Vanguard Life Strategy

Linton

gadgetmind wrote: »

Yes, and I prefer to spend my time on asset allocation rather than hunting for the next superstar manager or winkling out some new unexplored niche with no meaningful benchmark.

For my wife's small SIPP, even constructing something from individual trackers wasn't a practical option so I'm perfectly happy to use VGLS 100% equities with some strategic bond funds alongside. (I don't think the bond markets are anything even close to efficient at the moment but do also hold some passive bond ETFs in my SIPP.)

Broadly agreed. Unexplored niches dont have very many managed funds either - perhaps ETFs are better there. But there is a fair gap between the well indexed large company/mature market areas and complete obscurity.

For my wifes mid-sized SIPP I am getting global developed market coverage with a mixture of Vanguard national trackers and managed funds where there is some evidence of good local knowledge (Baillie Gifford seem to do well in Japan) and a Strategic Bond managed fund for balance. I was interested to see that my chosen SB fund is significantly into Australian bonds. The standard Gilts and Inflation Indexed bond funds seem too risky and poor performing to achieve their proper role in a portfolio. But as far as equity is concerned I cant bring myself to accept the VGLS geography allocation.

Linton

ruperts wrote: »

I see. Thanks for that. Then I'm struggling for a 10yr comparison for UK SC funds as I can only find FTSE SC index data for five years.

On trustnet go to "custom tab". That gives you the option to add a column for 10 years and a few other things.

MSCI World SC Index gave an annualised 10yr return of 8.34% while the MSCI World SC ex-UK returned 8.27%, so from that we can see that the UK must have performed slightly better, maybe 8.5%? Which cumulatively would give us 226%, or just slightly lower than the median managed fund at 229.7%. Account for the failed funds and your median fund underperforms still. Though that might be clutching at straws a bit.

What I suggest is that you look at the data and make up your own mind. In your example even if a UK MSCI SmallCap Index existed and did well I think you would have a problem finding a fund which follows it.

Do you know of any research into this I can access online? Or better sources of info?

There isnt much historical data around. Trustnet can provide most of what is available. Morningstar is sometimes useful. If you go to the trustnet Tools/charting section you can get hold of data on indexes, funds, and sectors over an extended period and compare them. Google may find you historical data for the major indexes eg FTSE100 but I havent found much else.

Hope you find your researches of interest and some use. Always better in my view to do you own research, assess what other people are saying in the light of your research and come to your own conclusions. I am wary of anyone who says they have the simple answer to all investing problems.

MinMoz

Basic question on the Vanguard Lifestrategy funds. If I took out one of the accumulation funds, what would the benefit be in having it within a S&S ISA as opposed to just a normal account?

Am I missing something?

ColdIron

MinMoz wrote: »

Basic question on the Vanguard Lifestrategy funds. If I took out one of the accumulation funds, what would the benefit be in having it within a S&S ISA as opposed to just a normal account?

In a word Tax

Dividend tax if you are, or could become, a higher rate taxpayer. Tax on interest if you use the 40% or 20% flavours. Capital Gains Tax if you do well over the years. Plus no requirement for careful record keeping for HMRC

This applies whether or not you use the Acc or Inc versions

black_taxi_2

On most investments you have to pay tax on your returns, but not if they are held in a Stocks & Shares ISA.

Any UK resident aged 18 or over can invest in a Stocks & Shares ISA. There is no upper age limit and you can withdraw your savings whenever you need to.

Best of all, it often costs no more to place cash or investments inside an ISA, so many investors receive these benefits free of charge.Within a Stocks & Shares ISA you pay no capital gains tax and no further tax on income.

You don't even need to declare ISAs on your tax return, and less tax means higher returns for you. These tax savings mean:

• For every £1,000 of profit you make, you could save as much as £280 in capital gains tax.
• For every £1,000 of income your investments generate, you could save as much as £450 in income tax.

bowlhead99

MinMoz wrote: »

Basic question on the Vanguard Lifestrategy funds. If I took out one of the accumulation funds, what would the benefit be in having it within a S&S ISA as opposed to just a normal account?

