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  • FIRST POST
    • lucyonline
    • By lucyonline 18th May 15, 11:03 AM
    • 23Posts
    • 3Thanks
    lucyonline
    Nutmeg, Vanguard Lifestrategy or Ready-Made Portfolio?
    • #1
    • 18th May 15, 11:03 AM
    Nutmeg, Vanguard Lifestrategy or Ready-Made Portfolio? 18th May 15 at 11:03 AM
    Hi all

    Complete newbie to investing here and was very much hoping for some of your expert advice.

    I have always been a bit nervous of the stock market but have always used my full Cash ISA allowance. I'm feeling a bit braver now and would like to put this year's ISA allowance of £15,240 into a Fund in a Stocks and Shares ISA. I already have the money in savings so am ready to transfer. Before I do, a few questions:

    1. I am clueless and don't have the time or understanding to research and choose between individual funds. I have been looking at Nutmeg who seem to do all the work for you (great for me) but on the forums people seem to say that you can do better than Nutmeg for a lower fee and better returns. One of the suggestions that comes up a lot is the Vanguard Lifestrategy range (I'd probably go 40 or 60), but that means buying an individual fund rather than a portfolio and I wasn't sure if it's better to diversify. Then there are the Ready-made fund portfolios offered by BestInvest or HL or whoever, which are more expensive than Vanguard but a little cheaper than Nutmeg but not actively managed which I think would mean that every so often I would need to sit down and assess and make decisions about whether or not to move my money which I'm not qualified to do!

    So the question is, for a complete clueless person who wants to pretty much just put the money somewhere and leave it and have it do better than it would in Savings/Cash ISA, what would be the best option?

    2. Once a decision has been made, is it better to then buy the thing in one big go (to maximise the use of the money that is currently sitting in savings) or drip feed to avoid buying when the market is high?

    Thank you so much for your time.
Page 2
    • economic
    • By economic 19th Mar 17, 8:01 PM
    • 1,824 Posts
    • 938 Thanks
    economic
    All classic "I need a new boiler but I don't want to know the details" thinking. From dealing with my mother and sister all my life, I now understand the best thing to do is to find a man who for god knows what reason will dutifully do all the chores and look after the details for you. Even better, marry a rich man who will exploit subcontractors and not pay them, like Donald Trump.

    Either you roll up your sleeves and get involved, and pay attention,



    or you can start with a rock solid company like Equitable Life, and end up with mush, like Equitable Life. Vanguard appears to be the elixir of life, and really hot with everybody, but just remember that's what people thought endowment policies were. You were supposed to pay off your mortgage, and still have a big lump sum when you retire. Look at Volkswagen, rock solid ,or rotten to the core? Toyota is beginning to feel dodgy, so does Samsung.

    You either know what is going on, or somebody you trust knows what is going on, AND KEEP AN EYE ON THINGS.

    With investment, there is no buy it and leave it.
    Originally posted by Pincher

    nicely put. and completely agree. nothing goes up long term. there are always cycles.
    • matt1983
    • By matt1983 19th Mar 17, 8:45 PM
    • 7 Posts
    • 3 Thanks
    matt1983
    Ive been educatinf myself on investing over the last month or so and have set up a stocks and shares ISA via HL. I have the following:

    Legal and General International Index Trust Accumulation

    Vanguard Lifestrategy 20% equity accumulation

    Vanguard lifestrategy 40% equity acc

    Vanguard lifestrategy 60% equity acc

    Vanguard lifestrategy 80% equity acc

    Vanguard lifestrategy 100% equity acc

    My money is more or less spread equally between these 6.

    Some questions i have:

    Are these good choices? Have read so many recommendations for the Vanguards in particular, so seemed like a good idea to spread my money between all 5 risk categories, but . . .

    Does it make sense to do this or is it pointless? Is there something im missing and have made an amateur mistake?

    Any advice would be really welcome as im now considering what to do in April with my next ISA allocation.

    Thanks in advance.
    Originally posted by matt1983
    There isnt any extra charge for having more than one of the vanguards, i wouldnt have done it if there was.

    Thanks for all the responses, has made things a bit clearer to me . . . As i said, i am new to this and things that seem obvious to some might need explaining to those with less experience.

