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Help! Analysis paralysis is stopping me from investing

Investing is not rocket science

A Monevator reader writes:

“I’m wondering if you have any general advice for someone on the edge of choosing between Vanguard’s LifeStrategy fund or going DIY (i.e. a Slow and Steady rip-off, adjusted for risk I’m comfortable with)?

I’ve been going over it all for too long, devouring this site and others. I’ve also read Smarter Investing, as well as a handful of other books on the topic.”

Dear Reader,

You’re not alone – a lot of people freeze at this stage. I was personally stuck in analysis paralysis for over a year before I made my first investment.

I was going round in circles, like a plane awaiting permission to land. Eventually I realised that I already had all the permission I was going to get.

I was frightened of doing the wrong thing and was hoping that the ‘right answer’ would somehow strike me like lightning.

But the truth is that if you’re deciding between different shades of a diversified passive investing strategy then you’re already as close to the right answer as you can get.

Like crack parachutists, most passive investing strategies will land you in roughly the same ballpark, and it’s fruitless to try to predict which one will come closest to the bullseye.1

Jump out of the plane! You won’t break your legs so long as you:

  • Take a conservative approach to risk tolerance. If you have no experience in the market and you’ve got more than 15 years of investing ahead of you, choose a 60:40 or 50:50 global equity:government bond split until you have some idea of how you will respond in a crisis.
  • Keep your costs low. The evidence against high fees is overwhelming. The UK’s financial regulator, the Financial Conduct Authority (FCA), published a report showing that benefiting from cheaper – but typical – passive fund costs could mean you 44% better off versus typical active fund costs.
  • Take action over a difference of 1% or 0.5% in fund and broker fees – but don’t sweat less than 0.1%.
  • Begin! The sooner you start investing, the easier it will be for you to reach your goal. So just start. Put away what you can into your ISA or in your pension – but stop putting it off. Get some momentum going, then work out the finer details like how much you should be investing later. (In fact do this next, once you’re investing monthly. It’s not hard.)

Even though I was committed to the passive way from my earliest investing years, I still sought advantages through optimisation.

That’s a very human thing to do, but the most important lesson I’ve learned since is to keep things simple.

Don’t take my word for it, ask Warren Buffett

Warren Buffett is one of the world’s richest men and one of the greatest investors of all time. He doesn’t need your money, he has nothing to prove, and he is a legend in his own lifetime.

He recommends plain vanilla passive investing.

Buffett makes his case in three pages of condensed and delightful wisdom that you can read in his 2017 Berkshire Hathaway shareholder letter2.

To condense Buffett’s wisdom still further:

The bottom line: When trillions of dollars are managed by Wall Streeters charging high fees, it will usually be the managers who reap outsized profits, not the clients. Both large and small investors should stick with low-cost index funds.

Over the years, I’ve often been asked for investment advice, and in the process of answering I’ve learned a good deal about human behavior. My regular recommendation has been a low-cost S&P 500 index fund.

To their credit, my friends who possess only modest means have usually followed my suggestion.

I believe, however, that none of the mega-rich individuals, institutions or pension funds has followed that same advice when I’ve given it to them. Instead, these investors politely thank me for my thoughts and depart to listen to the siren song of a high-fee manager or, in the case of many institutions, to seek out another breed of hyper-helper called a consultant.

Human behavior won’t change. Wealthy individuals, pension funds, endowments and the like will continue to feel they deserve something ‘extra’ in investment advice. Those advisors who cleverly play to this expectation will get very rich. This year the magic potion may be hedge funds, next year something else.

The likely result from this parade of promises is predicted in an adage: “When a person with money meets a person with experience, the one with experience ends up with the money and the one with money leaves with experience.”

If you want hard evidence instead of sage advice, read about Buffett’s winning bet against the hedge fund industry. The gory details are recounted from page 21 of the same letter.

Warren Buffett, pah! Enter The Accumulator!

It’s tough to follow a Warren Buffett mic drop (are people still dropping mics?) but I think I can do it with the tale of The Accumulator versus The Accumulator’s Mum.

The Accumulator’s Mum knows naff all about investing – having outsourced all responsibility to her family office, aka The Accumulator.

The Accumulator can at least claim he knows more about investing than his mum.

The Accumulator’s Mum has beaten The Accumulator over the last seven years.

The Accumulator put his mum into a Vanguard LifeStrategy fund.

