First Time Investor:Vanguard Lifestrategy

Drebin911

Good Evening all,

I've just got a few questions to ask, based on Investing into the Vanguard Lifestrategy fund(s).

This is my first time investing in Stocks and Shares, and up until now have been paying off debts, and saving in High interest accounts with spare cash.

I have now more or less maxed these out, and have been reading about investing with a S&S ISA.

I've opened up an ISA with Charles Stanley Direct after seeing they are the cheapest investing platofrom for my circumstances. After reading numerous good reviews on various websites and this forum, I am looking to invest in the Vanguard LS60 or Vanguard 80, both Accumulation (as opposed to Income drawing).

1. How much more of a 'risk' is 80 as opposed to 60? I understand the % principle, to do with Bonds and Equities, I'm looking to make a good return, and am prepared for some risk, but not a huge amount. I am aware of the ups and downs in the short term, but due to my age (Mid 20's) am not overly averse to this.

2. I've looked around a few sites, but am yet to find any solid figures, but can anyone point me in the right direction of historical returns (ROI %) based on the Vanguard Lifestrategy funds.

3. Any comments or suggestions on my initial plan below ?

I'm looking to kick off this fund with an initial 500GBP investment, and a further 250 GBP per calendar month as this is a comfortable amount I am happy to put away each month and not touch for years to come.

Bit of background

• 1st Time Investing

• Some Debt all on 0% interest for another 9-12 months

• 5 months salary in Savings in higher interest Current Accounts

• Age is Mid 20's, not completely averse to risk, but not overly wanting to gamble!

Thanks for reading


Joe

super_reds

Joe_Cocaine wrote: »

Good Evening all,

I've just got a few questions to ask, based on Investing into the Vanguard Lifestrategy fund(s).

This is my first time investing in Stocks and Shares, and up until now have been paying off debts, and saving in High interest accounts with spare cash.

I have now more or less maxed these out, and have been reading about investing with a S&S ISA.

I've opened up an ISA with Charles Stanley Direct after seeing they are the cheapest investing platofrom for my circumstances. After reading numerous good reviews on various websites and this forum, I am looking to invest in the Vanguard LS60 or Vanguard 80, both Accumulation (as opposed to Income drawing).

1. How much more of a 'risk' is 80 as opposed to 60? I understand the % principle, to do with Bonds and Equities, I'm looking to make a good return, and am prepared for some risk, but not a huge amount. I am aware of the ups and downs in the short term, but due to my age (Mid 20's) am not overly averse to this.

2. I've looked around a few sites, but am yet to find any solid figures, but can anyone point me in the right direction of historical returns (ROI %) based on the Vanguard Lifestrategy funds.

3. Any comments or suggestions on my initial plan below ?

I'm looking to kick off this fund with an initial 500GBP investment, and a further 250 GBP per calendar month as this is a comfortable amount I am happy to put away each month and not touch for years to come.

Bit of background

• 1st Time Investing

• Some Debt all on 0% interest for another 9-12 months

• 5 months salary in Savings in higher interest Current Accounts

• Age is Mid 20's, not completely averse to risk, but not overly wanting to gamble!

Thanks for reading


Joe

Hi Joe

Not familiar with Charles Stanley platform but would be surprised if they didn't have the Factsheets for the VLS funds, otherwise you wouldn't be able to invest in those funds without reading up about them. These factsheets will show historic performance, along with how the funds are invested, regions and asset classes. This might help you with your decision based upon your appetite for risk. This appetite is very much personal and so you need to be comfortable with the risk and not be guided by people with different appetites and circumstances.

Regarding some of your other queries, I think it will depend on how long you want to invest over. If a couple of years then this might not be the right fund for you, if happy to lock away for 10+ years then it might be more suitable.

Hope that helps slightly.

Edit: Link to document for one of the funds http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-accumulation

BLB53

I've looked around a few sites, but am yet to find any solid figures, but can anyone point me in the right direction of historical returns (ROI %) based on the Vanguard Lifestrategy funds.

