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  • FIRST POST
    • Murmansk
    • By Murmansk 7th Oct 17, 9:14 PM
    • 46Posts
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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 3
    • chucknorris
    • By chucknorris 8th Oct 17, 5:08 PM
    • 9,221 Posts
    • 13,836 Thanks
    chucknorris
    I try to minimise my exposure to that index due to it's mediocre performance compared to a world index.
    Originally posted by A_T
    That's exactly the way that we felt about shares generally for the last 20 years, there is no way that we would be worth what we are today if we had simply invested in shares. But saying that, the money has been made from our property now, and the time to sell has started. Since I invested in the ftse 100 it has gone up over 30% (about 2 years ago) and is paying a dividend of over 5% on the price paid, so I have no complaints, but it isn't where I want my wealth stored long term.

    EDIT: I think the best years for property are behind us now, and I also need to concentrate on wealth preservation, not making more, but is is hard for a leopard to change its spots, but I am aware that I do need to change my approach, and accept that I am at the 'job done' stage.
    Last edited by chucknorris; 09-10-2017 at 8:01 AM.
    Chuck Norris can kill two stones with one bird
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    • Thrugelmir
    • By Thrugelmir 8th Oct 17, 5:11 PM
    • 55,553 Posts
    • 48,913 Thanks
    Thrugelmir
    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.
    Originally posted by BLB53
    Long term studies suggest that

    Low inflation = economy spluttering.
    Moderate inflation = best returns
    High inflation =impact on corporate profitability

    In a study done a few years ago. In 10 decades, three had negative returns overall. Investing is far from predictable.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • zzzt
    • By zzzt 8th Oct 17, 5:20 PM
    • 208 Posts
    • 207 Thanks
    zzzt
    I've recently read a book called Smarter Investing by Tim Hale, and the basis of the entire book is that financial managers almost never beat the market after fees, and those that do, do so only for a brief period before failing (i.e. it's mostly luck).

    If you choose your own stocks yourself then you are assuming that you will be able to beat the market, and not only that, that you'll be able to do it better than industry professionals with 20 years experience (who, as I've said, also fail to beat the market).

    And if you instead decide to choose someone to manage it for you, you still have the task of choosing that person. How do you go about doing it? What makes you think you are good at judging how good a fund manager is? Past performance? The research shows it is no predictor of future performance. Most of the high-performing managers are just lucky, and over a long time period (20 years plus) they will give returns of less than the market.

    So the general advice is that it's always better to simply invest in a passive index tracker fund with low fees - fees are one of the things that will eat into your profits in a big way.

    Now, I am not an expert, but there was a wealth of academic sources given in this book based on 100 years of stock market data. So I'm inclined to think there is a grain of truth to it. Certainly it is the easiest option if, like me, you do not know much about investing.

    If you are investing in a fund which simply tries to track an index (mostly done by a computer) then the biggest difference is to be made in the fees and diversity. Vanguard have low fees and automatically rebalance your portfolio, so it seems like a no-brainer.

    Humans make terrible financial decisions because we are full of emotions and cognitive biases of which we are not aware and cannot control. The temptation to sell low and buy high is incredibly strong, because of fear of missing out, and fear of losing everything. In fact, the best time to invest is a recession, but it's the time when most people are afraid. The worst time to invest is during a boom, but that's when everybody wants to get in on the bandwagon.

    The one thing that has always been true, in spite of multiple recessions, is that the value of the stock markets always goes up. Maybe it will stop being true? I don't know, but for now I consider it a safe bet.

    Someone who invested in a passive index tracker fund just before the financial crisis in 2007 would have seen their money halve in a short space of time. But ten years later it would be worth double what you invested.
    • aroominyork
    • By aroominyork 8th Oct 17, 6:57 PM
    • 229 Posts
    • 45 Thanks
    aroominyork
    I've recently read a book called Smarter Investing by Tim Hale, and the basis of the entire book is that financial managers almost never beat the market after fees, and those that do, do so only for a brief period before failing (i.e. it's mostly luck).
    Originally posted by zzzt
    I read the opening pages on Amazon last week and it was mostly about not trying to beat the market. Is there much else in it other than expanding on that thesis?
    • Thrugelmir
    • By Thrugelmir 8th Oct 17, 7:04 PM
    • 55,553 Posts
    • 48,913 Thanks
    Thrugelmir
    I read the opening pages on Amazon last week and it was mostly about not trying to beat the market. Is there much else in it other than expanding on that thesis?
    Originally posted by aroominyork
    Consistantly beating the market is the issue at heart. For many people simply being passive with low charges is the better option. As they don't have the capital available to take the risk.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • Eco Miser
    • By Eco Miser 8th Oct 17, 7:04 PM
    • 3,088 Posts
    • 2,850 Thanks
    Eco Miser
    If you are investing in a fund which simply tries to track an index (mostly done by a computer) then the biggest difference is to be made in the fees and diversity. Vanguard have low fees and automatically rebalance your portfolio, so it seems like a no-brainer.
    Originally posted by zzzt
    Unless the index in question is a global index, you would be missing out on something.
    The Vanguard LifeStrategy series are funds of funds, where the second level funds are index funds, but Vanguard actively manage the proportions of each fund held.
    The one thing that has always been true, in spite of multiple recessions, is that the value of the stock markets always goes up. Maybe it will stop being true? I don't know, but for now I consider it a safe bet.
    Originally posted by zzzt
    Self evidently, the value of the stock markets does not always goes up, or there would be no crashes, dips, or corrections.

