Vanguard Life Strategy

gadgetmind

mark88man wrote: »

although you must be feeling pleased with your decision on a certain horse related investment

Yes, but more so the prefs than the ords. The latter did the job and were ditched but the prefs are LTBH unless the mad money decides to make me an offer.

by garbage I meant scam/cowboy territory not respectable (or nearly so) companies just down on their luck

Ah, fair enough. The good thing about panics is that said herd ditch everything, both good and bad, and only keep hold of a few odds and sods. I ignore the latter and grub through the dung heap of the former.

However, it must be said, I know people who'll shove £100k into something I'd hesitate to slap a fiver on. Respect!

grey_gym_sock

oh, i see, so the horse-related investment isn't to do with lasagne ...

bowlhead99

Carpi09 wrote: »

I will have 10k ready for April but I'm going to play safe and drip feed it. I also believe a downturn is likely to happen at some point this year and will invest when prices are lower.

May well regret it but aslong as I keep up with the drip feeding, I can't really go wrong.

mark88man wrote: »

pound cost averaging (drip feeding) is one of the few techniques that seems to generate good returns

broadly it encourages you to buy more when the prices are low and buy less when the prices are high

PCA is certainly recommended by many in the investment world. You will see them extolling the virtues of it on various websites: Sippdeal, TD Direct, Fidelity, Blackrock - they all say it's something you can benefit from.

Caveat emptor. What they have in common is that they are trying to sell investment products. It is difficult to convince a customer with limited resources to buy £1000-2000 of your product against all the rivals out there. It can be easier to get him to invest £50-100pm for one to two years, following which he will probably stay with you for many more, if you can sell him on a clever technique which makes his investment sound less risky as well as more affordable.

If you invest £1200 today at 100p, and the price is still 100p in a year's time, you neither gain nor lose on the capital. You just pick up a year's worth of dividends on the £1200.

Of course, the price will vary over the year. If you drip feed monthly and the price goes down then back up, you will have more than 1200 units at the end. So says the advice.

If it goes up then back down, you will have fewer units at the end. They don't promote this aspect of it, because it would push you towards wanting to put more in at once, and if cautious that might scare you off altogether; neither would it lock you into being a passive longterm customer who keeps the direct debit going.

Both of these 'drip' outcomes leave you only earning dividends on the average £600 you had invested over the year. If you take the view that markets go up over time (which in the long term they do), the mathematically correct thing to do is invest the funds as they become available, because 'time in the market' is more valuable than 'timing the market'. To someone whose £100 becomes available for investment once a month, then yes invest monthly. To someone who has the £1000 already available now: to defer any part of it is to engage in market timing, whether structured (£x a month) or unstructured (keep a couple of £k back in case things get generally cheaper).

As long as you recognise this is what you're doing by holding back and dripfeeding, that's fine. The 'market' has just jumped up 10%+ in a few months, and some parts of that market will inevitably fall at some point and present a better opportunity to buy. Which parts and when, is an unanswerable question. If you feel that largecap stocks are going to spend more time over the next year below their current price than above, you can defer your investment and dripfeed over the year. If the other way round, you should invest now.

Alternatively, you can find things other than index funds of largecap stocks to invest in today, and rebalance into the largecap indexes over the course of the next year as the alternatives go up or retain their value and the largecap indexes have gone down. Cash is not the only alternative to a largecap index fund.

both Ben Graham and Warren Buffett (two rather famous US investors) are supportive of the approach

Buffet is a fan of investing and if asked when you should invest, he would generally say that the typical investor is not successful in timing the market and therefore they should invest as and when they can, and keep going through thick and thin. This is absolutely not the same as saying that if you have committed cash available for an investment plan you should defer your investment in the hope of being able to catch a lower price via some mechanical 'buy little and often' approach.

Also, while Buffet says the novice investor should not try and time the market, nor pick their own stocks, it is notable that buying out of favour value stocks at tempting prices is something that both he and Ben Graham have made their fortune by doing. As an example, he did not buy a couple of hundred million pounds of Tesco shares every month for two years. He waited until a day when Tesco's price was falling rapidly and invested several billion. He times his investments. But then his 50 years of success is proof he knows what he is doing.

Carpi09

Bowlhead, thanks for that. It seems as though you have just copied and pasted that from somewhere, very well formatted and very well explained! :T

I was reading through it and thought maybe I should just put it all in now and then I read near the end, although only 10k, buffet timed it when the shares were falling.

