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Vanguard retirement 2050 or LS80?
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Makavelio
Posts: 11 Forumite
Hello everyone,
I’m considering opening a SIPP with Cavendish with a single fund. I only have a small pot currently of 10k and picked Cavendish for the low platform fee. I’m 32 and on the bench with choosing 2050 target retirement fund or use LS80 and lower the equatity every decade. I plan to put in around £300 a month.
Thanks
I’m considering opening a SIPP with Cavendish with a single fund. I only have a small pot currently of 10k and picked Cavendish for the low platform fee. I’m 32 and on the bench with choosing 2050 target retirement fund or use LS80 and lower the equatity every decade. I plan to put in around £300 a month.
Thanks
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Comments
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I personally do not like the target retirement fund. It requires you to match their risk reduction and not the other way around.
It also starts well above the risk profile of the average UK consumer and finishes well below. Also, for most people, there is no requirement to reduce risk anymore in the lead-up to retirement as drawdown would see you invested for another 25 or so years. People generally drop a notch in retirement. However, if you have gone through 30-40 years of investing at higher risk levels, then you will have gone through a dozen crashes and financial crisis by that time. Your attitude to crashes at that point will be "here we go again" and not be a concern. So, a large scale drop in risk would not be the norm. Just a notch or two.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I'd go for the VLS80 but lowering the equity every decade sounds a bit extreme. As you get near retirement and your pot has hopefully grown to a few hundred grand, I agree it would be a good idea to lower the equity a bit from 80% to maybe 60 or 50% if you still want your investment to grow through retirement when you are in the withdrawl phase.0
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LS80 and keep it at that until at least you are within 5 years of retirement then dial it back to 60.
But I am high risk, because if it was me I'd go all in on LS100 and keep it like that until within 5 years of retirement.0 -
With your timescales I would go LS100. Maybe as you get closer to retirement you should review it or indeed if there is a significant change/increase in bond yields. Right now who is even to say that bonds are any safer than equity?0
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So if you are 32 and considering TR2050 that's a normal retirement age of mid 60s.
If you look at the graphic on the Vanguard website the TR risk reduction doesn't start until you are around 45 so you would be wasting your 0.02% extra fee for the next 10+ years as you would get VLS80 performance anyway.
https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds
I wouldn't suggest VLS100 as you would be missing the benefits from rebalancing across asset classes. Have a play with the Vanguard asset mixer to see what I mean.
https://www.vanguardinvestor.co.uk/investing-explained/tools/asset-mixer
Unless you are planning to buy an annuity (or preparing to withdraw a lump sum rather than take the tax free element each month during drawdown) then I wouldn't suggest reducing shares exposure below VLS60.
In the medium term bonds are looking a bit risky so at 37 one pension is in VLS80 and the other is 75% Blackrock global equity tracker and 25% cash. I have been developing a basic rule where I increase cash as p/e ratios get stupid and vice versa.0 -
So if you are 32 and considering TR2050 that's a normal retirement age of mid 60s.
If you look at the graphic on the Vanguard website the TR risk reduction doesn't start until you are around 45 so you would be wasting your 0.02% extra fee for the next 10+ years as you would get VLS80 performance anyway.
https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds
I wouldn't suggest VLS100 as you would be missing the benefits from rebalancing across asset classes. Have a play with the Vanguard asset mixer to see what I mean.
https://www.vanguardinvestor.co.uk/investing-explained/tools/asset-mixer
Unless you are planning to buy an annuity (or preparing to withdraw a lump sum rather than take the tax free element each month during drawdown) then I wouldn't suggest reducing shares exposure below VLS60.
In the medium term bonds are looking a bit risky so at 37 one pension is in VLS80 and the other is 75% Blackrock global equity tracker and 25% cash. I have been developing a basic rule where I increase cash as p/e ratios get stupid and vice versa.
Be careful with using vanguard or it's tools religiously, it's not a cult though many seem to ascribe to the new religion.
Vanguard have a product to sell, like any other company, it comes as a surprise to many that despite their obsession with passives, vanguard had an active fund management arm that was actually larger than the passive side, certainly up to a year or two ago.0 -
I dont think its unreasonable to use the Vanguard tools to determing when their TR fund would start reduxing equity exposure. They would know as they are the fund manager making that decision.
Nothing in this world is truely passive but Vanguard products are at a sweet spot likely to match many peoples investment objectives.0 -
And Vanguard are promoting hybrid portfolios at the moment. A mixture of active and passive. I suspect we are going to start seeing some Vanguard active funds launched in the UK at some point.
Quote: (Ankul Daga, senior investment strategist with Vanguard Europe) In our view, passive investing is the starting point for clients, if for no other reason that that it's simple and low cost, merely seeking to capture a market's return. But active can play an important role. The key is to recognise what it takes to succeed in active management over long time horizons.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
And Vanguard are promoting hybrid portfolios at the moment. A mixture of active and passive. I suspect we are going to start seeing some Vanguard active funds launched in the UK at some point.
Quote: (Ankul Daga, senior investment strategist with Vanguard Europe) In our view, passive investing is the starting point for clients, if for no other reason that that it's simple and low cost, merely seeking to capture a market's return. But active can play an important role. The key is to recognise what it takes to succeed in active management over long time horizons.
Careful, you'll start upsetting a lot of people.0
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