You can look up the performance returns since launch in 2011 via the Vanguard website https://www.vanguard.co.uk/uk/portal/investments/all-products?assetType=BALANCED

I would say your plan looks good - maybe start off with the LS60 and see how it goes.

Its not so much about risk but the higher volatility of the higher equity options which could be a problem - the lower the volatility, the more chance the average investor has to stick with it over the longer period.

Have a play around with their asset class mix input various equity/bond percentages and see how the returns for each stack up https://www.vanguard.co.uk/uk/portal/investor-resources/learning/tools

For more on this and other passive index options check out the https://www.monevator.com site.

Drebin911

Hi Super_reds,

Thanks a lot for the link and reply.

The fact sheet is exactly what I was after - and for reference it looks like the Annual Return was 4.30% for the last complete 1 year period, and is spread over 14 holdings and a total fund size of 410 Million.

And re: Investment duration and risk correlation i'll look into some more sheets!

Cheers

Joe

Drebin911

BLB53 wrote: »

You can look up the performance returns since launch in 2011 via the Vanguard website https://www.vanguard.co.uk/uk/portal/investments/all-products?assetType=BALANCED

I would say your plan looks good - maybe start off with the LS60 and see how it goes.

Its not so much about risk but the higher volatility of the higher equity options which could be a problem - the lower the volatility, the more chance the average investor has to stick with it over the longer period.

Have a play around with their asset class mix input various equity/bond percentages and see how the returns for each stack up https://www.vanguard.co.uk/uk/portal/investor-resources/learning/tools

For more on this and other passive index options check out the www.monevator.com site.

Thanks for the Links! :beer:

Got a ton of reading to get through

And yeah, I'll look at beginning with the 60 and go from there, gonna have a play around with the numbers before making any more decisions.

dunstonh

2. I've looked around a few sites, but am yet to find any solid figures, but can anyone point me in the right direction of historical returns (ROI %) based on the Vanguard Lifestrategy funds.

Forget looking at investment returns on the VLS. They only have a short history and have yet to invest during a negative period. So, any data will only show good times. Not bad.

Why did you choose VLS? Why not L&G Multi-index or Blackrock Consensus?

bowlhead99

Joe_Cocaine wrote: »

1. How much more of a 'risk' is 80 as opposed to 60? I understand the % principle, to do with Bonds and Equities, I'm looking to make a good return, and am prepared for some risk, but not a huge amount. I am aware of the ups and downs in the short term, but due to my age (Mid 20's) am not overly averse to this.

In a big equities crash, global equities could fall 35-50% as they did in 2000-2003 or 2007-2009.

In a bonds crash, corporate and government bonds could easily fall 20-25% from current levels - perhaps quite a bit more, but it would take some time and likely wouldn't be as fast as an equities crash could happen.

So a completely arbitrary guess, imagine you have £1000 invested. If it is all in the 100% equity fund you could lose half of it. If it is in the 80% equity fund you might lose half of £800 but only 20-25% of the other £200. In the 60% equity fund, perhaps lose half of your £600 and 20% of the £400. So, depending on what you hold, you might be in for a short sharp shock or a prolonged long dip or some combination of both.

In the long long term, all those drops would likely recover - because if the value of ownership of the world's largest companies is trashed and can never recover to current levels even given three decades to get their house back in order - you will probably have bigger problems; maybe anarchy on the streets. But in the short term, people don't like to take these falls in value even if they claim to 'not be averse to ups and downs'. So an 80% equities component, if it's all you have invested, is more than the average person has. But then, you're younger than the average person who holds significant investments (other than pensions).

2. I've looked around a few sites, but am yet to find any solid figures, but can anyone point me in the right direction of historical returns (ROI %) based on the Vanguard Lifestrategy funds.

No point - they have only been going since 2011, which has been a bull market for equities (especially) and bonds and would not be a realistic long term return.

Long long term, assume a return of inflation plus maybe 3-5% for largecap international equities (conservatively maybe 7% nominal if you leave it long enough) and inflation plus a couple of percent for bonds (so maybe 4% nominal). With plenty of swings along the way.

