Vanguard Lifestrategy funds - performance?

dunstonh

Hi , I'm not using people's examples as to base my investing on. It's purely to find out illustrative examples of other people who have invested in similar/same funds to get a picture of what is happening in terms of returns that's all.

Why do you need other peoples examples when that data is already published by vanguard?

As there have been no significant negative periods since the fund launched, it is unlikely anyone's experience with these funds is detailed enough to give you anything useful.

TheTracker

Ryan_Futuristics wrote: »

What is the purpose of you quoting this chart? All it says is you can leverage asset classes with historical risk/returns to normalise the risk exposure across a portfolio of classes, and you can do this exactly because of the risk/return relationship. In fact, due to the straight line nature it says risk and return are well correlated, as the sharpe ratios show. And leverage isn't popular in the UK as US.

As I've said before you'd make a good (where good == similar to the crop) politician.

You said "Well risk and return certainly don't perfectly correlate". No one said they perfectly correlated except yourself. And the paper you took the graph from actually uses it to show "Although the relationship is by no means precise, you can see that asset class returns increase proportionally as their risk increases."

The irony is the graph comes from a paper looking for an "all weather portfolio" to ride out troubled times. That sounds similar to what the OP is looking for. But you twist it to construct further argument for your week by week tea reading. Investing in turbulent markets like Russia have historically proved greater return, but also supported in theory - why would anyone invest in a risk laden economy unless there was a premium on offer? When a market looks "cheap" one has to ask whether one has adequately assessed the risk.

And like a politician, you never actually gave your definition of "risk", but it is clearly not the commonly accepted definition. To be bold, I think your definition of risk is a derivative of risk, namely the risk of not exploiting risk.

Ryan_Futuristics wrote: »

And yours looks like this

Film theorists will tell you Kubrick's Eyes Wide Shut is a story of class distinction. So perhaps there is something in that, albeit asset not societal class distinction.

irm

krish123 wrote: »

if anyone is willing to share I would just like to know how you have done investing in either the LS 40/60/80/100 funds, so how much you have put in, how much your portfolio has grown, what dividends you have received etc.

As a (very) novice investor I have nothing to add in terms of the discussion, but I can provide a couple of images from Microsoft Money. My wife and I have the 60 and 80 funds in our ISAs, with £10,000 per account going into them back in April, and then £500 per account per month since July.





The price history graph only shows values at close of play each Friday (as I only enter them once a week), so it's a slightly smoothed out version of reality.

Ryan_Futuristics

tigerspill wrote: »

As a newbie to the whole world of self investing I am still on a huge learning curve.
One thing I think you have mentioned a few times is "Valuation" and that many deem the US is currently over-valued.
Obviously simple logic would suggest the buying of under-valued funds and selling over-valued funds.
My question is how do you go about assessing what is over and under valued? If the US is generally over-valued currently, what would you consider as being under-valued?
I have also been looking at the LS funds and they do seem to have a high %age in the US which also concerns me if they are generally considered as over-valued.

Well the dilemma with valuation is that 'cheap' usually accompanies 'unappealing' for some reason, and as such it's common for expensive regions or sectors to keep getting more expensive, and cheap to keep getting cheaper

But generally over 10-15 years, whatever news or events were lowering sentiment in one region have been replaced with new news and events shifting perspectives in a dozen other directions, and on the whole things tend to drift back towards their long-term averages

Buying cheap is never a guarantee of anything, but it at least means there's the potential for a lot of share price growth - so as masonic says, you'd also want to make sure you're well diversified and you're rebalancing your assets perhaps annually


The problem is, unlike today's very straightforward passive investing approach (or multi-fund active approach), there isn't a simple, universal narrative for how the typical investor can easily buy the inexpensive and avoid the expensive ... So I'm almost reluctant to keep taking the discussion in this direction

But about the simplest piece of investing advice I can give is that the UK doesn't look too expensive at the moment ...

So where Lifestrategy 80 has only 13% in UK equities, I'd probably be thinking closer to 40-50% (and maybe higher)

Many of the big UK firms do most of their business globally anyway, so buying UK equities effectively gives you global diversification

I often say Woodford Equity Income is the no-brainer fund for a UK investor (but I do say that so much that if it fails to deliver over the next 10-20 years I'll feel guilty!)

