Is a Vanguard Lifestrategy investment all you need

bowlhead99

MonroeM wrote: »

Why are the VLS funds so much more popular than other similar type of funds already mentioned ie. HSBC and L&G?

The amount of money pouring into the VLS range of funds dwarfs the amounts going into the other two companies range of funds?

BLB53 wrote: »

Lower costs - VLS now 0.22%.

Cost differences between VLS and L&G Multi Index and Blackrock Consensus and HSBC Global Strategy are pretty much irrelevant really. You pay anything from maybe 0.2 to perhaps a bit over 0.3. The returns in any year will diverge by more than the 0.1 difference.

Popularity just comes down to size, marketing and word of mouth. If you come to a general UK forum and everyone is talking about what supermarket they use, you will probably hear Tesco more than Morisson, because there's more stores. It doesn't mean you should use Tesco - or that they are any cheaper or better quality or fundamentally going to have more profits per pound of revenue or pound invested by shareholders than Morrisons or Sainsbury.

But if they are bigger and if they grow their revenues by x% because y% of existing customers used them and told their neighbour to try them, that's a bigger absolute cash inflow than if Sainsbury or Morrison grows their revenues by the same x%.

If VLS is a popular thing to recommend to others here (so much so that people are calling it VLS in threads as if everyone automatically knows that means Vanguard Lifestrategy), then it will stay being the most popular because when newbies come to the forum clueless about investing, other newbies will say they were recommended it as a good cheap broadly invested fund and it works for them.

So, while experienced investors might or might not still think it is the best thing since sliced bread, it takes on a life of its own and becomes de rigueur, and everyone keeps spreading the word.

Maybe that will change when we have a big inevitable market downturn and those newbie investors in VLS100 or VLS80 lose a lot of value and blame the product not the market and their own aggressive fund choice. The new investors who picked VLS60 because it was cheap and mentioned on this website and the league tables said it outperformed most others in the 40-85% equities mixed asset sector and had never had a really bad year... may wish they had taken notice that its fixed, highly international, equity component helped it outperform others in that category in the best of the good times and would do the exact opposite in the bad.

Until that happens, VLS is bound to continue to be very popular in the forum.

Also the funds are auto rebalanced to keep the fund at the level of equity chosen at the outset - there is no portfolio drift and no discretion for managers to alter percentages between equities/bonds. If you want 60% equities, that is what you will always have.

That's true - it makes it easy to know what you have if you're building a portfolio around it.

Worth noting that the equities mix does drift a little (and is actively changed sometimes, like when a while after launch they decided their investors would prefer the home bias to reduce to 25% UK).

Knowing the asset allocation percentage won't change (much) is a plus or a minus depending what you are looking for. It's great if you are trying to buy other things on the side and want to always know broadly what's in your VLS core to help come up with the overall wider portfolio mix. The VLS bit is always going to deliver the performance of 80% of UK-biased global equities and the 20% of certain bond types.

However, if you had it as your only holding, you might find the vanguard "fixed" asset mix moved aroundthe scale a bit in terms of potential risk and volatility against your preference. By that, I mean that although assets such as ordinary equities and bonds have fundamentally the same legal structure, rights & obligations etc through thick and thin, different global asset classes can have different volatility properties at different points in an economic cycle.

Something like L&G multi index will get their data providers and actuaries or risk consultants to feed them with data on an ongoing basis, about what to hold to target a particular risk or volatility level. This can result in the equities and bonds and other asset classes changing within the overall mix over time, as they strive to maintain its status as , e.g., "medium risk" or "volatility rating 5 out of 8".

That might be exactly what a newbie investor is looking for. However, he has read something that said that basically in simplified terms, risk was just how much bonds you had compared to your equities. So he will pick an arbitrary level of bonds, like 20%, and declare that this VLS product is perfect because it's cheap and always gives him that 20% without any effort on his part, so he's done. By contrast, the L&G fund is rejected because he doesn't want to have someone messing with his underlying holdings from time to time thinking they know best.

If he's on a thread where nobody uses L&G MI and three people use VLS, and they point out that VLS has billions under management while you can't get L&GMI at their Hargreaves Lansdown newbie platform of choice, you can bet that he will be swayed to use VLS.

However, it's only after a decade or more can he look back at (a) the total return and (b) the variability in ups and downs along the way, to determine that actually he *did* prefer the Vanguard solution. By which point it's too late to give that feedback to January 2017 investors.

Zola.

bowlhead99 wrote: »

Cost differences between VLS and L&G Multi Index and Blackrock Consensus and HSBC Global Strategy are pretty much irrelevant really. You pay anything from maybe 0.2 to perhaps a bit over 0.3. The returns in any year will diverge by more than the 0.1 difference.

Popularity just comes down to size, marketing and word of mouth. If you come to a general UK forum and everyone is talking about what supermarket they use, you will probably hear Tesco more than Morisson, because there's more stores. It doesn't mean you should use Tesco - or that they are any cheaper or better quality or fundamentally going to have more profits per pound of revenue or pound invested by shareholders than Morrisons or Sainsbury.

