Vanguard Life Strategy

JohnRo

If you're just looking to passively invest regular contributions in index trackers then something like a Lifestrategy fund is going to be close to ideal. The nature of the product is effectively doing the servicing job a FA would otherwise be doing with additional costs, for you.

Charles Stanley have just introduced a monthly investment facility which has a minimum requirement of £50 per fund pcm. They have a clean platform charge of 0.25% p.a.

I've tried several platforms and imho they've easily the best user account portal on their platform, customer service has been impressive so far as well.

ozzage

black_taxi wrote: »

just noticed vanguard now have a global small cap index

how long has that been there?

thx

Since the end of March

Vanguard expands range on Hargreaves Lansdown

https://forums.moneysavingexpert.com/discussion/4518759

bowlhead99

ozzage wrote: »

Since the end of March

Vanguard expands range on Hargreaves Lansdown

https://forums.moneysavingexpert.com/discussion/4518759

I hold it through another platform.

My lifestrategy 100%, bought first week of August is up 19.1% ; The global smallcap bought first week of December is up 20.8%. If you must do all your investing through index funds, I think a global smallcap one is worth having and a good complement to a Lifestrategy. Of course they are well correlated to each other and as of end of day today, both FTSE100 and DJIA are at fresh highs so I wouldn't recommend piling in with your life savings...

smoulder

For fun I plotted Vanguard LifeStrategy 80% Acc against FTSE-100 total return (i.e. dividends reinvested) and was surprised at how closely they track each other. As a new user, I can't post links or images, but it's quite easy to generate this graph using the Trustnet or HL sites.

I appreciate that this LifeStrategy fund contains ~28% UK Equity, but am surprised that the remaining 72% of the fund does not cause greater deviation. Is there something that I'm missing?

grey_gym_sock

the major equity markets are highly correlated with 1 another. when the UK goes up (or down), the others are usually doing roughly the same.

this does reduce the advantages of investing internationally - you don't get as much diversification as you might hope. but this is more in the short term. in the longer term, there will probably be more difference in the returns from different markets.

bigadaj

How does the small cap fund work, there's obviously too many small stocks to hold so is it synthetic?

JohnRo

bigadaj wrote: »

How does the small cap fund work, there's obviously too many small stocks to hold so is it synthetic?

It attempts to track the MSCI World Small Cap Index

about 4200 small companies in the so called developed world.

bowlhead99

bigadaj wrote: »

How does the small cap fund work, there's obviously too many small stocks to hold so is it synthetic?

"The fund employs a "passive management" or indexing investment strategy designed to track the performance of the Index by investing in all, or a representative sample, of the securities that make up the Index, holding each stock in approximate proportion to its weighting in the Index"
(my underlining)

If you look at the fund fact sheet here, you can see a marginal difference between Consumer Discretionary and Consumer Staples actual Vanguard allocation vs MSCI theoretical - it's 0.1%. So on the date they took the snapshot for the factsheet they had one high level sector that rounded differently. They won't really be buying and selling 4200 companies when you give them your £50 or redeem it later. Of course, the total daily flows are more than your £50 so they can do a lot, and it's all automated for them.

This is same as what they do on the other indexes. Whether funds use so-called physical replication of an index, or are synthetic with derivatives, you don't always get a perfect match in your net profits or losses as they don't always have it bang on.

The difference between a tracker's effective coverage of the index and the actual index, together with the expense ratio (offset by any dilution levy), is known as "tracking error" which varies across managers and funds.

As an aside, I mentioned this gave broad exposure to smaller companies around the world and so a decent complement to a lifestrategy which gives broad exposure to large companies around the world. However, this index only covers the major 24 developed markets -not the 21 "Emerging" markets or the 26 "Frontier" markets to which you might like exposure and could seek out elsewhere. In the high equity versions of a Lifestrategy, you do get dedicated largecap emerging markets exposure - but you'd have to look somewhere else, ideally using active funds or ITs, to get smaller emerging stuff if you were keen on that risk/reward potential.

Also a note on what smallcap actually means. The largest company in the index has a market cap of ~$8bn. You may have heard of Tripadvisor at #10, with ~$6bn. The average company size is a billion (obviously a weighted average, the median is more like $600m). At the smaller end of the scale, the smallest of the 4228 companies is $9m. If you had invested £5,000, you would have 1p in that smallest company. In reality, Vanguard probably don't include it in the companies which they use for their representative sample as it really doesn't affect your return whether they buy it or not.

Robie

JohnRo wrote: »

If you're just looking to passively invest regular contributions in index trackers then something like a Lifestrategy fund is going to be close to ideal. The nature of the product is effectively doing the servicing job a FA would otherwise be doing with additional costs, for you.

Charles Stanley have just introduced a monthly investment facility which has a minimum requirement of £50 per fund pcm. They have a clean platform charge of 0.25% p.a.

I've tried several platforms and imho they've easily the best user account portal on their platform, customer service has been impressive so far as well.

I am interested in investing with them.

I can't see anywhere how much ongoing commission they pass back to us for fund holding in ISA.

Do you know?

Thanks.
Robie

JohnRo

Robie wrote: »

I am interested in investing with them.

I can't see anywhere how much ongoing commission they pass back to us for fund holding in ISA.

Do you know?

Thanks.
Robie

Vanguard funds don't have a commission element, or perhaps a better way to describe it is that there is no component in any of the price you pay for Vanguard funds that includes a commission payment to anyone.

Consequently there is nothing for anyone to pass back, which is why the likes of HL (and others) charge a specific fee for holding them. It is also why Vanguard index tracking funds have (historically) had a much lower OCF (ongoing charges figure) than you would see elsewhere.

That's starting to change now with the RDR and clean index fund classes from the likes of Blackrock and HSBC who also remove any commission element from the price you pay to hold the fund.

** on second reading I assume you're referring just to Charles Stanley; the reason there is no explanation or detail from them about commission rebates, is because they don't have any funds available to purchase on their platform that pay any commission so there are no rebates to be had. All the funds they list are "clean" and a sight cheaper than the old commission paying varieties to boot.