Why doesn't everyone just buy Vanguard LifeStrategy?

ruperts · 7 October 2017 at 10:51PM

If this type of thread isn’t a sign of an imminent crash then I don’t know what is.

Audaxer · 7 October 2017 at 10:52PM

Murmansk wrote: »

I'm fairly new to this investing thing and have a fair amount of cash invested in Vanguard LifeStrategy funds. In the three weeks or so that I have had them they seem to have gone up nearly 2%.

Don't get too carried away. In the 6 months or so that I have been invested in VLS they have only gone up about 2% in total.

colsten · 7 October 2017 at 11:01PM

Audaxer wrote: »

Don't get too carried away. In the 6 months or so that I have been invested in VLS they have only gone up about 2% in total.

Different VLS options almost certainly perform differently as the portfolio mix is different. I agree, though - performance over 2 months is not indicative of future performance - in fact, there is no reliable prediction of future performance with any investment.

talexuser · 7 October 2017 at 11:41PM

I do worry about being happy that your fund has gone up 2% in a couple of months. My portfolio can do that either up or down in a day. It's easy to read in a thread what if it went down 40% but you should really think hard what if that really happened and you lost £4000 overnight from your 10 grands worth of funds. Could you absolutely wait say 2 years or more until it was back to 10 grand again without panicking? If not you are beyond your risk profile. There are always predictions of crashes around the corner, but areas do look overvalued and can we live with 0.5% base rates for ever?

dunstonh · 7 October 2017 at 11:43PM

I've concluded that "passive investing" is the way to go and all the research seems to point to the fact that you might as well just use tracking funds and find a ones with low charges - hence Vanguard for me.

You mean it was the right way to go for you. However, it doesnt mean its the right way to go for everyone else.

It seems to me that there is something of an "open secret" about Vanguard LifeStrategy in that they are great but the industry doesn't want everyone to know this because they'd all be out of a job!

Strange conclusion as Vanguard retail more via advisers than they do directly to the consumer. However, your assumption that Vanguard is best is flawed.

How do you deal with all the investors (whether or advised or DIY) whose investments perform better than VLS?

Also, you need to understand that VLS is a managed solution using underlying passives. The weightings are a management decision. You are not truly passive.

enthusiasticsaver · 7 October 2017 at 11:48PM

I have a VLS fund and about 60% of our total portfolios are invested in it but we also have an income portfolio which I prefer to having to sell VLS to subsidise pensions. The VLS is quite heavily biased to U.K. Which some people don't like and many people do argue that some active funds do out perform passives in spite of heavier charges. I can therefore see why it would not be for everyone. Also whilst our VLS60 has done well this year and last year in 2015 it did not do great. I am also convinced that much of the gains this year are due to currency fluctuations rather then growth.

In spite of all this I like the fund as I don't have the expertise to know how to balance a portfolio or pick funds to give the correct spread so it suits me.

BLB53 · 8 October 2017 at 12:14AM

It would be a poor choice if you want a steady reliable income

Not necessarily. I need income of ~4% p.a. and agreed the natural yield on my VLS 60 is only around 1.5% however the average return for the fund over the past 6 years is ~10% per year.

The solution for me is to sell 4% of my fund at the same point every year to provide my 'income'. I have a 10% cash buffer to draw on when there may be one or two years when there is a bear market as I would feel uncomfortable selling units which had gone down in value.

So long as the average return is 4% or above, this can provide my income requirements indefinitely.

bowlhead99 · 8 October 2017 at 1:04AM

talexuser wrote: »

It's easy to read in a thread what if it went down 40% but you should really think hard what if that really happened and you lost £4000 overnight from your 10 grands worth of funds. Could you absolutely wait say 2 years or more until it was back to 10 grand again without panicking?

Say 2 years or more? Probably best to be prepared for 5 years or more.

Last time there was a major crash (credit crunch / global financial crisis) governments and central banks the world over pulled out all the stops with the lowest interest rates in 400 years and monetary easing everywhere to 'help' the markets correct over the course of a few years. Next time they may not - either because they don't want to or they can't, or they try it and it doesn't work.

It's not just a case of 'oh it always bounces back in two or three years' just because it did the last couple of times. If you are going to jump into an index and ride it up and down you need to be prepared to ride it down a very long way and wait a very long time for it to reach its all time high again - on a total return basis- for you to make money (or at least not lose money).

If not you are beyond your risk profile

I expect there are lots of people who think they are not beyond their risk profile until something bad happens and they realise they were, after all.

Glen_Clark · 8 October 2017 at 7:30AM

bowlhead99 wrote: »

Say 2 years or more? Probably best to be prepared for 5 years or more.

Last time there was a major crash (credit crunch / global financial crisis) governments and central banks the world over pulled out all the stops with the lowest interest rates in 400 years and monetary easing everywhere to 'help' the markets correct over the course of a few years. Next time they may not - either because they don't want to or they can't, or they try it and it doesn't work.

It's not just a case of 'oh it always bounces back in two or three years' just because it did the last couple of times. If you are going to jump into an index and ride it up and down you need to be prepared to ride it down a very long way and wait a very long time for it to reach its all time high again - on a total return basis- for you to make money (or at least not lose money).

I expect there are lots of people who think they are not beyond their risk profile until something bad happens and they realise they were, after all.

I can see all that. But when I think that if I sold out it would be in pounds, instead of thousands of the world's biggest companies which look more solvent than the British Government (full of politicians making promises they can't keep), I decide to leave it where it is
PS: I also realise Brexit could be cancelled https://www.theguardian.com/politics/2017/oct/07/theresa-may-secret-advice-brexit-eu pound would rise so foreign share prices fall. But I can't see it happening because I suspect the interests of the Tory party will be put before the interests of the country again.

chucknorris · 8 October 2017 at 8:23AM

ColdIron wrote: »

There isn't one really, you could look at VHYL but I wouldn't want to bet the bulk of my entire retirement income on a single fund. If it's just for extra income or treats like holidays or a new kitchen then maybe VLS would work for you. Horses for courses

I quite like VHYL, as it is quite diverse, both geographically and in sector, and it obviously pays a decent dividend. I did intend to significantly (I mean just my shares, which are only about 26% of my portfolio) invest in VHYL but I went for the FTSE 100 instead (although that in reality is only about 12.5% of my portfolio). The problem (nice one to have though) is that although I would like to switch to VHYL it is going to take quite a few years to avoid paying CGT, but in the meantime I am getting great dividend income.

Why doesn't everyone just buy Vanguard LifeStrategy?

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