Alternative to VLS80?

Perdu

One week on and I'm still trying to get to grips with this.

After loads of Trustnetting and comparing, I'm fast developing fundblindness, and may be starting to over-complicate things..

To try to cut short the faffing, I'm wondering if something like the L&G Multi-Index might fit the bill (as described above, I'm looking to get something roughly in the VLS60-80 range, that isn't VLS..).

Currently looking at MI5 & MI6, and finding it hard to evaluate the difference in Asset Class Breakdown (eg Global High Yield ? Bond?) and they both have a big wodge of stuff called "Others" (!). How do I tell the equity/bond ratio, other than the fact that they are both in the 45%-85% bit, and does it even matter?

I'd be really grateful if someone could throw a little light on this or tell me if I'm missing something, or if I seem to be on the wrong track altogether.

Many thanks.

ColdIron

How about the fund factsheet? It shows this for the MI5

Fixed Income
Emerging Market Bonds (Local) 1.23%
Emerging Market Bonds (USD) 4.83%
Gilts 0.95%
Global Corporate Bonds 7.93%
Global High Yield 6.62%
Global Inflation-Linked Bonds 2.39%
Inflation-Linked Gilts 1.93%
UK Corporate Bonds 10.44%
UK Short Duration Corporate Bonds 0.00%

Perdu

ColdIron wrote: »

How about the fund factsheet? It shows this for the MI5

Fixed Income
Emerging Market Bonds (Local) 1.23%
Emerging Market Bonds (USD) 4.83%
Gilts 0.95%
Global Corporate Bonds 7.93%
Global High Yield 6.62%
Global Inflation-Linked Bonds 2.39%
Inflation-Linked Gilts 1.93%
UK Corporate Bonds 10.44%
UK Short Duration Corporate Bonds 0.00%

Aha! Thank you very much ColdIron. I couldn't find any of that on Trustnet, only the Asset Class Breakdown. I had already tried clicking on the Factsheet PDF but that didn't show up. However, knowing that your list exists I finally found it on L&G's website.

I think it shows me that approx 36% is Bonds, 52% Equities, and 12% Property & Cash. It obviously doesn't compare exactly with VLS but might be near enough..

Now I know a bit more I'll have a look at a couple of others, although I can't say I really know what I'm doing..

bowlhead99

Well, if you want to know the current proportion in bonds compared to equities you can look at the holdings via the factsheet as you've done. But that is a snapshot at a particular month end. It won't necessarily have that exact same mix in a year or two's time.

Its goal is to keep you in a certain targeted risk range, not to hold some hyper-specific ratio of equities to bonds to other stuff.

Perdu

bowlhead99 wrote: »

Well, if you want to know the current proportion in bonds compared to equities you can look at the holdings via the factsheet as you've done. But that is a snapshot at a particular month end. It won't necessarily have that exact same mix in a year or two's time.

Its goal is to keep you in acertain targeted risk range, not to hold some hyper-specific ratio of equities to bonds to other stuff.

Thank you Bowlhead, things are becoming a little clearer. I guess I had become a bit hung up on those ratios with VLS, but I'm beginning to understand this is not an exact science.

I'll look again at a couple of funds and make a decision. My nervousness about VLS100 is partly due to seeing that all the markets seem to be on a real high right now despite all the gloom and doom around, and realising that my attitude to risk might not be quite as robust as I had thought..

(goes off muttering "time IN the market, time IN the market..)

bowlhead99

Perdu wrote: »

My nervousness about VLS100 is partly due to seeing that all the markets seem to be on a real high right now despite all the gloom and doom around, and realising that my attitude to risk might not be quite as robust as I had thought..

(goes off muttering "time IN the market, time IN the market..)

Supply and demand for shares - and therefrom, share prices - are basically a function of:

- What level a company's profits and assets are at;

- How likely they are to be able to maintain or grow that level in the short / medium / long term;

- How easily are we able to get hold of money to buy shares ;

- What does it cost to buy other alternative things with your money and what returns are feasible from those other alternative things.

If 'everything is expensive' then everything can quite feasibly remain expensive or get more expensive due to changes in the things above.

Things are always subject to change. It was reported that Trump's election victory has given global equity markets an estimated $2 trillion boost with global bonds having lost almost the same amount in value terms. Is that a permanent or at least semi permanent change? Not necessarily, it's just an early movement of what markets feel is right if Trump puts his policies in place and changes the major US economic indicators through taxes and tariff levels etc; there's no guarantee he will actually push through what he says he will or that the economy and markets will behave as people project.

