Using the Vanguard Lifestrategy fund exclusively?

guymo

Linton wrote: »

If this argument that suggests the Vanguard funds are better diversified is correct you might expect them to be lower volatility ("safer") than the competition.

Not when the Vanguard fund is committed to being 80% in equities and the "competition" holds between 40 and 85% equities. You'd expect the VLS80 to be high up the volatility scale.

As for performance, well, would you expect a diverse mix of equities holdings to be top, middle or bottom of the list? VLS 80 comes out middling, because it can't take advantage of local outperformance.

Finally, to show that this kind of ranking is no way to decide what to invest in, take a look at the YTD performance rankings. VLS 40 is currently 14th, and 125th for volatility. Sure, a few months is not very long, but neither is a year or two.

Linton

foofi22 wrote: »

Just to add a bit of balance, and paraphrasing a little but aren't people usually informed that:
(a) investing is for the long term
(b) past performance is no guide to future performance!

However when 3 and 5 year records become available then some comparisons can be made for sure.

I don't hold Vanguard (I think it is a good vehicle) so I don't have an axe to grind

I would agree that we need a lot more data. 1 year is far too small to do anything other than flag something that might be worth looking at in the future. 3 or 5 years is rather small as we need a wide range of economic conditions for a good comparison.

However I would disagree that past performance is no guide to future performance. It may be when comparing two funds operating in exactly the same universe of shares with the same strategy. However it clearly is a guide (not a guarantee but a guide) when comparing different sectors or different strategies. To take an extreme example - equity funds vs bond funds. History shows that equity generally outperforms bonds. I dont think even the most ardent proponents of the random nature of investment returns would claim otherwise.

I think the Vanguard funds are a reasonable starting point for a new investor, far better than choosing random flavour-of-the-month funds or shares. However I dont believe they are particularly good as the core holding in an established portfolio in the modern globalised world where the major large company dominated markets are highly correlated.