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  • FIRST POST
    • Murmansk
    • By Murmansk 7th Oct 17, 9:14 PM
    • 45Posts
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    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 2
    • chucknorris
    • By chucknorris 8th Oct 17, 8:23 AM
    • 9,211 Posts
    • 13,832 Thanks
    chucknorris
    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
    Originally posted by ColdIron
    I quite like VHYL, as it is quite diverse, both geographically and in sector, and it obviously pays a decent dividend. I did intend to significantly (I mean just my shares, which are only about 26% of my portfolio) invest in VHYL but I went for the FTSE 100 instead (although that in reality is only about 12.5% of my portfolio). The problem (nice one to have though) is that although I would like to switch to VHYL it is going to take quite a few years to avoid paying CGT, but in the meantime I am getting great dividend income.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

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    • A_T
    • By A_T 8th Oct 17, 8:49 AM
    • 198 Posts
    • 95 Thanks
    A_T
    I quite like VHYL, as it is quite diverse, both geographically and in sector, and it obviously pays a decent dividend. I did intend to significantly (I mean just my shares, which are only about 26% of my portfolio) invest in VHYL but I went for the FTSE 100 instead (although that in reality is only about 12.5% of my portfolio).
    Originally posted by chucknorris
    I try to minimise my exposure to that index due to it's mediocre performance compared to a world index.
    • george4064
    • By george4064 8th Oct 17, 9:13 AM
    • 844 Posts
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    george4064
    I can see the benefits in investing to the Vanguard LifeStrategy funds, however I chose not to. The main reason is that I take a lot of interest in my investments and so I want to have control and oversight of it. I find it interesting and fun, plus it gives me the opportunity to learn. This is something that Vanguard LS either does not offer or is significantly lower (less interesting, not as fun etc).

    I do work in investment management so that probably separates me from many other private investors, but I understand that different peope have different requirements and preferences and hence some prefer the simple Vanguard LS route and others prefer to manage their portfolio themselves. Im very much in the latter.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

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    • ColdIron
    • By ColdIron 8th Oct 17, 9:45 AM
    • 3,454 Posts
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    ColdIron
    I quite like VHYL, as it is quite diverse, both geographically and in sector, and it obviously pays a decent dividend. I did intend to significantly (I mean just my shares, which are only about 26% of my portfolio) invest in VHYL but I went for the FTSE 100 instead (although that in reality is only about 12.5% of my portfolio). The problem (nice one to have though) is that although I would like to switch to VHYL it is going to take quite a few years to avoid paying CGT, but in the meantime I am getting great dividend income.
    Originally posted by chucknorris
    What I like about it, apart from that it's cheap and diverse, is that I think I understand how it works unlike some of its 'smart' competitors, I prefer filters to algorithms. I have a couple of ISAs I'm not currently using for drawdown and I have a tentative plan to convert 3/4 of one of them to VHYL in 3 or 4 years time for a few grand extra income and diversification from the others, but there's no rush so I'll see how I feel about it then
    • captainreckless
    • By captainreckless 8th Oct 17, 9:49 AM
    • 20 Posts
    • 15 Thanks
    captainreckless
    For my modest portfolio, holding it all in VLS 80 would probably be a reasonable choice. However, that isn't what I'm doing. Holding a selection of different funds that invest in different sectors allows me to get a clearer picture of what is going on in the world and understand the impact of events on the investment landscape. Also, I enjoy making up my own alllocations in different areas and thinking about what to buy next month.
    • george4064
    • By george4064 8th Oct 17, 10:09 AM
    • 844 Posts
    • 895 Thanks
    george4064
    To put this question into context and as an analogy, ask yourself this question;

    "Why doesn't everyone just buy package holidays?"

