Vanguard Life Strategy

A_Flock_Of_Sheep wrote: »

It's been a bit of a free falling market this week so far.

Oh please Sheep, stop micro-analysing the markets.

A_Flock_Of_Sheep wrote: »

I think one of the driving factors for the Vanguard LS funds is the fact that the running costs are quite cheap for holdings over £10k and in one package they offer a broad mix of bonds, property and exposure to global markets. A kind of one size fits all set it and forget it fund.

As I mentioned on another thread - looking the marketing literature for the Blackrock Consensus funds, which are similar in that they're portfolio funds built on trackers: they specifically say they don't claim to be a "one-size-fits-all product". There are a few sizes available (different levels of bond exposure and equity geographies), but none of them are necessarily suitable for 'all'; an investment product can never be that.

They do however claim to be "more of a one stop shop, for investors seeking low-cost, efficient and diversified market exposure". You could have some at the core of your portfolio and then play with other stuff around the edges, or for some people you could have it as your entire portfolio as long as you realise its limitations and are happy with it.

You mention they cover property. This is misleading as there is zero specific allocation to real estate. It is equities and bonds only. Some of those equities will be in the building sector which is somewhat linked to real estate asset prices, but is not the same thing. And while our FTSE 250 includes groups like Barratt, Bovis, Persimmon (actually perhaps Persimmon is at the bottom end of the 100 by now), their market caps are pretty small and typically 4/5ths of the UK allocation via the All-Share index in a Vanguard LS is going to be the FTSE100 with the exposure to smaller companies just a bit of noise around the edges.

I don't think any professional adviser or the smarter people on here would tell you your portfolio is 'missing a vanguard fund' or that you must have a vanguard fund for your portfolio to be complete. A lot of people here have pointed out that your previous portfolios were not very balanced (for example I think you had a thread last month when you were considering just having 3 equity income funds as your entire portfolio); and Vanguard LS is a quick way of getting some general global largecap equities exposure and perhaps some bond indexes (I only use the 100% equity version myself). Most advisers probably recognise the limitations of simply using largecap indexes in fixed ratios and would think they could tailor something better to your needs using other options, rather than take the off-the-shelf mix. - because as mentioned, one size does not fit all.

The VLS funds are not suitable for my needs as the dividend yield is quite small.

The FTSE 100 has generally given a dividend yield of 3% or so as a general rule of thumb, S&P and other indexes are sometimes quite a bit lower; a significant proportion of funds and investment trust set up with a goal of producing a yield will get you more income than FTSE and by extension, more income than a Vanguard Lifestrategy.

But even if you "need an income": one way of looking at it is that you need to generate sufficient total return within your portfolio that allows you to take cash out of your investments over time - if that return has come from growth rather than income it doesn't stop you getting access to the cash, as you can just sell a bit. A majority of platforms currently have no dealing fees to sell fund units. So it's only the hassle of having to actively go into your portfolio online and hit sell, rather than simply receiving the cheque from a dividend. Outside a wrapper it can actually be beneficial to generate your return as growth rather than income, as CGT is lower than income tax.

Either way, in my view you would not avoid global largecap developed and EM equities merely because the dividend yield was a bit lower than having the fund manager select the particular companies which had higher dividends and lower growth to give you the cash each quarter. As a prospective retiree, it is a valid viewpoint to look at equity income funds because of the generally more stable outlook for dividend producing companies when the markets are troubled, and OAPs typically want to have lower volatility in what they hold than a young person. It is not purely because of a need to physically receive cash each month, as one can always liqidate to get some cash.

So I think the simple answer that something is not suitable because it doesn't produce a lot of income and you need to be able to get cash each month, is only half the story. If you're spending money with an adviser to use his skills to fine tune a portfolio, he will inevitably have his own home-made off the shelf solution for someone of a particular risk / reward profile - and if he then wants to tweak that to account for particular personal circumstances it's extremely unlikely that he would rip up what he'd started with and add a bit of Lifestrategy.