While The Accumulator knew his mum needed the simplest strategy possible – and so gave her one – he himself wanted to ‘optimise’ through factor investing, REITs, over-balancing into the lowest P/E ratio investments, yadda yadda, yadda.

All that effort left The Accumulator trailing The Accumulator’s Mum’s higher passive exposure to the US market and her lower exposure to value equities.

The Accumulator hasn’t told his mum about this. If you’re reading mum, you’re welcome.

Please don’t go on about it.

Oblivious investing

You’ve heard from Warren Buffett and the Accumulator’s Mum. What more do you need?

Allow me to cite one last source – a wise and unassuming US financial blogger called Mike Piper, aka The Oblivious Investor.

Piper is one of those rare bloggers who risked their reputation by announcing that they’ve reduced their strategy down to ‘The Accumulator’s Mum’ level of easy-peasy-ness.

Piper made a succinct case for simplicity, stating:

The primary reason we made the change was to defend against what I’ve come to see as the biggest threat to our investment success: me.

To be more specific, it’s my temptation to tinker that scares me.

Piper’s evidence-based approach taught him that asset allocation is not precise – he calls it a sloppy science. Moreover, he realized that his expertise could be counterproductive and that the smartest move he could make was to reduce the chance that he’d screw up his own plan.

Piper’s answer was to move everything into a Vanguard LifeStrategy fund.

(In the interests of balance, please note that alternatives to Vanguard’s LifeStrategy fund are available.)

Take the plunge

My own experience has been similar to Piper’s: simplicity has a value all of its own.

The promise of complex strategies often goes unfulfilled, as illustrated by our recent look at the last 10-years of investment returns.

I’ve had to learn a lot to realise I don’t need to know as much as I thought.

The no-brainer approach really is a no-brainer.

Take it steady,

The Accumulator

  1. You can spend forever reading about which strategy worked for the last ten years or 21.5 years or what have you – but that doesn’t tell you what’ll work in the future. Sometimes it might even be a contrarian signal. []
  2. See pages 23 through to 25 []
{ 52 comments… add one }
  • 1 Flying Scotsman November 26, 2019, 12:31 pm

    That’s interesting that your mum’s lifestrategy investment beat your own portfolio. Out of interest, how did you decide on an asset allocation for her? I have a similar issue with my parents, and am struggling over asset allocation. Was she in traditional 60/40 or did you take less/more risk than that?

  • 2 Algernond November 26, 2019, 1:03 pm

    Was just thinking about de-accumulation mode.. Would the LifeStrategy be inefficient because you’d end up having to withdraw both shares & bonds, when often should only be withdrawing one ? (e.g. don’t want to withdraw shares during a down-turn).
    So although LS is simple, should maybe at least consider holding Shares and bonds separately? (All World Equity tracker + Bond tracker).
    Not that this should make you delay investing of course..

  • 3 Vanguardfan November 26, 2019, 1:33 pm

    @flying Scotsman I went Lifestrategy 60 for my elderly parent. Depends on circumstances of course but I think if investing on someone’s behalf, or even just making suggestions to them, I’d err on the side of caution especially if they have limited time horizon left.

  • 4 PaulH November 26, 2019, 2:48 pm

    I’ve advised several people to go with LifeStrategy (generally 80 or 60) when starting out. Not because it’s the ‘right’ choice, but because it’s close enough that not many will regret having some of it in a few years, even if they eventually decide on a different allocation as they learn more.

  • 5 PaulH November 26, 2019, 3:07 pm

    @Algernond – I’ve been thinking about this as I approach drawdown. One of my concerns is that as we get older our faculties decline. So while now I’m not particularly confident in my ability to know whether to buy shares or bonds this month (hence putting purchasing on autopilot), I’m even less confident in my ability to know what to sell when I’m 80.

    So while your point is a good one, my main concern is to leave future me (or my kids if I turn over the password to them!) with a pretty good, easily executed strategy. If that means making a little less than I could, well that’s just another cost of retirement.

    Having said that I’m currently pondering a LifeStrategy ladder, from 100% down to 20%. That lets me make ‘optimal’ sale choices while I’m still up to it, and once it feels too much I can switch to “sell the 100s, then the 80s”, and so on. That might still be overly-complicated, though, hence it’s just an idea I’m playing with for now.

  • 6 Algernond November 26, 2019, 3:18 pm

    @PaulH – Actually, I’ve set-up my partners SIPP into a very simple LS ladder (or step-ladder!): LS100 + LS20 and hoping that faculties will be up to rebalancing those two for a significant few years into drawdown….

