Vanguard Lifestrategy - Which one?

Newbie2saving

Hi all,

Looking for help again. I have decided to put a couple of old cash ISA's (approx £10k, currently getting 3% in cash) into a S&S ISA and after doing my homework, I'm heading towards Vanguard Lifestrategy. I'm 34, so on the principal you should hold your age in bonds and the rest in equities to total 100, this puts me between the 80% and 60% Vanguard LifeStrategy options. I've sat down, looked at the exposure of each, I fancy the 80% one, a little more risk. I'm not an expert when it comes to investments, I don't have much time to monitor which is why I like the idea of this principal.

I wondered does anyone own more than one? If so does this incurr additional charges?

I have a HSBC tracker I'm thinking of selling and throwing in as well.

This is a new 'product' to me, not really come across Vanguard too much although they seem to be market leaders in trackers in US.

Any information / tips would be greatly appreciated.

Jegersmart

I guess with any tracker you should do your homework as to what the indices used are, how they behave and what they are made up of as a starting point. If you decide to use these types of tracker funds I would look at the markets they "imitate" and see what the situation is - so if markets look toppy start to switch from a 100% equities (or whatever) into the less "risky" ones, and do the reverse when the fear is running high and the markets have sold off.....

I have never used these funds so I don't know any details regarding these specific funds however (in terms of charges, costs etc etc.)

Good luck!

J

Newbie2saving

This is a long term investment strategy, however picking up on your comment re markets looking toppy, I just kinda want to sit back and not worry which is where this theory may come unstuck? I don't want to be following the markets really closely. Initially I thought one of these funds may cover my needs, but now thinking I may need 2, and put less into the riskier one and balance things that way?

psychic_teabag

It depends which platform you hold it on. E.g. HL charges £2 per month per tracker, so you'd pay double. Best charges £12.50 per quarter no matter how many non-commission funds you hold. I think Alliance has an annual fee and a dealing charge.

See http://monevator.com/2011/12/13/hargreaves-lansdown-vanguard-funds/ for a detailed breakdown

Newbie2saving

psychic_teabag wrote: »

It depends which platform you hold it on. E.g. HL charges £2 per month per tracker, so you'd pay double. Best charges £12.50 per quarter no matter how many non-commission funds you hold. I think Alliance has an annual fee and a dealing charge.

See http://monevator.com/2011/12/13/hargreaves-lansdown-vanguard-funds/ for a detailed breakdown

Thanks.

I am on HL at present, hence one of the reasons for dumping my HSBC tracker and replacing it with this fund plus the extra ISA monies. I do hold a few other funds in HL and shares in the Vantage ISA, so don't really want to move. Best invest would cost me £50/a and HL for 2 VG LS would be £48, so still better off with HL currently.

I will have a look though as I'm interested in what else is avail, I started out with HL as a newbie, easy to use website, but their marketing really annoys me - is best invest similar on that front?

TH1878

Newbie2saving wrote: »

Hi all,

Looking for help again. I have decided to put a couple of old cash ISA's (approx £10k, currently getting 3% in cash) into a S&S ISA and after doing my homework, I'm heading towards Vanguard Lifestrategy. I'm 34, so on the principal you should hold your age in bonds and the rest in equities to total 100, this puts me between the 80% and 60% Vanguard LifeStrategy options. I've sat down, looked at the exposure of each, I fancy the 80% one, a little more risk. I'm not an expert when it comes to investments, I don't have much time to monitor which is why I like the idea of this principal.

I wondered does anyone own more than one? If so does this incurr additional charges?

I have a HSBC tracker I'm thinking of selling and throwing in as well.

This is a new 'product' to me, not really come across Vanguard too much although they seem to be market leaders in trackers in US.

Any information / tips would be greatly appreciated.

Where are the bonds held? Gilts? Corporate Bonds?

Gilts will probably receive a short-term boost because of Quantitative Easing but it can't be sustainable in the long-run - prices are artificially high so I would steer clear.

