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  • FIRST POST
    • Murmansk
    • By Murmansk 7th Oct 17, 9:14 PM
    • 51Posts
    • 14Thanks
    Murmansk
    Why doesn't everyone just buy Vanguard LifeStrategy?
    • #1
    • 7th Oct 17, 9:14 PM
    Why doesn't everyone just buy Vanguard LifeStrategy? 7th Oct 17 at 9:14 PM
    I'm fairly new to this investing thing and have a fair amount of cash invested in Vanguard LifeStrategy funds. In the three weeks or so that I have had them they seem to have gone up nearly 2%.

    I've been reading a lot about investing both online and in the books that I have seen frequently recommended.

    I've concluded that "passive investing" is the way to go and all the research seems to point to the fact that you might as well just use tracking funds and find a ones with low charges - hence Vanguard for me.

    I've come to the rather cynical conclusion that financial advisers might be a breed who make their money from people who have lots of money but haven't the time or inclination to do a bit of research - and people who haven't worked out that you don't need to worry about all the complexity.

    It seems to me that there is something of an "open secret" about Vanguard LifeStrategy in that they are great but the industry doesn't want everyone to know this because they'd all be out of a job!

    I'm wondering what people on here think of this?
Page 1
    • EdGasketTheSecond
    • By EdGasketTheSecond 7th Oct 17, 9:22 PM
    • 334 Posts
    • 185 Thanks
    EdGasketTheSecond
    • #2
    • 7th Oct 17, 9:22 PM
    • #2
    • 7th Oct 17, 9:22 PM
    Because I don't want any exposure to bonds right now!
    • TrustyOven
    • By TrustyOven 7th Oct 17, 9:24 PM
    • 675 Posts
    • 718 Thanks
    TrustyOven
    • #3
    • 7th Oct 17, 9:24 PM
    • #3
    • 7th Oct 17, 9:24 PM
    I'm fairly new to this investing thing and have a fair amount of cash invested in Vanguard LifeStrategy funds. In the three weeks or so that I have had them they seem to have gone up nearly 2%.
    Originally posted by Murmansk
    Beware that that is a very short timescale and depending on the fund chosen, the fund pricer per unit could fluctuate +- 2 or more %.

    Eg. the Vanguard LifeStrategy fund I have went -3 to -4%.

    So don't be duped into thinking that they will always give you 2% return.
    Goals
    Save £12k in 2017 #016 (£4212.06 / £10k) (42.12%)
    Save £12k in 2016 #041 (£4558.28 / £6k) (75.97%)
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    • jimjames
    • By jimjames 7th Oct 17, 9:28 PM
    • 12,239 Posts
    • 10,776 Thanks
    jimjames
    • #4
    • 7th Oct 17, 9:28 PM
    • #4
    • 7th Oct 17, 9:28 PM
    It's fine to go with Lifestrategy if you have the time to research to know which fund to buy and have assessed your risk tolerance to know what equity level suits it.

    It's fine if you know the best product to buy that fund in and is most suitable to your personal tax situation.

    It's fine if you can monitor developments and changes in the market that may affect your investment or wrapper.

    It's fine if you have a small amount of cash to invest and won't hit the ISA or pension thresholds.

    For some people one or more of these doesn't match their situation so they may need assistance.

    I'm fairly new to this investing thing and have a fair amount of cash invested in Vanguard LifeStrategy funds. In the three weeks or so that I have had them they seem to have gone up nearly 2%.
    Originally posted by Murmansk
    Bear in mind that increases in a short timescale can't be extrapolated and could just as easily go the other way. How would you feel if it had dropped 40%?
    Remember the saying: if it looks too good to be true it almost certainly is.
    • jimjames
    • By jimjames 7th Oct 17, 9:30 PM
    • 12,239 Posts
    • 10,776 Thanks
    jimjames
    • #5
    • 7th Oct 17, 9:30 PM
    • #5
    • 7th Oct 17, 9:30 PM
    Because I don't want any exposure to bonds right now!
    Originally posted by EdGasketTheSecond
    You don't need to? Use the LS100 fund
    Remember the saying: if it looks too good to be true it almost certainly is.
    • A_T
    • By A_T 7th Oct 17, 9:37 PM
    • 237 Posts
    • 121 Thanks
    A_T
    • #6
    • 7th Oct 17, 9:37 PM
    • #6
    • 7th Oct 17, 9:37 PM
    Lifestrategy is too biased to the lacklustre FTSE All Share Index
    • ColdIron
    • By ColdIron 7th Oct 17, 9:54 PM
    • 3,671 Posts
    • 4,418 Thanks
    ColdIron
    • #7
    • 7th Oct 17, 9:54 PM
    • #7
    • 7th Oct 17, 9:54 PM
    It would be a poor choice if you want a steady reliable income
    • BLB53
    • By BLB53 7th Oct 17, 10:32 PM
    • 1,174 Posts
    • 962 Thanks
    BLB53
    • #8
    • 7th Oct 17, 10:32 PM
    • #8
    • 7th Oct 17, 10:32 PM
    For a good all round low cost option they are hard to beat. I have held VLS 60 for the past 3 years and happy with returns so far.