If I were investing passively in the UK, I'd probably buy equal parts FTSE 100, FTSE 250, and Small Caps (perhaps you'd have to go active there and buy something like Marlborough Nano-Cap)


To take a look at global valuations, these sites are useful (but it's a deep subject - for most investors I think just knowing the UK is reasonable value and that emerging markets are worth a small, 10-15%, allocation in a portfolio is probably about the most useful thing I can suggest)

http://www.starcapital.de/research/stockmarketvaluation?SortBy=Shiller_PE
http://www.researchaffiliates.com/AssetAllocation/Pages/Equities.aspx

Ryan_Futuristics

TheTracker wrote: »

What is the purpose of you quoting this chart? All it says is you can leverage asset classes with historical risk/returns to normalise the risk exposure across a portfolio of classes, and you can do this exactly because of the risk/return relationship. In fact, due to the straight line nature it says risk and return are well correlated, as the sharpe ratios show. And leverage isn't popular in the UK as US.

As I've said before you'd make a good (where good == similar to the crop) politician.

You said "Well risk and return certainly don't perfectly correlate". No one said they perfectly correlated except yourself. And the paper you took the graph from actually uses it to show "Although the relationship is by no means precise, you can see that asset class returns increase proportionally as their risk increases."

The irony is the graph comes from a paper looking for an "all weather portfolio" to ride out troubled times. That sounds similar to what the OP is looking for. But you twist it to construct further argument for your week by week tea reading. Investing in turbulent markets like Russia have historically proved greater return, but also supported in theory - why would anyone invest in a risk laden economy unless there was a premium on offer? When a market looks "cheap" one has to ask whether one has adequately assessed the risk.

And like a politician, you never actually gave your definition of "risk", but it is clearly not the commonly accepted definition. To be bold, I think your definition of risk is a derivative of risk, namely the risk of not exploiting risk.



Film theorists will tell you Kubrick's Eyes Wide Shut is a story of class distinction. So perhaps there is something in that, albeit asset not societal class distinction.

The risk graphs show two things many commentators have pushed in recent times, which is that the relatively poor risk/reward profile of commodities means they should probably only occupy a very small part of a portfolio (where in the past they may have commonly made up 25%), and that emerging markets should probably get a higher allocation than most investors give them

In the case of bonds, with risk on the horizon, their allocation should technically be lowered ... But this gets to the crux of why I think this is an awkward time to be an investor

The popular narrative today is to simply buy-and-hold shares and bonds and let time-in-the-market take care of the rest ... At the same time, professional investors are moving heavily into cash, and struggling to find bond alternatives, while becoming increasing worried about stretched market valuations


An article popped up yesterday which I think quite well illustrates the *other* side of the narrative today:

FTSE 100 falls 7pc but turns £10,000 into £15,213. Has it really made any money in 15 years?

Those buying into the stock market will have been horrified to glimpse the future and see that today it stands at 6466 – 7pc lower. It would have turned £10,000 into £9,137.

But that's before dividends are included, as data collated by Hargreaves Lansdown shows. If you bought the right type of fund (accumulation rather than income – more is explained here) then £10,000 would have grown to £15,213.

It's a paltry compounded annual return of 2.8pc, according to our sums. But add in inflation, based on the retail prices index, and the return disappears altogether. In fact, you would have lost £138 in real terms.

http://www.telegraph.co.uk/finance/personalfinance/investing/11302303/FTSE-100-falls-7pc-but-turns-10000-into-15213.-Has-it-really-made-any-money-in-15-years.html


I find the undeterred positivity in today's popular narrative comes from either looking at the past century in the markets (the whole post-industrial revolution), or the past 10 years, when you're conveniently looking at the bottom of the tech crash vs today

What these past 15 years (and the unprecedented scale of QE needed to boost markets today) suggest to me is that the west has peaked, and is probably now over-invested

And bonds with capital risk stop being attractive diversifiers

In some ways P2P lending looks like the only sensible investment out there at the moment - but long-term I'm fairly positive Asia's got quite a bit of growth in it


And my definition of risk is investing in something where the potential for reward doesn't match the potential for loss ... In the case of US equities and bonds, the risk looms much larger for me


Kubrick once said "The What is more important than the How", I'm going to pretend he was talking about asset allocation

Linton

Ryan_Futuristics wrote: »

.......

An article popped up yesterday which I think quite well illustrates the *other* side of the narrative today:

FTSE 100 falls 7pc but turns £10,000 into £15,213. Has it really made any money in 15 years?

