DIY balancing or leave it to the grown ups

SoupAnxiety

Hi,

I have a portfolio of around £6k with Hargreaves Lansdown, roughly 90% in tracker equity funds and 10% in tracker bond funds. I'm looking for long term growth. Historically the bond allocation was to avoid volatility and provide a slush fund for any unexpected withdrawals, but I'd be comfortable with 100% equities and do not plan to withdraw any money for decades. The equity funds are made up of emerging, international and UK markets (weighted towards emerging) and bonds are corporate, international governments and UK government bonds. I'm also invested in a single actively managed fund (Fundsmith Equity), international in scope and which overlaps the equity index trackers. The actively managed holding was and continues to be built up by small monthly direct debit payments.

I'm bamboozled by the options available and generally prefer to go with low cost tracker funds and balance myself. However, the index funds of funds such as Vanguard LifeStrategy and those on offer by Fidelity seem to be perfect (!). If I was starting again I would chuck money into LifeStrategy 80 / 100 and leave it to the professionals. The weaknesses with my current setup are that I must rebalance manually and I'm not sure if there's any point in remaining invested in the actively managed fund over the long term when its asset allocation overlaps with the garden variety index trackers in my portfolio.

Ideally I would like to "convert" everything into a Vanguard LifeStrategy 80 / 100 fund holding but doing this as a lump sum runs the risk of me buying high. Doing this also means it might be worth jumping ship from HL and seeking out lower platform fees. Are the index funds of funds as brilliant as they seem or is it likely that in the long run a manually managed portfolio would deliver similar results? The best option might be to do nothing, accept I'm locked in and keep on top of rebalancing as I have in the past but there are so many recommendations for Vanguard LifeStrategy (particularly for people like me who do not have a clue)!

Please be gentle with replies

weenie15

SoupAnxiety wrote: »

Hi,

Ideally I would like to "convert" everything into a Vanguard LifeStrategy 80 / 100 fund holding but doing this as a lump sum runs the risk of me buying high.

Please be gentle with replies

When I first opened a SIPP with HL, I put my money in a bunch of funds - they weren't even the cheaper index funds (I didn't know any better!).

Gradually, I switched them into the Vanguard LifeStrategy 80 - it's free to switch with HL.

If you've got your holding in just one fund and are afraid of "buying high", you could just convert/switch a proportion at a time - you don't have to do it all in one go.

bigadaj

The sums you are talking about are fairly small, so the actual impacts and benefits of different strategies are likely to be fairly minor. HL are expensive but an extra say 0.2% on your sum only equates to around £1 per month, and their ease of use might be worth that to you.

Again in terms of changing to say vls80 from your current holdings the impact isn't likely to be large. If you are concerned then input your current portfolio into trustnet or Morningstar, and you'll immediately be able to compare asset allocation, major holdings and historic performance against other funds.

dunstonh

I have a portfolio of around £6k with Hargreaves Lansdown,

Straight away we can see the amount is too small to try and build your own portfolio and rebalance it. Lets say your model allocations had Japan at 3.8%. That is just £228. Do you really want to spend time researching each sector and funds within that sector and adjust for the changing allocations when the amounts are going to be that small?

Going multi-asset makes far more sense.

AnotherJoe

Ideally I would like to "convert" everything into a Vanguard LifeStrategy 80 / 100 fund holding but doing this as a lump sum runs the risk of me buying high.
======

But arent the funds you are switching from also at a "high point"? So its all relative?

BLB53

The weaknesses with my current setup are that I must rebalance manually and I'm not sure if there's any point in remaining invested in the actively managed fund over the long term when its asset allocation overlaps with the garden variety index trackers in my portfolio.

I think anything that makes life simpler is good. If you are switching everything to the VLS80, which I think would be the smart option, you may as well transfer to a cheaper broker. For example AJ Bell Youinvest charge 0.20% for funds which would save you £15 p.a. - more as your funds grow over time.

SoupAnxiety

Thanks for the replies all. I'm adding £50 per month at the moment but will be able to divert more from my monthly cash savings to investments after getting married next year.

Reading up more on VLS80 it seems to be the one for me. Am I right in thinking that as the initial charge is waived with HL there's no cost to switching. And, as I'm planning on holding the fund for years (I'm in my 20s and will not look at switching away from the equity weighting until well into my 40s, all being well) there's no drawback to switching existing holdings in one go?

Psychologically this seems too easy. I fell into the trap of holding many expensive actively managed funds, then moved to diverse index trackers. For a portfolio value similar to mine is it really as easy as holding a single LifeStrategy fund at the equity / bond mix you are comfortable with?

ColdIron

SoupAnxiety wrote: »

Am I right in thinking that as the initial charge is waived with HL there's no cost to switching.

Assuming your existing portfolio contains only unit trusts (funds), yes. There used to be a dilution levy but this is no longer charged

BLB53

For a portfolio value similar to mine is it really as easy as holding a single LifeStrategy fund at the equity / bond mix you are comfortable with?

Yes, very simple - leave the complicated strategies to those who want to try and beat the market.

Also, although you hold just one fund, it holds a blend of over 19,000 individual holdings so very diverse...incredible value for what you get!

EdSwippet

BLB53 wrote: »

If you are switching everything to the VLS80, which I think would be the smart option, you may as well transfer to a cheaper broker. For example AJ Bell Youinvest charge 0.20% for funds which would save you £15 p.a. - more as your funds grow over time.

OP later states they invest monthly (currently £50). Youinvest charge for fund trades, so this would very soon swamp anything saved on the annual fee. Even the £1.50/month regular trading 'discount' rate -- if available for VLS80 -- exceeds the £15 saving. Not to mention (in specie?) transfer charges.

Probably best to stick with a platform that doesn't charge for fund trades while at this level of activity. Maybe look again when assets exceed £10,000 or so.