Vanguard Life Strategy

ratechaser

Well, further to my earlier posts, I'm just about to pull the trigger, and buy about £53k of VLS80 within the Halifax ISA wrapper. Yes, I could do more research and probably come up with a better portfolio, but this is really about as good a balance of low effort, low charge and high diversification as I need.

And to be honest, when a friend, who also happens to be a former head of research for a major bank, tells me that passive and very diversified is how he plays it, then it makes me feel a bit more comfortable as well!

If I can average inflation +4% over a 10-15 year period, then I will be happy enough. Wish me luck!

RC

dunstonh

And to be honest, when a friend, who also happens to be a former head of research for a major bank, tells me that passive and very diversified is how he plays it, then it makes me feel a bit more comfortable as well!

Of the various multi-asset funds available, the VLS funds are actually, one of the weaker ones when it comes to diversification. Not at a level to avoid them. Just that they have a UK bias, lack property and fixed interest is not as spread as well as others. Not really an issue with VLS80. However, if it was VLS40 or VLS20 then that would be a consideration.

VLS80 is quite high risk for a new investor. It is above the level of the typical UK consumer. So, make sure you are prepared for the level of volatility you will see. If you can handle it, then fair enough.

ratechaser

dunstonh wrote: »

Of the various multi-asset funds available, the VLS funds are actually, one of the weaker ones when it comes to diversification. Not at a level to avoid them. Just that they have a UK bias, lack property and fixed interest is not as spread as well as others. Not really an issue with VLS80. However, if it was VLS40 or VLS20 then that would be a consideration.

VLS80 is quite high risk for a new investor. It is above the level of the typical UK consumer. So, make sure you are prepared for the level of volatility you will see. If you can handle it, then fair enough.

Well compared with the 80k of Lehman stock that I once owned, I think the relative volatility of VLS80 will be manageable This isn't money that I have any need for in the foreseeable future anyway.

Fair point re the lack of property, although it's not a sector that I've ever invested in bar my main home, so it is a bit of a blind spot for me right now. And I can cope with the 20% FI allocation as it is

gadgetmind

Commercial property is an interesting one.

I'd never again invest in it via an open-ended fund as the switch to bid pricing (knocks about 5% off the value of your investment if you sell) or slam the doors entirely so you lose access to your money for several years.

However, I have done very well from investing via REITs and property companies, and even property company trackers. These investments correlate fairly closely with equities, so you need other asset classes for rebalancing purposes, but the yields are usually very tasty.

I tend to drift away from property during the good times (and when yields are therefore low) but snaffle bargains when they all go onto deep discounts.

Not my usual passive approach!

Malthusian

gadgetmind wrote: »

Commercial property is an interesting one.

I'd never again invest in it via an open-ended fund as the switch to bid pricing (knocks about 5% off the value of your investment if you sell) or slam the doors entirely so you lose access to your money for several years.

However, I have done very well from investing via REITs and property companies, and even property company trackers. These investments correlate fairly closely with equities, so you need other asset classes for rebalancing purposes, but the yields are usually very tasty.

It is worth pointing out that the premium or discount on a REIT or property company - relative to the value of its actual assets - could quite easily move against you by 5% or more. For example, F&C Commercial Property traded at a premium or close to par in the first half of 2015, but has since fallen and is currently trading at a discount of 6% to its net asset value. So if you bought FCPT in early 2015, you would currently be facing the same problem as someone who bought an open-ended fund whose manager has just switched to bid pricing.

You could of course say "well, I'd rather the premium / discount was determined by the market rather than by the fund manager". But it's a mistake to think the bid-pricing risk with open-ended funds doesn't exist with closed-ended investment trusts.

You are correct that closed-ended funds can't close to withdrawals as open-ended ones can, as they can always be sold on the stock exchange. However, when commercial property hits a bad time, the market value of property investment trusts tends to collapse so spectacularly that I question whether you'd want to sell even if you could. Particularly as investment trusts often borrow to invest (which most OEICs don't) and if the market fears that the investment trust may not be able to pay its debts, you'll be lucky to get your bus fare by selling.

Tacitvs

Hi everyone

I've been trying to wrap my head around this for a few days now. I've looked at broker comparison sites and annual platform fees/trade fees/investment fees etc and I can't quite figure out what would work out well for me.

