Vanguard Life Strategy

JohnRo

You've got the wrong end of the stick.

As already explained up thread, you will only pay the headline TER or OCF as it being called now.

For the Lifestrategy 100% equity that annual OCF is 0.33% of the value you hold. That is it, end of, done. The underlying funds are just the ingredients, it's the chosen Lifestrategy fund you're paying for.

However, when you purchase that 100% equity fund there is an additional, one time dilution levy or 0.22% charged by Vanguard which covers the stamp duty charged by HMRC on equity purchases. That doesn't mean the OCF is 0.55% though.

brasso

JohnRo wrote: »

You've got the wrong end of the stick.

As already explained up thread, you will only pay the headline TER or OCF as it being called now.....

OK, thanks. This document from the horse's mouth actually explains it quite well -- https://www.vanguard.co.uk/documents/portal/press_releases/lifestrategy-fund-launch.pdf

jingleberry

brasso wrote: »

OK, thanks. This document from the horse's mouth actually explains it quite well -- https://www.vanguard.co.uk/documents/portal/press_releases/lifestrategy-fund-launch.pdf

Thanks for this. The document does talk about Vanguard Life Strategy being a fund of funds, and this usually rings alarm bells with me because of the propensity for higher changes. So any holder of a consituent fund, whether it is you, me or a fund of funds, will pay that funds AMC, which acts as a partial brake on growth of the fund value. In addition the fund of funds levies its own AMC, so in normal circumstances purely from a charges perspective it may be best to avoid funds of funds. I'm not sure that the document explicitly sets my mind at rest (either in terms of the AMC or the initial dilution levy) although it does imply that there is no double charging going on with these words (when explaining why some VLS charges are higher than others): 'The charges on the component funds lay within a range of 0.15% to 0.55% and as a rule of thumb, charges are higher for equities than for bonds. Within equities, they are higher for international mandates, particularly Emerging Markets, than UK equities. The management charge of the Vanguard LifeStrategy Funds needs to cover these underlying costs as well as the extra expenses of maintaining the funds such as audit and legal fees.'

Stochasticity

jingleberry wrote: »

Thanks for this. The document does talk about Vanguard Life Strategy being a fund of funds, and this usually rings alarm bells with me because of the propensity for higher changes. So any holder of a consituent fund, whether it is you, me or a fund of funds, will pay that funds AMC, which acts as a partial brake on growth of the fund value. In addition the fund of funds levies its own AMC, so in normal circumstances purely from a charges perspective it may be best to avoid funds of funds.

Take the Vanguard Lifestrategy 60% Equity fund (which has an initial charge of 0.24, an ongoing charge of 0.31% and nil exit charge). Its underlying holdings (and their charges if bought individually) are as follows:

Vanguard FTSE Developed World ex-U.K Equity Index GBP - 33.95% - nil initial charge - 0.30% ongoing charge

Vanguard FTSE U.K Equity Index GBP - 21.10% - 0.50% initial charge - 0.15% ongoing charge

Vanguard U.K Government Bond Index GBP - 18.86% - 0.10% initial charge - 0.15% ongoing charge

Vanguard U.K Investment Grade Bond Index GBP -12.45% - 0.75% initial charge - 0.20% ongoing charge

Vanguard U.K. Inflation-Linked Gilt Index - 8.51% - 0.10% initial charge - 0.15% ongoing charge

Vanguard Emerging Markets Stock Index GBP - 4.99% - 0.25% initial charge - 0.55% ongoing charge - 0.25% exit charge

If you were to construct your own portfolio using the six underlying holdings, you'd pay 0.24% initially, 0.23% per annum and an exit charge of 0.01%.

The LifeStrategy fund therefore costs you nothing extra initially, an extra 8 basis points per annum, and saves you 1 basis point when you come to sell.

So there is an additional cost to holding a fund of funds. However, the extra 8 basis points is a decent deal for automatic rebalancing (which adds value over the long term), for the simplicity of holding just the one fund, and for smaller investors in particular, for minimising per fund platform charges.

