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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 4
    • Audaxer
    • By Audaxer 20th Mar 17, 8:27 PM
    • 206 Posts
    • 55 Thanks
    Audaxer
    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.
    Originally posted by AnotherJoe
    While I agree with everyone that the OP should just have the one VLS60, I wouldn't have thought that having all 5 would get out of balance as they are all automatically rebalanced on an ongoing basis to keep their original percentage splits?
    • masonic
    • By masonic 20th Mar 17, 8:35 PM
    • 9,126 Posts
    • 6,271 Thanks
    masonic
    While I agree with everyone that the OP should just have the one VLS60, I wouldn't have thought that having all 5 would get out of balance as they are all automatically rebalanced on an ongoing basis to keep their original percentage splits?
    Originally posted by Audaxer
    Consider the case where you have £1000 in VLS 80 and £1000 in VLS 20. Overall, you start with a 50:50 allocation of equities to bonds.

    Then the value of the equities holdings rapidly doubles in value, while the value of the bonds stay static. You now have £1800 in VLS 80 and £1200 in VLS 20. You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.

    The drift is small, but not nothing.
    • Audaxer
    • By Audaxer 20th Mar 17, 9:05 PM
    • 206 Posts
    • 55 Thanks
    Audaxer
    Consider the case where you have £1000 in VLS 80 and £1000 in VLS 20. Overall, you start with a 50:50 allocation of equities to bonds.

    Then the value of the equities holdings rapidly doubles in value, while the value of the bonds stay static. You now have £1800 in VLS 80 and £1200 in VLS 20. You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.

    The drift is small, but not nothing.
    Originally posted by masonic
    Yes, thinking it through I was wrong as it would get out of balance, but I think in your example the split would actually be bigger at 67% equities and 33% bonds?
    • bowlhead99
    • By bowlhead99 20th Mar 17, 9:24 PM
    • 6,407 Posts
    • 11,337 Thanks
    bowlhead99
    You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.

    The drift is small, but not nothing.
    Originally posted by masonic
    Yes, thinking it through I was wrong as it would get out of balance, but I think in your example the split would actually be bigger at 67% equities and 33% bonds?
    Originally posted by Audaxer
    No.
    In the example there is £1800 in VLS 80. So 80% of that is £1440 of equities and the rest of it is not.

    There is also £1200 in the VLS 20. So 20% of that is £240 of equities and the rest of it is not.

    So altogether you can see there is a total of £1680 of equities, and the rest is not.

    As there is £3000 of total assets (one fund worth £1800 and another worth £1200), you can see that the £1680 of equities would represent 56% of the £3000 total.

    The maths is the same as what I was using back in post #28
    • seacaitch
    • By seacaitch 20th Mar 17, 10:08 PM
    • 63 Posts
    • 119 Thanks
    seacaitch
    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%.
    Originally posted by matt1983
    &

    Can anyone see any other real issues with keeping my 5 vanguards
    Originally posted by matt1983
    Something to consider...

    Many investment newcomers achieve poor results; one of the reasons is that they pursue things that are 'exciting' rather than things that are sensible. Exciting investments often prove more volatile, which can mean they move up quickly but can also mean they move down quickly. All investors, but newcomers in particular, are very good at chasing markets that have already risen a lot and running away from markets that have already fallen a lot. This behaviour ruins many people's returns.

    If you keep hold of all 5 LifeStrategy funds, then come the next major market downturn it may well, as you indicate, prove interesting to observe how they behave differently. But, there' also a possibility that, faced with a large and highly visible drawdown on your LS100 fund (as the most volatile of the 5), you become fearful about it as a result. Fear causes investors to sell things (things that they rightly should be buying). That selling is often rationalised as 'protecting capital' or 'adjusting risk appetite' and so on, but it's usually just an attempt to make the emotional pain induced by the loss-making position go away.

