VLS 60 buying more now ok?
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Yes i just have the VLS60 in my ISA, i will have to think a bit more about this, as i just wanted the 1 fund to add too now and again, and just forget it. ie no rebalancing etc.
Does it really matter if your VLS60 and VLS20 (or whatever you decide to go for) aren't exactly 50/50 in the amount of money to have in each?
If you put £1K in each one and a year later one is £1,200, and the other is £1,400 is it really important?
I'd just leave it, personally.0 -
bowlhead99 wrote: »I'm looking at more like 70% equities anyway, and using a whole bunch of products that aren't suitable for less-experienced investors
So you're 30% bonds? How do you alpha gains compare with others?0 -
Strange that you get criticised for pointing out loss potential for events that will happen to people that don't realise it.
We have seen people on this board many many times over the years invest in funds like the VLS. Often taking a long time to decide to invest (often missing periods of gains) who then come back and post that is down and they are worrying. Some have even pulled out crystallising their losses. So, I make no apology for pointing out the downside that WILL happen.
To even suggest that it is wrong to let people know their investments will go down as well as up says more about you than your snide comments about me and the other advisers that post here.
Dunstonh, I value your posts and your perspectives but I do think that is fair to point out that the loss figures you are quoting refer generically to any 60/40 equity bond split portfolio and are not specific risks associated only with the Life Strategy 60 fund.0 -
No.So you're 30% bonds?
My alpha gains compared to what benchmark? "Others" seems quite vague.How do you alpha gains compare with others?
My alpha might be zero after fees if you had an incredibly customised benchmark. But that benchmark would have to be different to a VLS70 if such a product existed, for it to make sense as a benchmark for my holdings.
I do fine though. I have not always been as low as 70% equity. As mentioned on another thread, markets have been going up a lot in recent years and there is not a lot cheap these days. I'm less in equities than I was a year or two ago.0 -
Different 60/40 bond funds can have different risk levels though. For example mix of foreign/ domestic holdings may introduce greater or lesser currency fluctuations, or use of company types or industry sectors which can be more or less cyclical or defensive etc, and the wide spectrum of bond types and maturities/durations which are available.I do think that is fair to point out that the loss figures you are quoting refer generically to any 60/40 equity bond split portfolio and are not specific risks associated only with the Life Strategy 60 fund.
And some mixed asset funds happen to be 60/40 now but may change that as different events happen in the world economic cycle which change the relative volatility of different asset classes.
Regardless, I'm pretty sure his point was that where people who come onto a forum and are routinely told.... hello, yes as you've probably heard, why not just buy VLS60, or VLS80 to use up your ISA allowance, it's dead easy, you can do it on this cheap platform for a low fee, I did it two years ago and am *very* happy with the results, don't know why you'd keep your bank account at 2%,... It can be very useful for dunstonh and his ilk to stand up and say, hey, btw, that's probably 30-50% loss potential there, are you sure?
Some people like TheTracker who are somewhat cynical of IFAs will characterise that as "fearmongering" from IFAs to put people off DIY investing in the hope the IFA industry gets revered for its sagely advice and perhaps more customers. Personally, not an IFA and don't use one, i think it is fine.
It is better people understand what they are getting into, rather than just going along with a more experienced person who says don't worry, buy now, and don't forget to hold through the dips. The person saying now "don't forget to hold through the dips" will not be calmly sitting by that person's side as the voice of reason in two years when they are trying to explain to their wife over breakfast that the ISA is down 40% and the wife is insistent that they "sell now to avoid further losses what the hell were you thinking buying that in the first place thinking you are some wall street expert".0 -
bowlhead99 wrote: »Different 60/40 bond funds can have different risk levels though. For example mix of foreign/ domestic holdings may introduce greater or lesser currency fluctuations, or use of company types or industry sectors which can be more or less cyclical or defensive etc, and the wide spectrum of bond types and maturities/durations which are available.
And some mixed asset funds happen to be 60/40 now but may change that as different events happen in the world economic cycle which change the relative volatility of different asset classes.