  • 7 Mr Optimistic November 26, 2019, 3:32 pm

    @Algernond. Yes, that’s my issue with LS at the moment. Liked this article but would suggest we get an article from TA’s mum rather than settling for second best in future.

  • 8 PaulH November 26, 2019, 3:56 pm

    @Algernond – Your very simple ladder is an option I’m considering, and for the same reason as you. Perhaps that’s the right balance of flexible and simple.

  • 9 cat793 November 26, 2019, 4:48 pm

    @Algernond. The point you make about deaccumulation is one that worries me and I like your solution of going for different LS funds. I would never have thought of that! My sipp is 100% in 80/20.

  • 10 Algernond November 26, 2019, 6:02 pm

    @cat793 – I think that’s not bad. You could just start contributing into LS20 when you get nearer to taking drawdown, and then you’ll have LS80 + Ls20 to re-balance between 🙂

  • 11 Prometheus November 26, 2019, 7:25 pm

    There are a number of reports citing time in the market etc. Just selecting a low risk life strategy choice rather than prevaricating should be the first action, then consider a more nuanced approach. Simples!

    Having said that, decision paralysis is a real issue..the common factor hit upon in the article is putting the decision in someone elses hands…clear risk there though.

  • 12 Prometheus November 26, 2019, 7:30 pm

    As an aside, you’re lucky you have this opportunity. My father invested in woodford and since I remarked on the flawed approach he has been peppering my inbox with ‘active fund’ propaganda…as they say, there’s no fool like an old fool…

  • 13 FIRE v London November 27, 2019, 1:49 am

    Good point about benchmarking one’s humble efforts vs LifeStrategy.

    I have generally been running approximately 80% equities, so LS80 is mostly the best benchmark. Except for a lengthy stint in 2016/17 after taking on more debt than I felt comfortable with, when LS60 would have been more appropriate.

    I’ve beaten LS80 by a whisker, and the blend of LS60/LS80 by a little bit more – but that’s certainly with no allowance for my time/effort/stress!

    Good to know I can recommend LS80 to Mrs FvL/mates/my family and sleep easily.

  • 14 The Borderer November 27, 2019, 2:49 am

    My sister-in-law has asked me to look after her SIPP investments. She is totally hands off so the reponsibility is mine alone. Thanks Sis!
    Her only criteria is that it must be as ‘risk free’ – by which I understand she means as low a volatility as possible.
    So I opted for Vanguard Global Bond Index GBPH Acc (30%), Vanguard LifeStrategy 40% Equity A Acc (40%), and VGOV (30%).
    Not my own perfect balance, but suits her.

    Which goes to show how everyone is different.

  • 15 Mark November 27, 2019, 8:10 am

    No mention of Vanguards Target Retirement Funds in the comments yet. For those of you looking at a blend of the LA funds to provide greater safety in retirement, are these not what you should lean to?

    Surelt the slightly increased fees on these from Vanguard are worth the simplicity they offer?

  • 16 Mark November 27, 2019, 8:11 am

    That should be LS not LA of course.

  • 17 oldie November 27, 2019, 10:09 am

    Avoiding looking for a near perfect solution can help. See article below. (It may have come from your site)

    Most Investors Should Be Satisficers not Maximisers


  • 18 Brod November 27, 2019, 10:54 am

    @Prometheus – so is your Father still emailing you with Active Fund bumph? I invested in Woodford at the launch but cashed out about 10% up after discovering Holy Monevator and his disciples.

    I’m in the process of moving from 100% equities to 80/20 or 75/25 equity/bonds, really to keep some powder dry as I’m building up a small DB Civil Service pension with spouse benefits. That’s my bonds allocation. But how to get a capital value? 5% that the Govt. suggests seems pitiful. Something like 2.5% that the market gives is more reasonable I feel.

    So off to benchmark against LifeStrategy 100 and 80 to see if my tinkering has paid off.

  • 19 Simon T November 27, 2019, 11:22 am

    Not sure if this is going to work but linking in a chart
    The higher line on the chart is my IFAs Aggressive Portfolio (mixture of global bonds, absolute returns, property, natural resources, gold, active, tracker etc etc)
    The lower line is Lifestyle 80
    Income reinvested and offer to bid

  • 20 The Rhino November 27, 2019, 12:06 pm

    Note the income payment type switch from interest to dividend from VGLS20 upwards and the tax implications that brings (i.e. 20% vs 7.5% if you are BRT) may have a bearing on those doing these sort of lifestrategy splits?

