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  • FIRST POST
    • roxy28
    • By roxy28 6th Mar 17, 5:34 PM
    • 598Posts
    • 57Thanks
    roxy28
    VLS 60 buying more now ok?
    • #1
    • 6th Mar 17, 5:34 PM
    VLS 60 buying more now ok? 6th Mar 17 at 5:34 PM
    I want to add to my above fund again before april, should i just bang it in and not worry its buying less as its price rises.
Page 6
    • jdw2000
    • By jdw2000 11th Mar 17, 8:48 AM
    • 415 Posts
    • 109 Thanks
    jdw2000
    Except that you may not need that money in 10/15 years - you are no longer required to buy an annuity with your pension pot, instead you can just take an income, either by switching to income focused funds or by selling a small part every year (or both).
    Originally posted by Eco Miser
    Fair enough about not buying annuities anymore. But principle still stands that you want less risky investments when you approach/reach retirement?
    • masonic
    • By masonic 11th Mar 17, 8:58 AM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    Fair enough about not buying annuities anymore. But principle still stands that you want less risky investments when you approach/reach retirement?
    Originally posted by jdw2000
    You need to ensure that you would be able to cover your spending needs without having to sell shares in the event of a stockmarket crash. There are various ways you could achieve that.
    • Eco Miser
    • By Eco Miser 11th Mar 17, 10:12 AM
    • 2,982 Posts
    • 2,760 Thanks
    Eco Miser
    Fair enough about not buying annuities anymore. But principle still stands that you want less risky investments when you approach/reach retirement?
    Originally posted by jdw2000
    Depends how risky your investments were in the first place. You could still be looking at 30+ years invested. I was six years retired before I made significant changes to my investments.
    Eco Miser
    Saving money for well over half a century
    • badger09
    • By badger09 11th Mar 17, 2:44 PM
    • 5,121 Posts
    • 4,336 Thanks
    badger09

    My Aviva pension has over 2000 different funds. How do you know which ones are unlikely to have 50% downturns?
    Originally posted by davieg11
    WOW! 2000 funds? That's nuts!

    Did Aviva set them up that way or you did?
    Originally posted by Sean473
    davieg11 doesn't mean his pension is actually invested in 2000 different funds, just that he can choose between 2000.
    • TheShape
    • By TheShape 11th Mar 17, 4:35 PM
    • 1,015 Posts
    • 772 Thanks
    TheShape
    How do you know what a huge drop is?

    Check out the dot com crash. The red cross is a 33% drop then it starts going up again - time to buy surely, because it has crashed back down to normal levels.

    Originally posted by jamei305
    What's that a chart of?

    I guess looking at that chart at the date of point x you might take the view that it's just come off a short term peak and not be tempted.

    But if the answer is just to invest when you have the cash, if that is at point x you've made a big mistake. I imagine someone trying to time the market might have waited until early 2001 which looks more like normal levels. Admittedly still not a great decision but far better than at point x.
    • masonic
    • By masonic 11th Mar 17, 4:56 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    I guess looking at that chart at the date of point x you might take the view that it's just come off a short term peak and not be tempted.
    Originally posted by TheShape
    It's easy to see that when you have the benefit of the rest of the chart. You aren't afforded that luxury when you need to make an investment decision. There are plenty of instances where a fall that looked like that was the low point. It's impossible to predict with any accuracy what will happen next, whatever the chart of past performance looks like.