Could someone explain how dividends work with the likes of the VLS fund?

Stochasticity

If you have a lump sum you're able to invest immediately, then drip-feeding into markets is likely (probabilistically) to (i) lower returns (because markets go up over time, on average) and (ii) lower volatility (because it takes you longer to become fully invested, and anything that's not invested is sitting in cash, which is less volatile).

It can be perfectly sensible to drip-feed a lump sum into markets if you're willing to accept that trade off. It may work out in your favour (because markets drop) and it may not work out at all (because they rise). If it doesn't work out, your investments will still have gone up.

Dividends - the Lifestrategy funds pay out once a year, on 31 May.

black_taxi_2

Just read thru this thread

VLS seems the perfect way for the passive investor

I'm close to being mortgage free so will basically swap mortgage payments for investment/savings 7k a year.

I'm single have no pension or savings---so aged 51 you thinking hard about last stage of life

Also learnt you can't have everything--bigger house/car/pension.

Priorities is a lesson in life

Also learnt health isn't guaranteed

will prob choose 80/20 till age 60
Then switch to 60/40 till 70

Basically building up a large nest egg

I won't be the richest but I will enjoy restaurants/cafes/short breaks--sporting events/city breaks

takesyourchances

Great reading tonight and excellent explanation by Bowlhead on drip feeding etc, all very good to read over

After my drip feeds this Thursday I might make a small additional payment this month into the Lifestrat, maybe the min around £250 or bit more to put a bit more in this tax year before April.

I am balancing money out for my cash ISA for April as well as other things but I am tempted to put a bit more in to the S&S ISA, but I am still balancing medium term cash out as well despite the terrible cash ISA rates!

There will be at least another £250 going into the Lifestrat core later this month on top of the drip feed this week which will bump the Lifestrat core up a bit more

I feel like I have a direction for this year now, I also want to increase the Lifestrat core as well before adding any more additional side funds etc on top of what I have got.

Thanks.

takesyourchances

black_taxi wrote: »

Just read thru this thread

VLS seems the perfect way for the passive investor

I'm close to being mortgage free so will basically swap mortgage payments for investment/savings 7k a year.

I'm single have no pension or savings---so aged 51 you thinking hard about last stage of life

Also learnt you can't have everything--bigger house/car/pension.

Priorities is a lesson in life

Also learnt health isn't guaranteed

will prob choose 80/20 till age 60
Then switch to 60/40 till 70

Basically building up a large nest egg

I won't be the richest but I will enjoy restaurants/cafes/short breaks--sporting events/city breaks

Great to hear that you have got great information from this topic and that the VLS seems to be for you. It is a well allocated all in one set up and with low cost fees.

It is an achievement getting close to your mortgage being paid off and one of life's great expenses cleared and to swap your payments around into an investment for your future is a good idea. You will still be able to accumulate over the years and hopefully with steady growth compounding it.

If you have enough income to do what makes you happy in life that is all we can ask for, if you can enjoy restaurants/cafes/short breaks--sporting events/city breaks that sounds good to me

If your overheads are reasonable and you are comfortable people can be in a much better position that others with higher income but with higher overheads and bad debts etc.

I still have a way to go yet though so trying to grow my investments ideally at some point in life I would like to be able to spend time outside of the UK for part of the year in nicer climates and lower living costs, all I can do is try :beer:

Good luck with it all and the main thing is to start no matter what age.

I know people in their mid 40's and 50's some related to me with nothing saved and no pensions and basically say there's no point now a pension won't be worth anything or this and that, excuses really and waste a lot of money in my eyes.

Each to their own really, I enjoy myself also but always pay myself first and I would rather at least try than not

Thanks.

bowlhead99

Carpi09 wrote: »

Bowlhead, thanks for that. It seems as though you have just copied and pasted that from somewhere, very well formatted and very well explained! :T

haha! I have a whole load of investing concepts and perspectives in my head, and as I find it much easier to learn complex stuff by taking it back to basic principles, it's quite easy to put together an 'explain it to me like I'm a five year old' version.

If you read my other 200 ish posts you might learn something, alternatively it might help cure your insomnia as being concise is not my greatest skill

I try and think about issues from all the angles so for example, there are various posts where it starts off reading like I think trackers are awesome and only in passing do I mention that they don't suit all markets ; and others where I am quite down on them for what someone wants them for and then surprise people by saying I have a chunk of my money in them.