But if they are bigger and if they grow their revenues by x% because y% of existing customers used them and told their neighbour to try them, that's a bigger absolute cash inflow than if Sainsbury or Morrison grows their revenues by the same x%.

If VLS is a popular thing to recommend to others here (so much so that people are calling it VLS in threads as if everyone automatically knows that means Vanguard Lifestrategy), then it will stay being the most popular because when newbies come to the forum clueless about investing, other newbies will say they were recommended it as a good cheap broadly invested fund and it works for them.

So, while experienced investors might or might not still think it is the best thing since sliced bread, it takes on a life of its own and becomes de rigueur, and everyone keeps spreading the word.

Maybe that will change when we have a big inevitable market downturn and those newbie investors in VLS100 or VLS80 lose a lot of value and blame the product not the market and their own aggressive fund choice. The new investors who picked VLS60 because it was cheap and mentioned on this website and the league tables said it outperformed most others in the 40-85% equities mixed asset sector and had never had a really bad year... may wish they had taken notice that its fixed, highly international, equity component helped it outperform others in that category in the best of the good times and would do the exact opposite in the bad.

Until that happens, VLS is bound to continue to be very popular in the forum.


That's true - it makes it easy to know what you have if you're building a portfolio around it.

Worth noting that the equities mix does drift a little (and is actively changed sometimes, like when a while after launch they decided their investors would prefer the home bias to reduce to 25% UK).

Knowing the asset allocation percentage won't change (much) is a plus or a minus depending what you are looking for. It's great if you are trying to buy other things on the side and want to always know broadly what's in your VLS core to help come up with the overall wider portfolio mix. The VLS bit is always going to deliver the performance of 80% of UK-biased global equities and the 20% of certain bond types.

However, if you had it as your only holding, you might find the vanguard "fixed" asset mix moved aroundthe scale a bit in terms of potential risk and volatility against your preference. By that, I mean that although assets such as ordinary equities and bonds have fundamentally the same legal structure, rights & obligations etc through thick and thin, different global asset classes can have different volatility properties at different points in an economic cycle.

Something like L&G multi index will get their data providers and actuaries or risk consultants to feed them with data on an ongoing basis, about what to hold to target a particular risk or volatility level. This can result in the equities and bonds and other asset classes changing within the overall mix over time, as they strive to maintain its status as , e.g., "medium risk" or "volatility rating 5 out of 8".

That might be exactly what a newbie investor is looking for. However, he has read something that said that basically in simplified terms, risk was just how much bonds you had compared to your equities. So he will pick an arbitrary level of bonds, like 20%, and declare that this VLS product is perfect because it's cheap and always gives him that 20% without any effort on his part, so he's done. By contrast, the L&G fund is rejected because he doesn't want to have someone messing with his underlying holdings from time to time thinking they know best.

If he's on a thread where nobody uses L&G MI and three people use VLS, and they point out that VLS has billions under management while you can't get L&GMI at their Hargreaves Lansdown newbie platform of choice, you can bet that he will be swayed to use VLS.

However, it's only after a decade or more can he look back at (a) the total return and (b) the variability in ups and downs along the way, to determine that actually he *did* prefer the Vanguard solution. By which point it's too late to give that feedback to January 2017 investors.

Do you invest in Vanguard LS yourself?

badger09

This thread illustrates bowlead99's point quite well:cool:

https://forums.moneysavingexpert.com/discussion/5595112

jdw2000

bowlhead99 wrote: »

The new investors who picked VLS60 because it was cheap and mentioned on this website and the league tables said it outperformed most others in the 40-85% equities mixed asset sector and had never had a really bad year... may wish they had taken notice that its fixed, highly international, equity component helped it outperform others in that category in the best of the good times and would do the exact opposite in the bad.

A 60%, highly-international equities component will be VLS60's undoing in a bad year/crash?

Zola.

badger09 wrote: »

This thread illustrates bowlead99's point quite well:cool:

https://forums.moneysavingexpert.com/discussion/5595112

haha you are right... I do agree that we could all sound like parrots recommending it..... but its popular for a reason, as its been delivering pretty well for the past 5 years.

Not many will speak out and so nope, not for me, I think X is much better that Vanguard LS for the following reasons....

adindas

Is it the right time to buy now or not ?
What is advantages and disadvantages of investing it now or wait until next year ??

The reason why I am asking because someone said it is not a good time to invest last year and this year due to brexit as well as the value of pound. If you wait for next year, is it going to be better ??

chockydavid1983

No idea.
Disadvantage is less time in the market.

bowlhead99

jdw2000 wrote: »

A 60%, highly-international equities component will be VLS60's undoing in a bad year/crash?

It won't be their "undoing", the funds will still exist, but they will likely do worse than a bunch of more conservatively positioned funds which are in the same broad "fund sector classification" of being a mixed asset fund of funds.

