2021 8:32 am

Journey begins , UK , advice please

Post by Welsh84 »

Hello all,

Newbie boglehead here, from UK.

Bit late to the game at 36 but still want in. Circumstances mean I cannot invest much as I need to save for a mortgage on day. However I can afford about £50 a month at least.

I just bought my first Vanguard ETF from free-trade app.

Its snp 500 VUAG

It reinvents dividends. I intend to keep getting this ETF till I can sell to buy into a proper vanguard snp 500 index.

I plan at present to hold all future ETFs/Index funds till old age or to pass on to my children.

Does my plans make sense ? Can I improve...
Is my ETF reasonable?
Thanks
TedSwippet
Posts: 5166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Journey begins , UK , advice please

Post by TedSwippet »

Welcome.
Welsh84 wrote: Wed Jul 28, 2021 8:45 am Its snp 500 VUAG
Any reason why you're investing only in US stocks? For a UK investor, and other non-US investors (and arguably, for US investors also) an all-world fund would be a more balanced choice. Vanguard FTSE All-World UCITS ETF (VWRP) for example, if you're sticking to Vanguard accumulating UCITS ETFs, although others from iShares and so on are readily available at similar price points.
Welsh84 wrote: Wed Jul 28, 2021 8:45 am It reinvents [reinvests] dividends. I intend to keep getting this ETF till I can sell to buy into a proper vanguard snp 500 index.
I don't understand this comment. VUAG is a "proper" S&P 500 index ETF (notwithstanding my note above about gaining better diversification by using an all-world ETF instead).
Welsh84 wrote: Wed Jul 28, 2021 8:45 am Does my plans make sense ? Can I improve...
Which platform or broker are you using? Platforms charges can sometimes make a large difference to outcomes. 'Free' platforms may not always be quite the low-cost nirvana you imagine, as they've been known to sometimes not offer the best prices on trades. Clearly, running a trading platform cannot actually be free to the operator, so they're making money somewhere, if only to cover costs (or to appear profitable prior to IPO!). Perhaps not a bad first step, but you'll want to keep a close eye on them.

Is this all inside an ISA? If not, why not? You won't have tax issues with either dividends or capital gains outside of an ISA just yet, but in a few years and when your investments start to add up, your older self will kick your younger self if they didn't wrap everything in an ISA as far as humanly possible. And a special note here that accumulating funds and ETFs can pose particularly vexatious tax issues when held outside of ISAs and pensions; distributing/income ones are cleaner in unwrapped accounts.

More in the wiki:

Investing from the UK - Bogleheads
UK Individual Savings Accounts - Bogleheads
Topic Author
Welsh84
Posts: 4
Joined: Wed Jul 28, 2021 8:32 am

Re: Journey begins , UK , advice please

Post by Welsh84 »

Hello Ted ,

thanks for replying. Its food for thought.
I will look at an all world ETF. I picked snp500 simply for growth. Is all world funds of similar growth levels ?

As for the platform. Im already thinking if my choice is wise or can I find better. I would move to Vanguard , but I can only see the VUSA ETF. I want my gains to be reinvested. Not sure if VUSA does this.

Also is there any point in aiming for a snp500 ETF/world ETF/bond ratio so early in ?

*Slaps head*No ISA for this ETF. Didnt as I only have this one to date. Perhaps I will set one up and transfer it . Maybe Vanguard ?? Not 100% sure yet.

Please excuse my ignorance, I'm at the start of a long journey, with no support network or guidance apart from here. Just want to knuckle down and lay roots for growth.

Thanks.
Genghis
Posts: 137
Joined: Fri Jun 26, 2020 6:53 am

Re: Journey begins , UK , advice please

Post by Genghis »

Hi Walsh84

Welcome!

I'm not a fan of the free app brokers. Some offer CFD trading so there's additional counterparty risk, others look like future bait and switches. At least with a low cost broker, you know where you're at.

For smaller portfolios, Vanguard Investor cannot be beaten, although their min regular investing is £100 a month (and if you do go for ETFs, there's no fractional ETF ownership). You're right, on ETFs they only offer distributing versions, but those dividends can simply be reinvested. There may be a small drag doing it this way, though. There are also "funds" (OEICs and unit trusts) which operate under a different legal structure and operate differently, e.g. the Vanguard FTSE Global All Cap fund, and this comes in an accumulating version. They're priced once a day. You can invest a full amount, say £100 and get fractional shares.

The Boglehead way is to buy the haystack. If you buy just the US, you're limiting yourself just to a part of the haystack. Now, that part of the haystack may grow more than the haystack overall, it may not, but you don't know. No one does. Part performance does not mean future performance. The logical equity holding for someone living in the UK is a global market cap weighted fund. I'm a similar age to you and don't own bonds, yet, but I plan to start increasing ownership from 40.

I'd suggest doing some more reading on sites such as this and Monevator. Read David Sawyer's Reset (but don't implement his portfolio) and Lars Kroijer's Investing Demystified.
Valuethinker
Posts: 48944
Joined: Fri May 11, 2007 11:07 am

Re: Journey begins , UK , advice please

Post by Valuethinker »

Welsh84 wrote: Wed Jul 28, 2021 8:45 am Hello all,

Newbie boglehead here, from UK.

Bit late to the game at 36 but still want in. Circumstances mean I cannot invest much as I need to save for a mortgage on day. However I can afford about £50 a month at least.

I just bought my first Vanguard ETF from free-trade app.

Its snp 500 VUAG

It reinvents dividends. I intend to keep getting this ETF till I can sell to buy into a proper vanguard snp 500 index.

I plan at present to hold all future ETFs/Index funds till old age or to pass on to my children.

Does my plans make sense ? Can I improve...
Is my ETF reasonable?
Thanks
1. make sure you take full advantage of any employer pension match before you do this (from memory, the legal minimum is 4% you, 1% govt, 3% employer but many employers match employees up to 5% or more)

By taking the employer match, you get an effective (pre tax) return of 100% when you start.

There's usually a target date retirement fund of some kind which will work. I would aim for age 60 or 65 and go with it.

You can get cleverer depending on fund selection. I am a big believer in "fire and forget".

If you happen to be a member of the defined benefit (final salary/ career average salary) pension scheme (NHS, Local Authorities, Police & Fire, Central Government - mainly) then you run with that. It's a nice safety belt to your savings.

2. as per Ted Swippet, you might as well do everything else in an ISA.

3. if you have high interest consumer debt, you should normally pay down that *first* before investing (but after grabbing the full benefit of employer match on pension). By which I mean 5%+ APR, usually. Car loans and mortgages you usually just let the term run out. But if you habitually run a credit card balance over monthend, or an overdraft, that's the first thing you should tackle.
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