Fund ideas help please :-)

[simong800]

Hi All,

I was hoping to ask for some help from the collective wisdom of the forum.

Sadly my Dad passed away earlier this year, and I am trying to help my Mum with some guidance on a "low risk" investment portfolio.

My Dad always managed their finances, and was extremely savvy - Cash ISA's, Prudential bonds, multiple current accounts to get the best interest rates, etc. He enjoyed administering this, my Mum never had any involvement really. The idea of an IFA would have him rolling his eyes, he wouldn't entertain one, but my Mum doesn't really know anything about this kind of stuff as he always did it.

I have my own stocks and shares ISA and SIPP which I manage myself, with a mix of passive and active funds, mainly growth, some income. I have done a lot of research on this stuff over the past 5 years, and it's a bit of a hobby, so whilst I am certainly no expert, I'd say I have an ok level of financial literacy in this area.

Mum is very risk adverse and scared of the stock market. But she knows that keeping her money as cash in the bank will see the value eroded. As such I am looking to give her some ideas (for her to then research herself so she's not going into it blind off just my suggestions!) for some funds she can invest a proportion of an overall pot into.

This will be money she theoretically never needs access to, unless something unforeseen happens (for example sudden onset of illness and needs a care home I guess). To give some ballpark figures, she has no mortgage or debt, can more than comfortably live off her pension (she doesn't need any income from this portfolio/pot). If she had say £100k as cash and another £100k to invest, which is money she'd never need to really touch, are there any suggestions for stock market/bond exposure on the lower end of the risk scale (I've a few ideas but keen to sanity check!)? She'd be happy beating inflation, rather than chasing growth.

Thanks in advance!

[Simpo Two]

I don't have specific answers, but would offer a couple of outside-box thoughts. (Experts forgive me if I've got any terminology wrong, I'm just an amateur here)

1) With 50% of the total staying in cash that effectively halves any risk/return/volatility on the other 50%. So if the invested half does a safe modest 4%, the overall gain is only 2%, barely in line with inflation. In other words, you can double the risk/return on the invested half.

2) Now I'm going to be really controversial, because I've been in exactly your position too. You say your mother can live happily on her pension and doesn't need the £200K. If that's true then you are not - if you step back and think about it - investing for her, you're investing for her children including yourself...

[cloud_dog]

OP sorry for your loss. I'm afraid you are going to need to provide much more background information in order for people to offer considered opinions.

For example:
1) How old is your mother?
2) Is she still working?
3) What pension provisions does she already have / What will she receive from your late father?
4) What is the rough size of this amount? And, is this all the 'spare' money your mother has?

[Benbay001]

https://www.vanguardinvestor.co.uk/investments/van...

Vanguard Life Strategy 60% equity 40% bonds?

Should beat inflation yet be low enough risk to keep your mum happy?

[SpunkyGlory]

Simpo Two said:

2) Now I'm going to be really controversial, because I've been in exactly your position too. You say your mother can live happily on her pension and doesn't need the £200K. If that's true then you are not - if you step back and think about it - investing for her, you're investing for her children including yourself...

I did think this as well.

All being well, and she lives for a long time yet but doesn't need the money, you are effectively safeguarding your inheritance? I don't mean that in an accusatory way, but assume it will come to your and your siblings or her grandchildren eventually.

[Simpo Two]

SpunkyGlory said:

All being well, and she lives for a long time yet but doesn't need the money, you are effectively safeguarding your inheritance? I don't mean that in an accusatory way, but assume it will come to your and your siblings or her grandchildren eventually.

Now might be a good time to investigate trusts with a view to mitigate IHT, if it's likely to be applicable. Last time I looked I think the threshold was £630K (ie double allowance for a married couple). Also an LPA.

[DoubleSix]

Nil rate band is £325,000 (not accounting residents NRB) so potentially £650,000 PETs/CLTs into trust... and again in 7 years etc

Edited by DoubleSix on Thursday 7th November 15:21

[BlackG7R]

Benbay001 said:

https://www.vanguardinvestor.co.uk/investments/van...

Vanguard Life Strategy 60% equity 40% bonds?

Should beat inflation yet be low enough risk to keep your mum happy?

Exactly what I was thinking, but maybe choose the 20% or 40% equity funds depending on how risk averse your mum is.

[LeoSayer]

If you're not willing to manage it for her, then your Mum might be better off in the hands of a professional who can assess all her plans, needs and attitude to risk now and over time.

It doesn't sound like she has any interest in doing it herself.

[Condi]

LeoSayer said:

If you're not willing to manage it for her, then your Mum might be better off in the hands of a professional who can assess all her plans, needs and attitude to risk now and over time.

It doesn't sound like she has any interest in doing it herself.

Isn't the point he wants a fund which is managed so nobody has to do anything. Something like the Vanguard equity/bond split above should be enough that it beats inflation without too much risk. I dont see the value in paying someone to tell you what you can work out for yourself?

[simong800]

Thanks for the comments, very helpful - some of you have given perspectives which I simply hadn't considered, and given me plenty of food for thought....

To answer a few questions/points ;

- she is 67
- no longer working
- I think she will receive circa £18k a year in pension payments (TBC)
- Rough size £200k (of Dad's estate)
- She has circa another £75k elsewhere, so "spare" so to speak
- VLS 60 or 40 was kind of what I had in mind actually, or an actively managed multi asset "defensive" fund, or a mix of trackers giving some global equity exposure combined with some bond exposure (but if doing this arguably why not just go for VLS)

However, good points made regarding the amount being held as cash, and whether the level of risk is right seeing this is money that shouldn't need to ever be accessed.....

Lots of food for thought, thanks for the opinions/comments thus far!

[cloud_dog]

The important question, the elephant in the room is.... How much would your mother need / like to live on?

If her existing income provides a comfortable standard of living then that may alter the risks to be considered than if she needs to ensure another £5k pa of income?