    A lot of the answers to that question will be the same for the Vanguard LS question.
    Last edited by george4064; 08-10-2017 at 10:20 PM.
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
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    • A_T
    • By A_T 8th Oct 17, 10:46 AM
    • 198 Posts
    • 95 Thanks
    A_T
    I use VLS20 as my "go to" bond vehicle. It has a hugely diverse array of UK and global corporate and government bonds. Then I just choose my equity indexes to go alongside it.
    • Audaxer
    • By Audaxer 8th Oct 17, 11:24 AM
    • 481 Posts
    • 204 Thanks
    Audaxer
    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.
    Originally posted by BLB53
    I think to provide an income of 4% indefinitely you need your fund/portfolio to grow at more than 4% per annum, so it keeps up with inflation. Maybe if you need to take out 4% per annum it would be best to grow at an average of say 6% per annum?

    I have started an income portfolio which should pay dividends of just under 4% per annum, but long term there should be some capital growth as well.

    I've also got a couple of VLS funds (currently VLS40 and 60) which may or may not be able to provide a similar level of total return. It will be interesting to compare against the income portfolio over time.
    Last edited by Audaxer; 08-10-2017 at 11:26 AM.
    • dunstonh
    • By dunstonh 8th Oct 17, 11:34 AM
    • 89,852 Posts
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    dunstonh
    One of VLS weaknesses is their spread of bonds covering the bond allocation. I would be more inclined to use L&GMI at the lower end of the risk scale than VLS.
    • aroominyork
    • By aroominyork 8th Oct 17, 11:40 AM
    • 229 Posts
    • 45 Thanks
    aroominyork
    One of VLS weaknesses is their spread of bonds covering the bond allocation. I would be more inclined to use L&GMI at the lower end of the risk scale than VLS.
    Originally posted by dunstonh
    Can you expand on this please, dunstonh? What is the VLS weakness about?
    • dunstonh
    • By dunstonh 8th Oct 17, 12:31 PM
    • 89,852 Posts
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    dunstonh
    Can you expand on this please, dunstonh? What is the VLS weakness about?
    Originally posted by aroominyork
    Look at the spread at the fixed interest between the two. Then look at the areas of fixed interest that are doing well and badly (not down to picking but just where we are at this time in the cycle). VLS doesnt invest in the spread required to pick up some of those areas beyond their general catchall funds. L&G will use more focused funds to increase weightings in the various areas.

    Broadly speaking, when you look at the comparative funds for risk, you generally find VLS is better with equities and L&GMI is better at fixed interest. If you compare various periods when bonds are stronger than equities or vice versa, you can see the differences.

    Hence, if you are looking to use a multi-asset fund for fixed interest, the L&GMI would be a better option. (although I wouldnt use either for that).
    • grandst
    • By grandst 8th Oct 17, 1:17 PM
    • 32 Posts
    • 20 Thanks
    grandst
    Lifestrategy has a high effective duration for its bonds, probably not the type of bonds you want to invest in at this time.
    • Audaxer
    • By Audaxer 8th Oct 17, 1:24 PM
    • 481 Posts
    • 204 Thanks
    Audaxer
    Look at the spread at the fixed interest between the two. Then look at the areas of fixed interest that are doing well and badly (not down to picking but just where we are at this time in the cycle). VLS doesnt invest in the spread required to pick up some of those areas beyond their general catchall funds. L&G will use more focused funds to increase weightings in the various areas.

    Broadly speaking, when you look at the comparative funds for risk, you generally find VLS is better with equities and L&GMI is better at fixed interest. If you compare various periods when bonds are stronger than equities or vice versa, you can see the differences.

    Hence, if you are looking to use a multi-asset fund for fixed interest, the L&GMI would be a better option. (although I wouldnt use either for that).
    Originally posted by dunstonh
    I also like the look of HSBC Global Strategy funds. Do you know how they compare to VLS and L&GMI for bonds and equity risk?
    • aroominyork
    • By aroominyork 8th Oct 17, 1:31 PM
    • 229 Posts
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    aroominyork
    Lifestrategy has a high effective duration for its bonds, probably not the type of bonds you want to invest in at this time.
    Originally posted by grandst
    Since both funds are meant to replicate the market - albeit with different methods for doing so - is L&G's going to be, and is it, much different?