    Mostly markets eventually come good again, but note the Russian stock market from 1917 - 1990.
    Eco Miser
    Saving money for well over half a century
    • aroominyork
    • By aroominyork 8th Oct 17, 7:09 PM
    • 229 Posts
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    aroominyork
    Mostly markets eventually come good again, but note the Russian stock market from 1917 - 1990.
    Originally posted by Eco Miser
    Luckily back in 1917 I listened to bostonerimus and stuck to Vanguard.
    • Thrugelmir
    • By Thrugelmir 8th Oct 17, 7:15 PM
    • 55,553 Posts
    • 48,913 Thanks
    Thrugelmir
    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!
    Originally posted by Murmansk
    May work for the major indices and companies with large market capitalisations. In other markets illiquidity of stock etc make automated trading and rebalancing an impossibility.

    Vanguard was built on the US market. Where opportunities to beat the market are very limited. Passively tracking the Shanghai is a totally different kettle of fish.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • dunstonh
    • By dunstonh 8th Oct 17, 7:27 PM
    • 89,852 Posts
    • 55,456 Thanks
    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?
    HSBC, since they amended the strategy a few years back has shown constant outperformance on the version that matches VLS60. The others do not match close enough in risk. If you are looking at VLS60 then HSBC now appears to be the better option.

    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?
    They have different investment objectives. L&G is risk targetted. VLS is not. VLS moves around the risk profiles more. L&G has a wider range of bond funds and it includes property.

    Neither VLS or L&GMI are meant to replicate the market. They are both active passives. i.e. weightings are active. Underlying assets are passive.

    I've recently read a book called Smarter Investing by Tim Hale, and the basis of the entire book is that financial managers almost never beat the market after fees, and those that do, do so only for a brief period before failing (i.e. it's mostly luck).
    Which is true of the US where its damned difficult for fund managers to add value. However, not true of the UK. A country which is in the minority worldwide when it comes to active management. You tend to find that the best returns come from hybrid strategies (mixture of passive and active).
    Last edited by dunstonh; 08-10-2017 at 7:29 PM.
    • Audaxer
    • By Audaxer 8th Oct 17, 7:36 PM
    • 482 Posts
    • 204 Thanks
    Audaxer
    HSBC, since they amended the strategy a few years back has shown constant outperformance on the version that matches VLS60. The others do not match close enough in risk. If you are looking at VLS60 then HSBC now appears to be the better option.
    Originally posted by dunstonh
    I already have a VLS60 and am looking at HSBC Global Strategy Balanced as a possibly for my next lump sum investment rather than putting more in VLS.
    • EdGasketTheSecond
    • By EdGasketTheSecond 8th Oct 17, 8:29 PM
    • 228 Posts
    • 123 Thanks
    EdGasketTheSecond
    You don't need to? Use the LS100 fund
    Originally posted by jimjames
    Well that's not really a 'life strategy' fund. Their aim is to supposedly limit risk by investing a certain percentage in bonds; more as you get older (even though that strategy is flawed right now).

    For a 100% equity fund there are hundreds to choose from, doesn't need to be VL's life strategy.
    • aroominyork
    • By aroominyork 8th Oct 17, 9:52 PM
    • 229 Posts
    • 45 Thanks
    aroominyork
    HSBC, since they amended the strategy a few years back has shown constant outperformance on the version that matches VLS60. The others do not match close enough in risk. If you are looking at VLS60 then HSBC now appears to be the better option.
    Originally posted by dunstonh
    A quick comparison of VLS and HBSC over five years:

    HSBC Cautious (14% equities), +28%
    HSBC Balanced (46% equities), +60%
    HSBC Dynamic (68% equities), +80%

    VLS20, +32%
    VLS40, +45%
    VLS60, +60%
    VLS80, +75%
    VLS100, +93%.

    So HSBC knocks spots off VLS, but presumably that's because HSBC is slanted to non-UK equities, eg Dynamic is 64.43% non-UK, 4.81% UK. So while global markets outperform UK and Sterling is weak, HSBC will win.
    • Audaxer
    • By Audaxer 8th Oct 17, 11:42 PM
    • 482 Posts
    • 204 Thanks
    Audaxer
    A quick comparison of VLS and HBSC over five years:

    HSBC Cautious (14% equities), +28%
    HSBC Balanced (46% equities), +60%
    HSBC Dynamic (68% equities), +80%
    Originally posted by aroominyork
    aroominyork, I think the HSBC equities percentages above are incorrect. As far as I can see HSBC Balanced has 63% equities and HSBC Dynamic has 84% equities, so returns are quite similar to VLS funds with around the same percentage equities.
    • Gadfium
    • By Gadfium 9th Oct 17, 8:43 AM
    • 627 Posts
    • 1,167 Thanks
    Gadfium
    A quick comparison of VLS and HBSC over five years:

    HSBC Cautious (14% equities), +28%
    HSBC Balanced (46% equities), +60%
    HSBC Dynamic (68% equities), +80%

    VLS20, +32%
    VLS40, +45%
    VLS60, +60%
    VLS80, +75%
    VLS100, +93%.

