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  • FIRST POST
    • Murmansk
    • By Murmansk 7th Oct 17, 9:14 PM
    • 45Posts
    • 9Thanks
    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 4
    • Malthusian
    • By Malthusian 9th Oct 17, 12:05 PM
    • 3,075 Posts
    • 4,453 Thanks
    Malthusian
    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.
    Originally posted by Eco Miser
    If you become a forced seller the market still goes up, just without you in it.

    This sounds like one of those supposed philosophical conundrums like "if a tree falls alone in the forest does it still make a sound". To which any eight-year-old could tell you the answer is "yes". If you make a loss by selling out of the market prematurely, if you miscalculate the level of cash you needed to meet your needs, that is not the market's problem. Just as a sound wave does not care whether there are any ears around to perceive it.
    Last edited by Malthusian; 09-10-2017 at 12:08 PM.
    • Eco Miser
    • By Eco Miser 9th Oct 17, 12:44 PM
    • 3,084 Posts
    • 2,849 Thanks
    Eco Miser
    The market goes up, if it goes up. If it doesn't go up within the lifetime of the investor, then effectively it never went up. Other investors will have a different view.

    When a tree falls, it creates vibrations in the air, whether these are actually sounds, or if a brain is required for sound to be perceived and therefore exist, is indeed a philosophical question.
    Eco Miser
    Saving money for well over half a century
    • Audaxer
    • By Audaxer 9th Oct 17, 2:02 PM
    • 481 Posts
    • 204 Thanks
    Audaxer
    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%
    Originally posted by aroominyork
    There seems to be a mistake on the HL Fund Analysis page as well. If you look on the same HL site, the HSBC's own factsheet for the Balanced fund, linked below, shows the fund has over 60% equities:
    http://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Documents.aspx?type=packet_fund_class_doc_factshee t_private&id=6cda99df-8382-463b-b6cf-c26b9a8f89e8&user=hl_website_documents

    Asset allocation copied from factsheet listed below:
    US Equity (29.2%)
    Corporate Bond (28.3%)
    Europe Equity (9.3%)
    Emerging Markets Equity (7.0%)
    Global Government Bond (4.7%)
    Japan Equity (6.0%)
    Property (4.9%)
    UK Equity (3.4%)
    Pacific ex Japan Equity (2.2%)
    Cash (5.2%)
    • AlanP
    • By AlanP 9th Oct 17, 6:27 PM
    • 938 Posts
    • 645 Thanks
    AlanP
    There seems to be a mistake on the HL Fund Analysis page as well. If you look on the same HL site, the HSBC's own factsheet for the Balanced fund, linked below, shows the fund has over 60% equities:
    http://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Documents.aspx?type=packet_fund_class_doc_factshee t_private&id=6cda99df-8382-463b-b6cf-c26b9a8f89e8&user=hl_website_documents

    Asset allocation copied from factsheet listed below:
    US Equity (29.2%)
    Corporate Bond (28.3%)
    Europe Equity (9.3%)
    Emerging Markets Equity (7.0%)
    Global Government Bond (4.7%)
    Japan Equity (6.0%)
    Property (4.9%)
    UK Equity (3.4%)
    Pacific ex Japan Equity (2.2%)
    Cash (5.2%)
    Originally posted by Audaxer

    I get to 57.1% equities based on the numbers quoted, which is what I have it recorded as in my Asset Allocation tracker s/sheet although the exact percentage per class have moved slightly to what I have noted. To be expected given they are managing the fund on a Risk Profile more than on a Performance basis in my view, so will tweak the specifics as they see fit.
    • Audaxer
    • By Audaxer 9th Oct 17, 10:20 PM
    • 481 Posts
    • 204 Thanks
    Audaxer
    I get to 57.1% equities based on the numbers quoted, which is what I have it recorded as in my Asset Allocation tracker s/sheet although the exact percentage per class have moved slightly to what I have noted. To be expected given they are managing the fund on a Risk Profile more than on a Performance basis in my view, so will tweak the specifics as they see fit.
    Originally posted by AlanP
    That's true, checking again I see the equities in the HSBC Balanced fund does add up to 57.1%. I think the equity percentage in the HSBC funds can vary it a bit more than VLS as they are managed, but as the Balanced fund is around 60% equities it can be compared to the VLS60, and the returns over the past 5 years for both funds are pretty similar.
    • Kernel Sanders
    • By Kernel Sanders 10th Oct 17, 8:41 AM
    • 3,124 Posts
    • 1,287 Thanks
    Kernel Sanders
    For those of us who have little knowledge of this type of investment, can you tell us what people mean by 'the yield'? Do Vanguard use all the dividends to buy more stock, leaving the investor to sell a fraction if they need income?
    Last edited by Kernel Sanders; 10-10-2017 at 9:55 PM.
    • bowlhead99
    • By bowlhead99 10th Oct 17, 8:51 AM
    • 6,741 Posts
    • 12,011 Thanks
    bowlhead99
    For those of us who have little knowledge of this type of investment, can you tell us what the gross return was over this period and how much of it was fees?
    Originally posted by Kernel Sanders
    You can see the three year return figures/ charts on their website (or those of the platforms which offer it, or places like Trustnet.com or Morningstar.co.uk.