Regardless, I'm pretty sure his point was that where people who come onto a forum and are routinely told.... hello, yes as you've probably heard, why not just buy VLS60, or VLS80 to use up your ISA allowance, it's dead easy, you can do it on this cheap platform for a low fee, I did it two years ago and am *very* happy with the results, don't know why you'd keep your bank account at 2%,... It can be very useful for dunstonh and his ilk to stand up and say, hey, btw, that's probably 30-50% loss potential there, are you sure?
Some people like TheTracker who are somewhat cynical of IFAs will characterise that as "fearmongering" from IFAs to put people off DIY investing in the hope the IFA industry gets revered for its sagely advice and perhaps more customers. Personally, not an IFA and don't use one, i think it is fine.
It is better people understand what they are getting into, rather than just going along with a more experienced person who says don't worry, buy now, and don't forget to hold through the dips. The person saying now "don't forget to hold through the dips" will not be calmly sitting by that person's side as the voice of reason in two years when they are trying to explain to their wife over breakfast that the ISA is down 40% and the wife is insistent that they "sell now to avoid further losses what the hell were you thinking buying that in the first place thinking you are some wall street expert".
I understand that different 60/40 bond funds can have different risk levels but I think that a generic "30% loss potential" statement could be applied to pretty much any 60/40 bond fund. I largely agree with what you say but it's a question of nuance. I think it is better to say: "Do you understand that a fixed 60/40 bond fund such as the Life Strategy 60 has the potential for a 30% loss", rather than "Do you understand that the Life Strategy 60 fund has the potential for a 30% loss".0 -
Assuming the forecast 30% loss in the total fund will be down to the 60% equity portion, that would mean a 50% reduction in the equity holding. Is it really certain at some time your equity balance in the fund will half in value?I understand that different 60/40 bond funds can have different risk levels but I think that a generic "30% loss potential" statement could be applied to pretty much any 60/40 bond fund. I largely agree with what you say but it's a question of nuance. I think it is better to say: "Do you understand that a fixed 60/40 bond fund such as the Life Strategy 60 has the potential for a 30% loss", rather than "Do you understand that the Life Strategy 60 fund has the potential for a 30% loss".0 -
Well, as you see that different funds have different risk levels, which could result in different potential loss levels, it can be difficult to be too generic. A more generic version would be the standard risk warning that investments can go down as well as up and past performance should not be taken as projection of future results. But generalisations are not taken notice of, as much as "this fund you have asked about could do this:[ ] are you ok with it ?!"I understand that different 60/40 bond funds can have different risk levels but I think that a generic "30% loss potential" statement could be applied to pretty much any 60/40 bond fund.
I think it is much more effective and easy to get someone to take notice of your risk warning if they have created a thread for a very specific fund and you reply on that thread stating in no uncertain terms and perhaps in capital letters that:I largely agree with what you say but it's a question of nuance. I think it is better to say: "Do you understand that a fixed 60/40 bond fund such as the Life Strategy 60 has the potential for a 30% loss", rather than "Do you understand that the Life Strategy 60 fund has the potential for a 30% loss".
"this exact fund that you are proposing to invest more money into: do you understand it could lose 30-40%, it may be a case of when not if, and how would you feel about that???"
In this case the warning seems to have converted our OP from wanting more of the fund to be also considering lower risk products. A decent, effective warning then.
If the reply had been more general, like..." hey, you know investments can go down sometimes, right, and funds with 60% equities can lose perhaps 30% sometimes, they might all do that if they're 60% equities, you cool with that?"...
Then the OP may have said to themselves, "well, they have to say that don't they, these risk minded people, but it sounds like all 60% funds are the same, and I was told 60% was the way to go, so I guess I'll just have to accept it then, and anyway, he didn't mention my fund by name, he was talking about funds generally, so it might not happen, and also, I've seen this vanguard fund do a lot better than others recently when it was going up, so I expect it will do better than the rival funds when markets are going down too, that's why everyone says good things about vanguard, they are cheap and effective and this one fund is all you need. I am sold. I will go ahead and invest more."
In such a case, the message did not really get through, and the investor is deluded about the risk and volatility they may be hit with, because they do not have the experience to know better.
Of course, maybe the investor is genuinely satisfied that the 30-40% fall is within their behavioural tolerance and capacity for loss. But maybe they misunderstood, as in my fictionalisation just there, and have glossed over and not properly evaluated it.
