Does the Vanguard Lifestrategy include any property/REITs?

blizeH

Hi,

We were considering investing in REITs (probably the Vanguard international REIT fund and iShares UK property) but then wondered if we already held some through Vanguard LifeStrategy?

I've looked at the holdings and it doesn't seem to, unless property just isn't in the top 10?



How much would you guys recommend having in REITs? Thank you!

benalder284

The VLS 60 fund will have some property exposure due to the property REITS (primarily British Land and Land Securities) in the UK All-Share - but it won't amount to much overall.

Many recommend 5-10% Property as a useful diversifier. There are a few closed or open funds to choose from and UK and International options.

Aretnap

Indeed, they hold REITs and other property based companies in proportion to their market capitalisation on the stock markets they cover, ie not a huge amount.

An alternative to using the VLS with a separate property allocation is to use one of the Legal and General Multi Index funds - those are multi asset funds which perform a similar role to the VKS series but do include a specific allocation to property, in addition to bonds and equities.

TheTracker

blizeH wrote: »

Hi,

We were considering investing in REITs (probably the Vanguard international REIT fund and iShares UK property) but then wondered if we already held some through Vanguard LifeStrategy?

I've looked at the holdings and it doesn't seem to, unless property just isn't in the top 10?

How much would you guys recommend having in REITs? Thank you!

I hold 10% property, 50% other equities, 40% fixed. Most model portfolios show 5-10% property, if any.

I didn't think Vanguard offered a real estate fund in the UK? The typical tracker held is the Blackrock global property security fund. I personally don't have a separate domestic/UK holding.The UK economy is already heavily represented by property companies.

Whether you go with VLS and a couple of satellite holdings like Property or a broader multi asset fund like L&G is a pretty small decision in the big scheme.

blizeH

Thank you all very much for the replies. We already have a buy to let so are way over 10% on property if that's the general recommended allowance - maybe the property held within the LifeStrategy would be enough allocation then.

This is the REIT we were considering, VNQ, I haven't checked but believe it is available to buy in the UK (haven't checked on iWeb yet though) https://uk.finance.yahoo.com/q?s=VNQ

bowlhead99

Most people with a buy to let have a pretty large (and usually, geared) exposure to residential property.

However, most of the exposure gained by buying into REITs is commercial property where your rent payers are businesses. Your investment value and the flows from it are driven not just by property values but also by the ability of businesses to demand property space and be able to pay high rents - which affects both rent income (your dividends) and capital value.

Commercial property, directly held, is a good diversifier to equities. Shares in REITs, priced based on demand, behave a bit more like shares in companies generally. Still can be a good diversifier but not quite the same as a direct fund, and not the same as your local BTL.

As an example of risk/drawdown potential, VNQ tanked during the financial crisis of 2008. Shares went from around $68 at the beginning of 2007 to a low of around $19 per share in March of 2008. So, make sure you are going in with your eyes open and not just looking at 1yr or 3yr or 5yr charts. 20 is better.

TheTracker

Why would you only invest in US property? Or would you add VNQI? Personally I'd go with a global investment.

Linton

Given that you have a BTL, and investing in trackers means investing in property companies rather than directly in buildings I see no point in tweaking the VLS property allocation. If you want to tweak I think you would be better looking at other assets that form a small part of VLS. Small Companies, SE Asia or Emerging Markets are often used for icing on the cake.

blizeH

Thank you all again for the replies - we would indeed be going for something like VNQI as long as it's available from our platform (iWeb) but I'm not sure if it is, so I was considering doing half into VNQ and half into iShares UK property or one of the other funds mentioned here (Blackrock, Legal & General etc) and it'd only make up a small amount of our portfolio, somewhere between 5-10%, though I appreciate with our buy to let we'd still be heavily overweight in property, I do like the idea of adding some commercial property in there too, rather than just relying on a single house.

Maybe Vanguard LifeStrategy already offers enough exposure then, all things considered. That'd certainly make it easier then too. I do like the idea of that Linton, especially since our other main holding is Fidelity World Index which has very little in Asian or emerging markets.

TheTracker

You hold VLS and a world tracker? That wouldn't ordinarily sound sensible.

Asset allocation needs to be done in the round. Deciding how much property to add, if any, needs to be decided in the context of all your other holdings.

blizeH

The split was mostly because we didn't feel comfortable having everything in Vanguard, plus the fees are lower on the Fidelity World Fund, though the diversification isn't so good.