Vanguard Lifestrategy 100 vs L&G global

rubuhoeikanaika · 2 March 2016 at 10:57PM

Hi there,

I've decided to make a (smallish) monthly investment in the Lifestrategy 100, mainly because it's so cheap. But some of those L&G funds look even cheaper. Since the lifestrategy 100 is all stocks anyway, is there any reason to choose it rather than one of the L&G global funds?

Thanks!

bowlhead99 · 3 March 2016 at 12:00AM

*Lifestrategy 100 is 100% equities and is global with a tilt towards UK (i.e., more UK listed companies than implied by the UK's share of world market capitalisation).

WHEREAS:

*L&G Global Equity Index Fund is 100% equities and is global, following the FTSE World Index with no special tilt to the UK. However, its cheapest class has OCF of 0.39% which costs more than Vanguard Lifestrategy.

*L&G International Index Trust is 100% equities and is global ex-UK, following FTSE World ex UK. It is cheaper than VLS but you would need to add your own separate UK fund at your own preferred weighting, and manually rebalance to get a proper global result.

Also even after you have manually added a UK component, you'll still get a slightly different return when you have a single tracker like L&G IIT covering many global regions, instead of a portfolio of trackers region by region strung together like Lifestrategy. For example if Apple doubles in size while Samsung stands still, in a single international index both your Apple exposure relative to Samsung and your US exposure relative to Asia Pacific would increase. However in the Vanguard fund-of-funds, the exposure to Apple compared to other US stocks would increase, but the total exposure to the US would not necessarily increase because they might be happy to rebalance and keep the US total fund at the same size relative to the AsiaPac fund(e.g. 44% vs 11% or whatever). So, a different result and you may or may not want it depending on your views on portfolio construction.

* The L&G Multi-index 7 fund is a fund of funds constructed from a bunch of funds which like VLS100 are mostly equities. However the '7' fund is the highest equity concentration out of the range (6,5,4 etc are lower in equities) but it is only 80% equities with the rest being bonds and property. Also it is a bit more expensive than VLS (0.31% vs 0.24%). If you were comparing it to VLS 80 it might be a good choice because of the dedicated property exposure but it is not the same as VLS 100 because it's not just equities.

So, whether there is any reason to choose VLS vs 'one of the L&G Global' funds depends exactly which L&G fund you were really considering and what you hope to achieve and how much you want to pay and whether you want to do any manual rebalancing etc.

Mistermeaner · 3 March 2016 at 1:48AM

Or why not a little of both vls100 and l+g7 ?

jimjames · 3 March 2016 at 8:04AM

Can you explain how you are calculating your basis of cheapness?

rubuhoeikanaika · 3 March 2016 at 11:18AM

bowlhead99 wrote: »

*Lifestrategy 100 is 100% equities and is global with a tilt towards UK (i.e., more UK listed companies than implied by the UK's share of world market capitalisation).

...

*L&G International Index Trust is 100% equities and is global ex-UK, following FTSE World ex UK. It is cheaper than VLS but you would need to add your own separate UK fund at your own preferred weighting, and manually rebalance to get a proper global result.

Also even after you have manually added a UK component, you'll still get a slightly different return when you have a single tracker like L&G IIT covering many global regions, instead of a portfolio of trackers region by region strung together like Lifestrategy. For example if Apple doubles in size while Samsung stands still, in a single international index both your Apple exposure relative to Samsung and your US exposure relative to Asia Pacific would increase. However in the Vanguard fund-of-funds, the exposure to Apple compared to other US stocks would increase, but the total exposure to the US would not necessarily increase because they might be happy to rebalance and keep the US total fund at the same size relative to the AsiaPac fund(e.g. 44% vs 11% or whatever). So, a different result and you may or may not want it depending on your views on portfolio construction.

Thanks, this seems like an absolutely decisive point. I hadn't considered the difference between a fund of funds and a single fund in this respect. I'm looking for a 'set it and forget it' direct debit to run for at least 10 years, and so I certainly don't want to have to do any manual rebalancing.

Vanguard's exposure to the UK does make me a little nervous: I'm very downbeat about the future prospects for the UK economy. (The current account deficit is worrying if nothing else.) Other than the fact that I'm paying in pounds, is there any reason to think that an ex-UK fund is particularly non-diversified? After all, we wouldn't say that about a fund that happened to exclude another comparably-sized economy, like France. (Or would we?)

Thanks!

Linton · 3 March 2016 at 12:13PM

rubuhoeikanaika wrote: »

.......... Other than the fact that I'm paying in pounds, is there any reason to think that an ex-UK fund is particularly non-diversified? After all, we wouldn't say that about a fund that happened to exclude another comparably-sized economy, like France. (Or would we?)

Thanks!

A major problem with only investing in the UK is that many industries that are important globally are not significantly represented on the London Stock Exchange. For example vehicle manufacture, consumer electronics, software, internet based companies. There are no industries unique to the UK. The UK share market represents about 6% of the global market.

So the UK is not well diversified, the absence of the UK makes only a minor difference to the asset allocation of the global market.

Vanguard Lifestrategy 100 vs L&G global

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