Vanguard Life Strategy

le_loup

Taoism wrote: »

should we add to vls40 or supplement it with others index trackers, or other fund of funds?

You have seen my previous reply to you and I agree with a lot that bowlhead says but you might just be interested in what I did in slightly different circumstances. And I am someone who has been an active investor for more than 25 years and thought I was pretty good. But anyway here is a post I made some time ago:

I wanted a setup and forget portfolio so that when I peg it, my wife need do nothing other than do an occasional sell to fund her new lifestyle - that is: because she will be so heartbroken she will NEED to buy new cars, replace her wardrobe, get some decent shoes and bags and support the waster of a boyfriend she will meet on the internet!

What I ended up with are the following Vanguard funds:
50% LS 80% (good whole world with 20% ultra safe)
25% UK equity income (where most of my previous dabbling had been)
15% Global Small Cap (bit of excitement)
10% UK Investment Grade Bonds (safety but not as safe as No. 1)

This gives me a desired UK Equity bias of 36%; then total bonds of 20% (with a 75% UK bias); 25% US; 7% Europe and the rest in Japan (4%), Other Asia (2%), Emerging markets (3%).

That's all in her name ... I kept my, smaller, pot to play with!!!

Taoism

Thanks to you all,
I will think about all the responses. I did find your response patronising bowl head, forums can easily make me feel patronised though.
My conclusions are that it is not a brilliant idea to ask for such advice in a forum! And that I shouldn't have shared more personal information with it, but perhaps I will either study more or pay someone else who I trust to help.

badger09

Taoism wrote: »

Thanks to you all,
I will think about all the responses. I did find your response patronising bowl head, forums can easily make me feel patronised though.
My conclusions are that it is not a brilliant idea to ask for such advice in a forum! And that I shouldn't have shared more personal information with it, but perhaps I will either study more or pay someone else who I trust to help.

As a fairly long term poster, I have to say that bowlhead is one of the least patronising, and one of the most knowledgeable posters in the area.

I'm not questioning that you felt patronised OP, but I'm sure that wasn't bowlhead's intention.

With such a huge amount involved, and no experience of investing, I would seriously consider consulting an IFA.

I'm a similar age to you, but already retired with a 'gold plated' final salary pension & state pension. After doing some research, I've started investing in the VLS 100% but would definitely not want to invest a £400k inheritance without proper advice.

This forum is a great place for ideas and discussion, but its no substitute for professional advice with so much at stake.

bertpalmer

Can I ask which vanguard ETF you have gadgetmind? I'm looking at those now...

bowlhead99

gadgetmind wrote: »

Smaller companies and private equity add to costs but what they add to returns is less clear. As for the rather trendy Absolute Return, many of these produce absolutely no return!

Well, smaller companies have been the stars of many equity portfolios over the last year or two - which is not to say that they always will be, and not to say that they won't crash harder than larger more resilient companies, but the direction of movement of an index of them can be different on any given day, than say FTSE 100, and the returns when they are good can be very good. So this suggests you should include them even if you shouldn't build the portfolio around them.


The returns from private equity - where the manager/owners' interests are aligned with investors' interests and the investment model allows for business transformation over time without demanding the quarterly results be judged by a fickle public market looking for a quick buck, can be shown to deliver superior returns over a few business cycles.


The cost of some of those returns in terms of fees can be quite high (building a portfolio of controlled private businesses is the exact opposite end of the cost scale from buying an index with a tiny bit of exposure to everything), and the asset class comes with obvious illiquidity risk, with some of the returns attributable to gearing which again adds risk. And the venture capital end of the scale has not been that awesome over some recent periods. However as a concept it is sound and most serious institutional investors have an exposure to it and to other 'alternatives' to mainstream stocks and shares.


Hedge funds, absolute return funds... sure a return of absolutely zero is not as good as +20%, it's just better than -20% ; if they can deliver a less volatile 5-7% a year, that might be preferable to +25,-19,+20,-15 etc. Obviously finding the good ones is tricky because most hedge funds are not marketed to the man on the street anyway, but there are some options out there.