    But if the answer is just to invest when you have the cash, if that is at point x you've made a big mistake. I imagine someone trying to time the market might have waited until early 2001 which looks more like normal levels. Admittedly still not a great decision but far better than at point x.
    I wouldn't consider point x to be such a bad point to make an investment. It's better than any time up to ~9 months prior or ~3 months after. If I had been put off adding to my investments during late 1999 and early 2000 and had managed to buy in at point x I'd be feeling rather pleased. Of course, I'd be adding money over the next 5 years as well.
    • flopsy1973
    • By flopsy1973 10th Apr 17, 8:31 PM
    • 158 Posts
    • 11 Thanks
    flopsy1973
    Have read this with interest so given that we will get at least a 30% fall in value what other alternatives are there to Vanguard for a more stable fund in the event of a downturn
    • masonic
    • By masonic 10th Apr 17, 8:36 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    Have read this with interest so given that we will get at least a 30% fall in value what other alternatives are there to Vanguard for a more stable fund in the event of a downturn
    Originally posted by flopsy1973
    Just pick a version of the Vanguard fund with less in equities... 40 or 20. But, you'll have to accept lower returns over the long term.
    • dunstonh
    • By dunstonh 10th Apr 17, 8:41 PM
    • 89,463 Posts
    • 54,931 Thanks
    dunstonh
    Have read this with interest so given that we will get at least a 30% fall in value what other alternatives are there to Vanguard for a more stable fund in the event of a downturn
    Originally posted by flopsy1973
    How much downside are you willing to accept?
    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.
    • Fatbritabroad
    • By Fatbritabroad 10th Apr 17, 9:03 PM
    • 170 Posts
    • 73 Thanks
    Fatbritabroad
    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.
    Originally posted by dunstonh
    Quite right we all know In our heads that stock go up and down but it's very different seeing it. The difference is your clients get to try and blame you for 'losing their money'. Like an overweight person having one pt session a week and eating chips every day blaming the pt for 'not losing weight'. I think this very often comes from a fundamental misunderstanding of what good financial advisers do but there you go.
    • Audaxer
    • By Audaxer 10th Apr 17, 9:03 PM
    • 404 Posts
    • 166 Thanks
    Audaxer
    Have read this with interest so given that we will get at least a 30% fall in value what other alternatives are there to Vanguard for a more stable fund in the event of a downturn
    Originally posted by flopsy1973
    If there was a 50% fall in equities, that would be a 30% fall in a VLS60, but would only be a 20% fall in a VLS40.
    • masonic
    • By masonic 10th Apr 17, 9:05 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    If there was a 50% fall in equities, that would be a 30% fall in a VLS60, but would only be a 20% fall in a VLS40.
    Originally posted by Audaxer
    That rather depends what happens to bonds. You can't assume they'd be unaffected by whatever caused a 50% fall in equities.
    • Audaxer
    • By Audaxer 10th Apr 17, 9:15 PM
    • 404 Posts
    • 166 Thanks
    Audaxer
    That rather depends what happens to bonds. You can't assume they'd be unaffected by whatever caused a 50% fall in equities.
    Originally posted by masonic
    That's true, but I was just assuming an example of a sudden drop in equities with bonds staying stable.
    • bowlhead99
    • By bowlhead99 10th Apr 17, 10:36 PM
    • 6,690 Posts
    • 11,884 Thanks
    bowlhead99
    That's true, but I was just assuming an example of a sudden drop in equities with bonds staying stable.
    Originally posted by Audaxer
    Right, but somewhere 30 or so posts up the thread I was pointing out that bonds have been going up significantly with equities going up even more (especially in sterling terms). And that therefore it was perfectly possible for bonds to go in the same direction at the same time as equities.

    If interest rates rise significantly, that's a negative for equity markets because access to cheap credit is lost (for both businesses borrowing to expand, and for prospective customers to be able to afford to maintain or increase business and consumer spending) and there is reduced demand from investors to take risk to get an income. Similarly it is a negative for all bonds currently in existence because the yield they offer can only match the new ones being issued with equivalent risk, by reducing the price of what people are currently paying for bonds. So it's quite easy to imagine a scenario where equities drop significantly and bond indices fall too.

    So, there's no point only mapping out for yourself a scenario where equities go down and bonds stay static. When equities doubled, bonds didn't stay static or only deliver a total return equal to the 2-3% a year they were yielding. They went up by more than that, due to market conditions - despite equities also rising substantially in that time period. The market conditions can change.
    • bigadaj
    • By bigadaj 10th Apr 17, 10:42 PM
    • 9,923 Posts
    • 6,338 Thanks
    bigadaj
    That's true, but I was just assuming an example of a sudden drop in equities with bonds staying stable.
    Originally posted by Audaxer
    Yes but it's an assumption based on historic data and at no point in history have we had near zero or even negative interest rates and huge amounts of quantitative easing.

    Bonds and funds have risen dramatically over the last few years and what goes up certainly can if not must come down.

    This is the problem with teh classic problem of what those with low risk tolerance do, classically the answer would be to go into bonds rather than equities but I personally think there's more risk in bonds than shares, and certainly less upside as well.
    • Type 45
    • By Type 45 10th Apr 17, 10:44 PM
    • 27 Posts
    • 3 Thanks
    Type 45
    @bowlhead

    If UK interest rates go up, how much will that affect VLS60 (which this thread pertains to)? UK interest rates will presumably only have a limited impact on the equities/bonds within a VLS product.

    Recently, US interest rates went up. And they are forecast to go up again soon. That didn't seem to have a major impact on VLS's value (that I can remember)?
    • Fatbritabroad
    • By Fatbritabroad 10th Apr 17, 10:52 PM
    • 170 Posts
    • 73 Thanks
    Fatbritabroad
    @bowlhead

    If UK interest rates go up, how much will that affect VLS60 (which this thread pertains to)? UK interest rates will presumably only have a limited impact on the equities/bonds within a VLS product.