    There will always be those who want to do better than average but I think over time, they may well underperform the equivalent VLS option.

    A big thumbs up from me.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • aroominyork
    • By aroominyork 7th Oct 17, 10:36 PM
    • 300 Posts
    • 72 Thanks
    aroominyork
    • #9
    • 7th Oct 17, 10:36 PM
    • #9
    • 7th Oct 17, 10:36 PM
    It would be a poor choice if you want a steady reliable income
    Originally posted by ColdIron
    Interesting point. What is the equivalent of VLS for people who need more income than they yield? And if there isn't a natural one, is the answer to stick with VLS and sell a few each month to provide extra income?
    • Audaxer
    • By Audaxer 7th Oct 17, 10:45 PM
    • 655 Posts
    • 295 Thanks
    Audaxer
    Interesting point. What is the equivalent of VLS for people who need more income than they yield? And if there isn't a natural one, is the answer to stick with VLS and sell a few each month to provide extra income?
    Originally posted by aroominyork
    The answer would be stick with VLS and sell a small percentage each year. In years when there is a crash (hopefully not too many) and you don't want to sell at a loss, take the equivalent percentage out of a cash emergency fund.
    • ColdIron
    • By ColdIron 7th Oct 17, 10:50 PM
    • 3,671 Posts
    • 4,418 Thanks
    ColdIron
    Interesting point. What is the equivalent of VLS for people who need more income than they yield? And if there isn't a natural one, is the answer to stick with VLS and sell a few each month to provide extra income?
    Originally posted by aroominyork
    There isn't one really, you could look at VHYL but I wouldn't want to bet the bulk of my entire retirement income on a single fund. If it's just for extra income or treats like holidays or a new kitchen then maybe VLS would work for you. Horses for courses
    • ruperts
    • By ruperts 7th Oct 17, 10:51 PM
    • 677 Posts
    • 1,116 Thanks
    ruperts
    If this type of thread isn’t a sign of an imminent crash then I don’t know what is.
    • Audaxer
    • By Audaxer 7th Oct 17, 10:52 PM
    • 655 Posts
    • 295 Thanks
    Audaxer
    I'm fairly new to this investing thing and have a fair amount of cash invested in Vanguard LifeStrategy funds. In the three weeks or so that I have had them they seem to have gone up nearly 2%.
    Originally posted by Murmansk
    Don't get too carried away. In the 6 months or so that I have been invested in VLS they have only gone up about 2% in total.
    • colsten
    • By colsten 7th Oct 17, 11:01 PM
    • 8,816 Posts
    • 7,517 Thanks
    colsten
    Don't get too carried away. In the 6 months or so that I have been invested in VLS they have only gone up about 2% in total.
    Originally posted by Audaxer
    Different VLS options almost certainly perform differently as the portfolio mix is different. I agree, though - performance over 2 months is not indicative of future performance - in fact, there is no reliable prediction of future performance with any investment.
    • talexuser
    • By talexuser 7th Oct 17, 11:41 PM
    • 2,304 Posts
    • 1,792 Thanks
    talexuser
    I do worry about being happy that your fund has gone up 2% in a couple of months. My portfolio can do that either up or down in a day. It's easy to read in a thread what if it went down 40% but you should really think hard what if that really happened and you lost £4000 overnight from your 10 grands worth of funds. Could you absolutely wait say 2 years or more until it was back to 10 grand again without panicking? If not you are beyond your risk profile. There are always predictions of crashes around the corner, but areas do look overvalued and can we live with 0.5% base rates for ever?
    • dunstonh
    • By dunstonh 7th Oct 17, 11:43 PM
    • 89,919 Posts
    • 56,595 Thanks
    dunstonh
    I've concluded that "passive investing" is the way to go and all the research seems to point to the fact that you might as well just use tracking funds and find a ones with low charges - hence Vanguard for me.
    You mean it was the right way to go for you. However, it doesnt mean its the right way to go for everyone else.
    It seems to me that there is something of an "open secret" about Vanguard LifeStrategy in that they are great but the industry doesn't want everyone to know this because they'd all be out of a job!
    Strange conclusion as Vanguard retail more via advisers than they do directly to the consumer. However, your assumption that Vanguard is best is flawed.