    Look at the spread at the fixed interest between the two. Then look at the areas of fixed interest that are doing well and badly (not down to picking but just where we are at this time in the cycle). VLS doesnt invest in the spread required to pick up some of those areas beyond their general catchall funds. L&G will use more focused funds to increase weightings in the various areas.

    Broadly speaking, when you look at the comparative funds for risk, you generally find VLS is better with equities and L&GMI is better at fixed interest. If you compare various periods when bonds are stronger than equities or vice versa, you can see the differences.

    Hence, if you are looking to use a multi-asset fund for fixed interest, the L&GMI would be a better option. (although I wouldnt use either for that).
    Originally posted by dunstonh
    I’m not drilling into the bonds – I couldn’t do it accurately – but comparing five year performance VLS does well enough for me not to question my holding in it: VLS80 (currently 77% equities) rose 75% compared to L&GMI 7 (75% equities) rising 49%; VLS20 (19.5% equities) rose 32% compared to L&GMI 3 (16% equities) rising 28%.
    • BLB53
    • By BLB53 8th Oct 17, 1:37 PM
    • 1,127 Posts
    • 905 Thanks
    BLB53
    I think to provide an income of 4% indefinitely you need your fund/portfolio to grow at more than 4% per annum, so it keeps up with inflation. Maybe if you need to take out 4% per annum it would be best to grow at an average of say 6% per annum?
    I am working on the assumption my VLS 60 fund will grow at an average of 6% p.a. long term so plenty of safety margin with my withdrawn income of 4%.

    Of course, if inflation were to exceed 4% I would hope for a corresponding uplift in returns from my Vanguard fund as I expect the long term returns to always be above inflation.
    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.
    • Linton
    • By Linton 8th Oct 17, 3:28 PM
    • 8,329 Posts
    • 8,224 Thanks
    Linton
    Since both funds are meant to replicate the market - albeit with different methods for doing so - is L&G's going to be, and is it, much different?

    I’m not drilling into the bonds – I couldn’t do it accurately – but comparing five year performance VLS does well enough for me not to question my holding in it: VLS80 (currently 77% equities) rose 75% compared to L&GMI 7 (75% equities) rising 49%; VLS20 (19.5% equities) rose 32% compared to L&GMI 3 (16% equities) rising 28%.
    Originally posted by aroominyork
    Trustnet tells me that the LGMI funds have only been running since august 2013
    • Linton
    • By Linton 8th Oct 17, 3:36 PM
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    Linton
    And again according to Trustnet the 3 year performance figure shows lgmi 3 slightly ahead of vls20.

    However one doesn't invest in these type of funds to maximise performance. A rather more relevant figure would be the performance during the bad economic times.
    • atush
    • By atush 8th Oct 17, 4:47 PM
    • 16,295 Posts
    • 9,962 Thanks
    atush
    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%.
    Yes, you e very new. To be making such conclusions that you have over very little experience/facts.
    • aroominyork
    • By aroominyork 8th Oct 17, 4:58 PM
    • 229 Posts
    • 45 Thanks
    aroominyork
    And again according to Trustnet the 3 year performance figure shows lgmi 3 slightly ahead of vls20.
    Originally posted by Linton
    My mistake. I looked at HL's five year chart tab and didn't see it began August 2013. Thanks for correcting.
    • bostonerimus
    • By bostonerimus 8th Oct 17, 5:03 PM
    • 968 Posts
    • 496 Thanks
    bostonerimus
    Most people will be perfectly well served for most of the time by something like one of the Vanguard Life Strategy funds. People can always then discuss the relative merits of various sector, duration and geographical allocations in multi-asset funds....that's what keeps a lot of the financial industry and forums ticking along, for what ever that's worth.
    Misanthrope in search of similar for mutual loathing
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