Vanguard Life Strategy

bowlhead99

bigadaj wrote: »

More recently there was a thread on here staing that investments in vanguard global smaller co,panties index had out performed all the actively managed funds in that sector, which would be one area in which you would expect managed funds to have a distinct advantage. This is obviously anecdotal over a particular timespan but was an interesting point.

To contradict myself a little on only using trackers for big developed markets I do have the global smaller companies one from Vanguard, its the only product of theirs I use apart from the Lifestrategy 100%.

My rationale for getting it was simply that if I was tracking FTSE UK for example I would want more of the FTSE250 and smallcap than I could possibly get via the allshare, as when building a portfolio I'm just as interested in local and regional businesses with growth prospects as I am in faceless global megacaps ; whereas the standard 'All Share' mix used by Lifestrategy gives you over 4x as much from the 100 as the 250, and hardly any properly small stuff.

Sp applying the same logic to other regions, the global smallcap tracker would complement the largecap Lifestrategy and round it out a bit. It is all still general developed markets and so trackers have a chance of working (in terms of getting you general exposure) albeit zero chance of outperforming. If I wanted extra weighting in UK or European or asian smallcaps beyond that basic exposure (which I do, because the global tracker is 60% USA/64% North America), I would (and do) use specialist active funds.

In terms of performance over the last 4 years, we have been coming off extreme lows of early 2009 and so nearly everything equities-based has performed well, and with smallcaps being more volatile than largecaps, there has been lots of gains to be made even if you just randomly threw money at the sector. Within the smallcap space, IMA North America has been the best regional sector over 3 or 5 years so if Vanguard's global smallcap tracker is almost 2/3rds North America, it's got a good chance to do well. Of course the reverse would be true if we have a crash or even a smaller correction of the toppy markets.

Generally I tend to think that smallcaps are the type of thing that you should have someone research and invest actively, due to the lack of information on them and the less efficient markets. But it's a hell of a job doing that on a global basis - too much work to do well and even a good manager will struggle to notch up significant outperformance if he's been given a global remit to invest in the best little companies on the entire planet.

So, as a lazy person, I've realised I'm OK with just getting that general global exposure to the sector returns through Vanguard Global and then using a few regional smaller companies funds (which I'm only asking to deliver in their one niche region of expertise) to skew the overall exposure away from the USA that I'd have had through the Vanguard alone. In the grand scheme of things I've not had the Vanguard too long, previously only had the active regional stuff. Might have considered it years ago except Vanguard's super-cheap global smallcap tracker wasn't an option anyway before I started using SIPPs.

stardust09

bigadaj wrote: »

More recently there was a thread on here staing that investments in vanguard global smaller co,panties index had out performed all the actively managed funds

Personally I am rather intrigued by what sectors a co-panties index is investing in! Maybe it's about time I pimped my portfolio....

:rotfl:

On a more serious note, I am seriously considering this Vanguard global small cap fund and it's good to see it mentioned again as coverage of it is minimal elsewhere.

gruffalo55

I have been reading this thread with interest and both myself and other half are ready to make a start with S & S ISA's. Originally we were looking at both holding a lifestyle 60 but I am now wondering whether there would be an advantage in holding either different lifestyle products or one of us having the lifestyle 60 and the other person holding completely different funds. I would appreciate some opinions please on which way to go and other funds to consider if only holding the one lifestyle fund.

ogletshore

Hi All,
I'd be grateful for your views on this fund. I spoke to my IFA and he seemed to think as there is a potential Bond bubble looming, and 26.4 % of the fund is invested in none index linked government debt,it could present a problem should interest rates rise.

jamesd

Looming?! More like the pricking/busting of the bubble looming. Bond prices have been rising for many, many years. He's right to be concerned. But when and to what extent it will burst is hard to predict. End of all QE forms and return to normal interest rates maybe, but markets try to anticipate moves.

ogletshore

Thanks for your reply,but what does 'pricking looming' mean ?

badger09

ogletshore wrote: »

Thanks for your reply,but what does 'pricking looming' mean ?

I think jamesd meant that, rather than a 'Bond bubble' looming, it is the pricking (or bursting) of that already existing 'bubble', which is looming

johnd_2

Could I tag a quick and slightly unrelated question on to this thread:

How would one use a LifeStrategy fund for income? I'm guessing that once or twice a year one would simply ask to sell say 4% (or 2 x 2%) of the fund value and get that credited to a bank account? Any difficulties with doing that via eg HL or BestInvest?

(Yes I understand about risk profiles etc, but the analogy would be with say a drawdown pension and taking an income from it, while being content to stay invested substantially in equities. I'm really asking about the mechanics.)

bowlhead99

If you get the income version of the fund, it pays a periodic dividend (its own income will be higher than its expenses so there is some spare money to pay out).

You are free to do with this what you wish - take it out of the account and spend it, reinvest it in the fund, reinvest it in another fund, keep it sitting around in the investment account to invest or withdraw later. If you need more income than it pays, yes you could sell a bit to extract some of the capital and keep however much invested that you wanted.

If instead you got the 'accumulation' version of the fund, your dividend is not physically paid out to you and you end up with a fund that has more assets in it, and no cash on the side to decide what to do with. If you had that flavour of the fund you would definitely need to sell some, to get cash.

Of course, if you are expecting to need to sell x times a year you would be looking for a provider whose fee structure did not charge you transaction fees every trade. Many platforms have free buying and selling on funds, but some (e.g. Sippdeal) do not. Of course this would have to be balanced with annual holding fees on the platform, any wire payment fees to send money to your bank account (most do not charge but some do), any 'processing an income drawdown' fee if it was in a Sipp, etc. Different platforms have different fee structures.

johnd_2

bowlhead99 wrote: »

If you get the income version of the fund, it pays a periodic dividend (its own income will be higher than its expenses so there is some spare money to pay out).

Many thanks. Doesn't seem to be a lot of point in opting for the income version (with yield probably <2%) if you want to take an income of eg 4%. So I deduce that there's nothing wrong with the principle of using the non-income version, but it's really a question of looking into the detail of the platform-related charges for making a withdrawal and choosing a platform on that basis.