L&G multi index or vanguard lifestrategy

xyz123

hi


I want to start investing with a small amount of say £5k over long term (10 years plus) I understand the risks of investing and that its my decision.


just wanted to get some thoughts from knowledgable folks here about whether to go with vanguard life strategy 60% or similar L&G multi index fund. The only difference I know of is that L&G has higher annual rate while offering some exposure to property. any other points that I have missed or any suggestions whether to go with either or to go with mix of both...


ta

Mistermeaner

Why not both?

**plus usual advice about pensions cash savings mortgage paying off credit cards yada yada yada**

xyz123

Mistermeaner wrote: »

Why not both?

**plus usual advice about pensions cash savings mortgage paying off credit cards yada yada yada**

Thanks. I was just not sure I'd with smallish portfolio is it worth having two funds. I don't know enough about equity distribution within each fund so don't know if I will end up simply duplicating in same shares...

All other advice obviously correct and already happening. Many thanks.

bowlhead99

If you don't really know which one you want, but feel you'd be broadly happy with either, there's no real negative in getting both, unless the platform you've chosen charges more fees for having two funds instead of the same total amount of money in one single fund. Many platforms just charge some percentage-based fee on the total NAV and don't charge for buys, sells or changes.

Obviously if you're going to be adding each month and using a platform which charges per transaction, it's cheaper to have fewer transactions - so you'd want to hold fewer funds or just take it in turns which one you bought each month.

Certainly, people will tell you you don't need two similar multi asset funds for a £5k total investment, or a £10k or £20k one for that matter. But if it doesn't cost materially more money to do it that way, no harm done.

In terms of worrying about "doubling up" on the underlying holdings of companies by having two very similar rival funds - that's mostly a red herring.

For example, let's say you invested £2500 in the LG multi 6 fund. Now you have another £2500 to invest. Do you invest the second £2500 in VLS80 which has similar investments and "doubles up" on most of them? Or do you invest the second £2500 in more LG multi 6, which has the same investments and doubles up on all of them?

As you can see, your second £2500 is going to double up on a lot of the holdings whichever way you do it. And it doesn't really matter that it does, as you already decided your goal is to put all of your £5k into those sort of companies.

dunstonh

The only difference I know of is that L&G has higher annual rate while offering some exposure to property.

Whilst both are active passive multi-asset fettered fund of funds the investment style is different. L&G is risk targeted. VLS is return focused. Vanguard is quite rigid in its asset allocation whereas L&G is more fluid.

SpeedSouth

dunstonh wrote: »

Whilst both are active passive multi-asset fettered fund of funds the investment style is different. L&G is risk targeted. VLS is return focused. Vanguard is quite rigid in its asset allocation whereas L&G is more fluid.

Could you elaborate on this?

Would VLS not target your risk as per your selection 20/40/60 etc?
Is this all info you can glean from factsheets?
For a newbie to funds and such where do I go looking for this sort of info?

When your talking assets allocation I assume simply VLS has a portfolio it tends to stick to whereas L&G will manage the risk by exposing itself to a greater variety of assets?
Thanks?

bowlhead99

If I can attempt to put Dunstonh's comment into laymans terms:

With L&G you pick a risk level and they build and maintain a portfolio to that risk level as determined by a third party risk rating agency; the portfolio mix may change over time allowing some reaction to market events but with the aim of ongoing suitability within the risk mandate. So the specific holdings in your pot may change, in terms of the exact ratio between equities, bonds, cash, real estate and across countries, but the same level of risk is being aimed at. So you can leave it to them and know you are getting the risks you signed up for, if they're doing their job properly.

With VLS instead, you pick what proportion of bonds you are willing to have in your static allocation based broadly on what return you are trying to get out of it, and that fixed 'strategic asset allocation' where you are constantly rebalanced back to the target mix that you signed up for, helps you stay on your target because you always know what is in your fund. You're right, that with VLS hopefully the strategic call you make on the level of equities to bonds will mean that the level of risk will remain broadly acceptable to you; but the value of having this type of fund as the core of your portfolio is that you know what proportion of it is in which of the two main strategic asset classes in terms of equities vs bonds.

So L&G attempt to manage a portfolio within a given risk level based on various metrics and market conditions over an economic cycle, while Vanguard do not attempt to interpret an overall risk requirement, they just try to give you what you said you wanted to buy, and if you'd like to adjust your equities allocation you can buy more '80' and sell more '60' or vice versa or if you want more cash you can liquidate some of it etc etc.

There are other groups doing something similar - e.g. Blackrock's 'Consensus' range. Like L&G they vary the mix between equity, bonds, cash and and other within each fund in the range, in an attempt to broadly match the ABI pension sector averages at a point in time. Some kind of alignment to industry standard risk profiles and sector average allocations means it's simple and cheap to know what you are getting in comparison to what the wider industry is getting (and maybe paying more money for). However, it's important to note that BR Consensus 85 means it is a mixed asset fund which has 'up to' 85% equity rather than a target of 85% equity, unlike for example Vanguard LS80 which does have a target of 80%.

Note some snippets of the language above are borrowed from marketing material which is designed for advisers to talk through with their clients rather than be pumped out directly to someone who is a self-confessed 'newbie to funds'. It can be difficult enough to explain nuances of different types of risk face to face, let alone over an anonymous internet forum.

But basically, although equities and bonds have different characteristics, the short answer is there is more to life than the simple 'what % bonds do you want' in isolation. Though if you are just generally looking to throw £5k into a pot and allocate it broadly across markets, you don't need to pay if the same kind of attention as would be warranted by a £100-200k portfolio where every 1% is perhaps a fortnight's net pay.

SpeedSouth

Thank you bowl head.

At present my amount is only £22k. I did see a couple of IFA,s but when they provided their reports their piece of the pie was substantial for the small amounts we were talking.

When/if it gets to the point that I'm lucky enough to be discussing £100k pots I'll reevaluate if my knowledge is still limited.