    The ‘complexity-stepping’ approach to ‘pulling-the-trigger’ is a really good one as analysis paralysis is a real problem, i.e. start lifestrategy, then add a lars style two fund/etf combo, then maybe a hale 6 or 7 fund/etf one (or throw some non-gilt stuff into the prev lars step), then maybe a few ITs around the edges. Build it up gradually.

    Lifestrategy is a great start but possibly not a great end, as TI has rightly pointed out, assume everything can fail. You need *eventually* to diversify more broadly than a single broker/product solution but possibly not straight away if the complexity and worry of that is stopping you doing anything!

  • 21 Simon T November 27, 2019, 12:11 pm

    btw Mods there might be a problem with the website comments (not sure if it has been mentioned before) but it looks like the timings against the post are not correct it looks like GMT+1. But when I posted I was post 17 (now 19) and it was approx 10:22 local (UK GMT). Other posts have now pushed ahead of me.

  • 22 Algernond November 27, 2019, 12:38 pm

    @Rhino says ‘Note the income payment type switch from interest to dividend from VGLS20 upwards and the tax implications that brings (i.e. 20% vs 7.5% if you are BRT)….’

    Is thta an issue if held in ISA/SIPP?
    Has there been a Monevator article on this?

  • 23 The Rhino November 27, 2019, 1:14 pm

    @Algernond – I believe it would only be something to think about if held in a taxable account, though I am no tax-expert. Seek out a professional tax-advisor if you have any concerns.

  • 24 Vanguardfan November 27, 2019, 2:28 pm

    @rhino I’m actually on a journey to try and become more simplified, not less, and think that just holding LS would be a fine way to end up! My elderly parent ended up with a super simple arrangement of cash and LS60. You don’t want to die with a complex portfolio in lots of different places…

    I’m not sure that decumulation has to be complicated either. Hold enough cash to prevent forced selling in a downturn (2-5 years worth? depending on how cautious you are) and just top up from selling LS. I don’t see the need to have lots of different LS types, they rebalance automatically so if you want to maintain broadly similar asset allocation just choose the one that suits. Perhaps I’m missing something but why make it more complicated than necessary?

  • 25 The Investor November 27, 2019, 2:41 pm

    Perhaps I’m missing something but why make it more complicated than necessary?

    Because as I said at the weekend, human beings love to complicate things. 🙂

    I cast no aspersions on my fellow complicatifiers on this thread — I expect my ‘retirement’ income will look as complex as a top-level schematic of a small developing world country when the time comes. But that’s because I’m an investing maniac and an inveterate tinkerer. 😉

    The average person is best off holding at least a year — and ideally more like 3-5 years — income requirements in cash, and then selling down a chunk of your portfolio held elsewhere (if following a SWR-based pure passive strategy) or redirect income from an income portfolio (say investment trusts) or some combination to top-up this cash buffer from year one.

    For the average passive investor, this would consist of selling say 4% of your LifeStrategy* 60/40 every year, withdrawing it from the pension (as per personal tax situation etc) and bunging it into your cash buffer (perhaps held over 2-3 savings accounts for safety).

    Here’s the rough idea:


    *For completeness, if *I* was following these strategy I’d use two different fund providers and hold them on two different platforms, all unconnected from each other, to reduce the risk of unforeseen and very – very – unlikely catastrophic failure:


  • 26 The Rhino November 27, 2019, 2:55 pm

    @VF – If I were 100% sure that my broker and my provider would never falter then I agree why make life any more complicated than a single broker single product solution.

    *Underneath* your broker/provider you are massively diversified with VGLS for sure. But *above* your broker/provider you’re taking a very concentrated risk, though the risk may be small.

    Hence my thinking is just diversification to mitigate the tail-risks associated with platform and provider failure. Nothing new or novel, TIs written several articles around it.

    I think of the conversation I’d have to have with my wife if my single broker collapsed or vanguard fell over… ‘So you put all our assets into just one thing?’… and I’d feel stupid.

  • 27 Berkshire Pat November 27, 2019, 3:03 pm

    I have a selection of Vanguard and iShares ETFs, and loads of individual shares, ALL held in an HSDL account (actually two HSDL a taxable CMA, and an ISA)
    How worried should I be, as they are about half my net worth?

