Vanguard UK Equity Income tracker

BLB53

As an altenative you might want to have a look at UKDV - TER 0.3% (and no monthly fee)

grey_gym_sock

i don't think you can deduce the risk from just the price history. or be confident which fund will do better.

personally, i'd be more comfortable with a managed fund for equity income. when i've seen comments from neil woodford (though i haven't seen very recent comments, so i could be out of date), he was negative about the UK economy generally, and so favouring companies that would do OK even if there's little growth. with that strategy, while relative underperformance is always a possibility (e.g. if the economy picks up, and cyclical companies outperform), the chances of large absolute losses seem lower. very much a matter of opinion, though.

simonfitba

So what else would be a good addition to the Vanguard Lifestrategy 80% core holding in an ISA?

The fund is pretty diversified but maybe an extra slice of emerging markets as westy22 suggests.

grey_gym_sock

yes, i think it's already about as diversified as can be. the question is do you want to go overweight in a specific area, on the grounds that some area is likely to outperform in the long term? (well, or because you're trying to call what will outperform in the short term, but let's ignore that for the moment.)

smaller companies is 1 idea. some say there is evidence that they outperform.

equity income is another theory.

a number of ppl seem to think emerging markets, but i'm very dubious about that. i've not seen any evidence that they outperform overall. their economies will - at least some of them - grow faster; and also their stock market capitaliztions, but most of that will be due to new companies being listed, not to the value of existing companies soaring.

gadgetmind

I have a small holding in the Vanguard UK Equity Income tracker alongside half a dozen other Vanguard trackers in my SIPP. When I say "small", it's only 6.5% of this part of the portfolio to give a slight value tilt.

I'm keeping a wary eye on it as I'm suspicious of mechanical stock picking with a narrow focus and yield as a driver, but it's done very well in the few short months this portfolio has been running.

This tracker has per-holding and per-sector caps, which should provide much-needed diversity.

simonfitba

I thought you held it gadgetmind. I just reckon it could be a better bet than picking a share portfolio outside an ISA.

This is a quick calculation but...

HL charge £24 a year for it, then there's the 0.5% initial charge and the 0.25% annual fee. So the cost on £10k would be £100 fees/charges in year one and £50+ each year after that. I think.

With shares to buy say 10 it would be roughly £15 in cheapest dealing and £50 stamp duty. So £65 in year one. With maybe £10 per year after that for dividend reinvestment.
But, of course, if you sell ten shares, that would cost £130. Then there's capital gains tax to worry about...but if there in an ISA then add a further £45 per year in holding charges.

It seems close to me. And the tracker's diversification might swing it.

PS. I realise HL doesn't do cheap dealing (selftrade does) but this is just a rough example.

gadgetmind

As soon as you start holding multiple Vanguard trackers with HL, you start seeing high fee percentages unless you have a decent pot.

£50 on £10k is 0.5%, which is about as high as you'd really want to go IMO.

I went with BI as I've done a "DIY Lifestrategy" with a tilt towards income, mid/small caps and EM. Of course, whether I'll beat LS is yet to be determined ...

gadgetmind

BTW, for £60pa with BestInvest, you can as many Vanguard trackers as you want, all the equities and ITs you can eat, and £7.95 dealing fees if you have £50k on platform, which can include ISA, SIPPs and unwrapped of yourself and relatives.

The big drawback is that BI don't currently link to ORB so no directly held gilts or corporate bonds.