Why doesn't everyone just buy Vanguard LifeStrategy?

ColdIron

ams25 wrote: »

Anybody retired been doing something similar?

I know there are arguments for a higher % in equity, but I think the approach I am using will make it easier (not easy) to live through a market drop and a longer period of poor returns without reducing drawdown income.

This is the approach I have taken. My top 2 tiers have more than one portfolio each (SIPP, ISAs, GIAs), partly by necessity but partly by design and it will allow me to re-profile one or more of them as time and circumstance dictate. My middle/income tier is the most diverse with a fair chunk of dividend producing equities though no absolute return as I don't really buy into it. My cash layer is bigger than two or three years. Splitting it up like this necessarily introduces and maintains structure and allows you to focus on the job of each part. I find it a resilient and low maintenance model with a lot of flexibility

Audaxer

username12345678 wrote: »

Once I get to the point of draw down then I will need to make a decision on whether to move more towards IT's to provide income but that decision is way in the future.

I've initially put most of my income portfolio in funds. I'm just a bit wary of investing too much in ITs as they are shares, and there is risk, albeit slight, that an IT could go bust and you could lose your whole investment in it. I think good income funds will produce the same level of income similar ITs over time.

OldMusicGuy

Audaxer wrote: »

I understand your need to protect capital, but when you get to drawdown would you not need a better return than 'inflation plus a little bit' if you want to drawdown an income as well as keeping up with inflation?

I think it depends on your situation. As all my pensions are DC, I have a very large pot of pension and savings. I plan to spend it before we die, I do not want to go out if this world having preserved a massive pension pot! So for me, just getting a return close to inflation will give us 30 years of good income, ignoring our state pensions, my wife's small DB pensions completely and the equity in our property.

Also, I do not believe in inflation as a reasonable measure of anything, especially when it is so low (would be different if it was 10 to 15%). Any "inflationary increases" can be easily adjusted by changes in lifestyle and spending patterns. So my goal in the decumulation phase is to avoid major losses rather than seek growth.

If inflation does shoot up to silly levels like I have seen earlier in my life, my strategy would need to change.

cloud_dog

Audaxer wrote: »

I've initially put most of my income portfolio in funds. I'm just a bit wary of investing too much in ITs as they are shares, and there is risk, albeit slight, that an IT could go bust and you could lose your whole investment in it. I think good income funds will produce the same level of income similar ITs over time.

Why isn't this true for OIECs?

(I'm going to ignore gearing atm as I do appreciate that that does add to the risk profile for ITs, and also ignore some of the more 'flavoured' share types ITs can issue).

ITs / OIECs / UTs value is as a sum of the parts (holdings) they have in many other investments/assets. So, if the statement can be true for an IT why isn't it also applicable for OIECs?

IanSt

cloud_dog wrote: »

Why isn't this true for OIECs?

I think Audaxer may be talking about the £50k fscs protection that covers OIECs but does not cover ITs. This won't cover loss of money caused by investment performance, but will cover losses if they were caused by e.g. fraud at their end.

That is a very low risk, but you may think why take the risk if you can find an OIEC fund similar to an IT.

cloud_dog

IanSt wrote: »

I think Audaxer may be talking about the £50k fscs protection that covers OIECs but does not cover ITs. This won't cover loss of money caused by investment performance, but will cover losses if they were caused by e.g. fraud at their end.

That is a very low risk, but you may think why take the risk if you can find an OIEC fund similar to an IT.

Yes, agree, in relation to a possible fraud situation.

bostonerimus

cloud_dog wrote: »

Why isn't this true for OIECs?

(I'm going to ignore gearing atm as I do appreciate that that does add to the risk profile for ITs, and also ignore some of the more 'flavoured' share types ITs can issue).

ITs / OIECs / UTs value is as a sum of the parts (holdings) they have in many other investments/assets. So, if the statement can be true for an IT why isn't it also applicable for OIECs?

IT's are investment companies and employ a variety of financial techniques such as borrowing (gearing) and derivatives. This can lead to both big gains and big losses. As a passive investor I avoid ITs as I don't believe the ideas of a board of directors or a manager provide added value and I think they are more prone to failure and fraud than open ended funds.

cloud_dog

bostonerimus wrote: »

IT's are investment companies and employ a variety of financial techniques such as borrowing (gearing) and derivatives. This can lead to both big gains and big losses.

Accepted, as stated in my actual post.

bostonerimus wrote: »

As a passive investor I avoid ITs as I don't believe the ideas of a board of directors or a manager provide added value...

Relevance?

bostonerimus wrote: »

...and I think they are more prone to failure and fraud than open ended funds.

The fraud aspect has already been offered by IanSt, and I very much agree.

In Audaxer's post...

Audaxer wrote:

I've initially put most of my income portfolio in funds. I'm just a bit wary of investing too much in ITs as they are shares, and there is risk, albeit slight, that an IT could go bust and you could lose your whole investment in it. I think good income funds will produce the same level of income similar ITs over time.

...it was not clear the comment specifically related to the possibility of fraud, and came across as a more general statement that ITs risked the possibility of 100% loss whilst this possibility wouldn't affect OIECs; which is why I raised the question, for clarification.

I am under no illusions over the heightened risk for an investor in ITs as opposed to OIECs for example but, at their simplest level they are both collective investment vehicles at different levels in the risk scale (and some ITs can be extremely risky, i.e. VCTs/EIS ITs) and it is highly unlikely that a general or income trust/fund would fail due to a comprehensive failure in 100% of their underlying assets, which was the implication of the post.

Eco_Miser

Audaxer wrote: »

Thanks, to give you a SWR of 3% I would have thought you would need maybe a medium risk portfolio for the pot to grow by roughly inflation plus 3% in retirement, so that you don't run out of money?

When I made the decision to retire I calculated that simply drawing capital would last me to 100+ provided the capital kept pace with inflation, no additional growth. That's ignoring the pensions I could start drawing at 65, which themselves will pay all my bills and basic spending. The actual growth over inflation is just a nice bonus.

jamei305

Because I believe my portfolio is better.

A - My Strategy 90% Equity
B - Life Strategy 100% Equity
C - Life Strategy 80% Equity