Those buying into the stock market will have been horrified to glimpse the future and see that today it stands at 6466 – 7pc lower. It would have turned £10,000 into £9,137.

But that's before dividends are included, as data collated by Hargreaves Lansdown shows. If you bought the right type of fund (accumulation rather than income – more is explained here) then £10,000 would have grown to £15,213.

It's a paltry compounded annual return of 2.8pc, according to our sums. But add in inflation, based on the retail prices index, and the return disappears altogether. In fact, you would have lost £138 in real terms.

http://www.telegraph.co.uk/finance/personalfinance/investing/11302303/FTSE-100-falls-7pc-but-turns-10000-into-15213.-Has-it-really-made-any-money-in-15-years.html


I find the undeterred positivity in today's popular narrative comes from either looking at the past century in the markets (the whole post-industrial revolution), or the past 10 years, when you're conveniently looking at the ......

This really is a strawman argument....

1) Very few people have a lump sum for which they buy and hold one investment. In practice most people are either steadily paying in, or steadily withdrawing money.

2) If you are investing a lump sum for 15 years putting all your wealth in the FTSE100 is a very poor strategy. Taking the starting point of 15 years ago when the FTSE100 was near its peak, just putting your money in the FTSE AllShare would have given you a 4% annual return, FTSE World 4.4%. Both of these are well above inflation - even RPI rather than CPI.

And that is assuming pretty conservative equity investing. EM for example would have given you nearly 8% annual return. FTSE Small nearly 5% annual.

Ryan_Futuristics

Linton wrote: »

This really is a strawman argument....

1) Very few people have a lump sum for which they buy and hold one investment. In practice most people are either steadily paying in, or steadily withdrawing money.

2) If you are investing a lump sum for 15 years putting all your wealth in the FTSE100 is a very poor strategy. Taking the starting point of 15 years ago when the FTSE100 was near its peak, just putting your money in the FTSE AllShare would have given you a 4% annual return, FTSE World 4.4%. Both of these are well above inflation - even RPI rather than CPI.

And that is assuming pretty conservative equity investing. EM for example would have given you nearly 8% annual return. FTSE Small nearly 5% annual.

1. Well plenty of long-term investors were holding the FTSE 100 (or All Share - the difference is slight) since before 1999, and they've simply had to endure 15 years of savings-account-like returns ... Drip-feeding can help, but when markets spend as much time going down as going up, returns aren't going to be spectacular

2. And 4% returns (minus broker and fund charges?) aren't much above inflation, and where we are now - at the top of the cycle again - is a dangerous place to be with markets propped up by QE

It wouldn't take much of a market correction (when we're possibly overdue one) to wipe out those returns pretty quickly


Emerging markets and smaller companies: exactly ... Emerging markets still have a lot of growth in them; equal-cap funds would have done a lot better than cap-weighted

But is *this* the popular narrative people are being sold? What's Lifestrategy 80's allocation to small companies and emerging markets combined? About 6%

coastline

krish123 wrote: »

Hi all,


I just wanted to get a feel of how well the different lifestrategy funds have performed but using real examples.


Iv only recently invested in the LS 80 fund and am currently just trying to build up some funds in there.


if anyone is willing to share I would just like to know how you have done investing in either the LS 40/60/80/100 funds, so how much you have put in, how much your portfolio has grown, what dividends you have received etc.


Basically im after real life examples of how well or bad these funds have performed.


thanks.

This link gives an idea of mixed asset funds from 1 month to 10 years...just change the current setting of 3 years.

http://citywire.co.uk/funds/mixed-assets/h23

bowlhead99

Ryan_Futuristics wrote: »

But about the simplest piece of investing advice I can give is that the UK doesn't look too expensive at the moment ...

So where Lifestrategy 80 has only 13% in UK equities, I'd probably be thinking closer to 40-50% (and maybe higher)

for most investors I think just knowing the UK is reasonable value and that emerging markets are worth a small, 10-15%, allocation in a portfolio is probably about the most useful thing I can suggest)

Ryan_Futuristics wrote: »

The popular narrative today is to simply buy-and-hold shares and bonds and let time-in-the-market take care of the rest ... At the same time, professional investors are moving heavily into cash, and struggling to find bond alternatives, while becoming increasing worried about stretched market valuations

An article popped up yesterday which I think quite well illustrates the *other* side of the narrative today:

FTSE 100 falls 7pc but turns £10,000 into £15,213. Has it really made any money in 15 years?
It's a paltry compounded annual return of 2.8pc, according to our sums. But add in inflation, based on the retail prices index, and the return disappears altogether. In fact, you would have lost £138 in real terms.