    I do think it will be interesting to see how the funds perform against each other, will make it a bit more exciting rather than just having the one at 60%.

    Any recommendations on other funds i could add to my list?
    • matt1983
    • By matt1983 19th Mar 17, 9:02 PM
    • 7 Posts
    • 3 Thanks
    matt1983
    Must admit im confused as to why its wrong to have the 5 vanguards, im sure ive read people saying they have more than one of them.

    Can anyone explain in simple terms why it is wrong to have all 5 of the vanguards?
    • Richard8
    • By Richard8 19th Mar 17, 9:08 PM
    • 9 Posts
    • 2 Thanks
    Richard8
    It seems many of the first time investors or people considering investing (such as myself) are generally being pointed in the direction of passive index tracking funds, mainly global multi asset trackers. Vanguard's LifeStrategy 60% Equity Fund is the one that seems to pop up the most along with others like Fidelity Moneybuilder, then it appears to be a case of whittling down your options as to which platform to use, whether that be a Stocks and Shares Isa or Investment account.

    I don't think any of us newbies will be rushing down to our local bank to set up a meeting with any advisors any time soon though, we would be better off taking our chances with a robo-advisor.

    On a more serious note though, If someone were to prefer a more hands off approach would anyone advise actually using a robo advisor service such as MoneyFarm or Nutmeg, has anyone had any experiences with the forementioned.
    • jdw2000
    • By jdw2000 19th Mar 17, 9:21 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    Must admit im confused as to why its wrong to have the 5 vanguards, im sure ive read people saying they have more than one of them.

    Can anyone explain in simple terms why it is wrong to have all 5 of the vanguards?
    Originally posted by matt1983
    The Vanguard fund is make up of 2 things: equities and bonds.

    Equities is shares in companies, and these fluctuate on a daily basis. They are volatile. You need a high risk appetite to have lots of these as you can lose money overnight. But you can also make money overnight...

    Bonds are less risky. They are loans to governments and companies and are not as prone to wild overnight swings in valuation. But too high a percentage of bonds in your investment means less potential of gain...

    VLS100 would be all equities. No bonds. So it's very volatile. You have to not mind losing lots of value overnight. You need a high risk appetite for this one.

    VLS80 is 80% equities, 20% bonds. Considered aggressive and risky.

    VLS60 is mid-road. 60% equities, and 40% bonds.

    VLS40% is 40% equities, and 60% bonds and is considered "safer", but less potential of capital gain.

    VLS20 would be for the jittery investor who simply cannot stomach the thought of losing money in the event of a stock market dip. 80% of his/her money is in bonds, and only 20% in equities/stock market.



    So....


    Let's say that I simply cannot decide on which risk setting suits me... I'm either VLS80, or VLS60... so instead I decide to put half my money in VLS60 and half of my money in VLS80. I therefore have technically got VLS70 (even though VLS themselves don;t do a 70/30 split, I have created one for myself). In these circumstances, splitting between VLS products makes sense.



    What you have done, however, is the most complicated VLS60 you could possibly make. You would have achieved exactly the same thing (VLS60) had you either: a) put all your money in VLS60 to begin with, b) Split your money half and half between VLS40 and VLS80, or c) Split your money half and half between VLS20 and VLS100.

    You might as well just have everything in VLS60 for simplicity sake.
    • dunstonh
    • By dunstonh 19th Mar 17, 9:24 PM
    • 89,852 Posts
    • 55,455 Thanks
    dunstonh
    It seems many of the first time investors or people considering investing (such as myself) are generally being pointed in the direction of passive index tracking funds, mainly global multi asset trackers.
    #
    Not seeing that here. Most of the time it is pointing towards multi-asset funds.

    I don't think any of us newbies will be rushing down to our local bank to set up a meeting with any advisors any time soon though, we would be better off taking our chances with a robo-advisor.
    Or going with a multi-asset fund.

    On a more serious note though, If someone were to prefer a more hands off approach would anyone advise actually using a robo advisor service such as MoneyFarm or Nutmeg, has anyone had any experiences with the forementioned.
    Look up their accounts. Scary reading.
    • jdw2000
    • By jdw2000 19th Mar 17, 9:25 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    then it appears to be a case of whittling down your options as to which platform to use, whether that be a Stocks and Shares Isa or Investment account.
    Originally posted by Richard8
    You would always want your money in an ISA (or pension) if you can as it is therefore tax free. If it is in an investment account then you have ti declare your earnings to the tax man. So use your ISA allowance before April if you can.



