Vanguard VLS funds

pardal51

hi all,

trying to understand how the Vanguard LS 100 ACC works.

Let's say that today unit costs £100 and you buy £10,000 worth which equates to 1,000 units

After 20 years the unit is priced at £90. Does it mean that your investment will be worth £9,000? Where do we "gain" for investing in the long-term?

I am adding VLS100 to my basket (also including VLS60 and VLS80)...Looking at 10-15years minimum investment period before thinking of touching it...

AM I missing anything here?

Linton

You arent missing anything . You gain because after 20 years the price is very likely to be several times higher than the price now. One reason is that apart from capital growth of the underlying investments, all dividends are reinvested into the core fund. So you get a compound interest type return.

There is no point in holding VLS100 and VLS80 and VLS60 as they are all invested in the same underlying shares and bonds, just in different proportions.

dunstonh

I am adding VLS100 to my basket (also including VLS60 and VLS80).

That is the only thing that is an issue here. Mixing and matching VLS versions is pointless. The same underlying assets are used with each version. So, you are just breaking the asset allocations with your management decisions.

ian-d

dunstonh wrote: »

That is the only thing that is an issue here. Mixing and matching VLS versions is pointless. The same underlying assets are used with each version. So, you are just breaking the asset allocations with your management decisions.

I suppose that depends if there are differing timescales and risks though? I have VLS80 on money I need sooner (S&SISA) and VLS100 on money for the very long term (SIPP).

eskbanker

pardal51 wrote: »

Let's say that today unit costs £100 and you buy £10,000 worth which equates to 1,000 units

After 20 years the unit is priced at £90. Does it mean that your investment will be worth £9,000?

<snip>

AM I missing anything here?

Yes, you're missing the fact that you somehow bought 1,000 units for the price of 100, so your £10,000 investment would have jumped to £90,000 - happy days!

bostonerimus

Your money can grow in two ways......capital appreciation because the stock price goes up and also reinvestment of dividends to buy more shares....that would be an Accumulation fund.

You might buy 50% VLS100 and 50% VLS80 is you wanted to synthesize a VLS90, but there really isn't much point in doing that IMHO, but your point about using less volatile investments in accounts that are ear marked for the short term is a good one.

TrustyOven

bostonerimus wrote: »

Your money can grow in two ways......capital appreciation because the stock price goes up and also reinvestment of dividends to buy more shares....that would be an Accumulation fund.

That would be an Income fund with the dividends manually reinvested

The accumulation fund would not see you buy more shares in the fund, instead your share would increase in value, thus making it look like capital appreciation.

bostonerimus

TrustyOven wrote: »

That would be an Income fund with the dividends manually reinvested

The accumulation fund would not see you buy more shares in the fund, instead your share would increase in value, thus making it look like capital appreciation.

Thanks, I hadn't realized that. In the US there's no Income or Accumulation versions of funds you just choose what to do with the dividends.....either reinvest or dump them to a money market fund if you need them as income.

bowlhead99

Over here, you pick an Income version if you want the income paid out to the cash part of your account (which you could then choose to spend on buying more units of that fund, or another fund, or withdraw it to your bank, or just leave it there a while) ; when the fund goes ex-div the unit price falls and you'll get the cash.

With the Acc version the income collected from the portfolio of underlying companies is just reinvested back in those underlying companies as they never send you the dividends and the unit price doesn't drop. However, they still track what dividends they would have sent you if you'd opted to receive the divs in cash, so you can pay your taxes on it, because you've still earned it (though not relevant if you're using an ISA or pension wrapper).

ALostMachine

pardal51 wrote: »

I am adding VLS100 to my basket (also including VLS60 and VLS80)...

What is the reason for buying all three?

badger09

ALostMachine wrote: »

What is the reason for buying all three?

Inexperienced investor?:cool: