Vanguard Lifestrategy funds - performance?

Ryan_Futuristics

masonic wrote: »

It looks like this is another area where I don't follow Ryan. Risk is usually defined in terms of the propensity of an investment to suffer short term losses or volatility. By both measures bonds (and arguably US stocks) are lower risk than Russian stocks. Risk and returns are usually correlated, so the best long-term returns are found in the riskier investments. There is clearly some cause for concern about what will happen to bond funds, but to suggest capital losses will rival those seen during an equity market crash is overstating the situation IMHO.

Russia indeed looks cheap and has done for some time and we've seen it fall by a third in the past few months. It could easily halve again in the short term. I'm happy to build a position, topping up on the way down, but it's not for widows and orphans.

Well risk and return certainly don't perfectly correlate ...

This is the thinking behind risk parity:





Emerging markets are more volatile than developed, but the upside has generally paid off over the longer term ... Essentially what this says is that emerging markets have short-term turbulence (corruption, wars, commodity reliance) but the big picture is one of the emerging world growing while the developed world slows down

I still only allocate 5-6% to Russia, but as Warren Buffett says:

"You Pay a Very High Price in the Stock Market for a Cheery Consensus"

Ryan_Futuristics

ExMugPunter wrote: »

Wow! Thats great news thank you!!

That means that in your expert opinion we are going to have a 15 year period of buying cheap units. Followed by 10-15 years of growth that will see us make a fantastic profit from our cheaply bought units just in time for retirement.

Amazing. Thank you.

No, this is only factoring in long-term reversion to Mean

The US has to get *below* its Mean valuation before you're buying cheap ... More likely you'll spend 15 years buying overvalued stocks then spend 15 years with them below value

Ryan_Futuristics

colsten wrote: »

Predicting the future as been a human pastime for as long as you can go back in history. As of now, the future has not paid *any* regard to the predictions.....it's all just a more or less educated gamble, and the only one thing you can be sure of is that you cannot count on anything, lol.

Well I don't think Arthur C. Clarke would agree with you on that one

But what we're really doing here isn't predicting the future so much as learning from the past ...

In the past, when interest rates have gone up, bond funds have been prone to crash ... When a nation's assets have been overvalued, they've tended to revert back to their long-term averages ... "Those who forget the past are doomed to repeat it"

masonic

Ryan_Futuristics wrote: »

But what we're really doing here isn't predicting the future so much as learning from the past ...

...in order to try to predict what will happen in the future. Your primary motivation is to seek the best returns in the future. If you didn't have an interest in predicting future returns, I doubt you'd take much interest in what had happened in the past.

It is also worth remembering that "Those who forget the past are doomed to repeat it" does not mean the trends of the future are guaranteed to follow those of the past. The prediction you make might be well supported by data, but it could still be wrong, so best not to bet the farm on a particular outcome.

ExMugPunter

Ryan_Futuristics wrote: »

No, this is only factoring in long-term reversion to Mean

The US has to get *below* its Mean valuation before you're buying cheap ... More likely you'll spend 15 years buying overvalued stocks then spend 15 years with them below value

Long term Reversion to the Mean. That also sounds good to me.

I dont need to buy cheap to hit my figures, I just need the long term average.

As the 'weakest' part of the LS funds is apparently the US, the long term average return from there is what 7%, 10% depending on how you measure it?

If they are going to spend 15 years at 1% to get them back to the 'mean' (get them back to fair value)?
So after that ( in order to keep their long term mean) they will then grow at around 7%.

Lovely. Thank you!

colsten

Ryan_Futuristics wrote: »

Well I don't think Arthur C. Clarke would agree with you on that one

Whilst he has been a whole lot more eloquent than I will ever be, I frankly don't give a damn about what he said about the future. He was no more capable than you or I or any other human being to predict the future, beyond simple facts like "if you go broke, your shares will be worth nothing" or "if you jump into a fire, you are unlikely to get away without burns".

Nobody needs an Arthur C. Clarke for those simple facts. And no Arthur C. Clarke - type can predict the future of economies, or even (or particularly) the future of a given company.

redpete

ExMugPunter wrote: »

The graphs will only show you so much though and actual investors performance will differ depending on when and how you fund the accounts.

krish123 wrote: »

yes you get exactly what I mean im looking for real investors experiences.

But EMP is saying that one person's past experience has little relevance to another person's future experience because of the dependency on how much, when and circumstances full of complexity.

So you either base decisions on a good understanding of fundamentals or a certain amount of hope combined with a simplistic understanding of fundamentals and performance data that averages out many people's experience - i.e. the performance data that is available from several sources. There are then varying degrees in the balance between hope and understanding.

ExMugPunter

redpete wrote: »

But EMP is saying that one person's past experience has little relevance to another person's future experience because of the dependency on how much, when and circumstances full of complexity.

So you either base decisions on a good understanding of fundamentals or a certain amount of hope combined with a simplistic understanding of fundamentals and performance data that averages out many people's experience - i.e. the performance data that is available from several sources. There are then varying degrees in the balance between hope and understanding.

Of course that is true.

However. this forum is generally the first port of call for people absolutely brand new to investing.

They seem to have come here ( just like I did) to avoid the complex jargon 'noise' of the financial press. So what is the point of then throwing them back to the lions with a graph that means nothing?

I have asked a range of questions on here and have received some fantastic answers back. But things seem to have changed recently.

The Op asked for real life examples, why not help him/her?

This forum has changed

redpete

ExMugPunter wrote: »

The Op asked for real life examples, why not help him/her?

I do consider it helpful to the OP to point out that that the question they asked won't result in information that they should base their investing strategy on.

I could quote real returns I have seen from my investments but would be no use unless I also said that I invested in a couple of Japanese funds just before the crash that they have not recovered from many years later, or that investments in UK funds have had great returns but would be even better if I'd sold rather then held etc. etc.

Ryan_Futuristics

masonic wrote: »

...in order to try to predict what will happen in the future. Your primary motivation is to seek the best returns in the future. If you didn't have an interest in predicting future returns, I doubt you'd take much interest in what had happened in the past.

It is also worth remembering that "Those who forget the past are doomed to repeat it" does not mean the trends of the future are guaranteed to follow those of the past. The prediction you make might be well supported by data, but it could still be wrong, so best not to bet the farm on a particular outcome.

We often clash on this, but the repeating *trend* of the future would be the US remaining the fastest growing, most stable, most over-invested market on the planet, while bonds move against equity markets and provide adequate cover

That's a) rather unlikely, and b) what you're betting on with a Lifestrategy portfolio

Valuation isn't a trend ... Valuation is just a way of quantifying what market prices mean by weighing them against something - such as earnings ... So to say stock prices won't follow their own underlying value anymore would be a much more radical statement than to say they still will