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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 3
    • Shashy
    • By Shashy 20th Mar 17, 10:59 AM
    • 34 Posts
    • 28 Thanks
    Shashy
    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
    It's because each of the Lifestrategy funds invests in the same underlying funds, just in different proportions.

    Let me have a go at expanding on the sweets vs biscuits analogy, where sweets are equities and biscuits are bonds:

    VLS20 = 2 sweets and 8 biscuits
    VLS40 = 4 sweets and 6 biscuits
    VLS60 = 6 sweets and 4 biscuits
    VLS80 = 8 sweets and 2 biscuits
    VLS100 = 10 sweets

    So your allocation has given you 30 sweets and 20 biscuits. Or to put it another way, your asset allocation between sweets and biscuits is exactly 60% sweets to 40% biscuits.

    Lets turn it back in to equities and bonds. You have, in a very complicated way, invested in a mix of Lifestrategy funds which has given you EXACTLY the same allocation between equities and bonds that you would have had you simply invested it all in the Lifestrategy 60.

    Does that help?
    • jdw2000
    • By jdw2000 20th Mar 17, 11:00 AM
    • 415 Posts
    • 108 Thanks
    jdw2000
    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.
    Originally posted by justme111
    Jeez, let's not complicate this at this stage with how growth/loss might affect the percentages! (Unless of course you have a helpful biscuit analogy!)
    • ChesterDog
    • By ChesterDog 20th Mar 17, 11:07 AM
    • 741 Posts
    • 1,273 Thanks
    ChesterDog
    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.
    Originally posted by matt1983
    Vanguard have missed a trick here...

    How about the Vanguard multi-Vanguard Vanguard-multi-asset-index-tracking Vanguard fund. With Lifestyling.
    I am one of the "Dogs of the Index".
    • Shashy
    • By Shashy 20th Mar 17, 11:08 AM
    • 34 Posts
    • 28 Thanks
    Shashy
    Vanguard have missed a trick here...

    How about the Vanguard multi-Vanguard Vanguard-multi-asset-index-tracking Vanguard fund. With Lifestyling.
    Originally posted by ChesterDog
    Take my money
    • coyrls
    • By coyrls 20th Mar 17, 11:09 AM
    • 804 Posts
    • 802 Thanks
    coyrls
    Jeez, let's not complicate this at this stage with how growth/loss might affect the percentages! (Unless of course you have a helpful biscuit analogy!)
    Originally posted by jdw2000
    With growth and loss, we might have to move from a biscuit analogy to a sex analogy.
    • ChesterDog
    • By ChesterDog 20th Mar 17, 11:09 AM
    • 741 Posts
    • 1,273 Thanks
    ChesterDog
    Take my money
    Originally posted by Shashy
    Thank you.

    In exchange, here is a chocolate hobnob with the chocolate sucked out.
    I am one of the "Dogs of the Index".
    • justme111
    • By justme111 20th Mar 17, 11:10 AM
    • 2,703 Posts
    • 2,605 Thanks
    justme111
    If all else fails, use a food or sex analogy.

    Fortunately, the food one worked...

    Originally posted by ChesterDog
    Don't get your hopes up, it's not the end yet
    • Shashy
    • By Shashy 20th Mar 17, 11:11 AM
    • 34 Posts
    • 28 Thanks
    Shashy
    Thank you.

    In exchange, here is a chocolate hobnob with the chocolate sucked out.
    Originally posted by ChesterDog
    Surely the correct phrasing is "with the chocolate sucked off" ?
    • ColdIron
    • By ColdIron 20th Mar 17, 11:17 AM
    • 3,202 Posts
    • 3,659 Thanks
    ColdIron
    Surely the correct phrasing is "with the chocolate sucked off" ?
    Originally posted by Shashy
    Careful now, let's stick to the food analogy
    • justme111
    • By justme111 20th Mar 17, 11:34 AM
    • 2,703 Posts
    • 2,605 Thanks
    justme111
    Phrasing been distracting , now looking at usernames makes me think of analogies
    • matt1983
    • By matt1983 20th Mar 17, 12:36 PM
    • 7 Posts
    • 3 Thanks
    matt1983
    My confusion was in not realising that the 5 vangaurds funds will be holding the same equities and bonds etc, so yes that means that i should have just put it all in the 60.

    But as ive said, i didnt have/wont have to pay anything for having the 5 rather than just the one.

    Can anyone see any other real issues with keeping my 5 vanguards or do you recommend closing 4 and putting all my money in the 60, which would be my chosen risk level.

    Thanks again.
    • Linton
    • By Linton 20th Mar 17, 12:49 PM
    • 7,976 Posts
    • 7,787 Thanks
    Linton
    One issue with keeping excess funds is that charges are normally made as a fixed amount per transaction. The more funds you hold the more transactions you need to make to keep them balanced. For example over a few years your VLS100 will probably increase in value significantly more than your lower % equity funds. To keep the whole portfolio at the VLS60 level you would need to sell some VLS100 and VLS80 and put the money into those lower % funds.
    • jdw2000
    • By jdw2000 20th Mar 17, 12:49 PM
    • 415 Posts
    • 108 Thanks
    jdw2000
    My confusion was in not realising that the 5 vangaurds funds will be holding the same equities and bonds etc, so yes that means that i should have just put it all in the 60.

    But as ive said, i didnt have/wont have to pay anything for having the 5 rather than just the one.

    Can anyone see any other real issues with keeping my 5 vanguards or do you recommend closing 4 and putting all my money in the 60, which would be my chosen risk level.

