New investor help - vanguard LifeStrategy fund with a possible 2015 crash.

Linton

ChopperST wrote: »

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I think its poor advice to tell the OP to avoid the US when at aged 32 he has the potential to be invested for 30 - 35 years and he can ride out the peaks and the troughs, particularly when following a drip feeding approach.

I don't know how you know that the best time time to invest in the US was 5 years ago??? The bull market could continue for another 10 years and the OP misses 10 years of capital gains, compounding and dividend reinvestment.
.......

Yes and it seem equally dangerous to tell people to invest a large % in the UK instead. In a two or so year's time this country could have voted to leave the EU. One can see that might unsettle the markets a fair bit in the short term and have unknown effects in the long term. These long term effects could be far more significant than the occasional crash and rebound.

Ryan_Futuristics

ChopperST wrote: »

An article regarding CAPE shamelessly pulled from the discussion forum at Monevator comparing CAPE v real world returns below;

https://www.kitces.com/blog/shiller-cape-market-valuation-terrible-for-market-timing-but-valuable-for-long-term-retirement-planning/

I think its poor advice to tell the OP to avoid the US when at aged 32 he has the potential to be invested for 30 - 35 years and he can ride out the peaks and the troughs, particularly when following a drip feeding approach.

I don't know how you know that the best time time to invest in the US was 5 years ago??? The bull market could continue for another 10 years and the OP misses 10 years of capital gains, compounding and dividend reinvestment.

BTW I'm not a Vanguard fan either and I agree with you regards to bonds for the foreseeable future. But Vanguard is popular now as it allows DIY investors diversification across multiple asset classes and geographical locations. I'm sure most people are intelligent enough to realise that they have done well as they are an index tracker and the indices that they hold have gone up.

Well US valuations can certainly get higher - they're around 27 now, and over 40 might even be expected with so much stimulus floating around (and stealth stimulus, in the form of bond income reinvestment, still in the $billions)

The two reasons I'm not tempted by the US are that whatever markets do, valuations (if not relative to US history, then relative to the rest of the world) can't keep growing indefinitely, and even if they can maintain this level, you're not looking at the same kind of economic growth you'll find in the developing world now

And on top of that, the US dividend's so low now I don't think there's much of a case for long-term compounding

InvestInPoker wrote: »

No, Vanguard LS is recommended because it is cheap and does its job well.

Vanguard LS products don't make any claims about some understanding of market movements either.

It does its job well - but it is a very young fund and it is quite dependent on the US stock market and bonds continuing to do their jobs well

Passive strategies back themselves into a rather overvalued corner - with 50% of world GDP now coming from emerging markets, I'm not sure LS represents an impartial picture of world markets

ChesterDog wrote: »

Wherever you look for data - and however loudly it is trumpeted - the only thing of which you can be fairly certain is that over a longterm timescale markets go up.

Well possibly, but possibly not in the same parts of the world they kept going up over the last century

There is a limit to how efficient we can make our markets (and the 20th century saw us go from steam-powered cars to supercomputers) ... and now we have another factor working against us: a rapidly ageing developed world population

Certainly if Asia keeps growing, and the developing world (with its superior demographics and momentum) are raised to the standard of the developed, this will be a period in which the US and UK will come to occupy a much smaller part of the global economy ... and I wouldn't bank too much on that being an uptrend (the UK's been sideways since 1999, and France has fared less well)

Linton wrote: »

Yes and it seem equally dangerous to tell people to invest a large % in the UK instead. In a two or so year's time this country could have voted to leave the EU. One can see that might unsettle the markets a fair bit in the short term and have unknown effects in the long term. These long term effects could be far more significant than the occasional crash and rebound.

Well I'm personally 30% UK ... I do think the FTSE 100 at least gives you good global exposure at reasonable valuations if you're looking for a simple investment strategy

My long strategy is to stick with dividend payers, though ... Even over the last century, 75% of market returns have actually come from dividends ... This next one may struggle much more with growth

colsten

What's this about the worst crash in a long time due for 2015? Tsunami? Meteor? Oil price? Nobody has told me anything about it before so I am now really panicking about not panicking at all before. Someone please tell me which crash, and when. Thank you!

nickohorny

Thank you everyone for your input, I enjoy your contribution as it is very informative. I can see now that my psychology to investing is currently being fed with doom and gloom I keep reading! hence me feeling a slight panic with it this year.