If you read the Vanguard literature, this is very deliberate as most investors will be over-exposed to property via their primary residence.

Sure, they have a reason for not including it, much as they have a reason for giving you an equity allocation to UK markets of a quarter or more even though the UK market cap is under 10% or so of the world market. And those reasons will work for some people - probably for most people in fact, that's the point of doing a mass market off the shelf product: you build what will sell to the lowest common denominator.


Of course, lifestyle / retirement planning is all about personal circumstances. So if Taoism and wife have suffered from long term low income, disabilities etc which afforded no previous retirement planning (noted in his other thread) - then perhaps he is not loaded up with a house and is not overexposed to UK property.


He might have nil, and be a serial renter whose future living expenses are driven by property prices. In which case some link to the direction of movement of that market could be good rather than bad. Or he might be spending a disproportionate amount of income on imported medical equipment from China or Korea or USA and therefore benefit from holding investments denominated in RMB, Won or USD.

I do see your point, and I personally diversify beyond LS, but only because I can do so without adding too much to my costs. Even so, I do question whether my added diversification and complexity will benefit me long term.. Back-testing suggests it should, but in the real world?

I completely understand where you're coming from, it's a bit of a leap of faith to trust your own judgement sometimes.


But as a man of science (well, engineering/gadgets), then a backtested theory that stands up to scrutiny and a logical arm's length, big picture review, should be something that you embrace. In the long term (ie given enough trials) the theories should come good when run for real.


Maybe some would say investing is an art rather than science, that three fund managers will give you five answers to why the market is moving, and that the top economists have predicted eleven of the last three recessions. But markets are run by men with calculators and computers not paintbrushes and so I tend to believe science has something to do with it.

I use Vanguard ETFs to achieve roughly the same effect but with more diversity and lower costs. However, this does require that I understand asset allocation, put in the work, and don't over-trade.

For most people, it would be very easy to do far worse than just slapping everything into a VLS fund.

I agree you do need to put work in so DIY investing isn't for everyone.


But selecting to DIY and then simply investing in one off-the-shelf fund is not necessarily the best solution for a newbie investor, even if it is cheap - if what you're trying to achieve is an instant structure for the financing of your life for the next 30 years, rather what many people on this thread are trying to do (building up a general pot of a reasonable amount over 20 years before even thinking what they might like to do with it).


I'm not denying it provides instant diversification across regions and gives you a mix of equities and bonds. Because clearly it does.


And it is clearly a better solution (if more expensive) than just buying some very cheap individual indexes and slapping them together haphazardly (or even worse, buying a single FTSE100 tracker because it's something you've heard of and is very easy).


So yes, someone could do much worse.


For what its worth Taoism I think it's no bad thing to share personal information about your situation if you're looking for peoples views on it. As long as you don't say something on a public website that personally identifies you as an individual (which you haven't), you are doing the right thing - because 10 responses relevant to your situation is way better than 100 irrelevant ones.


Any ideas that are given with some thought about what you're really asking and why, should be useful - even if they're just standard things like "take a look at this website to help you understand investments" or "don't discard the idea of paying some money to consult an IFA". Even if two views contradict each other, that's a good thing, because it helps to show that there are a range of views about the best way to go about something, and blindly following one investment book - or diving into the fund that has the most number of posts about it on a forum - can be a flawed approach.


If you wanted to know the highest paying cash ISA, you can read about that here. You'd also get told about some high paying current accounts and rival products, for good measure. For investments it is a little different because there is no one 'best' investment for the average person. You will still get people suggesting alternatives. But whether any of them work for you will come down to your personal risk tolerance, risk capacity, goals, level of understanding etc etc and in those respects there are a million different levels.


So, your ideas of doing some more reading and asking someone in the real world for a health-check of your situation and some professional regulated advice (rather than anonymous posters on the internet) seem pretty smart to me.


