Why doesn't everyone just buy Vanguard LifeStrategy?

bowlhead99

zoebel wrote: »

Assuming the basic premise of Vanguard LS is sound (low fees, diversification), my only concern is fees.

As I understand it, the fees on the LS are 0.22%. If you had, say, a Vanguard All World fund at 60% weighting and a Vanguard All World bond fund at 40% weighting, I would guess that the overall fees would be less than 0.22% overall. So, would that make it a better choice, seeing as the consensus amongst experts it that it isn't so much the choice of fund that is important, but rather asset allocation and FEES?

You say it is asset allocation and FEES so you are focussed on fees.

But it's ASSET ALLOCATION and fees so you should be focussed on asset allocation.

The disparity between the returns of equities in one part of the world and another can be 30%+ in any given year.

Lifestrategy is a product that puts your desired percentage into bonds and then takes your equities money and puts a quarter into UK indexes and 75% overseas. Whereas if instead you put your equities money into an 'all world' or 'global' index fund you will get about 6% in companies listed in the UK and 94% overseas.

In both cases the allocation of 'UK equities' money is going to be broadly in line with the FTSE all-share, of which a large component is big multinational companies who do not do all their business in the UK anyway. However, the UK all-share index does clearly have more UK exposure than the average company listed in the rest of the world has (e.g. those in US index, the Europe index, the Japan index, the Emerging Markets index etc).

So, the Vanguard Lifestrategy product - which was developed to be popular with UK investors by meeting the needs of the average UK consumer (who lives their life in the UK and anticipates spending pounds in the UK in retirement) - has some 'home bias' ; while the All-World or Global All Cap equity fund products do not.

That different asset allocation will result in a different level of gross return and volatility. If you lived outside the UK and had no reason to 'overweight' the returns of companies with UK assets or revenues then you would probably prefer a global fund (though might well want to add to it, something from your own country, because people do like to bias their investments domestically).

So, changing from the asset mix of lifestrategy 60% equity, to using one global equity index for 60% and one bond index for 40% will give you a different result, because you've changed the asset mix within the equities.

You've also changed the asset mix within the bond investments, because while your proposed portfolio has 40% in a global bond index, the lifestrategy 60 fund only has 20% in that global bond index and has the other 20% spread across 8 different bond indices. So you'll get a different result on the bond side too.

To summarise: yes you can save a few basis points on fees by building your own dirty version of a lifestrategy fund with only two fund components instead of what they do which is using 10+. In doing so you will depart from their professionally constructed portfolio mix and have a different allocation with different results and likely greater volatility due to the limited exposure to UK equities and the different bond types used. If you are happy with doing that, and believe the results will be no less desirable, go right ahead and build it yourself to save your 0.05% to 0.1% a year in costs (while taking on the burden of periodic rebalancing etc).

Prism

zoebel wrote: »

Assuming the basic premise of Vanguard LS is sound (low fees, diversification), my only concern is fees.

As I understand it, the fees on the LS are 0.22%. If you had, say, a Vanguard All World fund at 60% weighting and a Vanguard All World bond fund at 40% weighting, I would guess that the overall fees would be less than 0.22% overall. So, would that make it a better choice, seeing as the consensus amongst experts it that it isn't so much the choice of fund that is important, but rather asset allocation and FEES?

Maybe. If I was to do this on my platform the Vanguard All World fund is 0.24% and the Global Bond fund is 0.15%. However I would have to pay two platform transaction fees every time I invested and the bond fund has a 0.2% inital charge. So as long as I didn't want a high equity percentage I could probably save a tiny bit on fees. Another way could be hold the regional funds but this would add more transaction charges if you were contributing monthly and rebalancing.

zoebel

Thanks for that. So, all things being considered, the cheapest and best way to invest is to buy a LifeStrategy fund directly through the Vanguard platform, with no entry, exit or transaction fees. Phew! If only I had told people this earlier, it would have saved earlier commenters an awful lot of brain strain and argy bargy! It would also have saved me a lot of time reading all their hogwash.

A_T

zoebel wrote: »

Thanks for that. So, all things being considered, the cheapest and best way to invest is to buy a LifeStrategy fund directly through the Vanguard platform, with no entry, exit or transaction fees. Phew! If only I had told people this earlier, it would have saved earlier commenters an awful lot of brain strain and argy bargy! It would also have saved me a lot of time reading all their hogwash.

