Hi Michael
Thank you for sharing your thoughts openly – it’s really helpful for someone just getting into this and, in my case, quite late in life.

You list two the two Vanguard funds as the two you would choose if you were starting again, and then you say you prefer ETFs over funds for very clear reasons.

Does this mean you would invest in ETF equivalents to those funds? Do they exist?

Steve

Hi Martin, indeed the All Cap option is my go-to fund because of the 5% allocation to small caps. However, I don’t expect it to make a big difference to my portfolio especially at such a low weight. Regarding LifeStrategy, I quite like being lazy, but lately, I decided that the overweight UK equity (~20%) is too high compared to a global market-weighted portfolio. With LS you get smoother currency fluctuations though so not a dealbreaker either.

Mutual fund vs ETF: The returns should be identical, but I prefer ETFs mainly because:

a) They’re usually cheaper
b) They can be bought/sold instantly. Mutual funds can take days (although this can be a good thing, behaviourally!)

Since ETFs are just “stocks”, some people ask what would happen if lots of people try to buy or sell at once and inflate (or deflate) the price compared to the net asset value (NAV) of the holdings. In this case, banks and other institutions will take care of the price arbitrage and make risk-free money which is why such a scenario is very unlikely to happen.

Stay in touch!
Michael

I was wondering about your choice of funds to invest. Specifically this one:
Vanguard FTSE Global All Cap (Equities)

Why this one, instead of the Vanguard FTSE All-World? Is it because of the Small Cap tilt?
Or as you were saying that you want it simple, just a LifeStrategy 80 fund let’s say?

Do you also have preferences between a mutual fund and an ETF?

Regards,
Martin

Thank you for the thorough answer Mike. I will totally need to dig deeper, as the small companies market might be way different to the public stock exchange in which I have high exposure.

Happy new year :)

Thanks, Per! Seedrs and its main competitor Crowdcube are great for investors that want to get exposure to private equity. This was not even remotely accessible a few decades back. So in that sense, they unlock the private equity world for smaller investors and on top of that, they allow for tax advantages to those living in the UK.

30% – 50% back as a tax break is not bad at all in my book. It’s also exciting to invest in small companies and see them grow.

Having said that, I think there are high risks associated with them. You’re essentially investing in startups that have a high chance of failing and a small chance of hitting it big. As if that’s not enough, your money is locked until the company is sold or go public. I know Seedrs offer a secondary market which is great, but that’s based on the assumption there’s liquidity and demand.

So the risk component is hard to measure. How much of your portfolio do you allocate to those platforms? And how many companies do you invest in to have some diversity and improve the risk/reward ratio? Also, how can you be sure you have a good judgement on a particular company to allocate a bigger sum, say £50,000? This is what I struggle with. I know Seedrs recently launched an EIS fund, where they do the investing for you, the success of which remains to be seen.

I think the best way to test everything (including yourself) is to allocate a small percentage of your overall portfolio in a few sectors you really know. Then after 5-10 years see how you behave and take it from there. At least, this is what I’m doing!

Happy new year ;)

This is the third time I am reading your article, as I have mentioned in previous communications, I always enjoy your writing.

As I am one of those IT people who find those “boring” things, super interesting, can you please give me your perspective on platforms like seedrs.com? It looks like an interesting, but high-risk investment vehicle but I would like to know your thoughts.

Cheers

Hi Ivan, indeed, tax planning is an area I’ve only scratched. But in my view, ISA, SIPP and company pension are pretty much the go-to products that cover 95% of the population needs. Which is why I haven’t really dived deeper.

The wealthier can look into more advanced techniques such as tax-loss harvesting and EIS, VCT investing. Perhaps I can create a beginner’s post to tax planning.

Thanks for your kind words, it would be great if you can make the next meetup!

Very happy to have stumbled across your blog through reddit. It’s always great to see people in the UK also treading down the path of FI(RE). Most of the content I typically come across has an American roots so anyone who has in some way shape or form translated this for the UK is always appreciated.

Out of interest, would you consider expanding your content on the ‘packaging’ that one might use to invest? (Investing in either tax-efficient accounts or through SIPPs/company pension plans)

Keep up the good work!
Ivan

P.S. Sad that I found this after the meeting up had happened. Hope to make the next one!

One needs to start somewhere Rohan.. and my motto is that 80% of success is showing up!