Why doesn't everyone just buy Vanguard LifeStrategy?

Audaxer

Chris75 wrote: »

ETF v Index read this:
http://monevator.com/etfs-vs-index-funds-differences/

PS I am with Halifax & my platform fee is £12.50 per year & trades can be from £3.95.

That's a good article on Monevator. Another point that it doesn't mention is that index funds are covered by the Financial Services Compensation Scheme but I am fairly sure ETFs are not covered as they are shares.

dunstonh

Audaxer wrote: »

That's a good article on Monevator. Another point that it doesn't mention is that index funds are covered by the Financial Services Compensation Scheme but I am fairly sure ETFs are not covered as they are shares.

UT/OEICS are covered under the FSCS. ETFs and ITs are not.

There are several issues with that article. Bid/offer spread for UTs is worth a mention as there are still some that have it. However, it reads as if all have them. Also, the risk issues, are mentioned but the risk is not placed in any context or in some cases, not even mentioned as a risk. Inexperienced investors may not realise that a potential negative increases the risks.

Audaxer

Glen_Clark wrote: »

Exactly. Bonds are close to record highs, pumped up by record low/negative interest rates. So I find the advice from an IFA that they can only fall 'maybe 10% at the most' quite surprising.

If bonds did have a large fall like an equity crash, are they likely to bounce back in a year or two like equities usually do after a crash? If there is a big bond crash would that be a good time to buy more bonds?

Thrugelmir

Chris75 wrote: »

If my £100 bond is going to mature next year the price someone would pay is not going to vary much regardless of how much interest rate changed.

Your bond cost £108 to purchase though. On maturity you will receive the nominal value i.e. £100. An £8 capital loss.

Lloyds TSB Bank (61MP) 7.625% Notes 22/04/25 will cost you £136 to purchase at the closing price today. Irrepective of the interest earnt. You are guaranteed a £36 capital loss in 2025. That's the iceberg beneath the water. That many people overlook. When chasing yield to generate income.

Glen_Clark

Audaxer wrote: »

If bonds did have a large fall like an equity crash, are they likely to bounce back in a year or two like equities usually do after a crash? If there is a big bond crash would that be a good time to buy more bonds?

I don't know - I wouldn't count on them bouncing back because if they fell they would only be reverting to long term averages.
Sterling bonds are good for the likes of pension funds whose liabilites are in Sterling cash - because they don't have access to the better rates in retail savings accounts that we do.

Glen_Clark

Chris75 wrote: »

ETF v Index read this:
http://monevator.com/etfs-vs-index-funds-differences/

PS I am with Halifax & my platform fee is £12.50 per year & trades can be from £3.95.

I wouldn't feel safe with some of obscure ETFs, especially if they are synthetic.
But ultimately you still have to trust the system and its regulators. So most of my portfolio is in the large ETFs from Vanguard and iShares.

EdGasketTheSecond

Audaxer wrote: »

If bonds did have a large fall like an equity crash, are they likely to bounce back in a year or two like equities usually do after a crash? If there is a big bond crash would that be a good time to buy more bonds?

No, of course they won't and that is why they are so dangerous right now and why I won't be buying VL strategy. Once interest rates reverse and start climbing the trend will continue and bonds will be taken down.

You still find financial advisors carefully working out bond / equity splits on their calculators though to supposedly match risk to customer profile lol.

Audaxer

EdGasketTheSecond wrote: »

No, of course they won't and that is why they are so dangerous right now and why I won't be buying VL strategy. Once interest rates reverse and start climbing the trend will continue and bonds will be taken down.

You still find financial advisors carefully working out bond / equity splits on their calculators though to supposedly match risk to customer profile lol.

You're starting to worry me now. Are all types of bonds likely to suffer in a crash? Surely a VLS fund that holds a diverse range of bond funds might have some degree of safety in a bond crash?

EdGasketTheSecond

Audaxer wrote: »

You're starting to worry me now. Are all types of bonds likely to suffer in a crash? Surely a VLS fund that holds a diverse range of bond funds might have some degree of safety in a bond crash?

Long dated bonds are most at risk. Short dated bonds not much risk as they are approaching redemption at £100. Index linked bonds also at risk but depends on how inflation and interest rates pan out.

You need to see what type of bonds VL are investing in. If it is long dated ones then beware as they might not be as safe as you are led to believe.

Type_45

Does anybody know what type of bonds VLS60 has and whether they are the type that will take a hit when interest rates start going up?

I have had a look at the relevant trustnet page, but it might as well be in Chinese for me. No idea what's "long term" or "short term" as it doesn't say.


I've recently invested a lump sum in VLS60 so would be keen to know whether it's best to trade some for VLS80 etc.