    How do you deal with all the investors (whether or advised or DIY) whose investments perform better than VLS?

    Also, you need to understand that VLS is a managed solution using underlying passives. The weightings are a management decision. You are not truly passive.
    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 an Independent Financial Adviser local to you.
    • enthusiasticsaver
    • By enthusiasticsaver 7th Oct 17, 11:48 PM
    • 4,852 Posts
    • 9,173 Thanks
    enthusiasticsaver
    I have a VLS fund and about 60% of our total portfolios are invested in it but we also have an income portfolio which I prefer to having to sell VLS to subsidise pensions. The VLS is quite heavily biased to U.K. Which some people don't like and many people do argue that some active funds do out perform passives in spite of heavier charges. I can therefore see why it would not be for everyone. Also whilst our VLS60 has done well this year and last year in 2015 it did not do great. I am also convinced that much of the gains this year are due to currency fluctuations rather then growth.

    In spite of all this I like the fund as I don't have the expertise to know how to balance a portfolio or pick funds to give the correct spread so it suits me.
    1 week to go until early retirement. Debt free and mortgage free.

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    • BLB53
    • By BLB53 8th Oct 17, 12:14 AM
    • 1,174 Posts
    • 962 Thanks
    BLB53
    It would be a poor choice if you want a steady reliable income
    Not necessarily. I need income of ~4% p.a. and agreed the natural yield on my VLS 60 is only around 1.5% however the average return for the fund over the past 6 years is ~10% per year.

    The solution for me is to sell 4% of my fund at the same point every year to provide my 'income'. I have a 10% cash buffer to draw on when there may be one or two years when there is a bear market as I would feel uncomfortable selling units which had gone down in value.

    So long as the average return is 4% or above, this can provide my income requirements indefinitely.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • bowlhead99
    • By bowlhead99 8th Oct 17, 1:04 AM
    • 6,999 Posts
    • 12,607 Thanks
    bowlhead99
    It's easy to read in a thread what if it went down 40% but you should really think hard what if that really happened and you lost £4000 overnight from your 10 grands worth of funds. Could you absolutely wait say 2 years or more until it was back to 10 grand again without panicking?
    Originally posted by talexuser
    Say 2 years or more? Probably best to be prepared for 5 years or more.

    Last time there was a major crash (credit crunch / global financial crisis) governments and central banks the world over pulled out all the stops with the lowest interest rates in 400 years and monetary easing everywhere to 'help' the markets correct over the course of a few years. Next time they may not - either because they don't want to or they can't, or they try it and it doesn't work.

    It's not just a case of 'oh it always bounces back in two or three years' just because it did the last couple of times. If you are going to jump into an index and ride it up and down you need to be prepared to ride it down a very long way and wait a very long time for it to reach its all time high again - on a total return basis- for you to make money (or at least not lose money).

    If not you are beyond your risk profile
    I expect there are lots of people who think they are not beyond their risk profile until something bad happens and they realise they were, after all.
    • Glen Clark
    • By Glen Clark 8th Oct 17, 7:30 AM
    • 3,917 Posts
    • 2,920 Thanks
    Glen Clark
    Say 2 years or more? Probably best to be prepared for 5 years or more.

    Last time there was a major crash (credit crunch / global financial crisis) governments and central banks the world over pulled out all the stops with the lowest interest rates in 400 years and monetary easing everywhere to 'help' the markets correct over the course of a few years. Next time they may not - either because they don't want to or they can't, or they try it and it doesn't work.

    It's not just a case of 'oh it always bounces back in two or three years' just because it did the last couple of times. If you are going to jump into an index and ride it up and down you need to be prepared to ride it down a very long way and wait a very long time for it to reach its all time high again - on a total return basis- for you to make money (or at least not lose money).

    I expect there are lots of people who think they are not beyond their risk profile until something bad happens and they realise they were, after all.
    Originally posted by bowlhead99
    I can see all that. But when I think that if I sold out it would be in pounds, instead of thousands of the world's biggest companies which look more solvent than the British Government (full of politicians making promises they can't keep), I decide to leave it where it is
    PS: I also realise Brexit could be cancelled https://www.theguardian.com/politics/2017/oct/07/theresa-may-secret-advice-brexit-eu pound would rise so foreign share prices fall. But I can't see it happening because I suspect the interests of the Tory party will be put before the interests of the country again.
    Last edited by Glen Clark; 08-10-2017 at 7:37 AM. Reason: Added PS
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
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