What these past 15 years (and the unprecedented scale of QE needed to boost markets today) suggest to me is that the west has peaked, and is probably now over-invested

So, if I can summarise the key takeaways from these two posts on Sunday afternoon:

1) The simplest piece of investing advice to give to a new and casual investor - who should not be taken in by marketing hype or distracted by popular opinion on how to construct a portfolio [or led particularly strongly by one man's opinion of valuation?? ] is that the UK is not too expensive. As it is not too expensive, you can invest in it. You would be thinking "50% and maybe higher" allocated to UK equities.

2) The sheep invest in a portfolio of equities and bonds and after a long time of holding them they will expect to make money. While the market professionals - who a) do not invest in a way that is realistic for the common man, because they spend 50 hours a week being employed to do the investing rather than having to fit it into a spare 5 minutes at the weekend; and b) are incentivised by short term performance - are currently moving heavily into cash, this particular month.

3) A weekend newspaper article apparently provided a useful reminder of why the sheep may be wrong to think that they can invest money in the market and hold it for the long term. If we cherry-pick dates and say they had put all their money in one particular UK index in December 1999 (which with the benefit of hindsight, is the absolute high point that the capital value of the index ever reached in the century before or the decade and a half afterwards), then we can see that the amount of money which that unfortunate investor would have now, is no more or no less in real terms than it was at the start - it would not have been a particularly successful investment.

Unless, presumably, the investor only held that one index as part of a wider portfolio and periodically rebalanced (e.g. topping it up with sales from other holdings as it fell) and kept investing on an ongoing basis while it was at a whole range of different prices. In which case buying some assets at the wrong time would not have been a big deal. The same article mentions that another part of the same UK stock exchange, the FTSE 250, grew to over 3x cost in real terms in the same time period that the FTSE100 had its 3% (but zero real terms) annualised performance.

So clearly, investing in a wide set of assets is important, given you don't know which ones are going to be the dogs. IMHO the article is not really a 'useful reminder that buy and hold investing may not work' so much as common sense to keep diversified.

4) The west has peaked and is now probably over invested. So by implication you should not be investing there. Seems at odds with point (1), and the comment that only 10-15% should go to emerging markets.

- - -
IMHO, buying and holding a broad range of asset types and locations is not really a foolish sheep-like mentality, even though it will not produce returns as high as if you had taken more of a risk and concentrated on specific areas with potential and were right about those instincts.

Certainly some companies in some markets are trading at generous multiples of annual profits though this has been the case for many years and investors with broad portfolios have still made money, some years more than others of course. My take is that the casual investor who cannot cherry pick companies should have a broad portfolio and not try to time their investments into each asset sector to 'buy cheap' based on some inevitably imperfect valuation methodology for a broad geographic market or asset class as a whole.

In suggesting a broad portfolio I am not saying do it all by indexes because capitalisation-weighted indexes are indeed heavily concentrated in some industries or regions. So, a portfolio should be properly broad in terms of region and asset class and industry of underlying investment within equities.

My problem with replying to Ryan's posts is there is a lot of them and there is some of it that appears at least in some way self-contradictory or not fully thought through. It can then take a lot of patience to go through all the research and graphs to point out why something could be misleading or flawed or does not strongly point to a conclusion after all; while some will engage in doing this, ultimately most of us don't have the luxury of not having a day job to be able to do our own blog via this site nor reply in intimate detail to someone who is doing that.

gadgetmind

Ryan_Futuristics wrote: »

It's a paltry compounded annual return of 2.8pc, according to our sums. But add in inflation, based on the retail prices index, and the return disappears altogether. In fact, you would have lost £138 in real terms.

Yes, those who bought on that (carefully!) chosen date will have failed to beat inflation. However, in the real world (remember that?) people tend to buy a chunk per month. All of these different chunks will have seen differing returns, many of them very good, and none of them worse than the worst case example the paper chose to look at.

Take as a whole, someone who invested steadily even over the difficult decade and a half we've had, into a balanced portfolio, will have seen returns that easily beat cash in the bank.