  • 28 Vanguardfan November 27, 2019, 3:25 pm

    @rhino I’ll concede a case for two or maybe three brokers. I have three at present. Diversification across fund managers, maybe not so much (clue’s in the name). Too many cash accounts though, that could be whittled down.
    But I do think that as you get older, you ideally want most of your income just coming automatically (annuity? If no DB) with a buffer/slush fund in a couple of accounts.

    @TI, yes, I know we love to complicate things. That’s why I see simplifying as an ambition, a goal to be worked towards 🙂

  • 29 Mr Optimistic November 27, 2019, 3:43 pm

    I tried to spread things across platforms but there aren’t that many fixed fee ones. Also I had a sipp with Alliance and my wife’s got an ISa with ii. Wouldn’t you know it they are now just one.
    Certainly with pensions the desire to keep costs low points to a fixed fee provider once above a certain value, and that encourages consolidation to max the low fee benefit.

  • 30 The Details Man November 27, 2019, 4:23 pm

    Like FvL I benchmark to the LS80. After all the years of thinking and tinkering my investments’ information ratio to LS80 is… exactly 1. (i.e. I haven’t outperformed at all).

    So the long and short of it, just get started.

  • 31 Matthew November 27, 2019, 10:59 pm

    Tweaking passives is essentially tweaking your exposure to risk, which would be easier to do by simply tweaking vls bond allocation or being more/less gung ho with emergency funds, mortgage debt and insurances

  • 32 Matthew November 27, 2019, 11:43 pm

    Would using multiple funds increase your FSCS coverage? i.e. 85k in vls 60 + 85k in vls 100 = 170k protected in what is effectively vls80 without having to use multiple brokers, as I believe the underlying fund, if fca registered, has its own allowance, per platform?
    But if you wanted to I believe you could duplicate that with multiple brokers, to multiply your fscs coverage

  • 33 The Investor November 27, 2019, 11:56 pm

    This is our best article on fund coverage / compensation. It’s from 2013 so may need updating:


  • 34 Matthew November 28, 2019, 7:28 am

    Ahhh, not per fund, cheers @ti
    Btw was thinking the correct age group can use a LISA for 20% uplift and then at 60 put that all into a SIPP for another uplift, so long as you don’t go into a higher tax bracket

  • 35 Jonny November 28, 2019, 12:45 pm

    An interesting article, thanks. I’ve nothing to add, other than my interest to subscribe for updates of future comments!

  • 36 November November 28, 2019, 3:34 pm

    TA- Another good article and interesting comments.
    On the subject of balancing or choosing which LS equity/bond % is appropriate for my SIPP/ISA. What cash/bond notional equivalent value would I put on a DB civil service index linked pension of £10k pa. ?

  • 37 EB November 29, 2019, 12:40 am


    I’m also struggling with the “analysis paralysis” conundrum and in need of help to take the right next step. I’m completely sold on the passive investment approach and have decided that the best route for me is a Vanguard Life Strategy fund. However, all the noise at the moment about a potential 2020 recession is stopping me from getting (re)started.

    My situation is that I already have about 30% of my wealth invested in Vanguard Index funds (which I invested a few years ago) but for various reasons (none of them particularly good!) the remaining 2/3rd of my money is currently in cash. I fully intend to invest the majority of that in the stock market and know that is the sensible thing to do, but I’m worried about putting it all in now given the talk of a recession next year etc. as I worry I’ll be piling it all in at the top of the market and then will take a big hit if / when the market crashes. That said, I also worry that if I do nothing the market will keep going up and I’ll miss out……

    For context, I’m 30 and currently in no need of the money I want to invest in the next few years. What would you recommend that I do? As I see it I have a few options:
    > 1) Wait until / if there is a recessions / market drop to invest ANY of my cash
    > 2) Invest ALL of my cash now (and hope for the best!)
    > 3) Invest SOME of my cash now but hold some back to invest if / when the market drops – in this instance I’d love to know what % you recommend investing vs. holding back
    > 4) Drip feed some / all of my cash into the market over the next year or so (e.g. by investing 10% / month for 10 months)

    Would love to know your thoughts on what you think the best approach is. I know you can’t ever accurately time the market, but with talk of a recession becoming ever prominent, I just don’t really know what to do…

    In case it is relevant, I am actually still investing a bit (my monthly pension contributions) into the market on a monthly basis. my dilemma is just what to do with the lump sum of cash that I have available to invest.