That's very rude especially when people have been trying to help.

Prism

zoebel wrote: »

Thanks for that. So, all things being considered, the cheapest and best way to invest is to buy a LifeStrategy fund directly through the Vanguard platform, with no entry, exit or transaction fees. Phew! If only I had told people this earlier, it would have saved earlier commenters an awful lot of brain strain and argy bargy! It would also have saved me a lot of time reading all their hogwash.

The cheapest way to invest is to get the individual funds and etfs.
The likely better way (for many people) to invest is to pay a little more for Vanguard (VLS) to do all the allocations for you.
The best way to invest is not do either but select funds on a case by case basis without focusing always on low fees.

Thrugelmir

zoebel wrote: »

Thanks for that. So, all things being considered, the cheapest and best way to invest is to buy a LifeStrategy fund directly through the Vanguard platform, with no entry, exit or transaction fees. Phew! If only I had told people this earlier, it would have saved earlier commenters an awful lot of brain strain and argy bargy! It would also have saved me a lot of time reading all their hogwash.

When Vanguard (and the other major fund managers) become the "market" themselves. Then be interesting to see how investors react.

bowlhead99

zoebel wrote: »

Thanks for that. So, all things being considered, the cheapest and best way to invest is to buy a LifeStrategy fund directly through the Vanguard platform, with no entry, exit or transaction fees.

It's not "the cheapest and best way to invest" full stop. It is one way to invest.

Using Lifestrategy is one choice, and using Vanguard's own platform and paying a percentage platform holding charge on all of your assets year in year out (rather than using a different platform where you pay a fixed fee to buy and sell) is another choice. Different options will suit different people depending on their level of knowledge and understanding, the time and effort they can devote to research, and the amount they are going to invest.

Phew! If only I had told people this earlier, it would have saved earlier commenters an awful lot of brain strain and argy bargy! It would also have saved me a lot of time reading all their hogwash.

Well,
(a) you don't seem to have fixed the world's problems and found 'the cheapest and best way to invest', you have merely settled on one approach which works for you - so I don't see how that would save the authors of the 300 previous post any effort.Y

(b) you didn't seem to be in a position to 'tell people' anything earlier, you were 'asking people'.

Specifically, you were asserting perhaps naively that fees were most important and asking the question whether it would be better to build your own cheap version of a lifestrategy fund:

You said:

zoebel wrote:

If you had, say, a Vanguard All World fund at 60% weighting and a Vanguard All World bond fund at 40% weighting, I would guess that the overall fees would be less than 0.22% overall. So, would that make it a better choice,

I didn't see much hogwash in response. Within the space of about an hour, I answered your question about the ways in which it may be a better or worse choice, and Prism commented on the costs of buying and holding it if you were buying multiple funds and rebalancing using the platform he/she used.

I hope you are not suggesting that either of those posts were hogwash. Perhaps you mean that the stuff that came before your question and those posts was a lot of hogwash. The thing is, if you read long debates about the pros and cons of different investments, you learn things and pick up ideas and opinion. Even if some posters go a bit rogue and start trying to score points against the people who have alternative views, there are still some facts to learn in addition to the psychology of investing and the different approaches people take.

If you shortcut to 'just tell me the best way to invest and where to do it' people will tell you your question is unanswerable because making suitable investment choices is a mix of opinion and knowledge and personal circumstances (not that you have even shared any personal circumstances with us on this thread).

zoebel

Thanks for your feedback, but please let's keep it social and go easy on the balderdash. Try not to get your comments removed, due to their abusive nature, in future (sorry, whoever you were, I can't remember your name).

After all, it's only money. You can't take it with you! :beer::money:

PatelA

Sorry to bring up an old thread, but does anyone have any recommendations on good active managed funds to use? I am slightly put off that Vanguard seems to be too UK-focused from what i have read.

Alexland

PatelA wrote: »

Sorry to bring up an old thread, but does anyone have any recommendations on good active managed funds to use? I am slightly put off that Vanguard seems to be too UK-focused from what i have read.

Have you considered the HSBC Global Strategy fund series? Although mostly passive it has some tactical asset allocation and the UK is in proportion to global capitalisation.

Alex