Why doesn't everyone just buy Vanguard LifeStrategy?

bowlhead99

Ray_Singh-Blue wrote: »

I'm wary of assuming the returns of the last few years are normal.

You are right, the last 8 years have broadly been the returns of a bull market. We also get flat markets and down markets and very down markets.

Presumably anyone piling into VLS60 today is braced for at least a possibility of falls of -5% to -10% per year for several years, as in 2000 to 2003?

VLS60 is up about 60% in five years, i.e. £10,000 invested five years back is worth £16,000.

And clearly that '£10000' point was not the bottom of a market trough; both equity and bond markets were quite a bit higher then than they'd been three and a half years prior, in March 2009.

So, if you take your £16000 and imagine we have a big crash, but being generous assume it doesn't go lower than the £10000 point. That's not overly generous because of course some of the return since the £10000 point was the fixed interest earned from the bonds and dividends earned from the equities, rather than capital fluctuation. Let's just assume the investment goes back from £16,000 down to a more modest £11,000. That's a loss of about a third of the £16,000.

I agree with your caution but would suggest that 'possibility of falls of 5% a year for several years' (which would imply you would cumulatively lose 22.5% of your investment over five years as it slowly dripped away, if the downturn lasted that long) is well undercooking it. You should probably brace for losses of maybe 33% and over a shorter timeframe of, say, three years.

Not to say it would happen, but it could happen, and investing is about knowing what could happen. But that's why people don't use investments for three year timeframes unless they don't care about giving away their cash. The longer you invest, the closer you get to the 'long term' expected result in which a mixed portfolio of equities and bonds would be reasonably assumed to make you a positive return.

Type_45 wrote: »

Property is, and always has been, the best investment.

That is nonsense. Even if it were true that property has 'always been' the best investment (which is something that's demonstrably false over a number of timescales); the idea that something 'is' considered the best investment now just because it once 'was' the best investment, is a logical fallacy.

BLB53

Any idea what the figures for VLS80 are?

10.25% p.a
https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-80-equity-fund-accumulation-shares/price-performance

Type_45

If we didn't all have faith in the stock market growing none of us would be on this forum.

Of course it will grow over the long term. We know that for a fact. We just hope it doesn't cost us in the short to mid term.

I hope everyone's investments do well. This is not a Zero Sum Game. If the world's economy keeps growing (which it will, in the long term at least) it will lift all ships and we will all be winners.

Audaxer

Ray_Singh-Blue wrote: »

I'm wary of assuming the returns of the last few years are normal. Presumably anyone piling into VLS60 today is braced for at least a possibility of falls of -5% to -10% per year for several years, as in 2000 to 2003?

While in an equity crash the VLS60 is likely to have bigger falls than that, they will not be as big as those active investors will experience who are 'piling' a lot into 100% equity funds like Scottish Mortgage. It has had great returns, but when an equity crash comes hopefully the investors that hold funds like that, have it as part of a balanced portfolio with some bond funds to cushion the blow, or they are in for very big falls.

chiang_mai

"These aren't quoted performance figures though. They are figures which chiang mai is giving us.
Who knows where the numbers are from, or whether OCFs are included".


They are fund performance figures hence OCF's are included.

They cover a three month period albeit in my earlier post I referred to a snapshot of two weeks within that period.

My study is not intended to be the definitive study of passives vs non-passives, simply it is an observation on my part of how my portfolio performs vs passives, over a three month period.

Type_45

chiang_mai wrote: »

"These aren't quoted performance figures though. They are figures which chiang mai is giving us.
Who knows where the numbers are from, or whether OCFs are included".


They are fund performance figures hence OCF's are included.

They cover a three month period albeit in my earlier post I referred to a snapshot of two weeks within that period.

My study is not intended to be the definitive study of passives vs non-passives, simply it is an observation on my part of how my portfolio performs vs passives, over a three month period.

That's absolutely fair enough. I hope you continue to outperform the market/passives. As mentioned, though, 3 months is a brief snapshot.

Type_45

Audaxer wrote: »

While in an equity crash the VLS60 is likely to have bigger falls than that, they will not be as big as those active investors will experience who are 'piling' a lot into 100% equity funds like Scottish Mortgage. It has had great returns, but when an equity crash comes hopefully the investors that hold funds like that, have it as part of a balanced portfolio with some bond funds to cushion the blow, or they are in for very big falls.

So will every other investment.

brasso

chiang_mai wrote: »

No, I was referring to funds not stocks and the period covered was the past three months and continues today. I have close to 100k spread across thirteen funds and I'm tracking their performance at a detailed level to aid my understanding of what happens in the markets, how the funds react and to confirm the funds I have are the right ones.

3 months won't tell you anything. I'm also not sure that you'll ever be able to 'confirm you have the right ones'. There will always be funds doing better than the ones you chose.

Be aware that checking your investments every day can be dangerous. You can get drawn into a jumpy, short-term mindset, and might be tempted to buy and sell too often. Can be expensive. You can't easily identify trends by daily immersion. Once a month or once a quarter is actually much better though it's hard to avoid the temptation to take a peek more often.

brasso

Eco_Miser wrote: »

Since you decided to revive a ten day old discussion,

10 days! Oh dear -- clearly an appalling faux pas in your eyes. I will have to recheck the forum rules.

Eco_Miser wrote: »

I will re-iterate that what zzzt wrote, as written, is wrong. The stock market does not always go up.
As you yourself says there is no guarantee over less than 5 years. There's actually no guarantees over 20 years either, just past performance, which is no guide to the future.

I have most of my wealth in stock markets, so obviously I expect long term gains, but I don't expect the markets to always go up.

You persist in being too literal. Of course there is no "guarantee" over any arbitrary time period. But it's a general truth that the long term trend is upwards in nearly all indices, though you're right that it's not plain sailing. There are dramatic dips, lengthy plateaus and snail-paced recoveries like post-1929, or Japan in recent years. But look at the bigger picture.

BananaRepublic

Type_45 wrote: »

That's like saying that I'm selecting the ingredients in my Heinz Ketchup. I'm not. I'm selecting Heinz Ketchup and I'm trusting their ingredients are well selected. Sure, I can look on the side of the bottle and see what's in it. Perhaps it's wise to do so. But I am not interested in that level of minutia. It is because I don't want to spend time doing such things that I selected VLS in the first place.

Finellah is correct, you are choosing a given market and sector allocation namely the VLS one. However they have diversified over a range of markets, so you are reducing risk associated with choosing only one market.