Vanguard Life Strategy

bowlhead99

black_taxi wrote: »

http://www.nytimes.com/2015/04/12/business/mutfund/the-value-of-a-classic-in-a-turbocharged-world.html?ref=mutfund&_r=0




60/40

A classic mix.

But as the article notes:
"The bond side of the balanced fund may be a headwind for returns over the next decade. That’s because the current yield for high-grade bonds foretells future returns. With the 10-year Treasury note currently yielding about 2 percent, it is mathematically impossible for high-grade bonds to deliver the same returns as in decades past, when yields were at least twice as high"

For some people putting away money regularly with Vanguard, rather than going for a version that has 40% bonds, they could do a similar job with a VLS80 or VLS 100, manually rebalanced against a cash allocation stashed in high interest current accounts.

Obviously it depends on how much you have to invest as you can't get high interest current accounts to pay out on hundreds of thousands of pounds of deposits. But if your cash can get 3% pretax, risk free, that seems more sensible than getting 2-3% on a bond component with risk of loss. Obviously some types of bonds have differing risk / return profiles than others and alternative bond funds are available but this is just an idea.

Given the VLS can be in an ISA wrapper and a high interest current account can't be, such an approach is more suited to a low rate taxpayer, but the forthcoming tax allowances on savings interest income could help the cause even further.

roxy28

Dad who was 60 2 days ago is ready to go with his charles stanley isa, quite late to be a first time investor but wants the VLS fund. His aim is 10 years no more, and 90% certain he wants the VLS 40 because of the time scale and being a bit cautious.He would need a nudge to go to the VLS 60, does the 40 sound right out of the 2 for him.
He knows even the VLS 40 has risks.

westy22

roxy28 wrote: »

Dad who was 60 2 days ago is ready to go with his charles stanley isa, quite late to be a first time investor but wants the VLS fund. His aim is 10 years no more, and 90% certain he wants the VLS 40 because of the time scale and being a bit cautious.He would need a nudge to go to the VLS 60, does the 40 sound right out of the 2 for him.
He knows even the VLS 40 has risks.

Some would argue that the VLS40 is currently riskier than the VLS60 or VLS80 due to the much anticipated bond sell-off that most people seem to be expecting.

Mind you, many have been saying that for a few years and it still hasn't happened yet.

roxy28

westy22 wrote: »

Some would argue that the VLS40 is currently riskier than the VLS60 or VLS80 due to the much anticipated bond sell-off that most people seem to be expecting.

Mind you, many have been saying that for a few years and it still hasn't happened yet.

Ok thanks, the VLS 40 has 60% bonds so quite high.
So the bond sell off as you mention may be closer if expected, its all about making the decision and just get on with it without getting carried away with ifs or buts, but i suppose someone cautious its easier said than done.
As i said previous he deffo wants the VLS fund.

Kendall80

10 years is a relatively substantial time horizon. Maybe a little more risk would be ok especially if that 10 years is flexible.

roxy28

Kendall80 wrote: »

10 years is a relatively substantial time horizon. Maybe a little more risk would be ok especially if that 10 years is flexible.

In the last hour he said thinking it through overnight, he now thinks (gasp ) that the VLS 60 is probably right for him.

grrrr thinks...... probably etc etc etc.

MadMat

You could always compromise and split your money 50:50 between the two and end up with VLS 50

Mat

roxy28

MadMat wrote: »

You could always compromise and split your money 50:50 between the two and end up with VLS 50

Mat

That would also mean paying 2 lots of platform/fund fees?

MadMat

roxy28 wrote: »

That would also mean paying 2 lots of platform/fund fees?

As long as both are on the same platform it'd be no more expensive. You mentioned Charles Stanley, their fees for holding funds are based on total value, not number of funds. trading funds is free too.

Mat

Kendall80

roxy28 wrote: »

That would also mean paying 2 lots of platform/fund fees?

If you choose a % fee broker such as CSD you would be charged 0.25% and whatever the OCF is (0.24%?) So whether you split it or not you'd still be charged 0.49% overall.


There is also a 0.1% initial charge... just to confuse things a little more