    Sensible investing is principally about avoiding making avoidable mistakes. I think that by retaining 5 separate LS funds instead of simplifying to the single fund you've unnecessarily increased your chances of making this sort of avoidable mistake. You may not think you'd do what I describe above, and you might not do, but why take on a risk you don't need to. As a newbie investor with little or no prior experience you need all the protection from yourself that you can get.
    • Audaxer
    • By Audaxer 20th Mar 17, 10:17 PM
    • 206 Posts
    • 55 Thanks
    Audaxer
    No.
    In the example there is £1800 in VLS 80. So 80% of that is £1440 of equities and the rest of it is not.
    Originally posted by bowlhead99
    Fair enough - when he said the equity value had doubled I took that to mean that the VLS80 now had £1600 equity and still £200 bonds, but I suppose in a situation like that, the automatic rebalance would have meant £160 of these equities would be sold and bonds to that value bought to get back to the 80/20 split?
    • matt1983
    • By matt1983 21st Mar 17, 8:17 AM
    • 7 Posts
    • 3 Thanks
    matt1983
    Can someone confirm that i wont be charged anything by Hargreaves Lansdown if i sell off 4 of my 5 Vanguards and put all the money into the Vanguard 60? From all the advice given on here ive decided i might as well do that, as long as it wont cost me anything in fees.

    Also, would it be a sensible thing for me to just have that Vanguard 60 and to put next years ISA allocation into it? Id probably drip feed my money into it over the year.

    Being new to this i just want to make sure that i am giving myself a decent chance of making some good returns over the long term. If it would make sense to buy another form that perhaps has other assets not in the vanguard had anyone got any recommendations?
    • ColdIron
    • By ColdIron 21st Mar 17, 8:29 AM
    • 3,157 Posts
    • 3,595 Thanks
    ColdIron
    Yes, HL don't charge for buying or selling funds such as the Vanguard ones. There used to be a tiny levy on new purchases but that's now gone. If you want to be out of the market for the least time choose the 'Switch into another fund' option instead of the Sell option. I've never tried it on 4 funds all at once but the worst that can happen is you have to do them one at a time

    If I were in your shoes I'd stick with the VLS60 for the time being until you gain some more experience. It's a fund constructed in such a way that it's fine to use on its own
    • AnotherJoe
    • By AnotherJoe 21st Mar 17, 9:15 AM
    • 6,519 Posts
    • 6,935 Thanks
    AnotherJoe
    Can someone confirm that i wont be charged anything by Hargreaves Lansdown if i sell off 4 of my 5 Vanguards and put all the money into the Vanguard 60? From all the advice given on here ive decided i might as well do that, as long as it wont cost me anything in fees.

    Also, would it be a sensible thing for me to just have that Vanguard 60 and to put next years ISA allocation into it? Id probably drip feed my money into it over the year.

    Being new to this i just want to make sure that i am giving myself a decent chance of making some good returns over the long term. If it would make sense to buy another form that perhaps has other assets not in the vanguard had anyone got any recommendations?
    Originally posted by matt1983
    yep, and as suggested, use the "switch" option its just easier, unless you wanted with some or all of the money to "emphasise" some areas (perhaps only in minor way) that VLS wont be in to much extent. Or you might want to dial back the UK element (VLS is 25%) by bumping up your L&G fund at the same time. (Or you might not want to. But now would be a good time to do it if you are going to.)

    Speaking of tweaks like that, because I'm investing for 15-20 years out, I think that longer term Biotech and Far East will do better than the generality so i have about 5% in those two*. Others do similar with property and smaller companies (because VLS is by its nature large companies)

    Just throwing all these considerations in now whilst you are making this change. Not suggestions, just thoughts.

    * they are also more volatile = risky. So maybe dont fit your risk profile. OTOH 5% wont hurt
    • aajax42
    • By aajax42 21st Mar 17, 2:27 PM
    • 50 Posts
    • 5 Thanks
    aajax42
    The question of "Robo Advisors" appears to be outside of the regular contributors experience and dismissed without discussionhttps://uk.trustpilot.com/review/nutmeg.com I have read a number of articles recently that suggest returns are significantly better than their human counterparts and significantly cheaper.
    • Chickereeeee
    • By Chickereeeee 21st Mar 17, 5:01 PM
    • 392 Posts
    • 236 Thanks
    Chickereeeee
    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
    Just to play devils advocate here: it is often suggested that one has several pots of money, especially when approaching or in retirement, with different investment horizons. Near term cash pot, through to long term high-equity proportion pot.