    However, ISA/investment accounts are simply accounts. They are not platforms. Platforms are companies like HL or Halifax from which you can buy shares/funds/bonds to put into the ISA you have with them.
    • bowlhead99
    • By bowlhead99 19th Mar 17, 10:00 PM
    • 6,739 Posts
    • 12,007 Thanks
    bowlhead99
    Must admit im confused as to why its wrong to have the 5 vanguards, im sure ive read people saying they have more than one of them.

    Can anyone explain in simple terms why it is wrong to have all 5 of the vanguards?
    Originally posted by matt1983
    The funds each hold a very similar portfolio of assets, they just offer a different proportion of global equities (company shares) to bonds (loans to companies and governments).

    As equities will perform very differently to bonds (because equities have the potential for much higher rises and much faster and larger falls), they will each give a different level of performance.

    The idea of Vanguard offering you the different percentage of equity versions is for you to decide what level of equities is right for you. Higher equities is very likely to give the highest return over a period of multiple decades but in the short term anything can happen and it would not be impossible for the "100% equity" version to lose over half its value over the course of a year or two, before recovering, eventually, over the decade that followed.

    So if you didn't want the 'extreme' level of returns from the 100% equities fund, maybe just one notch lower than that extreme level, you could put £1000 into the 80% equities fund. Doing that, you'd get £800 of equities, with a quarter of them in UK listed companies (£200) and three quarters in companies listed overseas (£600) and the remaining £200 in bonds.

    Or you could put £1000 into the 40% equities fund whereby only £400 is going into equities (with the same mix of a quarter in UK equities (£100) and three quarters in international equities(£300) and you get £600 bonds.

    It is up to you, which of these you prefer. If you prefer to get something in between the two positions of 80% equities and 40% equities you could INSTEAD put £1000 in their 60% equities fund and get £600 equities (£150 UK / 450 Intl) and £400 bonds.

    So, if you want that 'middle' level of equities out of the five funds in the product range, you can just buy that 60% equities fund.

    Alternatively if you are a bit mad, and have £3000 to spend, you could buy £1000 of each of the 80%, 60% and 40% funds. By doing that, from the above summary of what is in each of them, you would have:
    £800+600+400 in equities (total £1800)
    split as £200+150+100 UK equities (total £450)
    and £600+450+300 international equities (total £1350).
    And £200 + £400 + 600 in bonds (total £1200).

    But buying three funds to get the average of all three when they are all basically structured the same way, is silly. You could have just bought £3000-worth of the middle fund 60% equity and been left with £1800 equities (450 UK, 1350 overseas) and £1200 bonds.

    If you buy all three of these funds you are making life more complicated for yourself than it needs to be. More holdings to transfer elsewhere if you decide to move platforms. A longer list of things in your account, all trying to achieve the same objective as the one 'middle' option you could have used. And in your case, you are looking to do five, which is even more extreme, and gaining nothing from it really.

    Your problem will be that these funds will all have different levels of performance. Over the long term you would expect the higher equities ones to grow relatively bigger. So instead of having £1000 in the 40 and the 60 and the 80 you might have £1100 in one, £1300 in another, and £1500 in another.

    So now you have relatively more in the high-equities fund and relatively little in the low-equities fund, so this means you are now taking more risks than you were before. When you work the maths through you now have 62% of your overall £3900 in equities, instead of the 60% that you started at, and presuming you do not actually want more than 60% in equities you will need to sell some of the higher fund and buy more of the lower fund. If you have five funds instead of three that's even more funds to do buying and selling with. Whereas if you had just bought the 60% fund and kept it, the fund manager would do all the 'rebalancing' for you every day or week or month for free, maintaining the original allocation that you said you wanted.

    The point of an out of the box multi-asset fund is to save you having to mess around with loads of holdings to pursue your objective. If you are not sure what you want, there is no harm in sitting back to pause before buying, rather than just buying everything that the shop sells and hoping it averages out to whatever you want.

