20 year investment

cwrw

Hi,
After going away and trying to weight up the best options within investing I have decided to go down the funds route. I'm planning on 50% into 2-4 aggressive uk and developing countries funds. The remaining 50% into either vanguard lifestyle100% equity or Hargreaves and Lansdown growth trust....the question is which one, as I am open to suggestions whilst also considering The total expense ratio for Vanguard LifeStrategy 100% Equity is .29%, with an initial charge of .16%. The total expense ratio for HL Multi-Manager Income & Growth Trust Accumulation (GBP) is 1.38%. Therefore, the Vanguard fund would be the cheaper option regarding annual management charges. The second option does seem to have performed a little better over past 3 years. ANY GUIDANCE WELL APPRECIATED!

dunstonh

Why would you use a VLS fund with a Hargreaves and Lansdown growth trust? its like having chalk and cheese.

Even by managed fund standards, that is expensive. Managed Multi-asset funds tend to have OCFs of 0.65 to 1.0%. The fact it is an unfettered MM adds to its cost compared to Vangaurd being a fettered MM with trackers.

It would be useful to know you thinking and what led you to the funds you chosen here as knowing how you got there would help explain what you are after.

Thrugelmir

Out of curiosity what's an aggressive fund?

cwrw

Hi
Sorry to cause the confusion - I'm green to all this. My thinking was that the HL fund of funds seemed to be raking in more profit (but higher costs) whilst the VLS was a more diverse portfolio of indexes. The point of origin for my query was to be able to have over time 70% portfolio with lower risk (as above choice either/or), and the other reminder to higher risk/gains exposure over a 20 year period. Being unlearned within this area I thought that leaving most assets managed by professionals who adjust their allocation + them being indexes would secure a safer returns likelyhood/greater spread.
In relation to the "higher risk funds" I mean funds as woodfords new uk fund or aberdeen latin american fund, which may offer greater risk exposure compared to index linked.
All I'm interested in is in getting as much money out of my investments after 20 years - PLEASE DO COMMENT AS ANY GUIDANCE IS ALWAYS APPRECIATED.

dunstonh

Having half tracker and half managed is fine but you need to do better than the HL fund.

n relation to the "higher risk funds" I mean funds as woodfords new uk fund or aberdeen latin american fund, which may offer greater risk exposure compared to index linked.

The VLS 100 is a high risk fund. it has exposure in UK equity and emerging markets. it is higher risk than than the HL fund. Not the other way around.

cwrw

dunstonh wrote: »

Having half tracker and half managed is fine but you need to do better than the HL fund.



The VLS 100 is a high risk fund. it has exposure in UK equity and emerging markets. it is higher risk than than the HL fund. Not the other way around.

Please do continue, as I would like a portfolio which largely takes care of itself, whilst being left for 20 years, with a few additions along the way and geared towards low running costs with a medium to large risk/profits outlook. Any offerings?

dunstonh

cwrw wrote: »

Please do continue, as I would like a portfolio which largely takes care of itself, whilst being left for 20 years, with a few additions along the way and geared towards low running costs with a medium to large risk/profits outlook. Any offerings?

I'm regulated. So, I cant give it to you on a plate. Discussion and comment only. Nothing should be left 20 years without reviews though. However, using multi-asset funds does make sense with your objective.

bowlhead99

dunstonh wrote: »

I'm regulated. So, I cant give it to you on a plate. Discussion and comment only. Nothing should be left 20 years without reviews though. However, using multi-asset funds does make sense with your objective.

I'm not regulated. So, I could say what I liked, with no comeback. Of course if you don't have comeback or pay anything for the advice, the advice is worthless and could be dangerous, which is the practical reason that people don't really dispense it here. But there is certainly lots of food for thought ("discussion and comment") making up thousands of posts on this site.

What is clear is that there's no right answer for everybody otherwise there wouldn't be 10,000+ investment options.

You mentioned you want 'a portfolio that takes care of itself'. Well all portfolios do that, but you might not like what they look like after they have taken care of themselves for 20 years. It is certainly easier to buy a fund-of-funds that holds different types of assets with a manager doing the rebalancing between the underlying fund choices, like in either of the ones you mention.

You mentioned 'low running costs'. For a simple portfolio of geographically dispersed equities, the Vanguard Lifestrategy funds do the "low cost" thing quite well (because following an index is very cheap as it doesn't require a lot of thought, resulting in low fees).

It is important to realise that committing to follow an index in order to pay low fees is not necessarily a great thing in the periods when the index is going down. The low fees would not stop you losing 30-40% in a year or less if you are following a set of indexes which are going downwards by 30-40% in a year or less. However over the long term cheap indexes will deliver good results compared to some more expensive funds and it saves you having to think of what else to buy or which manager might perform better in what markets. This is probably not the place for yet another 'active vs passive management' debate.

Finally you mention you have a medium to large risk outlook and profits outlook. If you want to be able to make 20-25%+ in a good year on equity investments with an average of closer to 5-8% over time, you have to be able to handle 40% down in a bad year and accept that you can have a multi- year run of it just going down all the time. If that is your idea of 'medium to large risk', then perhaps that VLS100 is for you. Some would call it high risk. But then an even more dangerous fund that could go up or down 50-100% in a year might be 'high risk' or 'very high risk' depending on your scale.

If losing 40%+ in the 2007-2009 credit crunch, or in the 2000-2003 post-dotcom bust, post 9/11, post Enron crash sounds like a lot of downside risk, you could try the VLS80 which is a little less volatile but would still have most of the same drops at the same times. Remember any fund you look at today, showing 5 year history, is basically showing the recovery from extreme market lows in Q2 2009, and they all look great. So have an awareness of what the bad times might look like and consider looking at the 10 year graphs. You won't find those for Vanguard LS funds because they did not exist before 2011. But you could look at other funds which used some of the same constituent indexes, to understand the gist of it.

There are a variety of techniques to avoid the extremes of risk from being 100% invested into the largest companies on the world's stock exchanges, which can involve different portfolio management techniques and different asset classes. It is up to you whether you use something like a fund of index funds from one provider or a more actively managed one.

A competitor product that uses cheap indexes would be the Blackrock Consensus fund - they also do an 'up to 100% equities' version and a 'up to 85% equities' version, and lower-equity versions. Similar sort of idea to Vanguard LS. You could even buy a bit of both. But as they both plan to do the same thing in a similar way, it wouldn't necessarily change the overall result other than via differences in geographic split and non-equities content.

If you only have a small amount of money and are not too worried about risk, feel free to dive in. If you are investing a bigger pot for a longer period, there's lots to learn by looking around this site, other sites and forums, reading books etc, which you'll find some basic pointers to, in other threads. Ultimately it is your money and you are not paying us, so I could be trying to mess with you just for fun, for all you know. So back to dunstonh's point, you're not going to get it on a plate.

Good luck though

cwrw

Many thanks for the replies. I will continue to look but I am running out of time. I think I get the gist of what is said regarding the fund of funds eg VLS perspective - if I'm willing to keep a steady course when the chips are down and leave my investment I will most likely turn out an average of 5-8% per year over a 20 year duration. But the downside would be that during the less profitable years I could have been investing in more responsive funds (active). It is a rather basic understanding but that is why I thought of the 50/50 split between VLs/other and actively managed stock as woodford / developing countries active funds. Going the right direction?

mf78

Just to add another thought into the mix, active funds don't always do better than index trackers when the market is going down. Some will do worse, while others will weather the storm better. But there's no real way of knowing until after the event.

cwrw

Keep on adding them thoughts!:T