    P.S I also know I should have invested all this money ages ago and I’ve definitely learnt my lesson on that…..but I didn’t so here we are 🙁

  • 38 The Investor November 29, 2019, 12:59 am

    @EB — We really can’t give personal advice as to what you should do, for all kinds of reasons. (We don’t know a reader’s bigger life picture, your dependents, future financial situation, we’re not qualified financial advisors, you may have a new puppy that depends on you not being too stressed to take him for walks, the list goes on and on. 🙂 )

    However I can give you something to think about, which is that this is primarily a psychological / emotional decision.

    Mathematically one ‘should’ always invest any money earmarked for long-term investing straightaway to have the best *chance* of maximum returns, because markets *tend* to go up over time and keeping money out of the market is *likely* to be an opportunity cost.

    But sometimes they go down, and then you lose a bit of money, for a while. And this might begin the day after you invest. No telling.

    Historically Western markets have always (eventually) gone back up again, but that’s not guaranteed, whether you invest now, five years ago, or in five years time. Whenever you invest any money in the markets there’s a risk of a setback — which becomes a near-certainty on a long enough time horizon. The market will crash again, and as you’re only 30 there’s a decent chance you’ll see all your stock market wealth *halved* at some point — perhaps an amount several times as much as you’ve got now. Postponing now doesn’t prevent that pain.

    You see where I’m coming from? Risk and the market go together. It’s all about your risk tolerance, and managing the likely pain a setback will cause you. How much you invest is part of that. How much you tilt your proposed LS to bonds is part of that. Keeping more than you ‘should’ in cash if you need to might be part of that. 🙂

    Would you be more annoyed to lose out on a 10% gain over the next year or to see your money invested instantly drop 20%? That might help you find your own answer. (And it has to be your own decision).

    Here are two more articles that could help:



    Good luck!

  • 39 TahiPanas2 November 29, 2019, 3:38 am

    as advised above, evidence over the long term suggests that diving into the market with all your stash in what turns out to have been the top of the market has proved to be far from the disaster you might imagine. But, as also advised, absolutely nothing is certain.

    However, the uncertainty you are feeling can paralyse anyone. In exactly the same circumstances at the beginning of my passive investing career, I opted for monthly instalments and found that I was in a psychologically better place to act knowing that over a given period I would get the average of the market or thereabouts. Whether this is true or not is not really the point as the crucial fact is that you are actually investing rather than waiting for a effective bolt from heaven to start the process. It was much easier to make decisions.

    The method, as you know, is to invest an identical sum of money at regular intervals irrespective of what is happening in the market. It doesn’t have to be monthly if you don’t have a big sum. Three or more months is OK depending on resources and your mindset. It worked well for me.

    Good luck,

  • 40 The Accumulator November 30, 2019, 7:15 pm

    @ EB – hopefully you’ll take heart from some of the drip-feeding techniques mentioned in the article The Investor linked to. If that doesn’t move you, try playing this: it’s a visceral analogy for the no-win game you play when you try to outsmart the market:


    @ Mr Optimistic – Ha! Monevator can’t afford her 😉

    @ Algernond – I would / will have separate bond and equity holdings come deaccumulation. Bear in mind that rules of thumb like the sustainable withdrawal rate are based on drawing down your equity and bond holdings equally, so historically you would have been fine if you chose a conservative enough SWR rate.

    Re: Rhino’s comment – if a fund is more than 60% invested in fixed income / cash then it’s taxed as interest not dividends. Generally this is not a problem in ISAs / SIPPs but take a look at this piece for a couple of wrinkles:

    @ Mark – I agree that Target Retirement Funds can be even simpler still but I didn’t want to get into it for reasons of simplicity! I did recently encourage a friend to go that route because it seems unlikely to me that she’ll want to manage her asset allocation as she approaches retirement age.

    @ November – you could just subtract £10K from whatever target you’re trying to hit and go from there. Or you could just a conservative SWR rate like 3% and calculate what your pension is worth from a defined contribution p-o-v. £10,000 x 33.333 = £333,330 = the equivalent you have in fixed income from your DB pension.

    @ Flying Scotsman – thankfully my mum had the resources (just) to pull off a floor and upside strategy: https://monevator.com/secure-retirement-income/
    I could secure her essential income requirements and a bit more through low risk assets, which took the pressure off accurately predicting her risk tolerance. If that had been a factor then I’d have gone 50:50 max and possibly lower. The problem then would have been whether a 40:60 equity:bond allocation would last long enough. Annuities provided the solution.