    OK, six pots may be too many, but would it not be reasonable to use different LS's for these pots? LS 100 for the pot that you plan not to touch for quite some time, LS 20 for fairly near term use pot? In theory, performance would equal LS60, but practically and emotionally, maybe not.

    C
    • masonic
    • By masonic 21st Mar 17, 6:35 PM
    • 9,126 Posts
    • 6,271 Thanks
    masonic
    Just to play devils advocate here: it is often suggested that one has several pots of money, especially when approaching or in retirement, with different investment horizons. Near term cash pot, through to long term high-equity proportion pot.

    OK, six pots may be too many, but would it not be reasonable to use different LS's for these pots? LS 100 for the pot that you plan not to touch for quite some time, LS 20 for fairly near term use pot? In theory, performance would equal LS60, but practically and emotionally, maybe not.

    C
    Originally posted by Chickereeeee
    If you went down that route it would be better not to use a mixed asset fund and instead hold equities and bonds separately, passively rebalancing as you decumulate.
    • bowlhead99
    • By bowlhead99 21st Mar 17, 7:30 PM
    • 6,407 Posts
    • 11,337 Thanks
    bowlhead99
    The question of "Robo Advisors" appears to be outside of the regular contributors experience and dismissed without discussionhttps://uk.trustpilot.com/review/nutmeg.com I have read a number of articles recently that suggest returns are significantly better than their human counterparts and significantly cheaper.
    Originally posted by aajax42
    Well, just to be a little flippant and dismissive:

    - much of the commentary that says they are better than cheaply-managed multi asset funds is written by the promoters of robo advised solutions who are doing self-publicising press releases.

    - returns significantly better than human counterparts is not something demonstrably proven, given many of the services do not have three years operating history let alone five or ten

    - trustpilot reviews are generally not written by financial professionals but by laymen who can say the service was nice but often are not well placed to opine on the reward they got for their risk -especially with short lifespan of the products so far and the fact that we have been in an eight year bull market for most asset classes: "hey, I like this product as I made money and the return was really good" means nothing without a LOT of context.

    Robo advisors do undoubtedly fill a niche, and some will likely emerge with decent spoils after the industry matures and there's some consolidation where some thrive and some get swallowed up. Meanwhile, the forum tends to focus more on the DIY alternatives for people in that niche (at the levels too small for personalised advice).

    After all, it's a money saving site and some of the robos are more expensive than managed multi asset funds at the small end and no cheaper than personalised advice at the very large end. Subject to challenge with unsustainable book-building promotions such as fee-free for first x months or on first £10k or whatever, of course.
    • dunstonh
    • By dunstonh 21st Mar 17, 7:37 PM
    • 88,110 Posts
    • 53,339 Thanks
    dunstonh
    The question of "Robo Advisors" appears to be outside of the regular contributors experience and dismissed without discussionhttps://uk.trustpilot.com/review/nutmeg.com I have read a number of articles recently that suggest returns are significantly better than their human counterparts and significantly cheaper.
    Originally posted by aajax42
    Trustpilot is easily abused and not at all reliable. We have seen plenty of scams with good trustpilot ratings and reviews. Fakers can easily manipulate them.

    One thing we have seen a fair bit on this board is where people looking to invest small amounts for the first time view "quality" very different to mainstream and experienced investors. Those attracted by robo-advice measure quality by facebook likes or things like trustpilot or how visual the app is. Whereas experienced investors look at the investments and the charges.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • seacaitch
    • By seacaitch 21st Mar 17, 8:00 PM
    • 63 Posts
    • 119 Thanks
    seacaitch
    Just to play devils advocate here: it is often suggested that one has several pots of money, especially when approaching or in retirement, with different investment horizons. Near term cash pot, through to long term high-equity proportion pot.