The easy thing about commenting on investments is that everybody has different goals and so there are always a range of right answers, which always makes it easy for me to waffle on with a couple of perspectives without necessarily saying anything 'wrong'!

I was reading through it and thought maybe I should just put it all in now and then I read near the end, although only 10k, buffet timed it when the shares were falling.

Yes he did but he already had a billion in Tesco, so as you would imagine, he and Charlie (and the younger guys who presumably do all the analysis and present the investment cases) know the business pretty well, and what they're looking for in terms of longer term results. His ethos is don't buy a share if you wouldn't want to own the whole company. If the company becomes more affordable without changing the long term outlook, why not buy more if you have the funds.

The difference with the rest of us is that we don't have huge research teams (without paying an investment manager) and so he advises us that we can pick up 5000 large businesses through a tracker and in the long run we will participate in global growth, and if they instead all go bust you have much bigger problems than a drop in your ISA...

takesyourchances wrote: »

I am balancing money out for my cash ISA for April as well as other things but I am tempted to put a bit more in to the S&S ISA, but I am still balancing medium term cash out as well despite the terrible cash ISA rates!

A comment here is that there's no reason to dive into buying more shares in anything just to use an allowance up, unless you are definitely going to max both parts of your ISA allowance each and every year from now on.

And using an ISA for investments isn't always necessary as a lower rate taxpayer, or as someone with spare CGT allowances. And if you're higher rate taxpayer, a pension is arguably better at tax saving if you can wait longer for the returns.

They say don't let the tail wag the dog, in your case the "S&S ISA limit" is the tail which should not be wagging the "investment choice and investment timing" dog. If you are not using your cash ISA limit it's perfectly valid to put money in that instead, particularly if you'll have short or medium term cash needs. Rates now are not so important as ensuring availability of the tax shelter a few years later when you might be paying a higher rate of tax and interest rates might be several times higher. And you can transfer a cash ISA to S&S easily in future, it's only going the other way which is outlawed.

Also if your risk appetite is not so high that you want to dive in 100% equity today, it's notable that a cash ISA probably pays as much fixed interest as a 10 year bond from most first world governments at the moment, and with zero risk of loss whereas the capital value of a bond can decline.

takesyourchances

bowlhead99 wrote: »

A comment here is that there's no reason to dive into buying more shares in anything just to use an allowance up, unless you are definitely going to max both parts of your ISA allowance each and every year from now on.

And using an ISA for investments isn't always necessary as a lower rate taxpayer, or as someone with spare CGT allowances. And if you're higher rate taxpayer, a pension is arguably better at tax saving if you can wait longer for the returns.

They say don't let the tail wag the dog, in your case the "S&S ISA limit" is the tail which should not be wagging the "investment choice and investment timing" dog. If you are not using your cash ISA limit it's perfectly valid to put money in that instead, particularly if you'll have short or medium term cash needs. Rates now are not so important as ensuring availability of the tax shelter a few years later when you might be paying a higher rate of tax and interest rates might be several times higher. And you can transfer a cash ISA to S&S easily in future, it's only going the other way which is outlawed.

Also if your risk appetite is not so high that you want to dive in 100% equity today, it's notable that a cash ISA probably pays as much fixed interest as a 10 year bond from most first world governments at the moment, and with zero risk of loss whereas the capital value of a bond can decline.

Very well put again! and an excellent phrase which is 100% correct, the tail was wagging the dog with my S&S ISA limit, my cash ISA is filled for this year and I have my cash ISA limit sitting ready for April and was having a few back and forward conversations with myself about using more of my remaining S&S limit up this year, even though I was telling myself to keep my cash ISA limit ready and not be using it

Part of the psychological game being played, the tail waging the dog sums it up well.

I am more than happy with what I have started with so far and feel the right thing to do is keep my cash ISA ready and not let the tax year approaching dictate my original plan.

After my drip feeds this week a last £250 I would be comfortable with before April which will increase my core lifestrat fund a little and still let me fill my cash ISA in April and not alter my plans that I was talking to myself about

Wise words and I understand that the tax shelter is important and also I need to maintain my cash access needed for 5 years and under as well. Good point about the bonds etc and the capital.

Interesting that it is possible to transfer cash ISA funds into the S&S ISA as maybe in the future this will be an option if I feel I am holding to much cash and want to transfer some over to the S&S.

Thanks again.