  • 41 jim December 1, 2019, 12:27 pm

    Good article.
    I openend a LISA a few years ago and just have been maxing each year into VLS 100. I’m going to stick with his strategy for the foreseeable future. I just wondered to spread risk across platforms, providers and allocations should I be every couple of years dropping 5k into HSBC global strategy cautious through a different provider. It’s would still mean i’m heavily exposed to equities but with 30 years of investment left (hopefully) before I start needing the funds I can perhaps change the split later down the line.

  • 42 The Accumulator December 1, 2019, 1:21 pm

    @ Jim – diversification in all things is a good idea, see The Investor’s comment:


    Diversifying some assets into a different asset class (bonds, in your case), different fund manager, different platform all make sense. Given you’ve recently started and have 30 years on the clock, there’s not much need to worry about this unduly – I’m assuming you don’t need the money for decades. But the more you rely on your wealth to pay the bills, the less exposed you should be to a single point of failure.


  • 43 EB December 1, 2019, 1:38 pm

    Hi all,

    Thanks so much for your thoughts. Really appreciate it. I’ve decided to take the plunge and invest my lump sum upfront…..so fingers crossed!

    I ave another question that I would also love some info on / which I was hoping you could point me in the right direction on, which is what the best way of investing money OUTSIDE of an SIPP and ISA is to: 1) Reduce the tax payable and 2) make reporting and paying any tax that is payable as easy as possible. I currently have some money sat in cash which I can’t put into an SIPP / ISA (as I’ve maximised my allowances) but I’m struggling to figure out what to do with it and have found it hard to get a clear summary of what the different options are for investing it in a way that is sensible from a tax PoV.

    The things I’m thinking about / trying to get to grips with are:
    > Whether investing in shares to make the most of the annual CGT allowance makes sense
    > Whether investing in index trackers in a standard investment account makes sense (I’m struggling to understand how paying tax on any interest works here though)
    > Whether investing in government bonds makes sense (I’m wondering whether doing this outside my ISA so all my ISA can be invested in funds would make sense – again I’m struggling to understand the tax treatment here though)

    If anyone has any thoughts/ points of good articles to read on this it would be greatly appreciated. Currently feel I’m going round in circles a bit!

    Thanks v much!


  • 44 The Accumulator December 1, 2019, 4:10 pm

    Hi EB,

    See this piece: https://monevator.com/tax-efficient-investing-uk-order-isa-sipp/

    You won’t be taxed on equities in a taxable investment account until you’ve maxed out your dividend income tax allowance and your capital gains tax allowance. That gives you quite a lot of headroom.

    Even then those taxes are lower than income tax, so bond funds should generally be tax sheltered first.

    Whether your investment is an index tracker or not isn’t relevant. If a multi-asset fund (like LifeStrategy) is more than 60% invested in fixed income (cash and bonds) then it’s taxed as bond fund i.e. at income tax rates.

    I’m not a tax pro so you do your own research. HMRC’s webpages on the topic aren’t too bad at all.

  • 45 EB December 1, 2019, 4:35 pm

    Thanks for the speedy reply, and REALLY useful to know that LifeStrategy funds can be counted as bond funds, as what I am leaning towards is investment in an index tracker such as Life Strategy, so I will make sure that check the % of cash and bonds held in whatever fund I choose to invest in (if that is the route I go down). I also understand that going for the income version of whichever fund I go for is the most sensible approach to take, so will look to do this.

    If I do choose to so this and to invest in e.g. the income version of the Vanguard Lifestrategy 80% equity fund, am I correct to understand that the tax treatment of this would be as outlined below?
    – I would not pay any CGT tax on my investments in this fund until I choose to sell them
    – Any income paid out will count as dividend income, so I would get some tax-free dividend allowance on this. To figure out and pay any additional tax owed on this dividend income I would need to submit my consolidated tax statements from the account in which I hold the funds to HMRC for them to assess any tax owned at the end of the tax year

    If I have understood correctly then I think I have a game plan! Please let me know if I’m being stupid and have misunderstood anything though….

    Thanks so much again for the help!

  • 46 Vanguardfan December 1, 2019, 5:31 pm

    @EB looks good, but I don’t know about the practicalities of paying tax as I do self assessment and the dividend income is declared there.