Edit:

Top 5 holdings in the 60% equity fund:

1 VANGUARD FTSE DEVELOPED WORLD EX UK EQUITY INDEX ACC 34.10 n/a
2 VANGUARD FTSE UK EQUITY INDEX ACC 21.20 68
3 VANGUARD UK GOVERNMENT BOND INDEX INC GBP 20.00 n/a
4 VANGUARD UK INVESTMENT GRADE BOND INDEX ACC GBP 11.20 n/a
5 VANGUARD UK INFLATION LINKED GILT INDEX ACC 8.60 n/a
6 VANGUARD EMERGING MARKETS STOCK INDEX INV EUR 4.90 n/a

psychic_teabag

I assume the age-as-a-percentage in bonds guideline is based on assuming the investment is for your retirement (so that you are gradually reducing the risk as you approach the time you need the money). Is that your situation, or might you need the money sooner ? And I assume that covers your assets as a whole : eg if you have lots of cash elsewhere, you can presumably reduce the bond element (and so go with the 80% equities fund).

Ilya_Ilyich

Trying to time the market by buying and selling which funds you use in certain market conditions is unnecessary and costly (there's an initial charge of 0.25%ish on each fund so transactions will hurt you). Whether you plump for the 80% or 60% fund should depend on your risk tolerance and timescale. The 80% fund will have bigger during the bad times; is this something you could cope with (financially and psychologically)? Is your investment for retiring in 35 years or might you want to take it out much earlier?

Jegersmart

Newbie2saving wrote: »

This is a long term investment strategy, however picking up on your comment re markets looking toppy, I just kinda want to sit back and not worry which is where this theory may come unstuck? I don't want to be following the markets really closely. Initially I thought one of these funds may cover my needs, but now thinking I may need 2, and put less into the riskier one and balance things that way?

Well, if you want to sit back and enjoy it *may* be better to consider a few actively managed funds instead of trackers - you can always pick some less volatile ones. Some examples off the top of my head might include M&G Optimal Income, Newton Asian Income, M&G Global Dividend - there are of course many of them. If we ignore the fact that trackers "just track" (and whether this is a good thing or not) I always want to know what my exposure is when I invest in a fund - so the percentages here (in these Lifestyle funds) and what they mean (as others have pointed out) would be a deterrent for me because I would really want to know whether gilts, govvies or corporates are involved and in which locations). However, I take an active role and have experience of the markets so I understand that it is easier for some to manage this than others.

I don't want to point you in any one specific direction, the main aim of my posts is to highlight the potential importance of understanding what you are looking at - at the very least!

Take your time and make sure you have all the facts so you know what you are doing as far as possible.

HTH

J

Jegersmart

Ilya_Ilyich wrote: »

Trying to time the market by buying and selling which funds you use in certain market conditions is unnecessary and costly (there's an initial charge of 0.25%ish on each fund so transactions will hurt you). Whether you plump for the 80% or 60% fund should depend on your risk tolerance and timescale. The 80% fund will have bigger during the bad times; is this something you could cope with (financially and psychologically)? Is your investment for retiring in 35 years or might you want to take it out much earlier?

One doesn't have to make changes all the time - it could be *very* costly not to do it. In my SIPP for exampel there are no switching fees anyway - but even if I swap out my total ISA holdings once per year it is only 0.25% and if one avoids even half a 20% sell off - what is 0.25% exactly?

As I said, it takes time and effort to know what you are doing and you can still get it wrong, but for me it has worked very well - but it is not for everyone ofc.

J

TH1878

Ilya_Ilyich wrote: »

Trying to time the market by buying and selling which funds you use in certain market conditions is unnecessary and costly (there's an initial charge of 0.25%ish on each fund so transactions will hurt you). Whether you plump for the 80% or 60% fund should depend on your risk tolerance and timescale. The 80% fund will have bigger during the bad times; is this something you could cope with (financially and psychologically)? Is your investment for retiring in 35 years or might you want to take it out much earlier?

Yes, but Gilt prices are at 300 year highs.

If yields were to revert to historical averages then you would need around a 70% loss in value. They may go higher in the short term but it would take a brave man to bet that they wouldn't lose money in the long term.

Particularly if we lose our AAA rating

I personally (this may not be suitable for you) would plump for M&G Optimal Income for the Fixed Interest exposure and go 100% equity on the remainder.