    Thanks again.
    Originally posted by matt1983
    No, there's no reason not to keep all 5 at this stage. As and when you change provider, though, you will not want to transfer all 5 of them as this may incur 5 charges. You will therefore sell them and then buy what you want to buy with your new provider.


    Another question you need to ask yourself at this point is whether they are income or accumulators. Unless they are in a SIPP or ISA you are better off having the "income" versions. I am pointing this out now because if you are about to sell/merge them then this is a good time to get the right type (income or accumulator). I wanted to change my own from accumulator to income and it involves selling and re-buying.

    In an ISA/SIPP you do not have to declare earnings on your investments to the tax man. Dividends to you can therefore be paid into your investment as 'accumulations'. However, if your investments are not in an ISA or SIPP, and instead they are in a normal trading account, then you will have to know how much income they have generated. The easiest way to do this is to have the 'income' versions of the VLS products so that you can clearly see how much income has been generated for the purposes of showing the tax man. (You can pay this income back into your investment manually if you wish).
    • Fatbritabroad
    • By Fatbritabroad 20th Mar 17, 12:56 PM
    • 152 Posts
    • 67 Thanks
    Fatbritabroad
    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?
    Originally posted by matt1983
    The only thing you could add is those areas life strategy don't cover. Small companies and (I think correct me if in wrong) commodities?
    • ColdIron
    • By ColdIron 20th Mar 17, 1:53 PM
    • 3,202 Posts
    • 3,659 Thanks
    ColdIron
    Can anyone see any other real issues with keeping my 5 vanguards or do you recommend closing 4 and putting all my money in the 60, which would be my chosen risk level.
    Originally posted by matt1983
    I've just bought a shirt but I decided to get a bit of a small one, a bit of a medium one and a bit of a large one and stitched them all together. It looks a bit odd and one arm is a bit tight but the other one is surprisingly roomy. On average it seems to balance out but my wife refuses to be seen in public with me

    Can anyone see any other real issues with keeping my Frankenstein shirt or do you recommend exchanging the arms for two medium ones and stitching them onto the medium chest, which would be my chosen shirt size

    Don't forget it cost you nothing to buy the five funds and it won't cost you anything to sell them and buy the one you really want
    • AnotherJoe
    • By AnotherJoe 20th Mar 17, 5:04 PM
    • 6,912 Posts
    • 7,356 Thanks
    AnotherJoe
    My confusion was in not realising that the 5 vangaurds funds will be holding the same equities and bonds etc, so yes that means that i should have just put it all in the 60.

    But as ive said, i didnt have/wont have to pay anything for having the 5 rather than just the one.

    Can anyone see any other real issues with keeping my 5 vanguards or do you recommend closing 4 and putting all my money in the 60, which would be my chosen risk level.

    Thanks again.
    Originally posted by matt1983
    Not right now, but if 60 is your chosen risk level, then quite quickly you will move away from that as they grow and fall at different rates. You are most likely away from that "60" level the day after you bought them even if only slightly.

    After a year you could easily be at 50 or 70.

    If you buy 60 then Vanguard automatically balance it for you to keep it at 60.
    • Fatbritabroad
    • By Fatbritabroad 20th Mar 17, 5:16 PM
    • 152 Posts
    • 67 Thanks
    Fatbritabroad
    Yes that's a really good point you've effectively diversified yourself out of rebalancing which was the main reason to buy lifestrategy in the first place
    • OldMusicGuy
    • By OldMusicGuy 20th Mar 17, 5:54 PM
    • 91 Posts
    • 134 Thanks
    OldMusicGuy
    Just to nitpick a bit, splitting your allocations across multiple VLS products isn't quite the same as picking one, because the allocations to sectors and countries varies a bit, so you may end up with a slightly different sector and geographic spread compared to just picking one fund like VLS60. But I suspect you didn't work out what the sector and geographic split would be across all five funds and decide that's better for you than the split of one fund like VLS 60..... ;-)

    So ask yourself why did you think it was a good idea? If it was spreading risk, why did you you pick 5 funds from one provider? Wouldn't be better to at least consider different funds from different providers, maybe focused on different geographies? That way you actually spread the risk a bit wider, whereas picking 5 different VLS funds is pretty much the same as picking one VLS fund from a risk perspective.

    I'm still learning at this game but I've found that reading a lot more about investing styles and retirement planning is helpful in avoiding the "oh those VLS funds look good and everyone seems to recommend them so I'll pick some of them" approach that us newbies can fall into. There are many good resources on this website that can help you learn more about your risk appetite, what you are planning to achieve and how you should invest accordingly.

    Like jdw2000 said, you need to decide what level of risk appetite you have. The fact that you think picking 5 VLS funds is a good idea seems to imply you may not have worked that out yet. Like some of the most recent posters said, as the value of those funds changes your risk profile will actually be different unless you rebalance them.
    Last edited by OldMusicGuy; 20-03-2017 at 6:09 PM.
    • chile_paul
    • By chile_paul 20th Mar 17, 7:00 PM
    • 388 Posts
    • 281 Thanks
    chile_paul
    If all else fails, use a food or sex analogy.

    Fortunately, the food one worked...

    Originally posted by ChesterDog
    I would love to see anybody explain this with a sex analogy.....(and comply with the forum code of course)
    • Gadfium
    • By Gadfium 20th Mar 17, 8:24 PM
    • 611 Posts
    • 1,121 Thanks
    Gadfium
    I would love to see anybody explain this with a sex analogy.....(and comply with the forum code of course)
    Originally posted by chile_paul
    Slow and steady?
    Once you put it in don't be tempted to take it back out or shove it into different pots?
    In it for the long game?

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