    If you're at the pub and want a shandy, ask the bartender for a glass with beer and lemonade in it, at your preferred ratio. Don't ask for a small beer and a small lemonade and a big glass to pour them both into. And don't ask for five very small shandies all of different strengths and a big glass to pour them into at the same time before you drink them. You are achieving nothing other than overcomplicating your life.
    • bowlhead99
    • By bowlhead99 19th Mar 17, 10:09 PM
    • 6,739 Posts
    • 12,007 Thanks
    bowlhead99
    You might as well just have everything in VLS60 for simplicity sake.
    Originally posted by jdw2000
    As a side note and small ramble from what we both wrote in our posts above in support of just going with the 60 if that's the asset mix you want... if you don't mind doing your own rebalancing and are on a platform that doesn't charge for it or take you out of the market to do so, you should get marginally more tax efficiency by holding half VLS 100 half VLS 20, than holding 60.

    But it is only a small amount and too much of a distraction to worry about, especially for someone who is brand new to investing and not sure if he should get one or three or five multiasset funds from the same range
    • jdw2000
    • By jdw2000 19th Mar 17, 10:29 PM
    • 415 Posts
    • 109 Thanks
    jdw2000
    As a side note and small ramble from what we both wrote in our posts above in support of just going with the 60 if that's the asset mix you want... if you don't mind doing your own rebalancing and are on a platform that doesn't charge for it or take you out of the market to do so, you should get marginally more tax efficiency by holding half VLS 100 half VLS 20, than holding 60.

    But it is only a small amount and too much of a distraction to worry about, especially for someone who is brand new to investing and not sure if he should get one or three or five multiasset funds from the same range
    Originally posted by bowlhead99
    OK, that is good to know. I wasn't aware of that. But yes, such nuances aren't his priority at this point! : )
    • bowlhead99
    • By bowlhead99 19th Mar 17, 11:50 PM
    • 6,739 Posts
    • 12,007 Thanks
    bowlhead99
    OK, that is good to know. I wasn't aware of that. But yes, such nuances aren't his priority at this point! : )
    Originally posted by jdw2000
    Generally when planning how to invest and what structures are suitable for your objectives you should consider tax leakage at the level of the fund vehicle as well as your own personal tax situation, and see what you can usefully minimise even if it is not the overriding objective.

    In some cases it is more important to deploy the money than reading up on how it works. You just need to know the downside risk of how much you might lose how fast, and whether it has a hope in hell of meeting your objectives... and if you are OK with those losses and potential returns and have considered the relative merits of a bunch of other competing options, you're good to go. If you can't afford to buy advice you are probably better getting clear on the basics and then topping up your knowledge as you go, rather than spending an extra few months on research - as long as your over-eagerness to get started doesn't put you in something that risks wiping you out or scaring you off because you didn't understand it.

    Once you have gone further down the road with your investments after initially skipping the reading on the more complex bits, you do owe it to yourself to circle back and look into it in more detail before you get enough assets that the odd 0.1-0.2% of extra return on one of your funds makes a difference. For some, that sort of difference is never going to outweigh the hassle factor of doing something other than the most administratively easy option.
    • AnotherJoe
    • By AnotherJoe 20th Mar 17, 9:27 AM
    • 7,385 Posts
    • 7,918 Thanks
    AnotherJoe
    Must admit im confused as to why its wrong to have the 5 vanguards, im sure ive read people saying they have more than one of them.

    Can anyone explain in simple terms why it is wrong to have all 5 of the vanguards?
    Originally posted by matt1983
    Because its the exact same as having just one of them in the middle, (or at most two), its more complex, involves more hands on work, and doesnt buy you anything in terms of risk avoidance.

    You've probably created (say) a Vanguard 58.5 which over time could become a 50.9 or a 62.3 or whatever and assuming you wanted that exact 58.5 (and if you didnt why buy like this??? ) you'll need to be buying and selling some of them over time to keep to that ?arbitrary? "58.5" ratio. A lot of work for no benefit.

    Also detracts from understanding the overall return you are getting, the "fun" of comparing the different ones performance is illusory as it tells you nothing useful, and doesn't allow you to adjust your funds by adding areas you might think VLS doenst do enough on

    You might for example think that smaller companies, property, far east, biotech, etc are underrepresented or will do better in future so you'd buy some of those in addition rather than spend your time pointlessly tinkering with multiple VLS funds that all effectively do the same thing.
    • ChesterDog
    • By ChesterDog 20th Mar 17, 10:41 AM
    • 783 Posts
    • 1,365 Thanks
    ChesterDog
    There are sweets (equities) and there are biscuits (bonds).