    The ongoing charges figure (management fee and running cost) is a smidge under 0.25% a yr
    • Linton
    • By Linton 10th Oct 17, 8:53 AM
    • 8,331 Posts
    • 8,225 Thanks
    Linton
    For those of us who have little knowledge of this type of investment, can you tell us what the gross return was over this period and how much of it was fees?
    Originally posted by Kernel Sanders
    Published returns are always net of fund manager fees, this being what is important to investors. What you see is what you would have got. You can't get gross data.
    Last edited by Linton; 10-10-2017 at 8:55 AM.
    • zzzt
    • By zzzt 10th Oct 17, 10:47 AM
    • 208 Posts
    • 207 Thanks
    zzzt
    No, I'm pointing out that your statement was wrong, markets do not always go up.
    Originally posted by Eco Miser
    Again, I think you are just wilfully misunderstanding me. It's essentially a straw man - you've pedantically taken something out of context in order to correct it. We actually agree - markets can and definitely will go down at some point, so no point continuing this discussion.
    • dellboy102
    • By dellboy102 10th Oct 17, 5:24 PM
    • 526 Posts
    • 95 Thanks
    dellboy102
    Because I don't want any exposure to bonds right now!
    Originally posted by EdGasketTheSecond
    Probably a silly question but can I ask the reasons why?
    • Chris75
    • By Chris75 11th Oct 17, 9:29 AM
    • 146 Posts
    • 54 Thanks
    Chris75
    Because he feels that bonds are priced for near zero interest rates & that their price will fall as interest rates rise?

    If you have a bond that pays 2% and interest rates rise to 4% you simplistically would only pay half as much for the bond. It is not that simple but this is the basic point of a possible argument.
    • BananaRepublic
    • By BananaRepublic 11th Oct 17, 10:39 AM
    • 826 Posts
    • 582 Thanks
    BananaRepublic
    I've recently read a book called Smarter Investing by Tim Hale,

    [snip]

    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.
    Originally posted by zzzt
    Don't believe everything you read.

    I've been investing for 20 years (ignoring pensions) and my biggest mistake was swallowing the passive fund hype. My active funds have done very well thank you. My passive funds did not so well, which is why I transferred the money to active funds, which have done far better. It is possible I have been lucky, but my luck is very consistent.

    The problem with studies is the assumptions they make. In some markets such as the US it is probably better to go for passive funds. But not all markets are like the US. And yes on average active funds do not do so well.
    • EdGasketTheSecond
    • By EdGasketTheSecond 11th Oct 17, 9:57 PM
    • 228 Posts
    • 121 Thanks
    EdGasketTheSecond
    Probably a silly question but can I ask the reasons why?
    Originally posted by dellboy102
    Bonds / Gilts are supposed to limit risk being less volatile than equities. However we are in a time of unprecedented low interest rates and bond capital values are close to all time highs. The price of bonds can only fall from here and unlike equities, you won't get your money back sometime in the future unless interest rates once again go down to these levels. You could potentially lose 50% of your money in long-dated bonds with no hope of recovery imho. I rate cash and gold as better than bonds if you want out of equities for a while.
    • Audaxer
    • By Audaxer 12th Oct 17, 9:06 AM
    • 481 Posts
    • 204 Thanks
    Audaxer
    Bonds / Gilts are supposed to limit risk being less volatile than equities. However we are in a time of unprecedented low interest rates and bond capital values are close to all time highs. The price of bonds can only fall from here and unlike equities, you won't get your money back sometime in the future unless interest rates once again go down to these levels. You could potentially lose 50% of your money in long-dated bonds with no hope of recovery imho. I rate cash and gold as better than bonds if you want out of equities for a while.
    Originally posted by EdGasketTheSecond
    Do we know that for sure? If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?
    • Chris75
    • By Chris75 12th Oct 17, 9:07 AM
    • 146 Posts
    • 54 Thanks
    Chris75
    I basically agree with EdGasketTh... but I wonder if interest rates will rise as much as some suspect. Can you imagine the effect on the economy if interest rates - and mortgage interest - went up significantly. Having said that I do not see fixed interest as the "safe" haven that the industry is still trying to sell it as.

