Vanguard Life Strategy

Malthusian

suts wrote: »

I currently have some money in a Fidelity Blackrock World Equity Fund which is doing well but not in an ISA!

Fidelity and Blackrock are two different fund managers. Do you mean you hold BlackRock World Equity via the Fidelity platform?

I plan to start moving it into an ISA and was wondering if the Vanguard 80/20 was in anyway comparable to the Fidelity fund?

As the name suggests, BlackRock is 100% equities so higher risk.

If you have all your money in BlackRock Global Equity then you have a lot riding on the fund manager making good decisions and no diversification against a crash in global equity prices. The Vanguard fund would diversify your investment over thousands of shares and bonds, would be expected to fall slightly less in a crash, and has significantly lower ongoing costs.

They are not very comparable as VS80 is a low-cost simple option designed to be suitable as the core of or even an entire portfolio for someone who just wants to track the global stockmarket, and BlackRock Global Equity is more suitable as part of the portfolio of an investor who has faith in the manager's investment decisions.

Linton

There are significant differences between the funds. The Blackrock fund is 100% equity, VLS80 is 20% bonds 80% equity which will reduce both the performance and the volatility somewhat compared to a 100% equity index fund.

The allocations to the various countries differ with the Blackrock fund having half the 23% UK allocation of equity part of VLS80. Some people would argue that 23% UK is too high. Of more interest though is the difference in allocation to the various sectors...

Financial - VLS80 19%, BRGE 9%
Customer Staples - VLS80 10%, BRGE 31%
IT - VLS80 15%, BRGE 6%
Health - VLS80 11%, BRGE 21%

The significance of these allocations in that the Blackrock fund is attemptimg to reduce its risk by investing preferentially in industries that are less likely to be severely hit in a crash (people are always going to need their basic shopping and healthcare) whereas VLS80 may have a greater tendancy to follow the booms and crashes, reducing the risk with the 20% bonds.

So which you should go for may depend on your attitudes to the management of risk. If you wanted to go full out for performance you wouldnt use either fund. On the other hand if you were a cautious investor, neither fund would be really suitable either.

For what it's worth the VLS80 performance over 5 years is a bit ahead of BRGE but not overwhelmingly so. On the other hand the past 5 years havent seen a major crash.

Filo25

A quick question from a noob at investment relatively speaking, is there a breakdown anywhere of what Vanguard hold as their non-equity holdings,

Maybe I'm being stupid but I still feel more comfortable with splitting my own investment between a global equity tracker for the equity portion (maybe with a bit of China and smaller companies added in) and buying bond funds separately in the desired proportion and then rebalancing as required myself.

I suppose the main downside to that approach is likely having higher management costs for the bond holding, but equally I do feel like a bond "tracker" is relatively meaningless and I would rather have some control over how that proportion of my pension is invested.

It is becoming a bit more relevant to me as I rediscovered some old AVCs in a high cost platform which I want to move into a SIPP and manage myself, its not a fortune (about £55k in total) but still its enough to want to do things properly rather than having a play around with things and learning from experience as I have been with my dripfed ISA.

Thoughts?

bowlhead99

fiisch wrote: »

Have I understood that correctly? Is the reduction in fees worth the hassle of switching from Vanguard to Halifax, when I already have a pre-existing relationship with Halifax?.

You mention this would be a first real foray into S&S and you already closed an S&S ISA earlier in the year and no longer have one.

So, I'd forget the "pre existing relationship with Halifax". From what you say, you don't have any current products with Halifax Share Dealing which is the part of the group that would provide you the S&S ISA. The fact that you use some other products that come under a Halifax brand umbrella or even the broader Lloyds group who owns them, is neither here nor there really as it doesn't afford you special treatment or preferential pricing.

If for example your average balance invested in the fund over the course of the year is £2000, the platform fee from Vanguard is £3 for the year. With Halifax it would be more like £3 every couple of months if you're doing a monthly regular investment plan, plus an annual fee on top. Halifax or Vanguard would each treat you just like they would treat me or anyone else who walked in off the street and wanted an account. So I would forget brand loyalty and just look at cost for the service level you want.

When you have a few tens of thousands you could reconsider who has a good offering in the platform market at that point, and whether you are going to stick solely to Vanguard investment products for this 'plaything' or have your interest piqued by other funds or shares on the market - Vanguard only deals in their own stuff, Halifax is broader and others are broader still.

bowlhead99

Filo25 wrote: »

A quick question from a noob at investment relatively speaking, is there a breakdown anywhere of what Vanguard hold as their non-equity holdings,

You can look at the factsheet for the particular Vanguard lifestrategy fund that you mean (e.g. 40% equity, 80% equity etc) and see the names and proportions of the vanguard bond index funds they hold. Then you can look at the factsheets for those investee funds and see what they hold (or what index they follow, and look up that index elsewhere).

