Vanguard LifeStrategy - which one?

amphibiandairy

Thank you for your helpful replies. The tables are particularly useful. I'll reflect on your comments then make a decision soon.

Alexland

Cactus_Jack wrote: »

Does anyone 'hedge' their Lifestrategy portfolio in the event of an equities crash?

There are funds such as the Orbis Balanced fund that use equity hedging instead of or alongside bonds to try and control the volatility of a portfolio. From observing the daily movements it is acting just like a traditional fund containing only stocks and bonds.

pip895

Alexland wrote: »

But you would miss all the extra growth when the market is not crashed and would be out the market between trades during a period of volatility. Best get the allocation right and stick with it.

Maybe but if the OP isn't feeling confident enough to go for the higher equity version first off then this is an option though. Re being out of the market - that isn't an issue at HL as you can switch 90% from one fund to the other in a single day. Do others not do the same?

bostonerimus

Cactus_Jack wrote: »

Does anyone 'hedge' their Lifestrategy portfolio in the event of an equities crash?

I was listening to Max Keiser who said you can insure a portfolio with 'options and futures' for around 2% of the cost of the portfolio but I don't know how this would tie in with LS.

I think his gist was get this 'insurance' if the market starts to show signs of volatility.

If you feel the need to "hedge" then your asset allocation does not align with your appetite for risk. If you get your portfolio's asset allocation right there should be no need to do anything else so you can sleep soundly.

Prism

Cactus_Jack wrote: »

Does anyone 'hedge' their Lifestrategy portfolio in the event of an equities crash?

I was listening to Max Keiser who said you can insure a portfolio with 'options and futures' for around 2% of the cost of the portfolio but I don't know how this would tie in with LS.

I think his gist was get this 'insurance' if the market starts to show signs of volatility.

I have a friend who uses options almost exclusively to fund his income (about 10% on average) however he uses alot of statistics to get that return and he also does best when the market believes that there is some increase in volatility which then transpires to be false. He has to own the shares directly (for calls) and during a crash he not only loses value on those shares but is also forced to buy more (through puts) on the way down. Not a good situation.

Hedging for a crash to me is usually looking for stocks or bonds that will hold their value to some degree and in rare cases go up whilst everything else is on the way down. Tricky to predict.

Alexland

pip895 wrote: »

Re being out of the market - that isn't an issue at HL as you can switch 90% from one fund to the other in a single day. Do others not do the same?

No even on Vanguard's own platform I put a fund switch instruction on on a weekend and it completed on Thursday night. I have seen it done overnight on Orbis if the order is placed early enough. Nutmeg seem to switch on the same day but they only trade twice a week and if you place the order too late you get shunted into the next slot. Some don't offer switching and make you sell and then keep logging in to see when the balance is available to buy again.

chrisgg

The general rule would be 10 years + = 100 Equities.

Be prepared for some volatility, ensure you hold your nerve if your portfolio drops 50%... it will recover and perform better over the long term. However, it's worth noting volatility can be more extreme with passives such as Vanguard Lifestrategy as in times of market weakness the passives track their indices down whilst active managers can move into more defensive stocks/asset classes/cash.

coyrls

chrisgg wrote: »

The general rule would be 10 years + = 100 Equities.

It's a general rule, not the general rule and not one that I would agree with.

chrisgg

All depends on your perspective and personal volatility tolerance I suppose. Missing out on gains in a bull market by investing in bonds can cost you just as much as lacking downside protection in a bear market by investing in equities.

chockydavid1983

aroominyork wrote: »

nb with that worst year being 1931.

Interesting to see it in tables like that and roughly in line with what I thought.
Is 1931 that much of an outlier does anyone know? I.e. were there many years almost as bad or is that by far the worst in general?