I'm looking to drop £1000-2000 in a VLS60 or VLS80 in an ISA which I can then transfer into the government scheme next year for buying a house where they'll contribute up to £1000 per year, and drip feed ~£100-250 per month into my ISA, depending on my financial situation at the time (I'm 22, not got a great deal of disposable income).

Can anyone give some examples of what would be a good or a bad platform for me, and why? I think HL looks to be not too bad, but I'm just not 100% confident I'll not be slapped with flat fees that are proportionally quite high for things like shoving a spare £50 I've got into the ISA, or withdrawing the money when the time comes to get on the property ladder. Am I right or wrong? Other suggestions?

masonic

It seems a bit unwise to invest money you are planning to use to buy a house in VLS. Unless you are not planning to buy a house for 10 years or so.

As to the best platform, HL might otherwise be ok, but does have quite high closure/transfer fees. There are other providers, such as Charles Stanley Direct, you should consider.

Malthusian

At age 22 the actual house purchase may well be far enough away that there's no reason not to invest in equities.

Long term investing is not a case of "if you're planning on using it in 5 years then invest in equities, if you're planning on using it in 4 years you must leave it in cash". If you don't know when you're going to buy a house but think it will be around five years or more and - the important bit - you are happy to rent for a year or two extra if you're unlucky with the timing of a market crash, investing in equities can be the right thing to do.

This was exactly what I did - I didn't know when I was going to buy a house but in the end by saving in stocks & shares ISAs I probably was able to afford a house a year or two earlier than if I'd left everything in cash. If I'd been unlucky and had to rent for another year or two it wouldn't have been the end of the world. I accepted that risk for the benefit of potentially being able to afford my objective a bit earlier.

Especially if your objective is to buy something that is constantly increasing in value (as far as we can tell). If you're taking a long term view and you're saving money in cash to eventually buy something which is increasing in price, then you have to run just to stand still. At least if it's invested for the long term you've given yourself some chance of keeping pace with the asset you want to buy - although of course there's no guarantee that stockmarkets will provide growth equivalent to house prices.

dunstonh

I'm 22, not got a great deal of disposable income).

So, would the high risk VLS80 be suitable?

A regular contribution to an stocks and shares ISA really needs around 15 years. Are you really planning to buy the property in your late 30s?

Tacitvs

dunstonh wrote: »

So, would the high risk VLS80 be suitable?

A regular contribution to an stocks and shares ISA really needs around 15 years. Are you really planning to buy the property in your late 30s?

masonic wrote: »

It seems a bit unwise to invest money you are planning to use to buy a house in VLS. Unless you are not planning to buy a house for 10 years or so.

As to the best platform, HL might otherwise be ok, but does have quite high closure/transfer fees. There are other providers, such as Charles Stanley Direct, you should consider.

Malthusian wrote: »

At age 22 the actual house purchase may well be far enough away that there's no reason not to invest in equities.

Long term investing is not a case of "if you're planning on using it in 5 years then invest in equities, if you're planning on using it in 4 years you must leave it in cash". If you don't know when you're going to buy a house but think it will be around five years or more and - the important bit - you are happy to rent for a year or two extra if you're unlucky with the timing of a market crash, investing in equities can be the right thing to do.

This was exactly what I did - I didn't know when I was going to buy a house but in the end by saving in stocks & shares ISAs I probably was able to afford a house a year or two earlier than if I'd left everything in cash. If I'd been unlucky and had to rent for another year or two it wouldn't have been the end of the world. I accepted that risk for the benefit of potentially being able to afford my objective a bit earlier.

Especially if your objective is to buy something that is constantly increasing in value (as far as we can tell). If you're taking a long term view and you're saving money in cash to eventually buy something which is increasing in price, then you have to run just to stand still. At least if it's invested for the long term you've given yourself some chance of keeping pace with the asset you want to buy - although of course there's no guarantee that stockmarkets will provide growth equivalent to house prices.

Hmm, I want to get on the housing ladder in my mid-late twenties really. I'd rather pay towards a house that'll eventually be mine than paying another person's mortgage. Perhaps it's best to wait in that event until I've got the house.

Thanks for the advice.