Most diversified Vanguard fund?

BLB53

Forget 'smart' this and that, keep it simple, low cost and diversified. The VLS80 will do a good job - OK a tad overweight for UK listed equity but that may not be such a bad thing at present. It is also underweight in US equity - again probably not a bad position given the rise in the S&P over the past 5 yrs or so.

Its far better to be roughly correct than exactly wrong!

Al.

Smart Beta is a middle way between a passive and active equity allocation.. but what some active managers might be doing is achieving the same net result as a Smart Beta asset, but at an active price. I'm not saying they're good or bad. Some clients will want or need exposure to something different, Guggenheim S&P 500 Equal weighted is a good example of Smart Beta.

I just read mention of the S&P. Let's use that as an example.

The problem with cap weighting that you associate with an index like that is that as one particular stock gets more popular (and hence pricier), it takes on a larger % of an index fund's holdings and reduces in value (who looks on Skoda or Kia as the definitive cheapie alternatives any more?). So, going back to a bongo standard S&P 500 tracker, in 1999 the biggest assets would have been Microsoft, General Electric and Cisco. But those stocks all remain at or below their '99 levels.

How does that leave a client if he/she had an investment timeline of 20 years?

We don't have to stop there - if your tracker is an Equal-weighted fund, it'll simply give you and your assets an equal weighting and works best in a wider, more broad-based market rally, especially small-company stocks outperform. In particular, I like Rules weighting, an index which gives greater weight to stocks according to the ye olde fundamentals (dividends paid out etc). WisdomTree LargeCap Dividend fund is a great example.

By all means dismiss Smart Beta, but at least understand how it works first.

collingbone614

If you like the idea of smart beta you could try Tim Hale's approach and add a "tilt". E.g. hold 90% all-world index (Vanguard World ETF) and then add 10% fundamental-weighted index (iShares World Value Factor ETF).

Gaaraz

Thanks very much to everyone for the replies Smart Beta seems like an interesting concept, will definitely need to do some more research into it, but I like the approach of having a just a small amount in such a fund.

Thanks for the heads up on the Vanguard World ETF too, unfortunately it seems to be US only (and in dollars) which means I can't get it through Vanguard direct though.

grey_gym_sock

you can't buy any of their ETFs directly with vanguard, only their funds. the world ETF is traded in £ (with code VWRL), as well as in $ (with code VWRD).

Gaaraz

That's great, thank you! Slightly higher expenses than the LifeStrategy (but only by 0.01%) but I really like the weightings on it.

Only problem (if I'm being picky) is that I'd probably prefer a fund, and also some other places (i.e. Fidelity) are quite a bit cheaper.

Archi_Bald

The F in ETF stands for Fund.

Gaaraz

Thanks, I meant an index/mutual fund.

colsten

Gaaraz wrote: »

Thanks, I meant an index/mutual fund.

I wouldn't discard ETFs as many are index trackers, and they can give you access to markets that may be out of reach otherwise. For example, I have a beautiful Property tracker ETF to complement my Lifestrategy funds. This was by far the most economic and most straight-forward way for me to add commercial property to my portfolio. If you haven't read it yet, this monevator article gives a good grounding on ETFs.

Gaaraz

Thank you @colsten, mind if I ask which property fund you have? I was looking at VNQ for US property, and iShares for UK property but that still leaves a big gap (VNQI looks perfect but it's not listed on iWeb or HL)