Critique my planned portfolio please

Tiglath

I've been reading about asset allocations, risk tolerance etc and am about to start my S&S ISA. I'm 46, and my pension and cash ISA happen elsewhere. I'm open to suggestions on anything obvious I've missed/gone too light/too heavy on below:

Vanguard Lifestrategy 80% - 20% (16% equity/4% bonds of total)
UK tracker - 17%
US tracker - 10%
Asia Pacific - 10%
Global bonds - 10%
Europe ex UK - 8%
UK value equity - 8%
Emerging mkts equity - 7%
Emerging mkts bonds - 5%
REIT - 5%

Any ideas welcomed I'll be starting off with a small lump sum dripfeeding various amounts by monthly saving via HL over 3 years to get to the above.

Jegersmart

To me it looks like a very diversified portfolio that should ensure average performance, or close to it.

HTH

J

westy22

This is the current allocation within the LS 80%:-

Allocation to underlying Vanguard funds
LifeStrategy 80 %
Equity Fund
Vanguard FTSE Developed World ex-U.K. Equity Index Fund 34.4%
Vanguard FTSE U.K. Equity Index Fund 28.1
Vanguard U.K. Government Bond Index Fund 9.3
Vanguard Emerging Markets Stock Index Fund 6.7
Vanguard U.S. Equity Index Fund 6.4
Vanguard U.K. Investment Grade Bond Index Fund 6.2
Vanguard U.K. Inflation-Linked Gilt Index Fund 4.4
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund 2.4
Vanguard Pacific Ex-Japan Stock Index Fund 1.2
Vanguard Japan Stock Index Fund 0.9
Total 100.0%

Why incur significant additional costs by 'doubling up' on many of these areas with extra funds? I would just go for the LS80% and then perhaps add a little extra seasoning by going overweight in Asia and/or smaller companies.

JohnnyJet

Like Westy said, you do look like you are doubling up on some funds. Being 46 why did you choose the Vanguard 80% and not the Vanguard 60%? I ask this because I am considering the 60% at a slightly younger age.

Tiglath

Thanks for the comments - much appreciated. I guess I'm a bit wary of having a large proportion of my 'pot' in one fund even if it's as diversified as the Vanguard one. I ummed and aahed about whether the VLS80 % on equities was too high and whether I should opt for the 60 instead. I thought I'd start off with the 80 and round it out with additional stuff, but looking at my spreadsheet based on the below I'm still at the 80% equity/20% bond mark; I shall ponder further on that one. I definitely get the point about doubling up on costs unnecessarily.

Comparing the 60 and the 80, the 60 doesn't have anything specifically Asia Pac, or US, or Developed Europe ex UK, whereas the 80 does.

JohnnyJet

I'm probably going to start investing in the Vanguard 60% this month on a drip feed basis. My thinking is that the Vanguard 60% should be slightly lower risk than the 80% and this will allow me to invest in some higher risk funds without my overall portfolio being too high risk. Then later on in life I may consider drip feeding into a second Vanguard fund, possibly the 20% fund, to further reduce my exposure to equities. But it's very tempting to go with the 80% fund when you see it rising faster than the 60% one.
By having so many funds aren't you simply duplicating what the Vanguard fund does automatically? Don't all of those funds incur a higher running charge? If so that could be a higher cost portfolio than is needed.

bigadaj

I'm a similar age, have very little in bonds currently both in invest nets and pension. I'm still nervous of bonds and think capital falls are due, equities perversely look less risky to me, though. Have reasonable amounts in cash, and won't consider bonds until something changes. I k ow the received wisdom with regard to life styling, but lets be honest, even after you've retired and assuming that you go into drawdown, are you really going to be largely in bonds and cash, not a wise strategy if you ask me.

Forever

I can understand why you don't want to rely on one fund. But as the vanguard is a tracker of trackers, having other trackers won't really benefit you very much.

I'm sceptical about having bond trackers within the Vanguard as it will track 'anything' - including debt you would normally want to stay clear of. Therefore, I wonder if a managed strategic bond fund where a manager is 'actively' managing is a better idea for your bond component and then use the vanguard 100% or 80% equity tracker? You could then slowly transfer funds from the more volatile Vanguard fund to your less volatile strategic bond fund as time goes on? I don't know if anyone else has a more informed opinion on this though?

Not many people seem to go for emerging market debt but I hold these and overall, they are a nice not too volatile holding. And they tended to do well during the last major crash too.

ColdIron

I'm a fan of EM bonds and some global bonds, and think they are better when actively managed. They would nicely counter the gilt nature of those in the VLS

bowlhead99

JohnnyJet wrote: »

By having so many funds aren't you simply duplicating what the Vanguard fund does automatically?

.
Yes although it does allow the ratios to be tweaked.

Don't all of those funds incur a higher running charge? If so that could be a higher cost portfolio than is needed.

In terms of ongoing running charges from Vanguard, actually the individual trackers can be cheaper. Example, their FTSE all share tracker is 0.15%, US tracker is 0.2% or if you just wantd broad US exposure you could get their S&P500 ETF at 0.09%. Compare to the ~0.3% rate for the Lifestrategy fund-of-funds.

Clearly 0.1% here or there is nothing compared to the difference in return driven by your high-level allocation between asset classes and regions.

Beyond the Vanguard charges there are costs from your platform of choice. Some platforms charge a fixed amound of pounds per fund invested per month, or a transaction fee on a buy or sell - in which case the lower the number of funds you're dealing in, the better. Others charge a fixed percentage fee on the value invested which is obviously better if dealing in smaller amounts and makes the number of funds held irrelevant.

As mentioned, funds mix affects return more than charges, so you should decide what you want to hold (or are likely to want to hold in future) before then selecting a provider that makes this economic. A problem is that the provider may change their charging structure and prices in a year or two as the industry feels the effects of the 'platform review' which changes their commission kickbacks from funds. If everyone went the route of fixed fees per fund held, fewer funds would be better. However the asset management industry has an ingrained culture of charging for things like admin, custody and management as a percent of assets held, and I'd be surprised if fixed fees per asset became the new norm.

To Tiglath's point about nervousness putting over 20% in one fund, I think this is unfounded particularly if you are then going to use the excess cash over that 20% cap to invest in the same asset classes with the same manager through the same platform.

Tiglath

I'm liking the idea of keeping the bonds out of the VLS, so current thinking is something like:

VLS100 - 65%
Strategic bonds - 15% - Old Mutual Gl. Str. Bonds?
EM bonds - 5% - Threadneedle or Aberdeen EM Bonds?
Global small cap - 5% - Vanguard or Invesco Perpetual?
Value - 5% - Fidelity Special Situations?
REIT - 5% - First State Global Property Securities?

I haven't looked at ETFs - I don't know much about them. Worth considering for one or more of the above?