It being Vanguard, who are owned by their investors, you can also be relatively confident that the extra cost of the LifeStrategy fund simply reflects extra costs, rather than profit.

jingleberry

Yes I agree with you, provided that the life strategy fund charges are not in addition to the underlying fund charges. As I say, I think usually with funds of funds they are levied in addition to the charges for the consituents.

takesyourchances

An update on the side funds being discussed previous in this thread, I decided over the weekend to open a second side fund to go along with my Vanguard lifestrat 60% and opened the First State Global Emerging Mkt Leaders Class A Accumulation with £550. To my surprise it is live on my HL account today.

I decided on the extra Global Emerging Market holding at the moment to add a bit more exposure to these sectors for the long term growth potential.

At the moment I checked the portfolio percentage holdings at present and they are:

Vanguard Lifestrat 60% - Core Investment 72.4%
Aberdeen Asian Small Cap Fund - 13.5%
First State Global Emerging Markets - 14.1%

On March 7th I will drip feed £250 to my LS 60% which will bring me to 3K invested in it and £50 to the Asian Small Cap which will bring both side funds then to £550 so far invested in them.

This is my last opening of a new fund for this tax year and a bit more remaining S&S ISA allowance used, I will adjust the drip feed over the 3 funds from April and look towards bringing the two side funds to around 10% each.

At the moment these 3 running are enough for me to contend with, the drip feeds will adjust the percentages held in the portfolio over the coming months ahead.

The other fund in mind was the Standard Life Global Small Cap fund, which I was considering to diverse into small cap in the developed world mainly with the LS 60% being mainly large cap in the developed world. I can keep this idea in mind still for ahead, or maybe something else, I felt for now the extra Emerging Markets holding as above would give extra exposure away from the UK and USA mainly in the Vanguard LS.

So now I can drip feed into these three and look to have the two side funds running around 10% over the coming months.

Still got more reading in Smarter Investing to do and hopefully this structure at the moment goes well

Any thoughts is appreciated, this is a long term view and I will keep drip feeding away into these and increase the overall investment.

This is a great topic and also I read various posts through the forum which has been excellent as well.

Best regards.

latecomer

Have to say this is a great thread - been following it since the start while trying to decide what I'm going to do with my savings going forwards. I'm mostly sold on passive investing via the Vanguard LS strategy but haven't had time to do any reading other than here and monevator.com yet. Mind you there is no immediate rush as we're not going to fill our ISAs this year, or at least not to the maximum allowed having put most of our cash savings into the mortgage.

guitarman001

Funds of funds is the ONLY way for me, also - otherwise I lose money left, right and centre.

I bought First State Emerging Markets Leaders (how is that different to the 'non-leaders' option?), Vanguard US Equity Index Acc and also Vanguard 60% Acc. Considered Kames High Yield bonds but if inflation rips I don't want a bunch of bonds (other than inflation-linked ones, but can't bring myself to pay into ANOTHER Vanguard fund at £2 a month). Can't seem to find Aberdeen Asian smaller companies - oh wait, it's an investment trust? Not sure about how to hold/deal that. First State Sustainability also ranks high. However these are at all-time highs - not worried about a fall?

I have a spare £2k now after selling out of LLOY and BDEV and need to put it in another fund (if not back into the above - though I'd rather stay out of UK funds, so not 100% keen on putting it back into Vanguard 60%)

takesyourchances

latecomer wrote: »

Have to say this is a great thread - been following it since the start while trying to decide what I'm going to do with my savings going forwards. I'm mostly sold on passive investing via the Vanguard LS strategy but haven't had time to do any reading other than here and monevator.com yet. Mind you there is no immediate rush as we're not going to fill our ISAs this year, or at least not to the maximum allowed having put most of our cash savings into the mortgage.

