Vanguard Life Strategy

guitarman001

The talk of highs is unnerving but I also keep hearing how inflation-adjusted etc, we're well off previous peaks. I just don't know.

Everybody knows my story. Lost £20k in risky AIM shares. Lost a tiny bit on gold. Almost bought some more gold months ago but WOW I am SO glad I didn't! I hold LifeStrat 60%, Vanguard American index, and First State Global Emerging. To date they're up 4.5%, 9.5% and 1%, respectively. Yeah, considered cashing some in and waiting for this 'drop' but there really is something to this passive investing, for the first time I'm making some money - £300 or so up on just over £5k invested, so only £19.7k to go to recoup my losses lol! Haven't been adding, though... Not yet, anyway. If there is a tumble from here, I can at least pull some money out, adding right now makes me a tad nervous. Will have to think on a strategy as I have some dosh maturing soon and don't know where to put it. Almost closing in on £40k savings now, should have been £60k but I was an idiot. Also should have saved more what with recent payrise but life has 'thrown a curveball' and I'm only just starting to look at saving again.

Property market will pump up a little soon due to government scheme but after that, then what? One bed flat costing a million quid? And with rates likely to go up? No thanks, I'm steering clear of that - looks like any dosh will be used to get out of the country.

Pleased so far with the LifeStrat investments, so easy (I can get on with my life without concerning myself over share analysis) and actually making returns for once. The American tracker has had such a good run.

gadgetmind

guitarman001 wrote: »

The talk of highs is unnerving but I also keep hearing how inflation-adjusted etc, we're well off previous peaks. I just don't know.

Do the maths.

If you use a CPI and RPI calculator such as this one -

http://fplusr.net/indexation.aspx

You see that the pound is worth either 50% less or 35% less now than in Dec 1999 depending on whether you use CPI or RPI. I trust RPI far more but let's use the lower number.

The FTSE 100 hit 6950 in Dec 1999, which is the same 6950*1.35=9408 now. Use RPI instead and you get over 10,000.

Let's run it the other way. The FTSE 100 is at 6760 as I type. This is the same as it being at 5000 in 1999. Would that have worried you then?

Regards your other comments, you seem to be getting a handle on diversification and asset allocation, but you need to work on understanding volatility and try to avoid market timing.

black_taxi_2

NO ONE knows how to TIME the market

a well known analyst said SELL 2009,since then mkt up 130%

it's time in the market not timing the market

Ark_Welder

Quite a number of MSE'ers were timing the market in back in August to October 2011 - buying into the falls...

There have been, perhaps three times over the last twenty seven years of investing where I have been able to time investing with any modest success: 2000, just after the peak (a combination of the Lasteminute.com IPO being pulled and then re-issued at a price 70% higher than originally, and the yield on my portfolio - including cash - falling to just over 2.5%); the troughs of 2003 (just before first Gulf War) and 2009 (credit crunch), both being at times of extreme negative sentiment and the yield on the portfolio rising above 6.5% in both cases. But have been wrong more times that right with attempts at timing major changes (as an example, reducing high-yield bond holdings in 2012).

On the whole, I use 'timing' more as an opportunity for re-balancing, such as a recent sale of overweight equities to raise underweight cash levels, leaving a less-overweight equity and still-underweight cash position.

I think that at extremes of sentiment, a certain level of timing is possible - if the investor has the cajones to go totally against the flow at that time - but not at any other time. And even with QE, I don't see any extremes of sentiment right now in either direction.

gadgetmind

Ark_Welder wrote: »

On the whole, I use 'timing' more as an opportunity for re-balancing, such as a recent sale of overweight equities to raise underweight cash levels, leaving a less-overweight equity and still-underweight cash position.

My heavy buying in 2009 and 2011 was also the result of deciding to redeploy existing and incoming cash rather than me choosing to heavily sell earlier on.

I've got no issue with letting value metrics tilt your asset allocation, but it should only be a minor tilt, and you do need to accept that you're almost as likely to be wrong as right!

Reacting like a scared rabbit to every bit of news flow isn't going to give someone either good returns or a solid night's sleep.

Ark_Welder

gadgetmind wrote: »

I've got no issue with letting value metrics tilt your asset allocation, but it should only be a minor tilt, and you do need to accept that you're almost as likely to be wrong as right!

The re-balance was a tad over 1% of assets. As much to do with wanting a bit more instant-access cash than anything.

Ark_Welder

I was going to re-edit the previous post, but the reply started to get a bit longer than expected...

gadgetmind wrote: »

Reacting like a scared rabbit to every bit of news flow isn't going to give someone either good returns or a solid night's sleep.

True, but knowing this is down to experience as much as confidence. I can't be confident that equities won't be lower in a year's time (apologies for the double negative), but experience allows me to be comfortable with continuing to hold equities. Investors that are newer to equities - perhaps those being driven out of cash in the chase for yield - have yet to build up their own experience. Combine that with the fact that equities can fall in value ('lose', as some would word it) and the result might be a lower level of confidence that equities are able to provide a suitable returns - even though equities can, and do, rise in value too.

I think that the lesson that I have learned over the years is to not be panicked into making changes: either selling when markets (of any kind) are falling, nor into buying just because they are rising. But I can still see why doing both of these might be considered: the fear of losing, and the fear of missing out. Once individuals can see past those two then they will have a better appreciation of the benefits of time in, over timing of.

Sanoffo

So I took the plunge last week on 15k in the Vanguard LifeStrategy 80% Equity GBP Accumulation. This is my first investment and yes I am feeling shakey after losing £280 in 4 days.

Im looking for a 5+ year investment but now fearing I'm going to lose a significant amount based on my first few days. Is this normal? At what point do you take what you have left and run?

jem16

Sanoffo wrote: »

Is this normal?

Yes, very normal. If you are feeling unnerved at this point, you are investing above your appetite for risk.

At what point do you take what you have left and run?

Never. That's the worst thing you can do is buy high and sell low. Unfortunately it's a mistake many new investors make.

If you are looking for a 5 year investment, then forget about it for 5 years plus.

bigadaj

Sanoffo wrote: »

So I took the plunge last week on 15k in the Vanguard LifeStrategy 80% Equity GBP Accumulation. This is my first investment and yes I am feeling shakey after losing £280 in 4 days.

Im looking for a 5+ year investment but now fearing I'm going to lose a significant amount based on my first few days. Is this normal? At what point do you take what you have left and run?

Don't panic. Stick with it and things should be fine. Markets are at near highs but most other asset classes, including cash, bonds and property are probably less attractive now. Just leave it alone, check it every month or so, and in time it will accumulate slowly, but with swings up and down.