Last week the FTSE100 ended almost 3.5% up, driven by a strong performance in banking and mining stocks. European central bank surprised us by announcing a reduction in the monthly amount of QE, but not viewed too negatively as it implies some confidence in the Euro-area; and at the same time it said it would be extending QE beyond it's original plan of next March, to December or beyond 'if necessary'. These external factors all push share prices about.

So, we don't know where shares prices are going next and the old 'time in the market' adage is generally a good one.

However, simply letting 'time in the market' take care of things is not super clever if the market you have gone into is 100% equities and you don't actually want to risk losing half your money and have to wait long enough for the time in the market to bear fruit. The peak-to-trough drawdown for global equities in the last couple of crashes was over 50% in USD terms. If you don't want that, and have nervousness about VLS100 or whatever else is your current product of choice, then don't invest in VLS100 or any other 100% equities product.

JohnRo

Perdu wrote: »

realising that my attitude to risk might not be quite as robust as I had thought..

It's a very good thing you're addressing that now. I suspect there is a lot of complacency in equity markets and that many people feel forced into taking on risky assets which may prove unsuitable due to the politburo's near decade of financial repression policies.

Better to get your attitude to risk sorted before you get started, which is tough when there's no easy way to test it for real. What you want to avoid is finding out the hard way that you got it wrong when it's too late, with a big drop in value that starts to make you feel ill or sell in a panic.

bowlhead99

I agree 100% with that JohnRo.

It is pretty easy for new investors to look at the returns of equities or bonds on a five year chart and see, ah yes, it is volatile but ultimately it makes money. Or even to be told that before that five year period there was a big drop, but it totally rebounded within a couple of years (just like the 2000-2003 drop before that) so a drop is nothing to worry about, and that 0-20% or so in 'safer' things like bonds or cash is easily enough.

Then a 50% drop happens and it takes more than half a decade to get around to coming back up, or maybe even a full decade, because the 'real economy' hasn't actually recovered since the last drop after all, even though shares and bonds are highly prized and priced. There could be a lot of tears.

Bloomberg put out an interesting 'what if' infographic last week - The Pessimists Guide to 2017. The same one a year earlier suggested both Brexit and Trump election win would happen. So their vision of the future is negative, but not impossibly so.

seacaitch

March 2009 is almost 8 years ago; plenty of investors will only have ever experienced a market that goes up - or goes down a bit but then always recovers and ends up (much) higher.

That conditioning will have shaped investor behaviour leading to greater exposure to risk assets than would otherwise be the case. That being the case, it's inevitable that the next serious and prolonged ber market will take a heavy toll, with many newer investors discovering that their risk tolerance is really quite different to their asset allocation. Lots will throw in the towel.

Perdu is right to be thinking about this stuff now and planning for it. Actually, just anticipating (visualising) the impact of a bear market on your portfolio and imagining how you would feel under various drawdown scenarios can help defang it somewhat, reducing fear and the likelihood of panic selling when those grim days arrive, although not so much as actually having a portfolio and asset allocation aligned to your sleep-at-night threshold.

Expensive bonds who prices impair future returns will also have increasingly led many investors into having greater equity allocations than they would otherwise have chosen, meaning a more volatile return profile awaits them than they would a) like or b) be expecting. Focusing on your long term plan is easy until a bear market punches you in the mouth, as some will discover.

Perdu

bowlhead99 wrote: »

... Bloomberg put out an interesting 'what if' infographic last week - The Pessimists Guide to 2017. The same one a year earlier suggested both Brexit and Trump election win would happen. So their vision of the future is negative, but not impossibly so.

Well, I followed your "interesting" link Bowlhead.. :eek:

.. and so I've decided to slightly tweak my investment strategy - I'm selling everything and buying gold, crates of tinned food and a horse..

Seriously though, that's a bit of an eye-opening perspective and really shows the danger of considering past trends as inevitable - although what else do we have..?

JohnRo and Seacaitch also make very good points. I have been there before - first in 2000 just before dotcom, it had just about got back to evens in 2008, and just recovered again last year when I realised how much the fees and charges had cost me over the years and decided to go it alone. Those two crashes I weathered quite well - nothing I could do and I had plenty of other stuff happening in life - but I feel I'm on the home stretch now and might run out of time for the (inevitable?) recovery.

Thanks again for all responses.