    OK, six pots may be too many, but would it not be reasonable to use different LS's for these pots? LS 100 for the pot that you plan not to touch for quite some time, LS 20 for fairly near term use pot?
    Originally posted by Chickereeeee
    In principle I think that's an entirely reasonable approach; there are others ways of achieving this goal, as masonic points out, but the idea of having separate investment pots earmarked with different investment horizons, and invested accordingly, seems reasonable.

    I do this sort of thing myself; different to the example you use, but aiming to address a similar issue of matching the volatility of the pots to the timeframe over which they're expected to be accessed and drawndown (spent). Non-volatile cash and cash-like for the immediate and short term; volatile equities for the longest term; various things inbetween.

    For someone a very long way from retirement, this wouldn't be sensible, unless some of the invested funds really had a much different (shorter) investment horizon than the rest, and were intended to be spent in the nearer term, and were accessible (eg. non-pension wrapped). I didn't get the impression the OP's goal was earlier access to part of the invested monies, so probably not applicable to them.
    Last edited by seacaitch; 21-03-2017 at 8:10 PM. Reason: deleted para
    • JohnRo
    • By JohnRo 21st Mar 17, 8:13 PM
    • 2,346 Posts
    • 2,078 Thanks
    JohnRo
    Wouldn't something like this alongside a good old fashioned emergency cash pool be a lot less hassle?

    http://monevator.com/vanguard-target-retirement-funds/
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • seacaitch
    • By seacaitch 21st Mar 17, 9:20 PM
    • 63 Posts
    • 119 Thanks
    seacaitch
    Wouldn't something like this alongside a good old fashioned emergency cash pool be a lot less hassle?

    http://monevator.com/vanguard-target-retirement-funds/
    Originally posted by JohnRo
    It depends what problem you're trying to solve (what requirement you're trying to address).

    A single target retirement fund would be useful for targeting a single date after which you were seeking a portfolio 'derisked' to Vanguard's particular 30:70 equity:bond recipe. If that's what you're after then that would seem a good product choice.

    But, if you're not intending to cash-in the fund at the target date then an entire portfolio that's been fully dialed back to 30% equities may not be what you want; after all, the investment horizon for many newly retired people may be several decades. Therefore, for money not earmarked for being spent for another decade or two or three or four, an equity allocation of 30% might seem very low. For example, it wouldn't suit me or mine.

    You might choose to address this issue with a ladder of target retirement funds, each targeting dates 5 years apart (for example), in attempt to derisk separate pots as you intend to call upon them for your spending. Obviously, that's increasing the hassle factor as you attempt to address more complex needs.

    Depending on what problem you're trying to solve, the cat-skinning options are endless!
    • Jon_W
    • By Jon_W 21st Mar 17, 11:09 PM
    • 108 Posts
    • 17 Thanks
    Jon_W
    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
    Do the different Vanguard LS products holdtrack exactly the same indexes in the same proportions, though?

    That is, is 'Index x' 10% of the equities portion (alone) in each of the LifeStrategy funds?
    • JohnRo
    • By JohnRo 22nd Mar 17, 12:02 AM
    • 2,346 Posts
    • 2,078 Thanks
    JohnRo
    The percentage allocations in each Lifestrategy Fund are actively maintained.

    I don't think the internals are entirely set in stone long term as Vanguard might tweak the regional parameters slightly within the fund's headline equity/bond ratio but I'm not certain how or when or if I've imagined that.
    'We can't solve problems by using the same kind of thinking we used when we created them.' ― Albert Einstein
    'Facts do not cease to exist because they are ignored.' ― Aldous Huxley
    • OldMusicGuy
    • By OldMusicGuy 22nd Mar 17, 8:50 AM
    • 80 Posts
    • 119 Thanks
    OldMusicGuy
    Do the different Vanguard LS products holdtrack exactly the same indexes in the same proportions, though?

    That is, is 'Index x' 10% of the equities portion (alone) in each of the LifeStrategy funds?
    Originally posted by Jon_W
    A quick look at the top 10 holdings in VLS 20 and 40 shows that the funds they hold are similar but the allocations are different. This also means they have different geographic splits (but they are mainly US and UK).
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