Am I missing something?

Yes maybe!
1)
If you are a higher rate taxpayer, and did not use an ISA, you would pay tax on the dividend income every year (whether you choose to take the distribution version which physically pays out the income every period, or the accumulation version which declares it but rolls it up into a higher share price and sends you a statement). However, basic rate taxpayers are fine for this aspect either way - because they get a tax credit on dividends, big enough that there is no further tax to pay even if investing outside an ISA.

2)
Whether you are a higher rate or lower rate taxpayer, if you were using, say, the 80% bond/20% equity version where the income is classified as "interest income" rather than as "dividend income" as it is in the higher equity versions of the lifestrategy, you would find that tax was deducted at source. In an ISA, the ISA manager would claim it back for you. Outside an ISA, you have paid tax that you didn't need to pay if you had taken advantage of your ISA allowance.

3)
If you are not using ISAs, and sell part of the fund at more than you paid for it and make a gain in excess of the ~£11k annual capital gains allowance in any one tax year, you will have to pay capital gains tax. The calculations for this in terms of working out what you paid for it and what proceeds you have received require you to keep proper records, particularly if you are adding to it over time. Also, when doing a capital gains tax calculation, you are effectively working out what part of the proceeds relate to a return of cost and what is a gain. This is more complicated if you have been using the accumulation version and some of the price represents auto-reinvested (rolled-up/ accumulated) dividends rather than actual gain. Again, accurate records are important.

Summary/ bottom line:
- if your holding is wrapped in an ISA, the taxman can't see in and doesn't require you to report anything, there is never any income tax or gains tax to pay. Whereas if you have not wrapped your assets, you might potentially pay tax on the interest (if a bond-heavy version); tax on the dividend (if a high rate taxpayer); tax on the gains (if gains in any one tax year, after losses in that tax year, exceed the annual allowance)

MinMoz

Thank you ColdIron, black taxi and bowlhead99 - very clear now and much appreciated.

Took out a Fidelity FTSE100 tracker at the start of this year only putting in £50 a month so I think that this has now used up my S&S ISA element for this tax year - (will check this - not sure if I can tfr the £1k I have there to Hargreaves Lansdown but use it against a Vanguard fund instead) - if that is the case I might save my increased £500 per month to go into Vanguard for next year.

On the cusp of being a 40% tax payer so worth using the S&S ISA.

bowlhead99

MinMoz wrote: »

Took out a Fidelity FTSE100 tracker at the start of this year only putting in £50 a month so I think that this has now used up my S&S ISA element for this tax year

Unlikely, unless that's a typo and you mean £500 a month, or there's something you're not telling us.

Your S&S ISA allowance for new subscriptions in any April-April tax year is around £11,500, less whatever new money you put into a cash ISA that tax year. Even if you maxed your cash ISA part of the allowance, you have barely used 10% of your S&S allowance if you've only been putting in 50 a month.

MinMoz

bowlhead99 wrote: »

Unlikely, unless that's a typo and you mean £500 a month, or there's something you're not telling us.

Your S&S ISA allowance for new subscriptions in any April-April tax year is around £11,500, less whatever new money you put into a cash ISA that tax year. Even if you maxed your cash ISA part of the allowance, you have barely used 10% of your S&S allowance if you've only been putting in 50 a month.

Just badly phrased by myself - was meaning more that I had used up my S&S ISA turn as opposed to using up the full allowance. Put in £500 initially, then £50 pm - so sitting at only £1k.

Can see that I can transfer it to HL so might do that and then see about upping my contribution to £500 pm.

Thanks again.

guitarman001

Glad I never put everything into LifeStrat 100% as I'm only 0.65% up now - money's done better in the bank!