  • 47 The Accumulator December 1, 2019, 7:10 pm

    @ EB – correct – you don’t pay CGT until you sell and also until you exceed your CGT allowance. Monevator has quite a few articles on CGT that are worth a look. Here’s a couple:



    I’m not sure why you think inc funds are better than acc funds? Something to do with your personal circumstances? From a tax p-o-v, they are treated the same. Any dividends you receive whether through acc or inc funds is dividend income and you can earn £2000 this tax year before you’re taxed. If LifeStrategy 80 yields 2% then you can hold £100,000 of it in a taxable account and not pay any dividend income tax.

  • 48 PaulH December 1, 2019, 7:53 pm

    @EB – if it’s an option, an alternative is to increase your pension contributions temporarily to absorb the excess. It does lock the money away long-term, of course, but the tax benefits are considerable.

  • 49 EB December 1, 2019, 11:41 pm

    Hi all,

    Thanks for the additional thoughts.

    @Paul H, increasing my pension contributions further / investing some of the money into my pension is something I’m thinking about, but I’ve already increased them quite a lot and in 4-5 years time we’re highly likely to need to sell our current flat and buy a larger one , and to do so will need some capital so I’m nervous about locking too much of my wealth away in a pension at this point. I will give that some more thought though….tricky one to get the balance right on!

    @ The Accumulator, thanks for the articles! All of my in-tax wrapper investments are Accumulator funds, but I’ve read some advice suggesting that for out-of-tax wrapper investments Income funds are better as they make it easier to calculate the capital gains tax owed. Does that make sense & do you agree with taking that approach if so?

  • 50 The Rhino December 3, 2019, 2:10 pm

    I think the advice that its beneficial to hold inc. rather than acc. type products outside of tax wrappers is fair.
    I would say it can make the admin of calculating your dividend/income tax and any potential CGT anywhere from a little bit simpler right up to avoidance of a complete nightmare depending on your individual circumstances.
    TAs right (of course) in saying the tax treatment is identical, but experience has shown me it can be harder than you might wish to do the necessary sums for acc. type units. You could argue just buy inc. units and avoid the dissection altogether.


  • 51 The Accumulator December 7, 2019, 6:39 pm

    @ EB – I guess it depends on how difficult you find it to track the dividends that accrue from Acc funds and to do the sums. My holdings are all under tax-wraps so I’m definitely not going to argue with Rhino’s experience. Should you want to know how to track your Acc fund dividends then this piece should help:


  • 52 The Investor December 7, 2019, 8:08 pm

    For what it’s worth, another vote for Inc funds outside of wrappers here.

    Investing outside of a tax shelter is (potentially) enough of a ball-ache without having to do extra sums/paperwork hunting.

    With income funds you can just total your payments at end of year from the income reporting tab at your broker. Easy.

    Remember outside a wrapper you’ll anyway need to keep records of all your purchases/sales in case you need to file for capital gains in the future (a potentially horrendous task when you’re reinvesting small amounts into the same fund either way, so be aware of that). If I was buying a big chunk of new fund outside a wrapper every year I’d even consider buying different funds each year to keep the resultant emerging CGT situation clear. (But keep in mind I’m not a passive investor and have held as many as 100 different securities at once at times, so I’m pretty weird. 😉 )

    It’s a good idea to try to defuse capital gains over the years using your allowance like this…


    …not only to manage down future tax liabilities but to try to prevent/contain future reporting to HMRC potential and avoid paperwork!

    If you’re not using / have maxxed out ISAs/SIPPs then you’re likely high net worth (or will be, unless an inheritance or similar) which makes managing all this even more important (because rates you’ll pay will be higher, curbing your realized returns).

    A few years ago there was a viable strategy of owning income-paying shares (/ETFs/trusts/funds) outside of ISAs/SIPPs, presuming you’d used all your allowances up, because you could earn quite a lot in dividends before taxes became an issue (again depending on your income band, but most people are lower-rate taxpayers in retirement). I say this because potentially one way to avoid the pain of reporting/CGT issues is to never sell and switch to spending the income in deaccumulation. But with the dividend tax allowance now a measly £2K this is not the attractive back-up plan it was.

    Really, use ISAs/SIPPs as much as you can. Take it from someone who has spent years managing down unsheltered capital gains and reporting to HMRC under changing tax regimes. It’s a pain. 🙂 And like @Rhino, I second income funds to make it slightly less painful.

    (In wrappers totally different, I’d say go Accumulation all the way! 🙂 )

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