You can generally get more returns from higher risk assets and will generally get worse returns for lower risk assets - e.g. the returns on super safe inflation index-linked government bonds will be much lower than corporate bonds or equities; perhaps even projected negative returns over the next five years, because some people will pay a lot for certainty of not losing large proportions of their wealth, and large institutions don't have the alternative opportunities of high interest current accounts and promo rates for switching banks.

So if you buy a fund which invests a good proportion of your money into a government bond index, you are not exactly setting yourself up for great projected returns.

3. Any comments or suggestions on my initial plan below ?

I'm looking to kick off this fund with an initial 500GBP investment, and a further 250 GBP per calendar month as this is a comfortable amount I am happy to put away each month and not touch for years to come.

I don't think anyone could have a major problem with you investing an amount that you can afford - which you say is a comfortable amount that you are happy to put away each month and not need to touch for years to come - into a mixed portfolio of international equities and bonds weighted a bit towards the UK markets.

You could of course invest a proportion into pension rather than ISA investments, depending on your tax situation and timescale.

You seem to have a good amount of cash saved up for emergencies, so the only thing to be wary of is your debt which is currently at 0% but you should probably prepare yourself for the eventuality that it stops being at 0% and needs to be refinanced at 20% or paid off immediately. Ongoing availability of cheap credit is far from guaranteed and personal circumstances may mean you dipping into your savings for living expenses (eg for unemployment or illness / disability) while at the same time not being able to refinance your debt (because of not having stability of employment).

If you're happy you have all the cash you need, by all means invest the rest in something that matches the level of returns and volatility you're willing to accept.

Also rather than just following links to the promotional literature on the Vanguard site or other investment platforms' sites who are selling the product, read and digest the several thousand posts on this site that cover the same area, those Vanguard lifestrategy funds and their rivals in particular. It would be expecting a bit much for us to regurgitate all the key pros and cons for you.

Dunstonh is right that there are several if not hundreds or thousands of funds that can provide you with an S&S investment that is diversified across asset classes using a variety of different techniques.

super_reds

Joe_Cocaine wrote: »

Hi Super_reds,

Thanks a lot for the link and reply.

The fact sheet is exactly what I was after - and for reference it looks like the Annual Return was 4.30% for the last complete 1 year period, and is spread over 14 holdings and a total fund size of 410 Million.

And re: Investment duration and risk correlation i'll look into some more sheets!

Cheers

Joe

No worries, last 12 months performance I thought was 11.16% but not sure 1 yr performance should be the be-all and end all.

It may have 14 holdings but those will be funds themselves so your investment is spread across many stocks/shares. The appeal of these funds are the ability to be very diversified at low cost for little effort. They appeal to people who want to invest and forget about for a few years.

Drebin911

bowlhead99 wrote: »

In a big equities crash, global equities could fall 35-50% as they did in 2000-2003 or 2007-2009.

In a bonds crash, corporate and government bonds could easily fall 20-25% from current levels - perhaps quite a bit more, but it would take some time and likely wouldn't be as fast as an equities crash could happen.

So a completely arbitrary guess, imagine you have £1000 invested. If it is all in the 100% equity fund you could lose half of it. If it is in the 80% equity fund you might lose half of £800 but only 20-25% of the other £200. In the 60% equity fund, perhaps lose half of your £600 and 20% of the £400. So, depending on what you hold, you might be in for a short sharp shock or a prolonged long dip or some combination of both.

In the long long term, all those drops would likely recover - because if the value of ownership of the world's largest companies is trashed and can never recover to current levels even given three decades to get their house back in order - you will probably have bigger problems; maybe anarchy on the streets. But in the short term, people don't like to take these falls in value even if they claim to 'not be averse to ups and downs'. So an 80% equities component, if it's all you have invested, is more than the average person has. But then, you're younger than the average person who holds significant investments (other than pensions).

No point - they have only been going since 2011, which has been a bull market for equities (especially) and bonds and would not be a realistic long term return.

Long long term, assume a return of inflation plus maybe 3-5% for largecap international equities (conservatively maybe 7% nominal if you leave it long enough) and inflation plus a couple of percent for bonds (so maybe 4% nominal). With plenty of swings along the way.