And then maybe people will finally stop making inane 'recommendations' like "basically you should just get a lifestrategy fund 40/60/80/100 whatever you prefer, I don't know much about investing but I bought this after being recommended it by the experts here and it has done very nicely the last two years"

Likewise in an equities crash, the 80% version will possibly do a great deal worse than those funds in its sector which have lower than 80% equities and are less focused on foreign assets - for the exact same reason that it has been outperforming them in the current equities bull market and sterling devaluation. In other words, being very high in equities, and 75% of the equities being ex-UK, and most of the UK companies being FTSE giants with foreign revenues.

Depending on the depth and longevity of the next inevitable crash, the addition of some serious troughs to go with the peaks on the VLS charts will perhaps curb the constant auto-recommendation of their dirt cheap performance- targeted passive product. This is not me saying it's a bad product, just that you should know and understand your product.

One point worth repeating is that the sector classifications given to these type of funds are pretty broad. If there is a sector called "mixed asset, 40-85% equities", then clearly that covers a massive amount of investing styles and risk levels. Some will have invested much more domestically rather than abroad. Some will have a truly variable level of equities depending on market volatility, perceived value, a preference for income vs growth opportunities etc.

Vanguard 80 fits into that 40-85% equities category but just says, hey, I'm 80% equity and I'm never dropping that, and the vast majority of my assets are overseas, and all my UK equity exposure comes from an index that has a lot of foreign exposure. Basically if we have a great bull period for equities and a real positive period for foreign assets generally because of sterling weakness, you can guarantee that Vanguard 80 fund will be well up there in the 'league table' for that sector as it has done all the right things for that set of economic circumstances. Even though you would have lost your shirt in the opposite circumstances putting it last instead of first in the league.

VLS60 is actually pretty close to the top in that sector too. Certainly higher than the returns you might expect on an ongoing basis from a fund that was "medium risk". It is medium in terms of being on a scale between VLS 100 and VLS20 but that scale is not completely linear when translated to risk and volatility. You can see it probably isn't only 'medium' risk because it has returned close to the top of the sector and it is only using simple trackers with no fundamental shifts in allocation, so those returns can be losses almost as easily as they can be gains. Still, everyone has their own definition of medium. Vanguard don't try to say it's medium, just lower equities than their high equities ones and higher than the low equity ones

It's definitely not exactly half way between diversified equities and cash. It's just a pile of world large cap equity indexes mashed together with bond indexes which have also been kind enough to rise over the last five years too. If that reverses, losses ensue.

- Lots of people come to this board saying I have had enough of low returns of cash and so am going to put some of these savings into S&S now but only if it's lowish risk.

- Then others, myself included will point out that cash is not zero risk because of inflation - and if you don't need all that cash on demand for a rainy day, you could consider taking investment risk over the longer term; because truly low risk investments really don't pay a lot right now.

- And then some bright spark will point out that VLS is a cheap product and they are using the 80 version but the 60 is lower risk, try that.

- And then the newbie punter thinking about putting a toe in the water looks at the charts, and sees the VLS60 did 10% annualised compound return for the five years ended 31/12/16.

- "Wow, that's a lot better than I've been getting on my cash, and it must be much safer than the 100% equity product which only got a few percent more annualised return. And everyone on MSE is talking about this VLS thing, some of these people with only a few posts saying they are new to it all are using the 80 one, and so I'm sure I can do at least 60 myself, the risk will be much lower. And I have all these savings earning a low return so I'll put £20k into it not £2k!"

Of course, if a fund can go up 10% a year compound there is plenty of scope for tears when things move in the opposite direction. The 61% growth over five years wasn't even starting from the bottom of the financial crisis of 2009. But if the five year 61% reversed in full, the fund would be at 1/1.61 of its value which is 62% : a 38% loss. Which is not the worst you could get. Does everyone investing truly appreciate that? Of course not.

It's not surprising that Martin Lewis says very little about investing techniques and a lot more about guaranteed cash products and other ways to save costs in your day to day life. Guiding someone through an investment purchase is a minefield, which is why it's highly regulated and why the IFAs on here don't go anywhere near recommending specific funds for individuals.

But as Badger's link aptly demonstrates, you can't mention being a newbie investor here for five seconds before someone with no investment qualifications steers you to VLS and monevator, the passive investor blog.

VLS: decent, not the only game in town.

Monevator: decent, not the only game in town.

Bowlhead99 comments: same.

jdw2000

adindas wrote: »

Is it the right time to buy now or not ?
What is advantages and disadvantages of investing it now or wait until next year ??

The reason why I am asking because someone said it is not a good time to invest last year and this year due to brexit as well as the value of pound. If you wait for next year, is it going to be better ??

My motto is: "time the market, beat the market. And always chase your losses".

Gadfium

adindas wrote: »

Is it the right time to buy now or not ?
What is advantages and disadvantages of investing it now or wait until next year ??

The reason why I am asking because someone said it is not a good time to invest last year and this year due to brexit as well as the value of pound. If you wait for next year, is it going to be better ??

The best time to start investing was 20 years ago.
The second best time is today.