Thank you so much for an amazing comparison! Looking at all them there’s not a huge difference between them I’ve been contemplating and been doing research but you simplified it all I think I will go down the ISA route and keep investing in stocks and shares choosing this option gives flexibility compared to Lisa and SIPP etc. thank you again.
It really depends on your tax rate, to a large extent. As a higher-rate taxpayer, with a generous employer contribution, the pension is worth a lot to me - it is a clear winner for me, personally. But the trade-off is less flexibility.
Then the LISA'S guaranteed 25% top-up makes it very hard to beat, as a second-place option. But again lacks flexibility, and has limited deposits.
So even after those two, I still want / need an ISA to provide flexibility and earlier access to funds.
This is why I use all 3 savings vehicles, with intention that ISA covers me to at least 60, then LISA, then pension. The further I can push back accessing my pension, the more valuable it becomes
How do you guarantee a 30% return over 20 years, though? That is the dream and most people would aim for that, but few will achieve it.
For context, 30% over 20 years would make you a top investors of all time - Joel Greenblatt levels of performance (assuming 20-year S&P500 returns of ~10% CAGR):
You also have to consider how long your stock will remain a top stock. Taking $SBUX as the example - 20 years ago the stock was $13, now it's $113 - but this is a CAGR of 11%, not 30%. Its 5y CAGR is only 8%, so it's highest growth period has been in the past.
I hope it works out for you, but I think it is exceedingly unlikely many people can achieve these sorts of returns with a single lump-sum investment. Good luck to you, though!
My 19 years within a SIPP pension is running at 27% compound , the AIM market today is littered with tiny market cap companies , most , 99% are rubbish, just find the 1% that our not .
The average investor takes a huge risk going for average returns
It’s the wrong approach in my view
Ask yourself can this stock ten bag within 3 years.
I think this is a really good point (about taking risks aiming for average returns), and I agree that the major risks reside in the regions where you don't see them, so you haven't attempted to mitigate them (your Black Swans).
Nonetheless, I don't think I could sleep well if my pension was sitting in microcaps or AIM investments - although I appreciate investing in index funds carries market risk while guaranteeing average returns, I don't feel confident enough in my ability to assess opportunity or cut losses to take what I perceive as a high risk of bankruptcy on microcaps.
I fully appreciate, though, that every investment provides opportunity at the right price
Impressive returns!
Thank you so much for an amazing comparison! Looking at all them there’s not a huge difference between them I’ve been contemplating and been doing research but you simplified it all I think I will go down the ISA route and keep investing in stocks and shares choosing this option gives flexibility compared to Lisa and SIPP etc. thank you again.
You're very welcome!
It really depends on your tax rate, to a large extent. As a higher-rate taxpayer, with a generous employer contribution, the pension is worth a lot to me - it is a clear winner for me, personally. But the trade-off is less flexibility.
Then the LISA'S guaranteed 25% top-up makes it very hard to beat, as a second-place option. But again lacks flexibility, and has limited deposits.
So even after those two, I still want / need an ISA to provide flexibility and earlier access to funds.
This is why I use all 3 savings vehicles, with intention that ISA covers me to at least 60, then LISA, then pension. The further I can push back accessing my pension, the more valuable it becomes
I get your point makes total sense great strategy.
Or you put a small lump sum into any of those savings plans and target 30% compound, per year on average, and let the market do all the work for you.
Never make any more payments
After 20 years you will have 100 times your investment
Start with tiny companies that can grow super fast.
SBTX is the ticker for where my money is.
This has worked for me
Good luck
How do you guarantee a 30% return over 20 years, though? That is the dream and most people would aim for that, but few will achieve it.
For context, 30% over 20 years would make you a top investors of all time - Joel Greenblatt levels of performance (assuming 20-year S&P500 returns of ~10% CAGR):
https://www.investorschronicle.co.uk/content/c1ced0a0-365b-51e3-87f5-09ea425f05f7
You also have to consider how long your stock will remain a top stock. Taking $SBUX as the example - 20 years ago the stock was $13, now it's $113 - but this is a CAGR of 11%, not 30%. Its 5y CAGR is only 8%, so it's highest growth period has been in the past.
I hope it works out for you, but I think it is exceedingly unlikely many people can achieve these sorts of returns with a single lump-sum investment. Good luck to you, though!
My 19 years within a SIPP pension is running at 27% compound , the AIM market today is littered with tiny market cap companies , most , 99% are rubbish, just find the 1% that our not .
The average investor takes a huge risk going for average returns
It’s the wrong approach in my view
Ask yourself can this stock ten bag within 3 years.
If not stay away.
All the best
I think this is a really good point (about taking risks aiming for average returns), and I agree that the major risks reside in the regions where you don't see them, so you haven't attempted to mitigate them (your Black Swans).
Nonetheless, I don't think I could sleep well if my pension was sitting in microcaps or AIM investments - although I appreciate investing in index funds carries market risk while guaranteeing average returns, I don't feel confident enough in my ability to assess opportunity or cut losses to take what I perceive as a high risk of bankruptcy on microcaps.
I fully appreciate, though, that every investment provides opportunity at the right price