You can generally get more returns from higher risk assets and will generally get worse returns for lower risk assets - e.g. the returns on super safe inflation index-linked government bonds will be much lower than corporate bonds or equities; perhaps even projected negative returns over the next five years, because some people will pay a lot for certainty of not losing large proportions of their wealth, and large institutions don't have the alternative opportunities of high interest current accounts and promo rates for switching banks.

So if you buy a fund which invests a good proportion of your money into a government bond index, you are not exactly setting yourself up for great projected returns.

I don't think anyone could have a major problem with you investing an amount that you can afford - which you say is a comfortable amount that you are happy to put away each month and not need to touch for years to come - into a mixed portfolio of international equities and bonds weighted a bit towards the UK markets.

You could of course invest a proportion into pension rather than ISA investments, depending on your tax situation and timescale.

You seem to have a good amount of cash saved up for emergencies, so the only thing to be wary of is your debt which is currently at 0% but you should probably prepare yourself for the eventuality that it stops being at 0% and needs to be refinanced at 20% or paid off immediately. Ongoing availability of cheap credit is far from guaranteed and personal circumstances may mean you dipping into your savings for living expenses (eg for unemployment or illness / disability) while at the same time not being able to refinance your debt (because of not having stability of employment).

If you're happy you have all the cash you need, by all means invest the rest in something that matches the level of returns and volatility you're willing to accept.

Also rather than just following links to the promotional literature on the Vanguard site or other investment platforms' sites who are selling the product, read and digest the several thousand posts on this site that cover the same area, those Vanguard lifestrategy funds and their rivals in particular. It would be expecting a bit much for us to regurgitate all the key pros and cons for you.

Dunstonh is right that there are several if not hundreds or thousands of funds that can provide you with an S&S investment that is diversified across asset classes using a variety of different techniques.

Hey Bowlhead,

I appreciate the lengthy post, and replies to my questions

Thanks for raising and making all of above points, I'll look again around the sites and forums.

In response to one of the above points about why I picked this specific Fund / company with vanguard - I had only read good things about it, but your points on how young the fund is, along with reading the promotional flyer from their website. I can always do some more research into it.

But again ,sincere thanks on your long informative reply.

Cheers

Joe

Drebin911

dunstonh wrote: »

Forget looking at investment returns on the VLS. They only have a short history and have yet to invest during a negative period. So, any data will only show good times. Not bad.

Why did you choose VLS? Why not L&G Multi-index or Blackrock Consensus?

Hey Dunstoh,

I've looked at a couple of other funds but looked heavier into VLS as it seems nice and simple, and transparent.

And I had read some favourable reviews on their performance, I'll go and have a look at the above quoted funds.

So many options available out there, I'm glad I can get some sound advice on it, with useful and informative posts.

enthusiasticsaver

I don't think there are any major drawbacks in your plan but then I would say that as I am investing in the Vanguard LS 60 accumulation fund myself. I have put lump sums in and £250 monthly so have around £41k in it at the moment. I am in a different position to you though being a good deal older (55) but I have a property which is now mortgage free and no debt. I am using Cavendish rather than Charles Stanley though but I think they both charge the same fees wise.


It has only been going a few years so as others have said there is not much historical data to go on as far as returns go.


You sound like you have emergency savings and no debt other than 0% so the only thing I would say is that if you are going to need money out to buy property say in the next few years this could pose a problem depending on what the market is doing at the time. Similarly if your 0% debt finishes and you need to realise some of your capital in your s and s isa then again the timing may not be great but of course none of us know what the markets are likely to do over the next few years.


The difference between the VLS 80 and VLS 60 is simply the percentage of the funds which are held in equities rather than bonds. As others have said there are other funds like the L and G and Blackrock Consensus. The only reason I went for the Vanguard is because it is slightly more UK biased and does not have the property element the L and G multi index funds have. I already hold a lot in property so did not want any more exposure to it. I think the fees on the Blackrock are slightly higher than the Vanguard too. As the fund is spread diversely across regions and sectors this reduces the risk to capital anyway and it is one of those funds you can just invest in and forget without any worries about being over exposed in any one particular area.