Haha Colsten, I know I know, I am reading too much into so called experts calling the end of the world! here are some scaremongering articles currently doing the rounds:

http://www.telegraph.co.uk/finance/economics/11322623/Ten-warning-signs-of-a-market-crash-in-2015.html

http://www.bloomberg.com/news/2014-11-10/predictors-of-29-crash-see-65-chance-of-2015-recession.html

http://www.profitconfidential.com/stock-market/stock-market-crash/

I think that should I invest in the LS, I would likely go down the drip feed route because although I wish I could ignore what I read, I find it hard to dismiss and would just have more peace of mind if gradually investing into the fund over the next 12 months and it does fall back significantly.

Saying that, the timeframe I will leave this money invested in the fund is long enough to ride through the market shock that is 'on its way' to hit the world this year! :rotfl::cool:

Ryan_Futuristics

nickohorny wrote: »

Thank you everyone for your input, I enjoy your contribution as it is very informative. I can see now that my psychology to investing is currently being fed with doom and gloom I keep reading! hence me feeling a slight panic with it this year.

Haha Colsten, I know I know, I am reading too much into so called experts calling the end of the world! here are some scaremongering articles currently doing the rounds:

http://www.telegraph.co.uk/finance/economics/11322623/Ten-warning-signs-of-a-market-crash-in-2015.html

http://www.bloomberg.com/news/2014-11-10/predictors-of-29-crash-see-65-chance-of-2015-recession.html

http://www.profitconfidential.com/stock-market/stock-market-crash/

I think that should I invest in the LS, I would likely go down the drip feed route because although I wish I could ignore what I read, I find it hard to dismiss and would just have more peace of mind if gradually investing into the fund over the next 12 months and it does fall back significantly.

Saying that, the timeframe I will leave this money invested in the fund is long enough to ride through the market shock that is 'on its way' to hit the world this year! :rotfl::cool:

Actually those doom-and-gloom articles NEVER stop ... They say "The market climbs a wall of worry" - you get the same voices calling "CRASH!" every year, and others predicting 30 year bull-markets

I think the better quality articles are things like this - with Morningstar's head of research:

Beckwith: Market I am not keen on is America. Very, very high valuations on almost every grounds wherever you look – on long term earnings on price to sales, even dividend yields are pretty uninspiring. And you have a market where most companies are stretching their profit and loss statements to show the highest possible profits. And so GAAP earnings, generally accepted accounting principle earnings are much, much lower than the earnings they actually publish. And so the quality of earnings in America I think is not new as good as they appear to be and valuations are very high, you just need a little bit of bad news about the U.S. economy and I think you could see a bit of tumble in the U.S. equity market.
http://www.morningstar.co.uk/uk/news/132869/2015-good-for-japan-bad-for-us-equities.aspx


He's not making a prediction so much as giving you a reality-check on the numbers ... And you should be aware Vanguard LS is very US-heavy, and we also expect some bad news for bond funds (which account for the non-equities part of the funds) when interest rates rise

Be aware a crash or downturn in US equities could stretch 20+ years - while bond funds could wipe out 4-5 years of value buying at the wrong time now - so drip-feeding has to be done with that in mind (don't just try to avoid a crash in the next year)

I'd urge people to invest in a fund paying at least a 4% dividend, as that guarantees your investment's going to be giving something back even in bad markets, and in many ways that's where the real money is in going long on stocks

nickohorny

On a side note to the Vanguard LS,

A friend of mine invested a while back in 'F&C Managed Portfolio Trust - Growth fund' He said it has performed great and is managed well, and I do really like the sound of it as I see it also acts as a well diversified fund in that it invests in a lot of other investment companies themselves holding underlying investments across a range of geographic regions and varied sectors.
So basically like a basket filled with many other baskets that hold many eggs.

