H-L introduces a Tracker Platform Charge

koru

principa wrote: »

Vanguard LifeStrategy is similar to holding a bunch of trackers with the added benefit of re-balancing, so it is a (more expensive) option.

More expensive? Depends what you are comparing with. The TER varies between 0.22% and 0.33%, depending on the mix of equities and bonds. I doubt you could construct your own diversified portfolio with a lower average TER.

You would have a lower TER if you just invested in the SWIP or Vanguard UK trackers, but the UK market tends, in the long run, not to perform as well as most overseas markets and it is also likely to be more volatile.

koru

dunstonh wrote: »

If you are low risk then you cannot use HL for trackers as they only offer medium/high and high risk trackers.

The bond element of the Lifestrategy trackers is fairly low risk, isn't it? What would be lower risk, other than instant access savings?

Ilya_Ilyich

Yeah I'd be interested to know what a low-risk tracker could track other than..cash funds?

dunstonh

depends on definitions as i see trackers as low-ish risk versus individuals shares and investment trusts etc as med/high risk

investment trusts are typically a notch up the risk scale compared to a comparable UT/OEIC. However, the assets are generally the major driver of where it appears on the risk scale.

Risk is usually benchmarked on a scale that places cash at the start and moves upward from there. Hence why equities are medium/high to high risk depending on the sector (with trackers). Managed funds in the same sector can be lower or higher risk than a tracker (or sector average). So, you cannot say that a tracker in itself is lower risk. If an adviser presented a FTSE tracker as low risk then its complaint just waiting to be upheld.

The bond element of the Lifestrategy trackers is fairly low risk, isn't it? What would be lower risk, other than instant access savings?

It isnt really a conventional tracker though. It has an investment strategy and is therefore bringing in a degree of management and you are paying for that strategy and management in increased charges (albeit only around 0.1-0.2%)

Yeah I'd be interested to know what a low-risk tracker could track other than..cash funds?

gilts and corp bonds mainly. Both of these do have trackers available although I do not believe HL has them.

principa

dunstonh wrote: »

gilts and corp bonds mainly. Both of these do have trackers available although I do not believe HL has them.

I'm looking at the Lifestrategy products. Can anyone tell me why anyone with a mortgage would consider buying a fund that includes bonds when they could yield similar amounts by paying down the mortgage?

gadgetmind

Ilya_Ilyich wrote: »

Yeah I'd be interested to know what a low-risk tracker could track other than..cash funds?

Property, particularly infrastructure, also has a place.

Linton

haf63 wrote: »

depends on definitions as i see trackers as low-ish risk versus individuals shares and investment trusts etc as med/high risk

A common misconception. Look at the FTSE100 graph - doubled and halved (roughly) twice in the past 10-11 years. This is rather more volatile than some of the more stable large shares - eg utilities, and much more volatile than say a cautious managed fund.

gadgetmind

principa wrote: »

I'm looking at the Lifestrategy products. Can anyone tell me why anyone with a mortgage would consider buying a fund that includes bonds when they could yield similar amounts by paying down the mortgage?

Because they add diversity to a portfolio. Under normal circumstances, equities and bonds are diversified so they don't bounce up and down together. This means that when equities go down, your bonds go up, and you rebalance by selling some bonds and buying some equities. When it all swings back, the same happens in reverse.

You can add other diversified assets and play the trick multiple ways. Sell high, buy low.

However, due to the rules surrounding ISAs and pension, you need to keep these assets in the same pot as you can't switch funds between pots at will.

Bonds yields are currently *very* low, which means prices are high. As a result, I'm moving towards being *far* lighter on fixed interest that portfolio theory would suggest is wise and will even be keeping cash in various pots.

gadgetmind

dunstonh wrote: »

gilts and corp bonds mainly. Both of these do have trackers available although I do not believe HL has them.

HL has the HSBC and Royal London gilt trackers but there is no need as the Vanguard LifeStrategy funds have fixed interest elements. For example, the 80% equity fund has 10% UK gilts, 6% Investment grade bond, and 4% UK index linked gilts.

£24 a year for a rebalanced low-fee portfolio in a pot.

dunstonh

I'm looking at the Lifestrategy products. Can anyone tell me why anyone with a mortgage would consider buying a fund that includes bonds when they could yield similar amounts by paying down the mortgage?

On a rebalancing portfolio the rebalancing between bonds and equities (and property and cash) is where the real gains can be made. That said, many bond funds have yields higher than mortgage rates.