Vanguard Life Strategy
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Bowlhead99 – Thank you for your long replies. They are giving everyone a lot of information!
So to ask direct, if you were in my shoes where would your portfolio construction go? The budget can push slightly higher.
Thanks,0 -
Why are Vanguard LS products held as some of the best places to invest?Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..0
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C_Mababejive wrote: »Why are Vanguard LS products held as some of the best places to invest?
It's not that they are concidered the best its that they are a very simple and cheap way to get a world wide diverse portfolio that you don't need to fiddle with.
By going with Vanguard lifestrategy you are going to do better than the average investor for almost no effort.
by creating your portfolio yourself though you can save a little bit of money something like 0.1% and can get something that you feel is more tailored to yourself and your own beliefs. Doesn't mean that will do better though of course and you will have to do your own rebalancing.0 -
C_Mababejive wrote: »Why are Vanguard LS products held as some of the best places to invest?
Their pro-passive investment marketing has developed a cult-like following on some US forums which has spread over here a bit in recent years; as a company, they seem to do what they do, well. The lifestrategy funds range are just funds-of-funds using their other index products without the hassle of rebalancing it yourself. There are others like L&G or Blackrock that have similar.
For a starter investor that wants to hold something cheap on a DIY platform without an advisor, they fit the bill as a generalist multi-asset fund. Of course there is more to life than costs, and when you add the management fee to the platform costs there are other products which can work out just as cheap direct with managers or in personal pensions which may suit just as well or better. There are also actively managed multi-asset funds that are more expensive which may well deliver better returns in different sets of economic circumstances.0 -
So bearing all that in mind, would going with the Vanguard 80 acc then the Vanguard 60 acc be anymore risky? I am guessing long term you will see more return with the 80?0
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savingsaving2015 wrote: »So bearing all that in mind, would going with the Vanguard 80 acc then the Vanguard 60 acc be anymore risky? I am guessing long term you will see more return with the 80?
Someone will come along with a much more comprehensive answer I'm sure, but for now I'll chime in. I'm a novice like you and still learning.
Simplistically speaking, the 80 has more risk than the 60 as it has a greater proportion of shares (equities). These are in general more volatile than bonds. Volatility is a two way street though, it means your returns could be higher but it also means your losses could too. As bonds are in general less volatile, having them in your portfolio (or inside a Vanguard fund) acts to slightly smooth out the ups and downs of the shares.
Whilst past performance is no guarantee of future performance, the below graph gives you a bit of an idea what I'm on about in practice.
This is the Vanguard Lifestrategy 80 and 60 over the last three years. You can play with these graphs yourself at Morningstar.
If you put £100 in the LS80 three years ago you would have about £140 now. If you put £100 in the LS60 you would have just under £134 now. (Depending on platform fees)
It would be tempting to look at that and say, oh well I'll take the £140, thanks very much. But spend a bit of time looking at the graph. We happen to be in a period where they are both heading up at the moment and the 80 is of course going up more quickly. Ignore that for a moment and look at what happens where there is a dip. The additional bonds have acted (most recently) as a bit of a brake, the 60 falls less quickly than the 80.
This is just for illustration though of course, bonds are actually doing fairly well at the moment at a time when shares are too which is a bit unusual. The next three years could turn out to be quite different to the above, but in general the graph explains (at least to me, a novice like yourself) how the 60 and 80 might respond slightly differently when things are buoyant and not so much.
It therefore completely depends on your timescales and your attitude to risk. Can you tolerate a bit more volatility for more potential upside (but with a greater risk you might end up getting less back)?
Hope this helps,Temrael
Don't use a long word when a diminutive one will suffice.0 -
Thank you for the reply.
What sort of % per year is that graph showing for both funds?
Thank you0 -
Not including fees remember
roughly 11.9% for the 80%
Roughly 10.5% for the 60%
Mat0 -
Mat beat me to it but it's easy to work out from the graph, you take away the initial outlay in the illustration (£100) and then divide the return by three (as it was over three years).
Of course the graph only covers a relatively short time so it could be different in a different week/month/year. Try not to think of the graph as showing what you'll get back, it's more a guide to how the ups and downs might work between the two funds going forward.Temrael
Don't use a long word when a diminutive one will suffice.0 -
Mat beat me to it but it's easy to work out from the graph, you take away the initial outlay in the illustration (£100) and then divide the return by three (as it was over three years).
Neither is right or wrong as such but in simple terms, a 45% increase over three years would equate to an average growth of 15% per year in your model, but the CAGR would be closer to 13% (i.e. based on cube roots rather than division). Not much of a difference over a short period of time but much more significant over a longer time!0
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