Vanguard Life Strategy

Mrshaw

Hey everyone!

The last week I have gone all in on investing research, having inherited about 20k. I instantly filled up my cash ISA with nationwide at 2.25% which is less than stellar and that low number led me on to investing. I fell on upon the popular blog 'monevator' and was thus turned to Vanguards LS.

I should say that I have forbid myself from investing anything in the first month in order to stop any costly mistakes so this is just me feeling my way around.

So far my plan is to invest 70-80% of my savings (not including Cash ISA) in the Vanguard 80% LS fund with the rest on emerging markets, global small caps and developed Europe

I am 22 so feel that I can take on risk and prepared to lose about 30% if all goes pear shaped. And the funds outside the LS fund are there as high risk/reward.

"ruperts" had a similar idea a couple pages back. He had a vanguard 60% LS but for me it seems maybe bonds aren't as safe as they once were. But that idea seems less than certain (the more i read the more its seems everyone know nothing). For some crazy reason i feel the 100% equity is safer but I feel that that is just me trying to time the market :-)

The other thing i see is that half my portfolio wont be tax free this year and I wont be able to do much drip feeding apart from 30-50 a month at most.

I know time in the market is key but for me it seems waiting 6 months for my next ISA allowance would allow my whole portfolio to be tax free and spreads my risk abit investing in two lump sums rather than 1.

Now as I said I really am just beginning and feel like I will never be ready to invest but you have to always have a plan.

AlwaysLearnin

Good idea not to rush in. At 22 you're hopefully looking at decades of investing, so plenty of time!

For the amount you can't get in to an ISA until next year, you can get 3-5% from certain current accounts to tide you over. If you're concerned about lump summing in to the ISA fund(s), then you could think about dripping in over a few months to spread out the purchases, for example £1k a month. A decision you will need to make is what platform to use. The comparison table on Monevator should help you there.

During your research you may have seen references to Tim Hales Smarter Investing book. It talks about balanced portfolios and the place for gilts/bonds etc which you may find useful to understand, albeit these are unusual times...!

TCA

bowlhead99 wrote: »

So applying the same logic to other regions, the global smallcap tracker would complement the largecap Lifestrategy and round it out a bit....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.

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.

bowlhead, I see from Ark Welder's thread that you hold Scottish Oriental Smaller Cos. Any views on Aberforth Smaller Cos and F&C Global Smaller Cos to complement large cap equity investment? Do you use any other small cap trusts or funds?

dutchism1958

Hi All,

I am thinking of going with the Vanguard LS 80%.I have inherited a portfolio worth about £28K which my wife has asked me to reinvest.It is currently sitting in a Vantage S&S ISA with Hargreaves Lansdown.
I have read all 42 pages of this thread and like some others would like to know "What do you think of the portfolio?".
The money has been with Cofunds and Fidelity for many years before it was transferred into Hargreaves recently to get all funds under one roof.The £28K is to be invested for 10 years and we can accept some risk.
Some of the stocks are not performing well and haven't been for a while,hence the proposal of transferring into the 80% VLS with H-L.

AVIVA INV ASIA PACIFIC PROPERTY CLASS A INCOME £2071
AVIVA INV EUROPEAN PROPERTY CLASS R GBP SETT INC £234
AVIVA INV PROPERTY TRUST INCOME UNITS £2097
AXA FRAMLINGTON HEALTH ACC UNITS £2129
FIDELITY GLOBAL SPECIAL SIT.ACC £1882
FIDELITY SPECIAL SITS ACC.UNITS £2447
INV.PERPETUAL CORP BOND INCOME UNITS £3
INV.PERPETUAL HIGH INCOME ACC UNITS £2300
INV.PERPETUAL INCOME,INCOME UNITS £1148
INV.PERPETUAL.LATIN AMERICAN INCOME £943
JUPITER CHINA INCOME £816
JUPITER EMERGING EURO OPPS ACC UNITS £1265
JUPITER HIGH INCOME INCOME UNITS £382
JUPITER INCOME INCOME UNITS £2810
M&G CORP BOND CLASS A INCOME £3762
NEPTUNE INDIA CLASS A RETAIL ACC £711
STANDARD LIFE SELECT PROPERTY RETAIL INCOME £3131

Any tips etc are greatly received.I feel Aviva,IP Latin America,Jupiter Emerging European Opps,M&G Corp Bond & Standard Life Select Property could be ones to replace?.I have read other's selections,and just want to check I am thinking along the right lines of transferring into VLS 80%.
Thanks.Gary.

takesyourchances

Few post back I was looking at maybe adding the Healthcare sector to my side funds along with my VLS as a bit of focus. I am not so sure to go 100% into the healthcare sector with a fund and then I looked at Invesco Perpetual High Income which at present is around 30% Healthcare within the fund.

Also I was thinking that I would like to round off my side funds which has various Asian sectors with some UK and thought about small cap with a separate fund.

Although Perpetual High Income is not a small cap fund, it would also bring some UK exposure back in the side funds and at the same time cover some Healthcare that I was exploring.

At the moment I feel this could be a suitable fund to add the my portfolio with the VLS 60% running at least 65% core.

Does anyone hold the Perpetual High Income fund at all or hold it along with a VLS?

This is all I hold at the moment below and I am considering this as an option.

VLS60% as the core
First State Asian Pacific Leaders
First State Emerging Markets
Aberdeen Asian Small Companies
Aberdeen Japanese Small Companies
Standard Life Global Small Cap
Considering Invesco Perpetual High Income

From my research it is a well respected fund and along with Neil Woodford as a fund manager and feel from looking over it all this could be a good holding to have within the 30% - 35% of side funds of the portfolio.