    In the medium term the bigger problem is that lack of central bank ability to reduce interest rates as they normally do in the down part of the economic cycle which could make the next downturn worse.

    Traditionally bond prices went up when share prices went down but there really is not the scope to do that now. Safe Bonds are a left over from previous situations. The brave new world of quantitative easing, near zero interest rates and record high equity costs has changed it all & I haven't mentioned Brexit for the domestic situation & the £.

    To me funds with high fixed interest components are not low risk investment but rather a possible way to loose not as much as is possible with shares.

    Always remember that in any market somebody is convinced that it is a good time to buy & someone else is equally convinced that it is a good time to sell & they then trade!

    Also remember that people in the funds game are salesmen.
    Last edited by Chris75; 12-10-2017 at 9:21 AM.
    • stardust09
    • By stardust09 12th Oct 17, 10:27 AM
    • 239 Posts
    • 210 Thanks
    stardust09
    Don't believe everything you read.

    I've been investing for 20 years (ignoring pensions) and my biggest mistake was swallowing the passive fund hype. My active funds have done very well thank you. My passive funds did not so well, which is why I transferred the money to active funds, which have done far better. It is possible I have been lucky, but my luck is very consistent. .
    Originally posted by BananaRepublic
    Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.
    • aroominyork
    • By aroominyork 12th Oct 17, 10:36 AM
    • 229 Posts
    • 45 Thanks
    aroominyork
    Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.
    Originally posted by stardust09
    Yes, Banana, please do send the allocations you have held for the last 20 years and the exact dates you made each change
    • EdGasketTheSecond
    • By EdGasketTheSecond 12th Oct 17, 11:30 AM
    • 228 Posts
    • 121 Thanks
    EdGasketTheSecond
    Do we know that for sure? If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?
    Originally posted by Audaxer
    I would say we know it for sure, yes; unless you think interest rates will go negative? (unlikely with rising inflation). I am old enough to remember bond carnage in the 1970's when interest rates rose to 15% and inflation to 23% !

    If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?
    Originally posted by Audaxer
    Maybe habits change too slowly? Maybe young IFA's with their flash cars haven't actually ever experienced rapidly rising interest rates and wouldn't know what to do in that scenario? What else can the financial services industry offer but what it has traditionally for the past 30+ years - they won't make much money if people just buy gold and silver but right now that could be their best choice along with asset-backed shares like property or miners with proven commercial reserves.
    Last edited by EdGasketTheSecond; 12-10-2017 at 12:49 PM.
    • Chris75
    • By Chris75 12th Oct 17, 11:42 AM
    • 146 Posts
    • 54 Thanks
    Chris75
    & the government gave a subsidy to the Building Society not to raise mortgage interest rate above 15%.

    I think RPI UK inflation got to nearly 25% in 1975.
    • BananaRepublic
    • By BananaRepublic 12th Oct 17, 1:21 PM
    • 826 Posts
    • 582 Thanks
    BananaRepublic
    Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.
    Originally posted by stardust09
    Fund sites such as You Invest have tools that allow you to research the performance of funds over 1, 3, 5 and 10 years. My funds are a selection that have consistently outperformed the markets, and not one or two stunning years and many mediocre ones. That way I have reasonable confidence that the outperformance is not just luck. I am currently mainly focused in the UK and Europe. My long term star performer is the Jupiter European Fund. It has been in and out of fashion but I have stuck with it and it has grown from £6,000 to £54,000 in 18 years. My other funds bought over 15 years ago have not done so well, but they have still done well. Well, apart from the Japanese fund. I bought into the "Japan is about to recover" hype that was fashionable every few years. I hold many funds such as the Marlborough Micro Cap Growth P Acc, a recent acquisition that is up 46% in 18 months or so.

    I've made a few mistakes. The early funds were bought with a discount which refunded the 5% fee that was common at the time. But I forgot about the 1% per year fee to the broker. That was again typical for the era. So for more than a decade I was paying them a fortune. They never ever sent a reminder about the fee. That should have been illegal, and is one reason the financial industry has a poor reputation. So often they do their best to hide what is actually going on under the covers.
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