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  • FIRST POST
    • funguy
    • By funguy 12th Jan 18, 10:46 PM
    • 539Posts
    • 820Thanks
    funguy
    Vanguard Direct site - which fund in case of stock market crash?
    • #1
    • 12th Jan 18, 10:46 PM
    Vanguard Direct site - which fund in case of stock market crash? 12th Jan 18 at 10:46 PM
    Hi all,

    I've got an account with Vanguard direct with some funds in the VLS80. Would it make sense to have some of my money invested in a more cautious Vanguard fund too in case of a stock market drop/correction? I see they do 100% bond funds as well...?

    Thank you
Page 2
    • Thrugelmir
    • By Thrugelmir 13th Jan 18, 2:48 PM
    • 56,728 Posts
    • 50,102 Thanks
    Thrugelmir
    It is also not a fact that corporate bonds will fall in line with falls in the value of equities. This may happen, but it may not.
    Originally posted by ValiantSon
    Both equities and corporate bonds will be influenced by the future direction of interest rates.

    Unless there perpetual in nature. Bonds mature. Refinancing of corportate bonds for companies is currently very cheap. Does little for medium to longer term returns.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • A_T
    • By A_T 13th Jan 18, 3:18 PM
    • 282 Posts
    • 166 Thanks
    A_T
    Well, initially I was correcting an implicit error that you made by suggesting that LifeStrategy funds were full of corporate bonds and that you would be better with government bonds, so my point still stands.
    Originally posted by ValiantSon

    Where did I say they were "full" of corporate bonds? I said they had a "large proportion" which is not the same thing at all. There was no error to correct.
    • A_T
    • By A_T 13th Jan 18, 3:21 PM
    • 282 Posts
    • 166 Thanks
    A_T

    It is also not a fact that corporate bonds will fall in line with falls in the value of equities. This may happen, but it may not.
    Originally posted by ValiantSon

    If there is an equity crash it's almost certain corporate bonds will too. Treasuries will go up.
    • ValiantSon
    • By ValiantSon 13th Jan 18, 3:30 PM
    • 206 Posts
    • 194 Thanks
    ValiantSon
    Where did I say they were "full" of corporate bonds? I said they had a "large proportion" which is not the same thing at all. There was no error to correct.
    Originally posted by A_T
    Your error was implicit. If you can't see that then I can't help you.
    • davieg11
    • By davieg11 13th Jan 18, 3:40 PM
    • 264 Posts
    • 154 Thanks
    davieg11
    Back to the OP. I'm relatively new to investing and I'm way above my risk profile in equities. My portfolio has went up 9% in the last 3 months and when I asked my IFA about it, he replied with this. "And yes there is plenty of talk about the downturn but also dangerous trying to gamble with how the markets will go and whether to disinvest into cash and wait for it to happen. Probably not a good idea."
    • A_T
    • By A_T 13th Jan 18, 3:41 PM
    • 282 Posts
    • 166 Thanks
    A_T
    Your error was implicit. If you can't see that then I can't help you.
    Originally posted by ValiantSon

    You inferred. It wasn't implicit. And you're right you can't help me.
    • username12345678
    • By username12345678 13th Jan 18, 3:47 PM
    • 167 Posts
    • 72 Thanks
    username12345678
    Your error was implicit. If you can't see that then I can't help you.
    Originally posted by ValiantSon
    Why was the error implicit?

    If you look at VLS20 for example the bond element has around 60% at AAA/AA and 40% at A/BBB.
    • funguy
    • By funguy 13th Jan 18, 5:46 PM
    • 539 Posts
    • 820 Thanks
    funguy
    Back to the OP. I'm relatively new to investing and I'm way above my risk profile in equities. My portfolio has went up 9% in the last 3 months and when I asked my IFA about it, he replied with this. "And yes there is plenty of talk about the downturn but also dangerous trying to gamble with how the markets will go and whether to disinvest into cash and wait for it to happen. Probably not a good idea."
    Originally posted by davieg11
    Thank you all for your advice.... If we think there is a likely downturn due in the next 1-2 years and you are invested in say VLS80 for the next 20y, would anyone rebalance down to say VLS60 or 40 for the next couple of years with a view to investing more at any drop point? Or would people stay invested in VLS80 and ride out any drops...

    Im really thinking aloud - I understand my level of risk, long term investing etc...just looking for people's opinions...
    • Thrugelmir
    • By Thrugelmir 13th Jan 18, 5:54 PM
    • 56,728 Posts
    • 50,102 Thanks
    Thrugelmir
    By switching funds you are attempting to second guess the market, i.e. time the peaks and troughs. The old adage is that time in the market is better than trying to time the market. With a 20 year time horizon you'd be better deciding on your risk tolerance and sticking with the same fund. Let the fund manger make the decisions. As it's the underlying performance of the investments that really matters. Not the market indices.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • AnotherJoe
    • By AnotherJoe 13th Jan 18, 6:40 PM
    • 7,902 Posts
    • 8,496 Thanks
    AnotherJoe
    Thank you all for your advice.... If we think there is a likely downturn due in the next 1-2 years and you are invested in say VLS80 for the next 20y, would anyone rebalance down to say VLS60 or 40 for the next couple of years with a view to investing more at any drop point? .
    Originally posted by funguy
    Anyone? For sure. I wouldn't. Been there done that, lost money doing it. Realised I'm not clever enough to know when the dips and rises will be in the short to medium term.