Any opinions anyone?

bowlhead99

IP High Income is mostly UK and mostly £10bn+ market cap. Every share it holds, you will already have in your VLS. They are looking for income stocks and it just so happens they have a lot of healthcare at the moment. Largecap healthcare does pay solid dividends so you would expect them to have a greater weighting to it than the standard FTSE all-share tracker which is still 9% healthcare. They have Glaxo, AZ and Roche in their top 5. Amusingly (if you were looking for healthcare) they also have British American Tobacco in their top 5, so they can get paid to create health problems as well as trying to solve them.

It is of course not a healthcare fund, which you wanted, nor a smallcap fund, which you wanted. So it doesn't really fit with the themes you were looking for other than some extra weighting to healthcare amongst its mostly-UK largecap theme. If you have bought into the idea that trackers are good for developed market exposure to largecap stocks, an have a large core investment in largecap trackers, I don't know why you would choose it.

It is a famously good fund and has produced decent results - though it's below average for its sector over the last year, it has done better over 3,5,10 years. Of course, you would have expected equity income sector to have done well in last few years as people dive into largecap dividend payers to try to beat the low yields on the traditionally safer stuff. At some point interest rates will correct and some of the high values in largecap income stocks will reverse. Arguably if the market corrects too far too fast, income stocks are safer in a crash than non-income stocks. If we avoid a crash, growth stocks and smallcaps will be better than the largecap income stocks which have a 'flight to safety and income' element to their current high values.

TCA wrote: »

bowlhead, I see from Ark Welder's thread that you hold Scottish Oriental Smaller Cos. Any views on Aberforth Smaller Cos and F&C Global Smaller Cos to complement large cap equity investment? Do you use any other small cap trusts or funds?

For UK I've been using Standard Life and Dunedin's ITs (latter is managed by Aberdeen), which have done very well over the last few years - both in terms of absolute value returned and against their sector peers.

For Europe I held European Assets Trust (F&C) which I'm currently out of, having had a bit more return from the share price than underlying NAV growth (though it's still at a slight discount at the moment). From a quick look at Trustnet I see it's pretty much top of its IT sector in 1, 3 or 5 years but my picking it was probably more luck than judgement. Actually trustnet only shows it against 3 others in the 'european smaller companies' investment trust sector, there are of course other ITs with exposure to european smaller cos and funds too.

I haven't looked at the two others you mentioned in any detail recently - as mentioned, I have just gone with a general global smaller co tracker and then topped up individual regions with active ITs or funds as I saw fit.

jamesd

One disadvantage of VLS as for most other trackers is that it weights its holdings by the value of the holdings on the stock markets - market cap weighting. Invesco Perpetual High Income doesn't. Instead, it eliminates the most volatile companies and concentrates on the income producers, a group that as a whole have historically outperformed the whole market, not just in the UK but in other markets.

One very substantial difference between VLS or any tracker and IP High Income is that it really is actively managed, with the manager getting actively involved in discussions about the future of companies it holds and sometimes very firmly advocating and voting in the direction that will favour the value of the fund.

Invesco Perpetual High Income can be expected to under-perform its sector during times of high capital value growth, when volatile stocks of the types it doesn't have high weightings towards will be growing in value faster. 2009/10 was a classic example of such a period. That makes now a moderately good time to be buying it if you think that the FTSE index is significantly above its average value, which it is, and don't plan to try selling the fTSE at a higher FTSE valuation based on market timing.

For smaller companies I've used both SLI and Old Mutual funds for the UK and both Henderson and Threadneedle for Europe.

There's definitely room in portfolios for a selection of funds picked because their managers have a good record.

dutchism1958

Thanks for this jamesd,
I have invested in IP High Income for a number of years because of the good reviews of Neil Woodford and the portfolio held.I have seen my 10K investment held in H-L for the last 4 years do very well,albeit flat at the moment.
What is SLI?.

dunstonh

SLI is standard life investments.

takesyourchances

Thanks again Bowlhead and to Jamesd for your replies they are much appreciated. I was actually amused looking at the holdings between Healthcare and Tobacco in the IP High Income, true creating a problem and trying to solve a problem

I have a percentage of UK Small Cap in the Standard Life Global Small Cap fund, so this was part of the debating with myself for a solely UK Small Cap fund as well. Healthcare funds I realize are niche and a sector, so not sure at the moment on going 100% with a fund into it at the moment.

Looking at my side funds I have 3 focused on small caps and a flavor towards Asia as well and an emerging markets fund, so when thinking of the IP High Income and after reading about it and looking at it I was thinking that it could be a good defensive add with income yielding selective companies being picked within it which included the Healthcare percentage held at the moment and of course the reputation of the fund itself and the manager came into the thinking as well.

Thank you also to Jamesd for your thoughts and for explaining. You have put some of what I was thinking to myself much better in regards to the funds performance in relation to the market which I was reading about partly as I have small caps and some more spiced selections which would be more volatile and picked for long term growth potential and was looking at this as also a potentially steady burner so to speak and defensive selection amongst the rest of the funds.

I could go add at a later point another funds option, a sector, Europe, another small cap focus etc. Ideally I would like 35% side funds with even allocation, so I think a max of 7 at 5% each in this portfolio. At the moment if I added another I would have 6 side funds. So I am trying to be a bit selective now for what I am adding and the IP Income idea as a fund I was thinking could be for a lot of the reasons Jamesd mentioned.

I will think it over and any more opinions are welcomed