    A confectioner will sell you a bag containing any proportion of the two you desire: 8:2, 6:4, 4:6, or even simply all sweets.

    So if you want your purchase to consist of, say, 60% sweets, you can just buy a large bag that contains 6:4 sweets to biscuits.

    Not much point buying ten smaller bags with biscuits and sweets in all sorts of different proportions, only to find when you get them home and tip them onto a plate that you have done something very simple (bought sweets and biscuits in a 6:4 mix) in a bonkersly complicated way.
    I am one of the "Dogs of the Index".
    • matt1983
    • By matt1983 20th Mar 17, 10:47 AM
    • 7 Posts
    • 3 Thanks
    matt1983
    Jdw200 - thanks for the reply.

    I do understand how the vanguards are structured and the different levels of risk from 20-100.

    But are you sure its so simple as saying that having an equal amount in each of the 5 different levels is exactly the same as having it all in the 60?

    Does anyone understand why im confused by this? I get the differeing amounts of equities and bonds in each and the corresponding levels of risk. I just dont get how having equal amounts in each could work out exactly the same as having all your money in the 60%.
    • matt1983
    • By matt1983 20th Mar 17, 10:50 AM
    • 7 Posts
    • 3 Thanks
    matt1983
    Hmm ok i actually think i might just understand what you are all trying to tell me now, so forget my last post.

    Thanks for all your help guys!
    • ChesterDog
    • By ChesterDog 20th Mar 17, 10:51 AM
    • 783 Posts
    • 1,365 Thanks
    ChesterDog
    Okay...

    You buy a £1 bag of sweets, a £1 bag of biscuits and a £1 bag that is equal parts mixture of sweets and biscuits.

    You take them home, empty them onto your plate and find you have £1.50 worth of sweets and £1.50 worth of biscuits.

    Which is the same result as you would have if you'd bought one £3 bag of 50:50 sweets and biscuits.
    I am one of the "Dogs of the Index".
    • justme111
    • By justme111 20th Mar 17, 10:52 AM
    • 2,820 Posts
    • 2,710 Thanks
    justme111
    See post #15.
    It will not be exactly 60% as time goes by as each one of those 5 components will grow /drop at their own rate but it does not matter from the point of view of understanding the principle. Chester dog's analogy with sweets and biscuits is excellent.
    • ColdIron
    • By ColdIron 20th Mar 17, 10:55 AM
    • 3,454 Posts
    • 4,061 Thanks
    ColdIron
    I see what you're saying ChesterDog, you seem to be saying he would be better served by a single, fixed allocation comestible such as a chocolate Hobnob
    • ChesterDog
    • By ChesterDog 20th Mar 17, 10:57 AM
    • 783 Posts
    • 1,365 Thanks
    ChesterDog
    Chester dog's analogy with sweets and biscuits is excellent.
    Originally posted by justme111
    If all else fails, use a food or sex analogy.

    Fortunately, the food one worked...

    I am one of the "Dogs of the Index".
    • jdw2000
    • By jdw2000 20th Mar 17, 10:58 AM
    • 415 Posts
    • 109 Thanks
    jdw2000
    Jdw200 - thanks for the reply.

    I do understand how the vanguards are structured and the different levels of risk from 20-100.

    But are you sure its so simple as saying that having an equal amount in each of the 5 different levels is exactly the same as having it all in the 60?

    Does anyone understand why im confused by this? I get the differeing amounts of equities and bonds in each and the corresponding levels of risk. I just dont get how having equal amounts in each could work out exactly the same as having all your money in the 60%.
    Originally posted by matt1983
    Yes, spreading your money out among the 5 products is the same as putting it all in VLS60.

    Forget about equities/bonds for a second.... It's just a simple case of working out the mathematical average between those numbers: 20, 40, 60, 80, 100. Clearly 60 is the average number if you have money spread across all 5 products. So why not just use the VLS60 product by itself?!



    The real question you need to ask yourself is this: Is VLS60 the right level of risk for you? That is what you need to think about today.
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