Vanguard life strategy

john0

Hi All,

i am looking in to putting some money in to vanguard life strategy, what should i bear in mind when deciding which one to invest in, will be looking to put an initial £1000 in and then drip feed.

thanks

wriggly

You can probably rule out the 100% equity fund. If this is your sole investment, it makes sense to have some bonds.

And the 20% equity fund is insanely conservative. Appropriate only for a very limited number of people.

So that leaves 40%, 60% and 80%. Essentially, the higher the equity, the more volatile the fund will be. So, the higher funds may perform better long-term, but may also spend more time at a loss.

Personally, I think 60% is the sweet-spot. If the stockmarket dropped 50%, this fund would drop 30%.

40% would be appropriate for a very loss-averse individual (although it is possible for it to have a loss, on an historic basis it is unlikely to incur a significant loss). If the stockmarket dropped 50%, this fund would drop only 20%.

80% is more aggressive, and may incur significant losses, but long term might do better. It may be appropriate if you have significant cash savings as well. If the stockmarket dropped 50%, this fund would drop 40%.

Ultimately it depends on your requirements and how you would cope with a large drop in value (hopefully a temporary drop, but there are no guarantees).

srcandas

john0 wrote: »

Hi All,

i am looking in to putting some money in to vanguard life strategy, what should i bear in mind when deciding which one to invest in, will be looking to put an initial £1000 in and then drip feed.

thanks

Sure you've seen it john but beware in hl it is £2 per month for each holding. Pity because I wanted to hold the 20% and the 80% but c'est la vie :beer:

mr_fishbulb

john0 - how long do you reckon you'll want to keep the money invested for?

The ratio of bonds to equities you should be looking at depends on how far you have to go before you want access to the money. For example if it was for retirement and you were planning to use it in 5 years time then you would want a lot more bonds than if you wanted to hold it for 30+ years.

bowlhead99

All the comments above are pretty sensible. If you are drip feeding cash into it over time, and in it for the longer term (not too worried about the fact that it might fall heavily right before you cash it out for some specific event like an impending car purchase or a house deposit, before going back up) - go for more equities.

mr_fishbulb makes a great point, but one thing to mention is that even at retirement you may still have 30+ years to live, and depending on your other investments (presumably some of them will be safer ones) there is absolutely not an issue in having £1000+ invested in equities in your 60s to get growth to support you in your 90s. It's all about when you actually need to use it.

john0

thanks for all your posts, i agree with you all most likely going to go for 60%.

srcandas i am aware of the £2 holding fee hance why i am only looking at one, i didn't think this was that high to be honest, i have just opened an isa that i was going to put it in with them, is there any way of moving to a different platform or do i have to stick with hl?

i have only put in £1000 cash that is waiting to be invested.

thanks

Jegersmart

I am not sure why a lot of people just decide that xx% in equities is the correct level for life and leave it there? I am not suggesting that people recalibrate investments on a daily basis - but taking a decision for a 10/20/30 year period seems a bit odd to me personally.....

J

srcandas

Jegersmart wrote: »

I am not sure why a lot of people just decide that xx% in equities is the correct level for life and leave it there? I am not suggesting that people recalibrate investments on a daily basis - but taking a decision for a 10/20/30 year period seems a bit odd to me personally.....

J

I guess most have many other things in their lives with no great interest in investments so just forget and let it run. And in some ways that can give good returns and avoids the temptation to take and spend the profits or over tinker.

But the advice seems to be a review every 1 to 2 years. Changing with Vanguard in hl costs 0.32% so I guess a change on average every 7 to 10 years would not be of great concern.

In my case I use the Vanguard as a base and adjust the higher risk elements of the portfolio as and when so am unlikely to change the vanguard all things being equal :beer:

john0

yes i would fit in to your category srcandas, at the minute i do not have the time to properly look at my investmeents and to manage them in great depth. it will be however a great platform for me to build my knowledge and then can research more.

can you or someone quickly summarise the different reasons on whether to go for accumulative units or income units thanks?

srcandas

john0 wrote: »

yes i would fit in to your category srcandas, at the minute i do not have the time to properly look at my investmeents and to manage them in great depth. it will be however a great platform for me to build my knowledge and then can research more.

can you or someone quickly summarise the different reasons on whether to go for accumulative units or income units thanks?

Income funds pay what you can consider a dividend. The acc versions simply incorporate those in the unit price.

I always go for the acc where it exists but depends on your tax position, whether SIPP. ssISA or unwrapped, and whether you want income to spend on a regular basis.

I have the odd income fund and receive odd share dividends. Within wrappers these are either reinvested automatically (the income funds) or form little pools of cash. As I'm a fairly active trader the cash gets mopped up in the next trade leaving just a little to cover any expenses (like the £2 per month Vanguard fee).

I guess in the future as regular management fees become the norm having an income fund or share that pays a dividend creating a little regular reserve of cash in each pot may be useful.

I trade shares outside wrappers as it keeps costs down and for now I can live with £20+k CGT allowance. I use an unwrapped hl account and they keep track of all income and dividends so I just have a look to fill in my tax return each January. Simples

Sorry not sure that is a very clear explanation. Perhaps someone with more literary talents will be along shortly

Totton

Vanguard have a brief pdf that suggests funds based on investing horizons, you can view it here http://vanguard-lifestrategy.com/Retail_LifeStrategy%20_FINAL.pdf

Personally I would consider your age, attitude to risk, time horizon and other savings. Other than your emergency cash pot you should consider any other savings held in building societies etc, if you have half of your money in a BS and half in an investment account, then that 60/40 fund is more like 30/70 when viewed as your total pot of investments, that's how I look at it anyway :-)

I would be cautious of such statements as

Personally, I think 60% is the sweet-spot. If the stockmarket dropped 50%, this fund would drop 30%.

I doubt there can be such assurance taken, the Uk or US stock market can drop 50% but in the Life Strategy funds your money is spread across several stock markets not one, although I take the point that often they seem to move in the same direction.

Whatever you decide to do remember that you can easily switch between funds if you feel uncomfortable or more tolerant of risk.