Vanguard Life Strategy

Carpi09

Just interetsed to see how everyone is getting on from the start of this thread. Unfortunately i had to pull out because of a house purchase. All positive i hope!

bigadaj

dunroving wrote: »

I've been in the 40% only for a few weeks so way, way too early to tell.

While a lot of my other funds have been going great guns in the current fever, the VLS40 has just been creeping, but I presume when the inevitable correction occurs and the other stuff drops like a stone, the VLS40 will respond less drastically because of the mix of S&S and other equities ...?

....possibly not.

The 40 version is designed to be lower risk and consequently likely lower growth. The problem is the 60 part of this is bonds, both government and company. When interest rates rise then bond prices will almost certainly fall, due to the relative yield needing to be higher, so the existence of what many term a bond bubble isn't really in your favour.

Gadfium

Carpi09 wrote: »

Just interetsed to see how everyone is getting on from the start of this thread. Unfortunately i had to pull out because of a house purchase. All positive i hope!

I've grown my investment in the 80% to about £34K, with another £10K going in as soon as a cash ISA transfers to iWEB. Its up overall about 12% over the last 2 years, but that is as a whole, with different chunks going in over time.

I've also stuck a few £K into a 100% fund to see how that does.

So not a stellar growth, but in line with my requirement (5% per annum after tax). I like the "fire and forget" aspect of it all. I'm sure that there's higher growth options out there, my problem is that I do not have the skills to identify them.

Futuristic

I currently have a S&S ISA with Cavendish and as a mere trial as a first time user I put in £2k with "Vanguard LifeStrategy 80% Equity Acc" and in the 6 months has had increase of 1.85%

I have £1k with "CF Woodford Equity Income Fund C Acc" and its had increase of 10.75% in the 6 months

I'm now looking to split a further £5k in the ISA for this tax year as safe investment, what would be recommended? 75% in VL & 25% in Woodford?

masonic

Futuristic wrote: »

I'm now looking to split a further £5k in the ISA for this tax year as safe investment, what would be recommended? 75% in VL & 25% in Woodford?

"Safe investment" really doesn't fit with either of those, but perhaps you mean something different than the conventional meaning of the term.

It depends on how much UK bias you want to end up with. Perhaps you would be better off splitting between Woodford and Vanguard FTSE Developed World ex-UK, for example, and possibly adding a separate bond fund if you feel the need.

jamesd

What do you mean by "safe investment"? Do you mean the conventional investment meaning of low ups and downs in value, lack of real risk of loss to capital whenever you want to exit, resistance to inflation, FSCS capital value protection or something else?

The Vanguard Life Strategy funds aren't suitable for most of those possible objectives but they might still be suitable for what you have in mind.

Some issues with the Life Strategy series:

1. They use bonds. There's every reason to believe that rising interest rates from lows not seen for hundreds of years will cause a one way capital loss on bond funds, for the bond proportion. Bonds also have up and down value movement on top of this, though typically lower than equities. If you need to sell after interest rates have risen you could see a significant capital loss.

2. They use equities. You can expect 20% or so capital value drops two or three time a decade and 40% once or twice a decade.If you need to sell during a down time you could see a significant capital loss.

If you can hold long enough for the equity portion to make enough money to cover the likely loss on the bond portion it could be OK but it seems more sensible to me just to not buy the bit that's expected to make a loss. After all, nothing forces you do that, you can pick a global equity tracker and use P2P or cash instead without taking that likely loss.

There will again be a time when bonds can do their traditional job of reducing the risk of capital loss as well as volatility, it just happens that now isn't one of those times. When that happens, the Vanguard Life Strategy range will presumably go back to being a good deal for those who want equity/bond mixtures.

mapk

Reading around on bonds and the effect of rising interest rates at some stage (the only way is up, I guess), I'm thinking I should be looking at VLS 100 instead of VLS 60. I understand I should be looking at that as a longer term investment.

I was also considering an L&G Multi Index fund; the proportion of equities to bonds in MI7 looks similar to VLS80. Another option would be Woodford Equity Income which has done comparatively well.

I understand some posters here have picked up bond exposure elsewhere, and am wondering about the gain in that too. As always, I'd welcome your comments!

dunstonh

I was also considering an L&G Multi Index fund; the proportion of equities to bonds in MI7 looks similar to VLS80.

On risk, the MI6 maps closer to VLS80 than MI7.

I'm thinking I should be looking at VLS 100 instead of VLS 60.

Could you stomach losing almost half your investment value during a major crash?

Another option would be Woodford Equity Income which has done comparatively well.

That would be introducing single sector funds into a multi-asset solution. What makes you think that your management decisions to break asset allocation are better than those of L&G or Vanguard?

mapk

Thanks Dunstonh. I'm still keen on a multi-asset fund, just concerned that a significant proportion in bonds at this time of low interest rates will only yield less in that sector than the initial investment. I'm lacking experience here, so might not understand the implications fully, and am sure my management decisions aren't as well informed as the big fund managers! Are there any other diversified multi-asset options I could usefully be looking at here?

masonic

mapk wrote: »

Thanks Dunstonh. I'm still keen on a multi-asset fund, just concerned that a significant proportion in bonds at this time of low interest rates will only yield less in that sector than the initial investment. I'm lacking experience here, so might not understand the implications fully, and am sure my management decisions aren't as well informed as the big fund managers! Are there any other diversified multi-asset options I could usefully be looking at here?

There is nothing wrong with avoiding bonds entirely, but swapping VLS60 for VLS100 is a big jump in risk, which is the point I believe dunstonh was trying to illustrate. The solution is to combine VLS100 with a proxy for bonds. You have options as a consumer that fund managers do not, specifically holding cash in high interest current accounts / regular savers and P2P lending, which you could hold in addition to the high-equities multi-asset fund as a substitute for bonds.