    Im really thinking aloud - I understand my level of risk, long term investing etc...just looking for people's opinions...
    Originally posted by funguy

    Are you sure? If you were i dont think you'd be looking to try and time the market.
    • bostonerimus
    • By bostonerimus 13th Jan 18, 8:28 PM
    • 1,411 Posts
    • 826 Thanks
    bostonerimus
    Like the majority of multi-asset funds Vanguard's UK Lifestrategy funds are untested in a stock market crash. They contain a large proportion of corporate bond funds - such funds crashed along with equity funds in the credit crunch. Gilt funds went up at that time.
    Originally posted by A_T
    I held a roughly 60/40 allocation in a couple of equity and bond index funds from 1987 to 2014 and that took me through several crashes and has given an 8.5% annual average return.
    Misanthrope in search of similar for mutual loathing
    • Alexland
    • By Alexland 13th Jan 18, 8:46 PM
    • 1,105 Posts
    • 730 Thanks
    Alexland
    Well, initially I was correcting an implicit error that you made by suggesting that LifeStrategy funds were full of corporate bonds and that you would be better with government bonds, so my point still stands.
    Originally posted by ValiantSon
    Vanguard have a nice chart showing both government and corporate bond returns. Unexpectedly when equities took a dip in mid 2014 to mid 2015 corporate bonds seemed to do better than government bonds.

    https://www.vanguardinvestor.co.uk/articles/latest-thoughts/markets-economy/chart-all-bonds-not-equal



    See correction in posts below - the equities dip was mid 2015 to mid 2016

    Alex.
    Last edited by Alexland; 13-01-2018 at 10:25 PM. Reason: Correction note
    • username12345678
    • By username12345678 13th Jan 18, 9:11 PM
    • 167 Posts
    • 72 Thanks
    username12345678
    Are you sure that's what that chart is saying?
    • Alexland
    • By Alexland 13th Jan 18, 9:15 PM
    • 1,105 Posts
    • 730 Thanks
    Alexland
    Are you sure that's what that chart is saying?
    Originally posted by username12345678
    I was surprised too. However corporate bonds seem to have fared worse in the short period after mid 2015.
    Last edited by Alexland; 13-01-2018 at 10:25 PM.
    • A_T
    • By A_T 13th Jan 18, 9:55 PM
    • 282 Posts
    • 166 Thanks
    A_T
    The equity dip started mid 2015. By no stretch of the imagination was it a crash though. UK Gilt funds did better during that period that GBP Corporate Bond funds.
    • Alexland
    • By Alexland 13th Jan 18, 10:17 PM
    • 1,105 Posts
    • 730 Thanks
    Alexland
    The equity dip started mid 2015. By no stretch of the imagination was it a crash though. UK Gilt funds did better during that period that GBP Corporate Bond funds.
    Originally posted by A_T
    Well that explains it - my recollection of the equity dip was 1 year out (should have checked the dates) in which case from mid 2015 corporate bonds did take a slightly bigger dip than government bonds at the same time as the equity dip which is what we would expect to see.
    Last edited by Alexland; 13-01-2018 at 10:23 PM.
    • pip895
    • By pip895 14th Jan 18, 8:27 AM
    • 494 Posts
    • 280 Thanks
    pip895
    It seemed to me a perfectly reasonable for your view of the market phase to influence your risk tolerance. So if you feel stocks are overvalued after significant gains swapping for instance from VLS80 into VLS60 would be reasonable.

    When a market correction occurs - say 30% then you swap back to VLS80. You can't know of course that the market won't drop another 10% -20% but the chances are that you will be better off than sticking to the lower risk fund overall. Ther is no guarantee - but at least a better than even chance that using this strategy you could be better of than sticking with the more agressive fund. At the very least you have dialled down your risk.

    I follow this sort of strategy although not using the VLS funds - I am in cautious mode at the moment but holding my 40% in a mixture of cash, market nutral/absolute return and strategic bonds. The policy hasn't realy been tested by a big fall as yet though I have taken advantage of a few of the smaller corrections. Of course I may bottle it and bury my head in the sand when the big crash comes but if I do then that will just tell me I'm more a VLS60 than a VLS80 sort of investor lol.
    • ValiantSon
    • By ValiantSon 14th Jan 18, 12:57 PM
    • 206 Posts
    • 194 Thanks
    ValiantSon
    You inferred. It wasn't implicit.
    Originally posted by A_T
    No, it really was implied.

    If there is an equity crash it's almost certain corporate bonds will too. Treasuries will go up.
    Originally posted by A_T
    "Almost certain". Interesting assessment of probability. Corporate bonds may fall if equities do, but they may not. You don't know, and neither do I. The causes of the fall in equities is as important as the fact that they are falling, as to how bond markets will respond. Your analysis is extremely simplistic.

    And you're right you can't help me.
    Originally posted by A_T
    Nice talking with you.
    Last edited by ValiantSon; 14-01-2018 at 1:02 PM.
    • chockydavid1983
    • By chockydavid1983 14th Jan 18, 1:08 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    Is there a single global bond fund that has a good mix of corporate/ government bonds? I can't seem to find this out for Vanguard Global Bond Index on the fund info page:
    https://www.vanguardinvestor.co.uk/investments/vanguard-global-bond-index-fund-pound-sterling-hedged-income-shares
    • ValiantSon
    • By ValiantSon 14th Jan 18, 1:15 PM
    • 206 Posts
    • 194 Thanks
    ValiantSon
    Is there a single global bond fund that has a good mix of corporate/ government bonds? I can't seem to find this out for Vanguard Global Bond Index on the fund info page:
    https://www.vanguardinvestor.co.uk/investments/vanguard-global-bond-index-fund-pound-sterling-hedged-income-shares
    Originally posted by chockydavid1983
    It depends what you think a good mix is.

    The page shows you thedistribution by issuer of bonds in the fund. Is this not what you are looking for?
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