New portfolio sense check(UK)

[mase]

Hi,

I started my portfolio 5 months ago after reading plenty of books, forum posts and blogs. Now I am up an running I would like a sense check on my options to see if I have grasped the correct principals and choices available to me.

My investment: �700 per month, from a zero balance
Based: UK

Stocks  - Vanguard FTSE UK All Share Index Unit Trust

Bonds -  Vanguard UK Long Duration Gilt Index Fund

Gold - I buy physical gold, my view on this is overtime the charges on an ETF could erode value were physical gold is bought once at a premium and held. I buy mainly Sovereigns or Brittania's once I have enough money is the gold pot.

Cash - Highest interest ISA account available on the market

Any comments would be much appreciated

[Ad Orientem]

A quick look at the two funds you are using suggests no problems. Both seem to be doing what needs to be done and both are inexpensive. Your gold is physical and although I am not up to speed on British ISAs, from what little I know that seems like an acceptable near cash alternative.

[gizmo_rat]

It's all good, a couple of minor points to think about;

Check your broker's fee structure is a good fit for your portfolio size and holdings
http://monevator.com/compare-uk-cheapes ... e-brokers/

Unless you have an overriding reason for using the Vanguard find you might consider holding the Bonds directly e.g. GB00B54QLM75 , it's theoretically safer and doesn't have any management fees (unless your broker piles some on).

Later down the line you might consider holding a small proportion of the Gold in an EFT just for ease of rebalancing. 

[mase]

It's all good, a couple of minor points to think about;

Check your broker's fee structure is a good fit for your portfolio size and holdings
http://monevator.com/compare-uk-cheapes ... e-brokers/

Unless you have an overriding reason for using the Vanguard find you might consider holding the Bonds directly e.g. GB00B54QLM75 , it's theoretically safer and doesn't have any management fees (unless your broker piles some on).

Later down the line you might consider holding a small proportion of the Gold in an EFT just for ease of rebalancing.

I chose the bond fund as it is placed inside a stocks and shares ISA which means any income is free from income tax. The broker costs were cheaper compared to buying direct.

The stocks element is also inside an ISA which means all income in my portfolio is exempt from income tax, and the gold is exempt from capital gains as sovereign and Britannia coins are exempt from CGT.

I don't like the taxman :-)

[Ad Orientem]

It's all good, a couple of minor points to think about;

Check your broker's fee structure is a good fit for your portfolio size and holdings
http://monevator.com/compare-uk-cheapes ... e-brokers/

Unless you have an overriding reason for using the Vanguard find you might consider holding the Bonds directly e.g. GB00B54QLM75 , it's theoretically safer and doesn't have any management fees (unless your broker piles some on).

Later down the line you might consider holding a small proportion of the Gold in an EFT just for ease of rebalancing.

I chose the bond fund as it is placed inside a stocks and shares ISA which means any income is free from income tax. The broker costs were cheaper compared to buying direct.

The stocks element is also inside an ISA which means all income in my portfolio is exempt from income tax, and the gold is exempt from capital gains as sovereign and Britannia coins are exempt from CGT.

I don't like the taxman :-)

You may color me impressed.

[banker22]

Hi,

I started my portfolio 5 months ago after reading plenty of books, forum posts and blogs. Now I am up an running I would like a sense check on my options to see if I have grasped the correct principals and choices available to me.

My investment: �700 per month, from a zero balance
Based: UK

Stocks  - Vanguard FTSE UK All Share Index Unit Trust

Bonds -  Vanguard UK Long Duration Gilt Index Fund

Gold - I buy physical gold, my view on this is overtime the charges on an ETF could erode value were physical gold is bought once at a premium and held. I buy mainly Sovereigns or Brittania's once I have enough money is the gold pot.

Cash - Highest interest ISA account available on the market

Any comments would be much appreciated

Why didn't you decide to invest in a short term gilt fund rather than keeping cash? Does anyone know of any good short term gilt funds that I can trade within an ISA?

Thanks

[goodasgold]

Why didn't you decide to invest in a short term gilt fund rather than keeping cash? Does anyone know of any good short term gilt funds that I can trade within an ISA?

Thanks
[/quote]

Banker22, you may want to ask this question on the Bogleheads list. They have some sharp people over there regarding UK and other non-U.S. investments.

[mase]

I would imagine the cost of buying a fund would outweigh any gains this approach may yield. I don't think I am investing enough to make that strategy work, but I'm open to suggestions - I must admit the cash part was a bit confusing.

