Alternatives to Vanguard LifeStrategy

short_butt_sweet

dunstonh wrote: »

VLS is 0.33% and HSBC is 0.20% if measured on total charges.
VLS is 0.22% and HSBC is 0.18% if measured on OCF only.

do you think it's better to go by the "total charges" figures? it should be in theory, but there have been doubts about the methodology used the calculate the transaction costs (which are the extra costs included in "total charges").

They prey in the church of Vanguard. Seriously, Vanguard do have a cult following and it can feel that way sometimes.

hunting inside a church?!

Audaxer

adindas wrote: »

In term of fund charges it seems that VLS at 0.22% vs HSBC at 0.19%. The income yield is slightly higher from the HSBC fund at 1.4% compared to 1.3%.

I wonder why many people still in favour of VLS 60 ?

Not much difference in total return after costs between HSBC Global Strategy and VLS funds. Maybe VLS are more popular because there are more options than the HSBC GS range, but probably because they get more publicity than the HSBC funds and new investors tend to hear about VLS first as a good solution for passive investing.

dunstonh

do you think it's better to go by the "total charges" figures? it should be in theory, but there have been doubts about the methodology used the calculate the transaction costs (which are the extra costs included in "total charges").

There are certainly issues with transaction charges but things are starting to be tidied up. There are potential issues with Vanguard's charging disclosures.

Vanguard LS60
OCF at 0.22%
Transaction Cost Ex-Ante 0.11%
Ongoing Cost Ex-Ante 0.22%

Most other fund houses are using Ongoing Cost Ex-Ante as the total charge (OCF and TC). Vanguard are reporting the OCF only in that field.

HSBC Global Strategy Balanced Portfolio
OCF at 0.18%
Transaction Cost Ex-Ante 0.02%
Ongoing Cost Ex-Ante 0.20%

HSBC have all three fields correctly reported. Even if you consider the TC to be a flawed measure, the reporting should still be compliant.

hunting inside a church?!

oops. Perhaps that was a Freudian slip

short_butt_sweet

dunstonh wrote: »

There are certainly issues with transaction charges but things are starting to be tidied up.

on seconds thoughts, and supposing that transaction costs are (or will be) measured sensibly, i don't think it's always valid to add them to the OCF, in order to obtain total costs.

the issue is: who is paying the transaction costs, all investors currently invested in the fund, or just those who are buying and selling units in the fund?

although most funds are single-priced nowadays, it's still possible for the fund mangers to make the investors buying and selling units bear the transaction costs (or part of them), by using a "floating price" for the units (above the true NAV when more people are buying units, below when more are selling).

and in the case of index funds (or of relatively passive funds), where most of the transaction costs are likely to be due to units being bought and sold (though a smaller part of the costs may be due to changes in the composition of the index being tracked), i would expect all or most of the costs to be borne by investors who buy and sell units. active funds are different, since some of the transaction costs - perhaps most of them - are incurred because the manager chooses to change the portfolio.

for instance, if VLS has an OCF 0.22%, and transaction costs of 0.11%, then adding those numbers together doesn't really tell me what i want to know. i would like to have 2 final figures for costs:
1) the total on-going charges i'd pay if i hold units in the fund for a year, without ever buying or selling units; and
2) the average round-trip costs i'd pay (because of the floating price) if i buy and later sell units (in addition to what i pay under (1) for the time i hold the units).

so in theory, 1 possible answer could be that the price is not floated at all, so there is effectively no cost to buy and sell units, and continuing holders bear all the transaction costs. in that case, the figures would be:
1) 0.33%
2) 0%

but that is unlikely to be how the fund is run. another answer could be that buyers and seller pay all the transaction costs, continuing holders none of them. in which case, the figures would be:
1) 0.22%
2) ???% (more information is needed to calculate this)

or the real position could be somewhere between those 2 possibilities. but i suspect that it is nearer to the latter, at least for VLS and other passive(-ish) funds.

if i am correct in guessing that the transaction costs in passive funds are mostly borne by investors when they buy and sell units in the funds, not when they are continuing to hold units, then as a long-term investor i'm not going to pay very much attention to transaction costs, because i won't be paying much of them.