Yes I agree this thread has been really great and a lot of very interesting discussions and points throughout it. The Vanguard LS offers a good simple core mix for me personally for passive investing, I read monevator regular now and have been enjoying the interesting smarter investing book and have read some more last night.

My cash ISA I have money ready for it for April which will fill the allowance and I will be drip feeding my funds each month in my S&S ISA, I am happy to be getting on with the 3 funds I have at the moment and working away on them as in my above post.

I have a 5 year bond maturing this October, so can look at re-investing part of it into these funds and could look maybe at an additional fund then from part of this maturing bond, I still have the Aberdeen Global Small Cap in mind when this bond matures so will see

I am pleased to be underway now with this, I feel I was to cash ISA based to long and the rates are not good, I was after a bit of structure for the S&S ISA and now I have the Vanguard Life Strat and the 2 side funds I feel more content there is a direction now and I can work away at investing in these. I will update my portfolio percentages as I go along.

Good luck also latecomer if you decide on the Vanguard Lifestrat, personally I am happy to have started into this passive investing this year and let us know how you get on if you decide it is for you.

Best regards.

takesyourchances

guitarman001 wrote: »

Funds of funds is the ONLY way for me, also - otherwise I lose money left, right and centre.

I bought First State Emerging Markets Leaders (how is that different to the 'non-leaders' option?), Vanguard US Equity Index Acc and also Vanguard 60% Acc. Considered Kames High Yield bonds but if inflation rips I don't want a bunch of bonds (other than inflation-linked ones, but can't bring myself to pay into ANOTHER Vanguard fund at £2 a month). Can't seem to find Aberdeen Asian smaller companies - oh wait, it's an investment trust? Not sure about how to hold/deal that. First State Sustainability also ranks high. However these are at all-time highs - not worried about a fall?

I have a spare £2k now after selling out of LLOY and BDEV and need to put it in another fund (if not back into the above - though I'd rather stay out of UK funds, so not 100% keen on putting it back into Vanguard 60%)

Yes funds of funds my approach also, it lets us have different holdings in lots of areas and across a few funds you can create a good global mix and exposure mix into various companies and locations around the world. I feel much more comfortable with this approach and the passive approach.

I prefer this to placing large amounts into one or just a few company stocks and this is allowing me to build the investment up over time and regular every month.

Good to hear that you also have the First State Emerging Markets Leaders along with your Vanguard LS fund, I am happy with this choice and the extra coverage it gives, I looked into it also on citywire's web site and on the net and the fund manager seems to have a very good record and rating as well. Not sure on the non leader fund to be honest, would need to look.

I felt there was enough bonds in the 40% of the Lifestrat 60% to be adding anymore at the moment.

The Aberdeen Asian Small Cap fund I have is a fund, I have it through HL. Here is a link to it on HL if this is of use to you.

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/a/aberdeen-global-asian-smaller-companies-d2-gbp-accumulation

The Aberdeen Asian Small Cap has been performing very well from I took it out, I see it is at a high etc, regarding being worried about a fall, I have thought over this even before I took these funds out, I don't want to get comfortable and think these will rise and rise all the time and this is normal, I considered all this before hand and accept the risk for return long term.

My thinking was on opening with £500 etc and a minimum drip feed of £50 per month that if the market went up and down then the drip feeds would be capturing the various prices of any fall's and rise's over time.

My first £50 drip feed is 10% of my initial investment and with a long term view in mind it wouldn't take long for drip feeding amounts to add up to more value invested than the initial opening investment of £500 capturing whatever the market price is when the drip feed buys into the fund each month over and over. I hope my explaining of thoughts makes sense

With the side funds choices I have, I did not want to be over exposing into the UK and Europe and Asia I feel has a good long term growth potential and was happy with the countries and allocations in the Asian Small Cap.

My mind was on this approach and the smarter investing book has helped with the long term perspective as well so far.

Hope that link to the Aberdeen Asian Small Cap fund helps you and good luck:)

Best regards.