So, I'm happier with more, and more specific, risk warnings than fewer or more generic ones. If you are forced to consider what could happen, before you take the plunge, and then it happens, you are much more likely to remember that you had properly considered that potential and that it was within expectations and nothing to worry about. Rather than being surprised by it, and all of a sudden it's not the product you thought you wanted.0 -
FTSE All-World peak to trough drawdown within the last decade, in USD terms (which is how they measure the world index), was 58%. That's total return, even accounting for dividends received. So that's the sort of returns you can get from global equities.Assuming the forecast 30% loss in the total fund will be down to the 60% equity portion, that would mean a 50% reduction in the equity holding. Is it really certain at some time your equity balance in the fund will half in value?
That's taking a world index that is majority invested into dollar-based companies (because of the worldwide equity market capitalisation), and measuring it in dollars. So, then consider Vanguard's VLS equity structure holds a mix of companies with considerably in excess of 75% non sterling assets and revenues, but the performance you want to measure will be in pounds sterling terms...
So, it is very clear that the drop in equities in a VLS fund could be in excess of the 58% drop that was measured in the world index between 2007-2009.
It is not to say it will happen, but it couldn't be a surprise if it did.
If you are in doubt that VLS60 could drop by 40% in a few years, consider: if you had invested £6000 in that fund a while back, it would be worth £10,000 now. So, why in a market downturn could it not go back to £6000? That would be a loss of 40% from here.
Just to focus on that last point as an example - although it's no more important than the first one. The fund only launched in summer 2011, and £6000 invested then would have risen by 68% to end of Feb 2017, which is greater than £10000 today. July 2011 was not the trough of a great recession or market crash. It was an OK time, couple of years after a rapid recovery from the bottom of the credit crunch and markets, emerging markets especially were doing well.
In the time since then there has been dividend income earned and bond interest received. That stuff is "one way". But as capital values can drop to much lower than they were in 2011 (as evidenced by the 2009 levels), it's far from impossible for a fund like VLS60 to give back its gains and go from £10000 back to £6-7000.0 -
bowlhead99 wrote: »So if ,VLS60 is not right for you and you only want one fund, then sell it and buy the one fund that's right for you. It might be VLS40. It might be L&G Multi Index 5. It might be something you read about somewhere other than this forum.
Your ideal holding is unlikely to be some customised combo of VLS60 and VLS20 which needs periodic attention to make sure it mathematically adds up to the ratio which you could have got off the shelf by selling up and buying VLS40. If you know how to buy the fund you have already, you can probably figure out how to sell it and buy a different one.
Personally I wouldn't want VLS40, as I really wouldn't want to trust 60% of my performance to a pile of bond indexes. However if you were to ask me what I have instead, it wouldn't be suitable either, because I'm looking at more like 70% equities anyway, and using a whole bunch of products that aren't suitable for less-experienced investors
This is good advice and having been there myself and still suffer from though I've learnt not to act on it, you seem to be jumping on whatever the last piece of advice given as 'yes I'll do that', investing anywhere just on the say so of a forum member is not the way to go. Use the info these guys give you and work out your risk profile and then do your own research.
My view is I use cash as my counterbalance (I have about 20k in each) and have invested 100%, in equities vls 100 apart form a few thousand of shares in shell and my own employer because of the tax perks' because my view of bonds is they aren't performing the way they used to . I totally see the argument that in a crash they may not fall as much but I'd rather have the ready cash! But even if you pay an ifa (which I see no issue with doing if I felt I needed more complicated advice) people still need to take responsibility for themselves as well. My investment money is my risky money and im OK if I lose the lot as my pension is my main long term investment and I am using the isa e to build a decent sum so I can retire early if I want. But I've come to that conclusion over the best part of 3 years of trial and error and mixing active and passive funds with individual shares etc which in hindsight was way too risky and costly for the amount of money I had to play with. But I could be totally wrong
I'll reconsider when I've got 75k to 100k saved and may well take advice at that point as between that and my pension I will have a decent sum and won't assume that the 'long toothed ifas', may not actually be able to tell me something I hadn't considered. But I still take full responsibility for my decisions . 0
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