Hi,

I started my portfolio 5 months ago after reading plenty of books, forum posts and blogs. Now I am up an running I would like a sense check on my options to see if I have grasped the correct principals and choices available to me.

My investment: �700 per month, from a zero balance
Based: UK

Stocks  - Vanguard FTSE UK All Share Index Unit Trust

Bonds -  Vanguard UK Long Duration Gilt Index Fund

Gold - I buy physical gold, my view on this is overtime the charges on an ETF could erode value were physical gold is bought once at a premium and held. I buy mainly Sovereigns or Brittania's once I have enough money is the gold pot.

Cash - Highest interest ISA account available on the market

Any comments would be much appreciated

Why didn't you decide to invest in a short term gilt fund rather than keeping cash? Does anyone know of any good short term gilt funds that I can trade within an ISA?

Thanks

[atrus138]

Later down the line you might consider holding a small proportion of the Gold in an EFT just for ease of rebalancing.

How much gold are you buying each month? Google says that 700 pounds is about $1,100, which is about the price of an ounce of gold right now. It might be a good idea to put some into an ETF and save a bit until you can get an entire ounce, since you get more gold for your dollar buying an ounce instead of fraction-ounces.

[mase]

Considered that option on the gold gizmo, I kind of went for a half way house approach.

I basically put my gold money into cash for about 3 -4 months to let it build up and then buy a decent sized coin of gold to keep the charges to a minimum.

Because gold earns no interest I did not want ETF eroding my other with charges.

[Jake]

Gold - I buy physical gold, my view on this is overtime the charges on an ETF could erode value were physical gold is bought once at a premium and held. I buy mainly Sovereigns or Brittania's once I have enough money is the gold pot.

One of the clever ideas Harry Browne had when developing the PP strategy is to hold the gold portion abroad. There are lots of ways of achieving this— they are outlined in Craig's book. It's a hassle to organise at first, but much easier for people in the UK to do than it is for US residents. Something to consider going forward...

[ashantiwarrior]

Hi there,

I'm UK based and new to the PP system but it makes a lot of sense to me what you have done. Rather than go for a UK only stock fund, I chose

Stock: IWRD as an ETF (45%)
Bonds Direct purchase of 30 year UK Gilts (25%), I'd be interested if people think whether even longer dates bonds would work, the UK govt offers even longer dated bonds.

Gold: SGLD (5%)
Cash: Offset mortgage (25%). This seems a good way to use the cash component.

I used www.peaktotrough.com to model this portfolio and it seemed to do slightly better than the 25% across the board approach.

I know I could go a bit higher in Gold but I am working up to it

Any comments are appreciated.

[mase]

How much did it cost you to buy through bonds direct?

[ashantiwarrior]

I bought them at �3.95 per transaction, TD direct were offering a special rate, but they offer the same rate as stocks purchases normally, around �10 a transaction. Much cheaper than a Bond ETF, since there are no ongoing charges.

[gizmo_rat]

Stock: IWRD as an ETF (45%)
Bonds Direct purchase of 30 year UK Gilts (25%), I'd be interested if people think whether even longer dates bonds would work, the UK govt offers even longer dated bonds.

Gold: SGLD (5%)
Cash: Offset mortgage (25%). This seems a good way to use the cash component.

Any comments are appreciated.

It rather depends on what you found attractive about the PP system in the first place. I think I'd characterise your allocation / method as a "Post 2008 60/40" portfolio. It's a perfectly sensible allocation that I'd be happy to hold, but it isn't the PP and you shouldn't expect it to behave like it was (for better or for worse). It'll likely outperform the PP in more prosperous times, but underperform in other economic conditions.

wrt. to long dated gilts and the PP, longest dated works best (more volatility) you just need to remember to sell off your gilts when they have about 20 years until maturity and replace with longer dated gilts.   

[mase]

I bought them at �3.95 per transaction, TD direct were offering a special rate, but they offer the same rate as stocks purchases normally, around �10 a transaction. Much cheaper than a Bond ETF, since there are no ongoing charges.

I can see that working if your investing larger amounts, but that charge equates to 2.5% of what I invest in bonds each month. Thanks for the info though, when I become rich i will go this route ;-)

[Observer]

For my FtSE All share tracker - i use Scottish Widows - they are much cheaper than vanguard with an all in cost of 0.07% pa
Short Term Gilts , you can use National Savings & Investments - as it is fully backed by Her Majesty's Treasury - Short Term Gilts are not worth investing in unless you have over �2 Million (limit for NS & I) in that portion, which i suspect would be a few of us - why pay charges for a short term gilt fund, when you can avoid management fees, and get better access to funds through NS&I?