Good advice is expensive because you want to know the very best way to do something and some people have dedicated their entire careers to working it out and will not tell you what they think the answers are (while assuming responsibility to an industry regulator if their answers are inappropriate) without taking some of your cash by way of reward. You might also want a professional to build your house or fix your car, even if you're physically capable of moving bricks and turning spanners. With books and youtube you can find out how to build a house (or at least a shed) and a car (at least a basic one) and furniture (or at least some flatpacked IKEA stuff).


The IKEA stuff or the Lifestrategy stuff might be just the job for you. Or you might find that looking back in 25 years when it is too late to make a material difference by changing your mind at the age of 85, you would rather have had the more expensive custom job.

LookingToTheFuture_2

As a new investor I find the diverse range of opinions on this thread very interesting and helpful. I'm starting out with Vanguard Lifestrategy 80 because I don't know enough yet to do my own asset allocation and rebalancing. I find the comments by bowlhead99 in particular very informative and realise that I need to start thinking about my long term strategy.

I will be investing for 15-20 years and hope to learn enough in that time to be able to manage my own investments in a drawdown pension at retirement. But the more I look into the subject the more I realise there is to learn! It does seem like there's a lot of work involved in managing a portfolio but everyone on here seems to really enjoy it. So my first port of call is to keep reading and learning and accept that there are no easy shortcuts and that I will inevitably make some mistakes along the way (but hopefully not too many).

Also I've needed to completely change my mindset - investing is so different to saving. It's quite strange to see my total balance going down instead of up in the few days it's been invested but I've read so much on this forum about risk and the ups and downs of the market that I was expecting it and I'm focusing on the return I'll get in 15 years time instead of the depressing red minus figures on the screen!

gadgetmind

bertpalmer wrote: »

Can I ask which vanguard ETF you have gadgetmind? I'm looking at those now...

A whole slew.

VWRL is the core, but I've then added VUKE for a bit more home bias, VAPX and VFEM so additional Asia and EM, MIDD for more mid caps.

I've then got VGOV, INXG, SLXX and ISXF for bonds.

I've then got Infrastructure such as HICL, BBGI, and JLIF, a few REITs, and some "themes" such as RCP, SST and BRWM.

20 holdings in total.

badger09

LookingToTheFuture wrote: »

As a new investor I find the diverse range of opinions on this thread very interesting and helpful. I'm starting out with Vanguard Lifestrategy 80 because I don't know enough yet to do my own asset allocation and rebalancing. I find the comments by bowlhead99 in particular very informative and realise that I need to start thinking about my long term strategy.

I will be investing for 15-20 years and hope to learn enough in that time to be able to manage my own investments in a drawdown pension at retirement. But the more I look into the subject the more I realise there is to learn! It does seem like there's a lot of work involved in managing a portfolio but everyone on here seems to really enjoy it. So my first port of call is to keep reading and learning and accept that there are no easy shortcuts and that I will inevitably make some mistakes along the way (but hopefully not too many).

Also I've needed to completely change my mindset - investing is so different to saving. It's quite strange to see my total balance going down instead of up in the few days it's been invested but I've read so much on this forum about risk and the ups and downs of the market that I was expecting it and I'm focusing on the return I'll get in 15 years time instead of the depressing red minus figures on the screen!

Sounds like a very sensible approach. I'm sure the novelty of checking your investments every day will soon wear off

LookingToTheFuture_2

badger09 wrote: »

Sounds like a very sensible approach. I'm sure the novelty of checking your investments every day will soon wear off

I'm trying not to check it every day but I can't help myself!

bertpalmer

gadgetmind wrote: »

A whole slew.

VWRL is the core, but I've then added VUKE for a bit more home bias, VAPX and VFEM so additional Asia and EM, MIDD for more mid caps.

I've then got VGOV, INXG, SLXX and ISXF for bonds.

I've then got Infrastructure such as HICL, BBGI, and JLIF, a few REITs, and some "themes" such as RCP, SST and BRWM.

20 holdings in total.

Thanks for being so open. I need to start researching ETF's as I know nothing. Are they just a low cost fund that tries to track an index?

Not sure whether I really need these in addition to the VLS100 and a few smaller funds.

Investing seems overly complicated sometimes. Or maybe I'm just overcomplicating it for myself!