    So HSBC knocks spots off VLS, but presumably that's because HSBC is slanted to non-UK equities, eg Dynamic is 64.43% non-UK, 4.81% UK. So while global markets outperform UK and Sterling is weak, HSBC will win.
    Originally posted by aroominyork

    Are you talking about the HSBC Global Strategy funds? If so, the HSBC Global Strategy Balanced has 80% equities.
    https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio-c-acc
    • Audaxer
    • By Audaxer 9th Oct 17, 9:06 AM
    • 482 Posts
    • 204 Thanks
    Audaxer
    Are you talking about the HSBC Global Strategy funds? If so, the HSBC Global Strategy Balanced has 80% equities.
    https://www.trustnet.com/factsheets/o/g1hd/hsbc-global-strategy-balanced-portfolio-c-acc
    Originally posted by Gadfium
    I think the Trustnet figures are wrong as the HSBC Global Strategy Balanced is around 63% equities. Under Asset Classes it shows European Equities as 28.1% which does not match the Top Holdings list which shows it is a Bond index that is 28.1%
    • aroominyork
    • By aroominyork 9th Oct 17, 9:12 AM
    • 229 Posts
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    aroominyork
    Audaxer has picked up the mistake on trustnet. My fund analysis was from HL (I think the hyperlinks work for non account holders).

    Balanced fund
    International Equities 42.62%
    International Bonds 39.55%
    Property 4.75%
    Cash and Equiv. 4.15%
    UK Equities 3.24%
    UK Corporate Bonds 2.35%
    UK Gilts 1.49%
    Other 1.43%
    Managed Funds 0.18%
    Investment Trusts 0.12%
    Alternative Trading Strategies 0.11%
    Money Market 0.00%

    Dynamic fund
    International Equities 63.43%
    International Bonds 19.96%
    Property 5.24%
    UK Equities 4.81%
    Cash and Equiv. 3.82%
    Other 1.88%
    UK Corporate Bonds 0.35%
    Investment Trusts 0.18%
    Managed Funds 0.17%
    Alternative Trading Strategies 0.16%
    Last edited by aroominyork; 09-10-2017 at 9:17 AM.
    • dunstonh
    • By dunstonh 9th Oct 17, 9:24 AM
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    • 55,456 Thanks
    dunstonh
    Looking at FE, the HSBC Balanced fund looks like it has a snapshot error on the asset weightings with European equity and global fixed interest being reported the wrong way around in the August snapshot.

    This has happened before, including on this fund. For example, North America tends to hover in the mid 20s on this fund but the Sept 2015 snapshot had just 2% N America and global fixed interest shot up by the difference. The following month, it went back again.
    • zzzt
    • By zzzt 9th Oct 17, 9:54 AM
    • 208 Posts
    • 207 Thanks
    zzzt
    Self evidently, the value of the stock markets does not always goes up, or there would be no crashes, dips, or corrections.
    Originally posted by Eco Miser
    Not sure if you are intentionally misunderstanding, but I'm well aware of that. The point is that they recover, and you have to look at them over a longer time period, which is what my story about someone investing just before 2008 was about.
    • aroominyork
    • By aroominyork 9th Oct 17, 10:10 AM
    • 229 Posts
    • 45 Thanks
    aroominyork
    Not sure if you are intentionally misunderstanding, but I'm well aware of that. The point is that they recover, and you have to look at them over a longer time period, which is what my story about someone investing just before 2008 was about.
    Originally posted by zzzt
    zzzt, there is a huge divergence of expertise among people posting on here and some of the less experienced people (such as, I think, you and me) can misunderstand fundamentals of investing - look at any one day's questions to see that. So the more experienced people will often err on the side of caution to set us right. It's usually meant with the best of intentions (though you'll get the occasional less generous poster).
    • Eco Miser
    • By Eco Miser 9th Oct 17, 11:51 AM
    • 3,088 Posts
    • 2,850 Thanks
    Eco Miser
    Not sure if you are intentionally misunderstanding, but I'm well aware of that. The point is that they recover, and you have to look at them over a longer time period, which is what my story about someone investing just before 2008 was about.
    Originally posted by zzzt
    No, I'm pointing out that your statement was wrong, markets do not always go up.

    In the long term, most recover, but that may take too long for some who become forced sellers while the markets are in a trough.
    Eco Miser
    Saving money for well over half a century
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