    Recently, US interest rates went up. And they are forecast to go up again soon. That didn't seem to have a major impact on VLS's value (that I can remember)?
    Originally posted by Type 45
    While you're at it can you let me know this Saturdays winning lottery numbers
    • Type 45
    • By Type 45 10th Apr 17, 11:10 PM
    • 27 Posts
    • 3 Thanks
    Type 45
    While you're at it can you let me know this Saturdays winning lottery numbers
    Originally posted by Fatbritabroad
    Just pointing out that the UK element of the VLS is only 20% or so. It should not be the case that a BoE hike in interest rates will spell doom for VLS...
    • bowlhead99
    • By bowlhead99 11th Apr 17, 6:42 AM
    • 6,690 Posts
    • 11,884 Thanks
    bowlhead99
    Just pointing out that the UK element of the VLS is only 20% or so. It should not be the case that a BoE hike in interest rates will spell doom for VLS...
    Originally posted by Type 45
    @bowlhead
    If UK interest rates go up, how much will that affect VLS60 (which this thread pertains to)? UK interest rates will presumably only have a limited impact on the equities/bonds within a VLS product.
    Originally posted by Type 45
    1) Around a third of the bonds are UK government or corporate bonds. An increase in UK interest rates would, other things being equal, directly damage the value of those bonds.

    2) Three quarters of the equities are listed in foreign countries and therefore implicitly valued in a currency other than sterling. Of the remaining quarter of the equities which are of companies listed in the UK, probably 60%+ of their assets, revenues and profits are held or earned in a currency other than sterling because the VLS range uses the FTSE UK cap-weighted index to select its UK listed stocks which is heavily skewed to multinationals in certain industries. So you could perhaps say that 90% of the valuation of VLS's equities are non- sterling.

    So, if UK interest rates rise, providing a relative boost to the strength of sterling over other world currencies, that is a negative for the open market valuation (in pounds sterling terms) of those internationally-held assets.

    3) A UK rate rise is negative for the value of UK equities in the equity markets for reasons noted in the earlier posts.

    4) Markets are global. Nothing happens in a vacuum. We were doing QE and reducing interest rates at the same time as US was doing the same, and Europe followed suit along with Japan. At present both the Eurozone and Japan have negative interest rates, along with non-Eurozone Europe-region countries such as Switzerland and Sweden, while the UK rate is on the floor and the US rate is not much higher but is finally signalling that it will go up. So, clearly the risk is not just the negative outcomes in items 1), 2), 3) above, linked to 'only' the UK interest rates going up on their own.

    So, a significant holder of bonds and global equities such as VLS 60 could get a worse result if all the interest rates around the major markets rose at the same time than if just UK rates rise. So don't make the mistake of thinking your risk is just what the BoE does.

    And in such a scenario the fact that some of the VLS global bond holdings are hedged to sterling does nothing much to save the value of your bonds because there is no major sterling strengthening and the hedge proves to be an unnecessary cost - as global bond markets tumble on global increased interest rates, together with global equities, without currency being to blame.

    Recently, US interest rates went up. And they are forecast to go up again soon. That didn't seem to have a major impact on VLS's value (that I can remember)?
    Originally posted by Type 45
    The market knows that it doesn't know everything. It does have some consensus views of what might happen because there are trillions of pounds and dollars and Euros and Yen and RMB etc placing bets every day.

    The stuff that's "priced in" is the stuff that's either viewed by an average number of people as 'most likely to happen', or viewed as 'perhaps likely to happen' by a larger number of people. If people are expecting a tick up in US interest rates and have a view on how much and when (another couple of them this year perhaps), then the market will not shock and shudder when it eventually happens, as long as the magnitude and timing is no harsher than already signalled - because it's already partially positioned for the outcome. So, as the US rate ticked up recently, people weren't really surprised, and it was seen as a vote of confidence in the US/world economy by the Fed, so no major crash.

    Still, the fact that pre-positioning exists doesn't save you from losing money; because you may easily lose money as the market moves to reflect its next expected position rather than on the day itself when the event actually happens. And you can certainly lose money as the market moves to reflect a position that *wasn't* averagely expected by a majority, or wasn't most expected by an average number of people - but was instead unexpected by the majority of the money that was at work.
    Last edited by bowlhead99; 11-04-2017 at 6:50 AM.
    • masonic
    • By masonic 11th Apr 17, 6:44 AM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    If UK interest rates go up, how much will that affect VLS60 (which this thread pertains to)? UK interest rates will presumably only have a limited impact on the equities/bonds within a VLS product.

    Recently, US interest rates went up. And they are forecast to go up again soon. That didn't seem to have a major impact on VLS's value (that I can remember)?
    Originally posted by Type 45
    Vanguard has published an opinion piece tackling this issue:
    https://www.vanguard.co.uk/documents/adv/literature/bond-investing-in-a-rising-rate-environment-tlor.pdf

    A gentle rise in rates is unlikely to do much more than stunt growth. However, the effect if there were some shock to the economy, or interest rates had to be raised more aggressively to head of inflation, could be much more dramatic.
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