Vanguard LifeStrategy - Further Development

Broken_Biscuits

During "Uninteresting performances" as mentioned in the opening post is the best time to invest. Over time you are likely to be buying in cheap at those points.

I have a few funds that are doing exceptionally well at the moment and I'm reluctant to top them up at the moment when they are likely to be at a near all time high price. A few Gold funds up 100% in a year and fundsmith up 40% as examples.

brendon

JohnRo wrote: »

I cannot understand the wisdom of holding both VLS80 and VLS100 together. If you must have two VLS funds then surely it would be better to have VLS 20 and VLS100 in your desired proportions and then rebalance annually.

You are wrong on this point. The VLS 80 and VLS 100 have similar volatility profiles, which means they will not differ by a huge amount. That means (a) your allocation stays closer to your target; (b) you have to rebalance less often; and (c) therefore, in theory, save money on transaction fees.

JohnRo

brendon wrote: »

You are wrong on this point.

What Point?

brendon wrote: »

The VLS 80 and VLS 100 have similar volatility profiles, which means they will not differ by a huge amount.

Which means there isn't much if anything to be gained by holding both together.

brendon wrote: »

That means (a) your allocation stays closer to your target; (b) you have to rebalance less often; and

Which reinforces the argument there's not much if anything to be gained by holding both together.

brendon wrote: »

(c) therefore, in theory, save money on transaction fees.

Transaction fee argument is moot. There are several no dealing fee percentage brokers which are far more appropriate for the amounts being discussed than the fixed cost/transaction fee brokers.

mageliken

During "Uninteresting performances" as mentioned in the opening post is the best time to invest.

I agree, and so I'm now looking back with a bit of regret and trying to learn a lesson. I also realise bringing sentiment into this doesn't help, so I acknowledge my own flaws to an extent. You also talk about not wanting to top-up well performing funds believe that they are at all time high. If you truly believe this, then shouldn't you consider selling out entirely? Otherwise, should it not be business as usual?

I thought the P2P idea was interesting, but I'm still not sold on this. The majority of my wealth is conservatively held in savings accounts, trying to maximise what interest I can, and then I appreciate all of my other investments are significantly riskier.

Given my time horizon for these non-pension investments (10-20 years), I am a bit conflicted by what dunstonh seems to be supporting (i.e. the idea of a VLS100 if you are capable enough of managing the risks and turbulence - in terms of personality and capability to endure losses) and TheTracker who suggests maybe VLS60.

What is logical, is the big disparity between my cash savings and something at the VLS80/100 end. I'm not sure if this means I should discount VLS80/100, investing in which would probably lead me to keeping a larger sum as an emergency reserve in savings. Or perhaps there is a middle-ground in addition to VLS80/100 (or instead of), which could reduce the emergency cash for more manageable risk based on my time horizon and better returns than cash. Is this what TheTracker refers to by VLS60?

bigadaj

It's not easy times, but then is it ever.

Going for a vls40 or 60 should be les volatile, the problem is that these funds have more bonds and less shares. Many bonds, particularly government ones, might be considered to be at high valuations, meaning that they will offer little performance over the next few years, it's now not uncommon for negative bond yields on prime government bonds meaning that your paying someone to take your money and there's significant risk of capital loss on longer dated bonds.

Cash returns are very low, p2p is an option but certainly has risk, and equities are fairly high in historic terms but still have a decent dividend yield in comparison to long term averages and certainly to interest on cash.

Obviously answer is to diversify and hold a bit in each, in which case if soemthing drops badly then it's only a percentage of your total wealth.

There may be balue in property now, given the recent falls, but this comes after a long run of good performance and for the uk at least Brexit may weaken demand. Foreign assets also now look expensive given the exchange rate currently, so simplistically who knows.

brendon

JohnRo wrote: »

What Point?

Which means there isn't much if anything to be gained by holding both together.

Which reinforces the argument there's not much if anything to be gained by holding both together.

Transaction fee argument is moot. There are several no dealing fee percentage brokers which are far more appropriate for the amounts being discussed than the fixed cost/transaction fee brokers.

There is a point in holding them together. If you want 90% equities, you can achieve that with VLS 100 and any other VLS from 20 to 80. Just in different proportions. You gain exactly what I said -- the volatility is similar, so you'll always be close to 90%. If you went with VLS 20 instead, you might be 85% at times and 95% at other times. You would therefore have to rebalance more frequently to keep within your risk tolerance. Your point on transaction fees in valid.

TheTracker

mageliken wrote: »

What is logical, is the big disparity between my cash savings and something at the VLS80/100 end. I'm not sure if this means I should discount VLS80/100, investing in which would probably lead me to keeping a larger sum as an emergency reserve in savings. Or perhaps there is a middle-ground in addition to VLS80/100 (or instead of), which could reduce the emergency cash for more manageable risk based on my time horizon and better returns than cash. Is this what TheTracker refers to by VLS60?

If I understand correctly, you have £40k in high interest cash, 2k in VLS inside an ISA wrapper, and 10k in a Dimensions fund held in a pension wrapper. You probably don't need to call upon any of this money in the next 10+ years. You are 26.

You've asked about the VLS holding, but really I think its not the starting place. You are forgoing the long term advantages of contributing to an ISA. I'd be contributing each year, while retaining enough cash for emergency situations.

You've performed a risk analysis that says you can manage a product like vls80-100, but I do wonder if this was in mind of also holding the bulk of your money in cash. You need to look at all your finances holistically. So yes, my suggestion was to consider holding less cash and then the remaining money in vls60-80.

Since your cash is outside a tax wrapper, looking at p2p is worth it. Eg, instead of holding 40k @ 3% you could reduce that to 30k and put in 10k @ 10%, lifting the return up to almost 5%.

mageliken

You've asked about the VLS holding, but really I think its not the starting place. You are forgoing the long term advantages of contributing to an ISA.

My VLS funds are held within a S&S ISA. I have a Help to Buy ISA as part of my cash savings, however cashed in all of the remainder of my cash ISA savings due to poor interest rates some time ago.

So yes, my suggestion was to consider holding less cash and then the remaining money in vls60-80.

I will re-evaluate the idea of p2p, and as an alternative look at possibly de-risking my current VLS holding with a view to being more comfortable investing more in this (rather than holding it in cash, or than I would be with my current VLS80/100 mix). Thanks for your thoughts TheTracker.