Why doesn't everyone just buy Vanguard LifeStrategy?

chiang_mai

Once again, here's the grid I posted earlier showing best asset class by year, notice the consistency of the balanced portfolio in the average section: https://www.mfs.com/wps/FileServerServlet?articleId=templatedata/internet/file/data/sales_tools/mfsvp_20yrsb_fly&servletCommand=default

Using the grid as a guide, how do you think the more balanced or diversified portfolio would have fared versus the 100% equities portfolio!

Also, yes I'm aware of the Vanguard range, I should, of course, have written VLS mixed asset products.

IanManc, if you've got a counter-argument or reasons why, put them forward but enough of the abusive comments, they are unnecessary.

OSCO

Has too much UK allocation for my liking, but maybe just being picky!

chiang_mai

chrisgg wrote: »

Over how many 10 year periods in history has cash outperformed the FTSE 100? Not sure how you can draw the conclusion that 100% equities will lose money. Not unless you're buying African mineral companies or something. With a time horizon of 10+ years, a geographically diversified portfolios of equities (I'd recommend a core satellite approach) is the way to go.

It genuinely bewilders me seeing people in their forties investing their pensions in around 50% equities. Just look at the FTSE/MSCI World's gains in the last 20 years compared to bonds!

I have not suggested that cash outperforms the FTSE, I have however strongly advocated balanced portfolio's, as it seems have you.

Don't be bewildered by watching 40+ year olds invest only 50% in equities, we 40+ year olds are equally as bewildered by younger generations taking the level of financial risk that they do. But there again, we took similar risks at that age, it's just that now we seem to have learned to moderate risk rather than indulge in it - not a slight, just an observation.

bigadaj

chiang_mai wrote: »

Once again, here's the grid I posted earlier showing best asset class by year, notice the consistency of the balanced portfolio in the average section: https://www.mfs.com/wps/FileServerServlet?articleId=templatedata/internet/file/data/sales_tools/mfsvp_20yrsb_fly&servletCommand=default

Using the grid as a guide, how do you think the more balanced or diversified portfolio would have fared versus the 100% equities portfolio!

Also, yes I'm aware of the Vanguard range, I should, of course, have written VLS mixed asset products.

IanManc, if you've got a counter-argument or reasons why, put them forward but enough of the abusive comments, they are unnecessary.

You are using the wrong criteria for your argument

A more realistic example would be for example the trustnet aggressive, balanced and cautious plots. The higher the level of equities the higher the long term return, though with added volatility.

Interestingly are you claiming that a 60:40 will perform better than a 80:20 equity to bond portfolio, and consequently a 100% equity portfolio will perform worse still?

I think what you're actually arguing is that you want to be close to the efficient frontier in accordance with modern portfolio theory. That's fine and theoretically gives you the highest return for a particular level of risk, but increasing the level of risk has the very strong probability that returns will also increase.

IanSt

chiang_mai wrote: »

Once again, here's the grid I posted earlier showing best asset class by year, notice the consistency of the balanced portfolio in the average section: https://www.mfs.com/wps/FileServerServlet?articleId=templatedata/internet/file/data/sales_tools/mfsvp_20yrsb_fly&servletCommand=default

Using the grid as a guide, how do you think the more balanced or diversified portfolio would have fared versus the 100% equities portfolio!

Well that grid is really only relevant for US investors or people who are using the $ as a home currency, but even if the grid referred to the UK I don't see anything there that makes me think that an equity/bond portfolio is better than 100% equities. The only equity position that loses to the equity/bond portfolio is someone who invested 100% in international stocks.

But if someone really prefers the more pedestrian approach of an equity/bond portfolio because it lets them sleep at night then I'm happy to let them do so - at least they've not just left it in cash!

talexuser

For the first 10 years or so of Pep and Isa contributions I always had a couple of good bond funds for diversification and reduced volatility, maybe around a fifth of the portfolio. After a couple of corrections I decided the performance was just too pedestrian compared to the performance of my equity funds, and any smoothing effect in a downturn not particularly impressive. The next 15 years or so I have been all equity funds (apart from the tiny % some funds may have some bonds). You get to the point where the reinvested growth is such that a correction is no big deal if you don't need the money now and can wait for recovery. Saying equities are guaranteed to lose money over time is just ridiculous.

Linton

chiang_mai wrote: »

Once again, here's the grid I posted earlier showing best asset class by year, notice the consistency of the balanced portfolio in the average section: https://www.mfs.com/wps/FileServerServlet?articleId=templatedata/internet/file/data/sales_tools/mfsvp_20yrsb_fly&servletCommand=default

Using the grid as a guide, how do you think the more balanced or diversified portfolio would have fared versus the 100% equities portfolio!

.....

The grid shows you how each sector behaved over 20 years - it's the average column. Obviously the best of the options is the small/medium cap equity. Apart from "International" all equity options beat all bond options over 20 years. The outperformance during the good times more than compensates for the bad performance when times are hard.

The point of using bonds isnt to increase the overall performance but rather to reduce volatility at the expense of overall performance.

It seems obvious to me - I must have misunderstood your argument.

chiang_mai

I have only a single argument and that is that 100% equities is not cost-effective over the medium term plus, the return on cash employed is poor (resulting from market crashes) and that more balanced portfolio's, ones that hold a range of asset classes, including bonds, perform better and is lower risk.

It's getting late my time now and some of the comments are getting tedious, out.

Type_45

IanManc wrote: »

You've put forward an argument and someone has produced evidence which counters it.

Your response is the intellectual equivalent of putting your fingers in your ears and singing "la la la la I can't hear you".

:wall:

What evidence?

Type_45

eskbanker wrote: »

But you do apparently need someone to tell you that what you saw with your own eyes in a specific demographic group within one massive city may not be representative of the entire population, hence the comment about generalisation!

The average wage of £2.2K per month is representative of the entire population. That is the what "the average London wage" literally means. And the IFS report which showed that 40% of renters' wages go on rent is also representative of London.

And what makes you think that in my 20 years in London I only saw a "specific demographic"? What demographic is that exactly?