Maybe I'm being stupid but I still feel more comfortable with splitting my own investment between a global equity tracker for the equity portion (maybe with a bit of China and smaller companies added in) and buying bond funds separately in the desired proportion and then rebalancing as required myself.

That's not 'stupid' per se, but it obviously requires you to take decisions on what you want to hold in what proportion, for both equities and non-equities, and research /source / acquire /rebalance that allocation in line with your own model. Essentially taking away the work that Vanguard does in the lifestrategy model and doing it yourself (and paying for the underlying portfolio components yourself, which will likely be more expensive than indexing).

To do it well, requires expertise and/or time/effort that many don't have, which is why they use a lifestrategy fund instead - or use one as the core of a broader portfolio.

I don't think it makes a lot of sense to look at the vanguard factsheets and try to recreate them with a time lag after they get published, to save a few basis points in fees - which some have suggested doing in the past. However, if you think you know what you're doing, it could make sense to pore over the factsheets if the purpose is simply to validate your suspicion that they are not what you want.

It is becoming a bit more relevant to me as I rediscovered some old AVCs in a high cost platform which I want to move into a SIPP and manage myself, its not a fortune (about £55k in total) but still its enough to want to do things properly rather than having a play around with things and learning from experience as I have been with my dripfed ISA.

Well, vanguard would say they "do things properly" within the parameters in which they operate - but if what they do is not what you want to do - then figure out how to build your own portfolio and do that, rather than buying their product.

Filo25

bowlhead99 wrote: »

You can look at the factsheet for the particular Vanguard lifestrategy fund that you mean (e.g. 40% equity, 80% equity etc) and see the names and proportions of the vanguard bond index funds they hold. Then you can look at the factsheets for those investee funds and see what they hold (or what index they follow, and look up that index elsewhere).

That's not 'stupid' per se, but it obviously requires you to take decisions on what you want to hold in what proportion, for both equities and non-equities, and research /source / acquire /rebalance that allocation in line with your own model. Essentially taking away the work that Vanguard does in the lifestrategy model and doing it yourself (and paying for the underlying portfolio components yourself, which will likely be more expensive than indexing).

To do it well, requires expertise and/or time/effort that many don't have, which is why they use a lifestrategy fund instead - or use one as the core of a broader portfolio.

I don't think it makes a lot of sense to look at the vanguard factsheets and try to recreate them with a time lag after they get published, to save a few basis points in fees - which some have suggested doing in the past. However, if you think you know what you're doing, it could make sense to pore over the factsheets if the purpose is simply to validate your suspicion that they are not what you want.


Well, vanguard would say they "do things properly" within the parameters in which they operate - but if what they do is not what you want to do - then figure out how to build your own portfolio and do that, rather than buying their product.

Just to clarify, I totally buy into the logic behind the tracking methodology (at least for the more developed "efficient" markets), my concern is more that I buy into something like a VLS60 and suddenly I discover that I'm holding a lot of long dated Gilts with limited upside and substantial downside.

I find the whole non equity side of portfolio the most challenging by far in the current environment, short dated gilts have negligible returns (and in my noobness I would almost prefer cash) , long dated add in significant interest rate risk, and then you are moving into higher yield which obviously brings more risk into the portfolio, its a conundrum for me alright!

Just been reading through Hales book and he appears very negative on high yield bonds, but it probably would be my preference at present on gut instinct, although I well know the gut is not often to be trusted! Equally if I raise the risk profile by goign high yield should I then look at reducing equity further to reduce the overall risk of my portfolio even though that means greater high yield exposure.

So many questions and no real answers that I can find in this low rate QE ending universe!

PS my comment on doing it properly wasn't aimed at Vanguard, more at my S&S ISA which is currently full of actively managed funds

suts

Malthusian wrote: »

Fidelity and Blackrock are two different fund managers. Do you mean you hold BlackRock World Equity via the Fidelity platform?



As the name suggests, BlackRock is 100% equities so higher risk.

If you have all your money in BlackRock Global Equity then you have a lot riding on the fund manager making good decisions and no diversification against a crash in global equity prices. The Vanguard fund would diversify your investment over thousands of shares and bonds, would be expected to fall slightly less in a crash, and has significantly lower ongoing costs.

They are not very comparable as VS80 is a low-cost simple option designed to be suitable as the core of or even an entire portfolio for someone who just wants to track the global stockmarket, and BlackRock Global Equity is more suitable as part of the portfolio of an investor who has faith in the manager's investment decisions.