I really liked the look of this fund myself but am mainly opting to go down the Vanguard LS route because they had lower fees which I constantly read is a key focus to investment holdings.

As a real newbie investor, could anyone advise why it is best suited for me not to invest in an active managed fund such as this F&C one? Is it just the fees and expenses?

http://www.fandc.com/fandc-managed-portfolio-trust/

http://www.hl.co.uk/shares/shares-search-results/f/f-and-c-managed-portfolio-trust-plc-growth-shrs

This forum is great! Thanks everyone.

TheTracker

The LS funds are simply funds of funds. LS80 contains 3 equity trackers and 4 Bond trackers. Anyone who uses the "too US heavy" argument is neglecting to say it is quite simple to roll your own LS fund, in fact the OCF is lower if you buy separately, but of course you may incur extra trading costs. If you don't like the US exposure then hold less World ex-UK or build a World tracker from a few regions. Each of those internal funds has been going some time as well so I'd ignore anyone who says LS doesn't have a track record. Similarly those who decry it doesn't contain property, well you buy that tracker on the side. This board has taken a turn from investment to speculation lately and you should read the posts with that in mind.

Ryan_Futuristics

nickohorny wrote: »

On a side note to the Vanguard LS,

A friend of mine invested a while back in 'F&C Managed Portfolio Trust - Growth fund' He said it has performed great and is managed well, and I do really like the sound of it as I see it also acts as a well diversified fund in that it invests in a lot of other investment companies themselves holding underlying investments across a range of geographic regions and varied sectors.
So basically like a basket filled with many other baskets that hold many eggs.

I really liked the look of this fund myself but am mainly opting to go down the Vanguard LS route because they had lower fees which I constantly read is a key focus to investment holdings.

As a real newbie investor, could anyone advise why it is best suited for me not to invest in an active managed fund such as this F&C one? Is it just the fees and expenses?

http://www.fandc.com/fandc-managed-portfolio-trust/

http://www.hl.co.uk/shares/shares-search-results/f/f-and-c-managed-portfolio-trust-plc-growth-shrs

This forum is great! Thanks everyone.

Yeah, the active vs passive debate is really about fees ...

Essentially, in the medium-term, a passive fund is a bet that broad markets keep rising - whereas an active fund may only require certain sectors or companies to rise ... they can rotate towards growth and away from danger

In the US, passives are generally seen as riskier (because without a manager, they can leave you more exposed to hard times) ... But fees can be a great equaliser over longer periods due to their impact on compound interest - it means there's pressure for an active to keep beating the market by at least its own fee

The reason the F&C fund doesn't appeal to me is because it's got quite a hefty management charge, a bid-spread (which means you lose money straight away) and doesn't seem to pay much of a dividend

For me, these are the kind of funds that can (especially if they have rough patches) really drag down the performance of actives ... Plus it's a fund of funds, which means you're paying two lots of fees

I'm not a big fan of these - neither is Warren Buffet

What I'd look for is management charges around 0.5-0.75%, and I hate bid-spreads (a high buy price and a lower sell) ... At these fees, the active/passive debate isn't very compelling, and it's more about how you want to be exposed to the markets

Two investment trusts I'd say fit the bill - if you want to just put money in and leave it to grow - could be Murray International (MYI) and the Scottish Mortgage Investment Trust (SMT) ... But these can be slow, lumbering, mammoth funds which really see their best growth over 10+ year periods (but have trackrecords stretching to almost the 19th century)

edinburgher

2) I am reading an awful lot about the worst crash in a long time due for 2015.

Really? I'm not being sarcastic, but genuinely haven't read a single article suggesting a 'crash'.

nickohorny

edinburgher wrote: »

Really? I'm not being sarcastic, but genuinely haven't read a single article suggesting a 'crash'.

Hi,
I posted 3 this morning:

http://www.telegraph.co.uk/finance/economics/11322623/Ten-warning-signs-of-a-market-crash-in-2015.html

http://www.bloomberg.com/news/2014-1...recession.html

http://www.profitconfidential.com/stock-market/stock-market-crash/

As people on this forum say though, this kind of talk happens all the time...