Vanguard Life Strategy

Audaxer

renova wrote: »

Thanks that does make sense, but with 100% and if you know you need the money at the +30 year point for certain (but not before), are you not hugely exposed after 25 years or so if things take a down turn? Does it not make sense to dial down the risk over time at all? Or should you just remain exposed to maximum potential equity gain for the duration?

I would agree it makes sense to reduce the risk over time if you start with 100% equities. If after 25 years your pot had built up to £500k and then there was a 50% equity crash reducing it to £250k, I don't think many people would be too happy with that outcome.

aroominyork

A_T wrote: »

However VLS100 does not truly reflect global capitalisation whereas something like HSBC FTSE All-World Index Fund or Fidelity Index World does and they historically produce higher returns.

Except they don't truly reflect global market cap. According to Bloomberg in Oct 2016, USA market cap was $23.8tr and the world's was $65.6tr, so USA had a 36.3% share. Yet HSBC is 46.9% USA, Fildelity is 53.0% USA, VLS100 is 40.3% USA. Surely there's no such thing as a fund that truly reflects global cap - it's just a matter of which way you like your fund skewed.

grey_gym_sock

aroominyork wrote: »

Except they don't truly reflect global market cap. According to Bloomberg in Oct 2016, USA market cap was $23.8tr and the world's was $65.6tr, so USA had a 36.3% share.

i'd guess that those figures are just the raw market caps, not allowing for

1) markets where there are restriction on foreign ownership of shares - e.g. 'A' shares in china (though those are becoming more accessible) - which indexes usually exclude (because the index is supposed to be something it's practical to invest in)

2) large blocks of shares held by a single shareholder, which indexes typically exclude when weighting a company's shares (i.e. they give the shares a weight in the index based on the "free float", which excludes those large shareholdings)

both those factors are generally more significant in emerging markets, hence indexes will scale down those markets compared to their raw market cap, and hence the USA becomes larger in relative terms. which is all perfectly sensible, to make the indexes "investible".

though of course you can argue the "true" market caps are the raw ones, not the ones adjusted for investibility.

Yet HSBC is 46.9% USA, Fildelity is 53.0% USA, VLS100 is 40.3% USA. Surely there's no such thing as a fund that truly reflects global cap - it's just a matter of which way you like your fund skewed.

perhaps that's a little harsh.

VLS100 is deliberately overweighting the UK, so it's not trying to truly reflect global market cap.

those HSBC and fidelity funds have no deliberate overweighting. the main difference between the 2 funds is that the fidelity fund is developed world only, the HSBC fund is both developed and emerging. to fit in emerging markets, HSBC have to hold less in developed markets, hence you'd expect them to hold a bit less in the USA than fidelity do.

so i'd say that the HSBC and fidelity funds are both truer reflections of global market cap than is VLS100. and the HSBC fund is a truer reflection than the fidelity fund (unless you don't like investing in emerging markets).

aroominyork

I gladly bow to your greater knowledge, grey gym. You need to drill deep to understand that HSBC includes emerging markets since its top ten holdings are Apple, Microsoft, Facebook, Amazon, J&J, ExxonMobil, JP Morgan, Google, Alphabet, Wells Fargo.

ColdIron

No deep drilling required, it tracks the FTSE All-World Index. The opening paragraph in its factsheet says The index covers Developed and Emerging markets. You shouldn't rely on the top 10 holdings as it says nothing about the 3,080 other holdings

A_T

Here in the UK the Vanguard FTSE Global All Cap Index Fund is probably the most accurate reflection we have of the global stock market.

grey_gym_sock

A_T wrote: »

Here in the UK the Vanguard FTSE Global All Cap Index Fund is probably the most accurate reflection we have of the global stock market.

i would agree. the FTSE global all cap index covers large, medium and small caps companies, in both developed and emerging markets. compared to the FTSE all-world index, the only difference is that the latter doesn't have the small-cap companies.

Murmansk

I'm no expert on this stuff but as fairly recent messages on this thread were asking which platform to use to invest in Vanguard LifeStrategy I can tell you that you can buy direct from Vanguard now - I think this has only been possible since earlier this year.

Linton

grey_gym_sock wrote: »

i would agree. the FTSE global all cap index covers large, medium and small caps companies, in both developed and emerging markets. compared to the FTSE all-world index, the only difference is that the latter doesn't have the small-cap companies.

Interesting that the geographic asset allocation is significantly different to that of other global index funds with only 51% US, higher "financials" and lower "technology". The China allocation is notable by its continued omission in any reasonable % (Less than 2.3%). I wonder what the true index would look like. Perhaps we will see a mass migration of tracker investments as we get nearer to being able to invest in it.

A_T

Linton wrote: »

Interesting that the geographic asset allocation is significantly different to that of other global index funds with only 51% US, higher "financials" and lower "technology". The China allocation is notable by its continued omission in any reasonable % (Less than 2.3%). I wonder what the true index would look like. Perhaps we will see a mass migration of tracker investments as we get nearer to being able to invest in it.

The FTSE All World and Global All Cap include emerging markets which are often omitted in other global indexes