Approach to retirement planning - Stocks and funds

[Mark8303]

Just looking for some opinions and this is the place to ask for them

I am 1 to 5 years from retirement depending upon the the markets after Brexit! I have a certain amount in pensions (about 325k) and about 260k in ISA's which is a mixture of funds through my IFA and shares which I manage (about 60k).
I have started to take profits where they exist after December's rout and move into a mixture of income funds and shares which offer good yields. I have found that as a result of the drops over Christmas a number of shares are yielding high returns (as high as 9%) averaging out at about 7% . Do the better informed think this is a worthwhile strategy heading towards the big R? So far this year I have bought Crest Nicolson & Scottish Mortgage.
I already hold Shell - L&G - Astra Zenica and a few other steady stocks along with a few recovery hopes like BAT and RBS. Oh and pureley because I know the company and think it's got a good future, I hold Ceres Power Holdings as a Great British hope.

Any thoughts appreciated.

[Derek Chevalier]

Mark8303 said:

Just looking for some opinions and this is the place to ask for them

I am 1 to 5 years from retirement depending upon the the markets after Brexit! I have a certain amount in pensions (about 325k) and about 260k in ISA's which is a mixture of funds through my IFA and shares which I manage (about 60k).
I have started to take profits where they exist after December's rout and move into a mixture of income funds and shares which offer good yields. I have found that as a result of the drops over Christmas a number of shares are yielding high returns (as high as 9%) averaging out at about 7% . Do the better informed think this is a worthwhile strategy heading towards the big R? So far this year I have bought Crest Nicolson & Scottish Mortgage.
I already hold Shell - L&G - Astra Zenica and a few other steady stocks along with a few recovery hopes like BAT and RBS. Oh and pureley because I know the company and think it's got a good future, I hold Ceres Power Holdings as a Great British hope.

Any thoughts appreciated.

Not clear on what Brexit has to do with your retirement date unless you are planning on purchasing an annuity and know how much you need for it (but then this value will surely fluctuate?). Is this something that the adviser has recommended in his financial plan?

What do you think holdings individual shares gives you over a diversified portfolio?

£60k seems like a large percentage of your total pot for "play money" - is there any reason it's not with the IFA?

[Mark8303]

To clarify, my IFA has advised me to 'spend' the ISA's first at 4.5% p.a. in retirement to defer any tax liability and leaving the pensions to keep appreciating. Then use drawdown for the pension pots along with the state pension which would kick in in 2024.
He favours a transition into bonds as I approach retirement to smooth the returns and avoid volatility once I am relying on the income.

The 60k 'play money' started off as 4.5k when I sold my BMW bike five years ago and it snowballed from there. Each time I have had a bit put by I've shoved it into shares and funds via AJ Bell. I have been maxing out my wife's ISA allowance as well to keep the pot with the IFA fed and he's now looking after 200k of ISA split between us. I guess I thought I might be able to do o.k. on my own as I've been researching the better performing funds and copying their top holdings. It was all going so well until recently, I was about 23% up plus the yield but then the slump started late last year and I started to think it was time to play it a bit safer before I lost all of the gains. If I was 10 years from retirement I would probably just monitor it, ride out the fluctuations and look to the dividends.
I think Brexit will have an impact based upon the customers I deal with and my observations reading the business pages but even when reasonably well informed it's not clear which way the markets will go.

[NickCQ]

Mark8303 said:

I have found that as a result of the drops over Christmas a number of shares are yielding high returns (as high as 9%) averaging out at about 7%

Seems cheap, I agree, but it's worth remembering that dividend yields are backwards looking, i.e. last period's divi over current price.

Div yields automatically go up when prices come down. What is not guaranteed is that the company will pay out the same £ div in the next period. Some companies adjust their payout to a target dividend yield - so the dividend tracks the stock price (with a bit of a lag).

Also the fall in the stock price may be a result of poor earnings performance, which again will limit the amount that can be paid out in the next period.

[Derek Chevalier]

Mark8303 said:

Then use drawdown for the pension pots along with the state pension which would kick in in 2024.

This implies you are not planning on buying an annuity (at least in the short term)

Mark8303 said:

He favours a transition into bonds as I approach retirement to smooth the returns and avoid volatility once I am relying on the income.

Assuming you are definitely not buying an annuity (in the short term) this is not clear to me.


What has changed in your retirement plan that has enabled you to take less risk?
Have you revised downwards your retirement expenditure?
Has the recent bull market meant that you can afford to take on less risk yet still not worry about running out of money?
Why should your portfolio be any different (assuming you're not buying an annuity) in accumulation vs decumulation?

Mark8303 said:

he's now looking after 200k of ISA split between us.

I'm assuming he's not charging you for the £60k or including it in any formal retirement planning?

Mark8303 said:

I guess I thought I might be able to do o.k. on my own as I've been researching the better performing funds and copying their top holdings.

This may not be an optimal approach

Mark8303 said:

but even when reasonably well informed it's not clear which way the markets will go.

Extremely well informed people (the type that run hedge funds staffed by egg heads analysing petabytes of data) have no idea either. Ignore anyone that says they do, and I'm still not clear on why it's relevant to your retirement date

[Mark8303]

Thanks for your responses Derek it's just the sort of thing I was after. Sometimes it takes a second pair of eyes to point out the issues I have overlooked or need to re-assess. I am not completely against an annuity (or partial?) solution but I was concerned by the meagre rates on offer. I figure that by using drawdown I was hedging my bets in case annuity rates improved. You're right, my only charges against the 60k are from AJ Bell which are not too bad (when compared to HL for example). The charges paid out on the rest of our ISA investments can look a bit daunting when markets are down but to be fair, my IFA has managed to double our money every 7/8 years so far. He also got me into an offset mortgage 15 years ago and that saved me a lot of money and paid off the mortgage 6 years ahead of schedule. Although, there are those who say that current mortgage rates make it a 'good' debt if you can put the money to more profitable use elsewhere. I did have a BTL flat until 2 years ago but got out of that when I could see the tax breaks being eroded and the market (in the south) beginning to stall. Frankly, unless it's run as a business with lots of care I don't think being a landlord is as easy or as profitable as some would suggest. I am quite glad to be rid and can sleep at night knowing I owe nothing to anybody for anything.

[Ginge R]

Don’t obsess overly about investing for income. I like income investing, retirement primarily is about generating income after all, but don’t become fixated on it. Total-return investing focuses on building diversified portfolios which also aim to seek greater long-term investment growth as well as creaming off an income stream.

Mark8303 said:

Just looking for some opinions and this is the place to ask for them

I am 1 to 5 years from retirement depending upon the the markets after Brexit! I have a certain amount in pensions (about 325k) and about 260k in ISA's which is a mixture of funds through my IFA and shares which I manage (about 60k).
I have started to take profits where they exist after December's rout and move into a mixture of income funds and shares which offer good yields. I have found that as a result of the drops over Christmas a number of shares are yielding high returns (as high as 9%) averaging out at about 7% . Do the better informed think this is a worthwhile strategy heading towards the big R? So far this year I have bought Crest Nicolson & Scottish Mortgage.
I already hold Shell - L&G - Astra Zenica and a few other steady stocks along with a few recovery hopes like BAT and RBS. Oh and pureley because I know the company and think it's got a good future, I hold Ceres Power Holdings as a Great British hope.

Any thoughts appreciated.