Advice on adding Small-Cap fund to Vguard Lifestrat

DoctorW

Hi all,

I had some great advice last time (as usual), so I'm back for more.

I'm currently investing in a Vanguard Lifestrategy 100 fund, drip feeding around £1500 a month into this at the moment through Hargreaves Lansdown ISA. I've maybe got another £500-750 a month that will either go into a cash savings, P2P lending (much smaller amount as I'm just dabbling with Rate Setter) or under the mattress (joking).

As I'm still doing my research trying to build knowledge, I've seen a few opinions from wise (appearing) folk that adding a small-cap tracker to these funds is seen as a way to get diversified exposure to something that is not necessarily given too much weighting in the VLS tracker. As I know how much more important asset allocation is than trying to find the latest and greatest fund manager etc. it's something I'm trying to look further into.

I realise it's quite a broad question but wondered what all your esteemed thoughts were on;

a) adding more (Global) small-cap exposure to a VLStrat - unnecessary or not too much of a bad move?

and b) the cheapest method to go about this.

The performance of the VLS 100 Equity has pretty much mirrored (as you'd expect I suppose) the performance of their Global Small Cap Index over the past 5 years, only rising and staying above the VLS 100 by a few percentage points in July 2013.

This kind of makes me think it's unnecessary and to discipline myself to stick with the one Vanguard fund, though I know this is probably an over-simplified way of looking at it, depending on how I view the next 10 years or so for smaller companies amongst many other factors.

Anyway i'll stop waffling, over to the experts.

Thanks in advance,

DW

TCA

DoctorW wrote: »

The performance of the VLS 100 Equity has pretty much mirrored (as you'd expect I suppose) the performance of their Global Small Cap Index over the past 5 years, only rising and staying above the VLS 100 by a few percentage points in July 2013.

This kind of makes me think it's unnecessary and to discipline myself to stick with the one Vanguard fund, though I know this is probably an over-simplified way of looking at it, depending on how I view the next 10 years or so for smaller companies amongst many other factors.

Anyway i'll stop waffling, over to the experts.

Hopefully an expert will be along shortly!

There's nothing wrong with adding the Vanguard Global Small Companies Index to your VLS fund. You can't read anything into past performance or similarities in past performance. The two funds invest in different things and by adding small company exposure you're covering more of the whole market. Of course that doesn't necessarily mean you'll do better from it, it's just more diversification.

DoctorW

TCA - thanks for your reply, I understand exactly what you mean, not looking to a small-cap fund expecting to improve my overall performance just trying to keep as diversified as possible I suppose, as I imagine thar' be very rocky years ahead.

TCA

The Vanguard Global Small-Cap Index Fund gives you exposure to over 4,000 small cap stocks, so it's certainly diversification. 58% of them are in the U.S. so that's another factor to bear in mind. Might be a factor for you, might not. You can buy small cap ETFs for certain countries or regions. It's crystal ball stuff Doc. You could add on bits to your VLS until the cows come home. But FWIW, I reckon some small cap exposure is a good thing.

But I'm a learner in this game too, so large pinch of salt required with my ramblings.