Vanguard direct to customer offering confirmed

TheTracker

bostonerimus wrote: »

I'm still waiting for posts from active fund investors that have lost money. People are usually quick to advertise success rather than failure. It is certainly true that some active funds will out perform their benchmark and also that some won't. Choosing a fund on the basis of past results isn't something that I'm willing to do because I like the certainty of lower fees more than the possibility of higher returns.

A passive strategy is pretty easy to track and I know that with my essentially 3 fund portfolio of Vanguard US Total Stock Market, Vanguard International Stock Index, and Vanguard Total Bond Market I've averaged 8% annually for that last 30 years without doing much work through 3 or 4 major downturns. The UK investor can now do much the same as there are lots of tracker funds available and the more that pressure that Vanguard can exert on the platform side the better.....I speak as a satisfied long term US Vanguard customer.

It's even easier in the UK. Because our domestic market is so small (around 8% of global?) and because our domestic market is so heavy on a small number of companies, the easiest thing to do is ignore any home bias and just hold a whole world tracker. Of course, whole world is a subjective term. But it's dead simple to ensure emerging and small markets are included, even property.

The usual FUD parroted on this board is
- so and so market isn't so efficient and so not suited to a tracker (false: passive has no relation to efficiency)
- some commercial league ladder like Morningstar or trustnet has passive sway down the list. (Matters not a jot, these exhibit survivorship bias, and no concept of assets under management vs position. They never seem to mention SPIVA.)
- our financial advice company has portfolios better than these, performance shows. (No relevance, sample size so small)
- taxation in the US means it works there not here. (Rubbish, the maths of passives works before tax is applied, and UK has no tax that varies with passiveness. Of course, the situation in the US may be different, but it doesn't change the fact in the UK).
- it is possible in the uk to 'sort the wheat from the chaff'. (No evidence presented of peer reviewed strategy delivering this).
- everyone seeks different outcomes from their portfolio, active allows greater outcome variability to meet strategy. (Pish posh, just as much significantly achievable with passive).

My view is the the board is polluted with often well meaning financial advisors in whose interests it is to seed the FUD of superior performance. They'd do far better to sell real financial services, ethically.

The UK is however fortunate to have some more objective financial advice sites. Monevator is chief among these, appealing to both passive and active audiences in a non combatative fashion.


There's my 2p.

hennerz

Amen.


If I had been an IFA or private investor backing managed funds successfully over the last 5, 10 or 20 years I too would struggle to see the possibility that my success may have been luck. I don't doubt that there are IFAs that can choose managed funds that outperform trackers but the reality is that they aren't going to be able to tell others how to do this in a MSE thread and that individual investors aren't going to be able to identify those IFAs from the hundreds of other IFAs they can choose from.

hennerz

BananaRepublic wrote: »

A few points:

Don't take it personally. I'm just presenting the research to a alternative strategy to your own. Do whatever you like, but when you give advice or make posts like you did I don't want your post to come across as fact to someone less knowledgable.


If you want to have some fun we can do a bet like Warren Buffet's, you pick four UK hedge funds and I'll take a FTSE tracker with dividends reinvested and we'll let it ride 10 years, both put in £50 and winner picks the charity.

bostonerimus

bigadaj wrote: »

Yes but the situation in the us, where you are based, is somewhat different.

Taxation is different, tax free wrappers are different and teh size of teh economy means that you can just but a is tracker and forget it, as suggested by mr Buffett.

The nature of US/UK tax free wrappers and asset allocation will not be factors in the relative returns of indexing vs active funds......but taxation of the funds and fees are big factors. In the US active funds are less tax efficient than passive funds because of the tax on the short term gains. How does the UK tax those?

Linton

bostonerimus wrote: »

The nature of US/UK tax free wrappers and asset allocation will not be factors in the relative returns of indexing vs active funds......but taxation of the funds and fees are big factors. In the US active funds are less tax efficient than passive funds because of the tax on the short term gains. How does the UK tax those?

In the UK there is only potentially Capital Gains Tax when the fund is sold outside a tax wrapper. What internal buys and sells the fund makes is of no concern.

bostonerimus

dunstonh wrote: »

The US position is different though. Most managed funds do fail to beat trackers because of US taxation. That tax does not exist in the UK. Plus, as mentioned above, you would be daft to build a UK equivalent of the typical US model allocations. You tend to find European/UK models are more worldwide in their approach than the typical US model.

Remember that Vanguard itself has managed funds that outperform trackers and it also has the opinion of a mix and match approach.

Yes, it's enlightening to look at investing from a UK perspective after 30 years in the US where 40% domestic equities and 20% international is very common. So a simple thing to do in the UK would be to swap those numbers.......15% or 20% UK equity and 45% or 40% international. People should not worry too much about the "perfect portfolio", 5% or 10% here or there is far less important than regular saving and discipline through the ups and downs.

I'm not a complete passive index fundamentalist, there are some good low cost active funds out there. For historical reasons I've had a small percentage in Vanguard Wellesley for a long time....its a 40/60 balanced fund with a 0.15% fee and is very popular as an income fund with US retirees.

Thrugelmir

dunstonh wrote: »

In last place were active US funds, only a third of which managed to beat the top tracker.

The long term historical data is that only around 800 of 25,000 listed stocks outperformed the market average. You can count on one hand the stocks that provided the real performance in the US over the last 25 years. If you didn't hold these shares. Then there's no way you could have beaten the market.

bostonerimus

Linton wrote: »

In the UK there is only potentially Capital Gains Tax when the fund is sold outside a tax wrapper. What internal buys and sells the fund makes is of no concern.

Wow, so even without paying tax on their short term trading gains the vast majority of UK active managers still can't beat the index......that really underlines how poorly active managers perform.
(Admittedly this is for 1997 to 2008 and it would be nice to have a more recent analysis)

http://www.pensions-institute.org/workingpapers/wp1404.pdf

jamesd

Sue58 wrote: »

The new Vanguard platform is absolutely great news for customers who only hold Vanguard funds.

I hold some passive funds in different single sector regions including the HSBC American Index Fund (0.07%) but only 1 Vanguard fund so its not really worth changing platforms.

Depends how much money is involved. But first check the competition where your money is because it's usually possible to get a cheaper fund price than Vanguard. Then the platform costs might make moving or staying cheapest.

jamesd

bowlesbargain wrote: »

I want to move my ISA, I want to get a decent divided how do I check the Vanguard units to see which pay the higher divided. I can see how you pick a trust ie 60/40, 20/80 etc but I cannot find anywhere to say what the divided rate is I am looking for between 4 and 5%

Probably a mistake to look for the dividend, unless it's to use your annual dividend allowance outside an ISA or pension. Total return investing and occasional sales to match the income need is the way to go.