Why doesn't everyone just buy Vanguard LifeStrategy?

BananaRepublic

zzzt wrote: »

I've recently read a book called Smarter Investing by Tim Hale,

[snip]

So the general advice is that it's always better to simply invest in a passive index tracker fund with low fees - fees are one of the things that will eat into your profits in a big way.

Don't believe everything you read.

I've been investing for 20 years (ignoring pensions) and my biggest mistake was swallowing the passive fund hype. My active funds have done very well thank you. My passive funds did not so well, which is why I transferred the money to active funds, which have done far better. It is possible I have been lucky, but my luck is very consistent.

The problem with studies is the assumptions they make. In some markets such as the US it is probably better to go for passive funds. But not all markets are like the US. And yes on average active funds do not do so well.

EdGasketTheSecond

dellboy102 wrote: »

Probably a silly question but can I ask the reasons why?

Bonds / Gilts are supposed to limit risk being less volatile than equities. However we are in a time of unprecedented low interest rates and bond capital values are close to all time highs. The price of bonds can only fall from here and unlike equities, you won't get your money back sometime in the future unless interest rates once again go down to these levels. You could potentially lose 50% of your money in long-dated bonds with no hope of recovery imho. I rate cash and gold as better than bonds if you want out of equities for a while.

Audaxer

EdGasketTheSecond wrote: »

Bonds / Gilts are supposed to limit risk being less volatile than equities. However we are in a time of unprecedented low interest rates and bond capital values are close to all time highs. The price of bonds can only fall from here and unlike equities, you won't get your money back sometime in the future unless interest rates once again go down to these levels. You could potentially lose 50% of your money in long-dated bonds with no hope of recovery imho. I rate cash and gold as better than bonds if you want out of equities for a while.

Do we know that for sure? If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?

Chris75

I basically agree with EdGasketTh... but I wonder if interest rates will rise as much as some suspect. Can you imagine the effect on the economy if interest rates - and mortgage interest - went up significantly. Having said that I do not see fixed interest as the "safe" haven that the industry is still trying to sell it as.

In the medium term the bigger problem is that lack of central bank ability to reduce interest rates as they normally do in the down part of the economic cycle which could make the next downturn worse.

Traditionally bond prices went up when share prices went down but there really is not the scope to do that now. Safe Bonds are a left over from previous situations. The brave new world of quantitative easing, near zero interest rates and record high equity costs has changed it all & I haven't mentioned Brexit for the domestic situation & the £.

To me funds with high fixed interest components are not low risk investment but rather a possible way to loose not as much as is possible with shares.

Always remember that in any market somebody is convinced that it is a good time to buy & someone else is equally convinced that it is a good time to sell & they then trade!

Also remember that people in the funds game are salesmen.

stardust09

BananaRepublic wrote: »

Don't believe everything you read.

I've been investing for 20 years (ignoring pensions) and my biggest mistake was swallowing the passive fund hype. My active funds have done very well thank you. My passive funds did not so well, which is why I transferred the money to active funds, which have done far better. It is possible I have been lucky, but my luck is very consistent. .

Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.

aroominyork

stardust09 wrote: »

Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.

Yes, Banana, please do send the allocations you have held for the last 20 years and the exact dates you made each change

EdGasketTheSecond

Audaxer wrote: »

Do we know that for sure? If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?

I would say we know it for sure, yes; unless you think interest rates will go negative? (unlikely with rising inflation). I am old enough to remember bond carnage in the 1970's when interest rates rose to 15% and inflation to 23% !

Audaxer wrote: »

If so why are people still investing in bonds and why are the likes of VLS20 and VLS40 still considered low risk?

Maybe habits change too slowly? Maybe young IFA's with their flash cars haven't actually ever experienced rapidly rising interest rates and wouldn't know what to do in that scenario? What else can the financial services industry offer but what it has traditionally for the past 30+ years - they won't make much money if people just buy gold and silver but right now that could be their best choice along with asset-backed shares like property or miners with proven commercial reserves.

Chris75

& the government gave a subsidy to the Building Society not to raise mortgage interest rate above 15%.

I think RPI UK inflation got to nearly 25% in 1975.

BananaRepublic

stardust09 wrote: »

Out of curiosity, can you share which active funds you hold? It would be interesting to know. Thanks.

Fund sites such as You Invest have tools that allow you to research the performance of funds over 1, 3, 5 and 10 years. My funds are a selection that have consistently outperformed the markets, and not one or two stunning years and many mediocre ones. That way I have reasonable confidence that the outperformance is not just luck. I am currently mainly focused in the UK and Europe. My long term star performer is the Jupiter European Fund. It has been in and out of fashion but I have stuck with it and it has grown from £6,000 to £54,000 in 18 years. My other funds bought over 15 years ago have not done so well, but they have still done well. Well, apart from the Japanese fund. I bought into the "Japan is about to recover" hype that was fashionable every few years. I hold many funds such as the Marlborough Micro Cap Growth P Acc, a recent acquisition that is up 46% in 18 months or so.

I've made a few mistakes. The early funds were bought with a discount which refunded the 5% fee that was common at the time. But I forgot about the 1% per year fee to the broker. That was again typical for the era. So for more than a decade I was paying them a fortune. They never ever sent a reminder about the fee. That should have been illegal, and is one reason the financial industry has a poor reputation. So often they do their best to hide what is actually going on under the covers.

Glen_Clark

The reason I haven't bought Vanguard Life Strategy is because its not an Exchange Traded Fund.
Which means there are platform charges for holding it.
And it isn't so easily and cheaply traded which I do to use up Capital Gains Allowance, selling one ETF and buying an equivalent one with another ETF provider (eg Vanguard, BlackRock, HSBC)