Sorry i didn't explain myself properly. The Blackrock is part of an 80/20 lifestyle fund i hold with Fidelity, 80% being the Blackrock portion. All is good with this fund apart from the fact it is not in an ISA

Linton wrote: »

There are significant differences between the funds. The Blackrock fund is 100% equity, VLS80 is 20% bonds 80% equity which will reduce both the performance and the volatility somewhat compared to a 100% equity index fund.

The allocations to the various countries differ with the Blackrock fund having half the 23% UK allocation of equity part of VLS80. Some people would argue that 23% UK is too high. Of more interest though is the difference in allocation to the various sectors...

Financial - VLS80 19%, BRGE 9%
Customer Staples - VLS80 10%, BRGE 31%
IT - VLS80 15%, BRGE 6%
Health - VLS80 11%, BRGE 21%

The significance of these allocations in that the Blackrock fund is attemptimg to reduce its risk by investing preferentially in industries that are less likely to be severely hit in a crash (people are always going to need their basic shopping and healthcare) whereas VLS80 may have a greater tendancy to follow the booms and crashes, reducing the risk with the 20% bonds.

So which you should go for may depend on your attitudes to the management of risk. If you wanted to go full out for performance you wouldnt use either fund. On the other hand if you were a cautious investor, neither fund would be really suitable either.

For what it's worth the VLS80 performance over 5 years is a bit ahead of BRGE but not overwhelmingly so. On the other hand the past 5 years havent seen a major crash.

Thanks for taking the time to share all of that information. My primary concern is that my Fidelity stuff is not wrapped in an ISA. I am toying with idea of moving at least some of it into a Vanguard 80/20 or similar within an ISA.
I think i,m right i saying that to do this i need to sell the Fidelity, release the cash and then buy the Vanguard?
I have been happy with the Fidelity over the past years and so was worried about moving any of it into something which didn't perform anywhere near as good,
By the way i,m a relative Noobie to all of this :-)

fiisch

bowlhead99 wrote: »

You mention this would be a first real foray into S&S and you already closed an S&S ISA earlier in the year and no longer have one........

Thank you Bowlhead99 this post was very helpful.


I suppose it is blind brand loyalty that is tempting me to use Halifax, coupled with the fact that the new opened ISA would visible under one of my regular banking apps.


However, from what I've learned, it'd be beneficial not to be checking the ISA's performance on too regular a basis, therefore being visible via a banking app I otherwise use regularly could well be construed as a disadvantage.


I will start via Vanguard's own platform - from small acorns oak trees grow and all that..!

TBC15

Filo25 wrote: »

Just to clarify, I totally buy into the logic behind the tracking methodology (at least for the more developed "efficient" markets), my concern is more that I buy into something like a VLS60 and suddenly I discover that I'm holding a lot of long dated Gilts with limited upside and substantial downside.

I find the whole non equity side of portfolio the most challenging by far in the current environment, short dated gilts have negligible returns (and in my noobness I would almost prefer cash) , long dated add in significant interest rate risk, and then you are moving into higher yield which obviously brings more risk into the portfolio, its a conundrum for me alright!

Just been reading through Hales book and he appears very negative on high yield bonds, but it probably would be my preference at present on gut instinct, although I well know the gut is not often to be trusted! Equally if I raise the risk profile by goign high yield should I then look at reducing equity further to reduce the overall risk of my portfolio even though that means greater high yield exposure.

So many questions and no real answers that I can find in this low rate QE ending universe!

PS my comment on doing it properly wasn't aimed at Vanguard, more at my S&S ISA which is currently full of actively managed funds

So how’s it going, and why didn’t you follow the bellwether.

Filo25

TBC15 wrote: »

So how’s it going, and why didn’t you follow the bellwether.

I assume you mean for the S&S ISA?

Not going particularly well unsurprisingly, but only been doing for a few months, and am learning from my mistakes as I go, as I said not much in there it is a case of drip feeding in each month anyway.

Obviously given the pension being a larger one-off I would rather be somewhat more traditional in approach there.

In terms of first thoughts maybe 60% global equity index tracker, 5% China (as I believe most of the index trackerts are underweight), 5% smaller companies, and currently 30% short dated corporate/higher yield bonds, any thoughts on that kind of allocation, more aggressive than most, maybe.

Did have a look at the VLS60 bonds but the bond split isn't really what I am after (although I may well be wrong there).

Although VLS100 would seem to offer some china coverage, which could save me needing an additional China fund, and I would be comfortable enough being overweight in the UK at present, so that might be a possibility for the equity section.