Lifestrategy or.....

Bravepants

In my retirement planning spreadsheet I am assuming 5.5% returns for both my AVC and ISA.

AVC is a bunch of trackers in Scottish Widows Pens Portfolio 3, I will likely transfer to a SIPP in the next couple of years as the TER is 1% in Scottish Widows and a bit expensive. I will probably go with L&G Multi-index 5 for that.

My ISA is 75% VLS 60 and about to become 25% in FTSE Global All Cap Index, making for a 70% / 30% equity/bond split. As long as I get 5.5 % over the long term I can retire in 5 years time, so I'm not overly concerned with what does better than what.

I have to decide one way or another in what to invest and following constantly changing advice on forums could involve faffing about with your fund mix, much better to make a decision stay committed. I will rethink my allocation once I hit retirement, probably looking at income funds, but I want to avoid too much prodding and poking at this stage.

dunstonh

Personally, I really appreciate the auto rebalance feature of my VLS 60 fund...always remains at 60% equities. I think the risk is higher from the L&G fund where managers need to make consistently good calls on the markets to maintain some advantage.

The L&G decisions are to maintain a risk level more than to look for growth. In theory, the riskier investment should return more over the long term. L&G is more about reducing downside and VLS is more about increasing upside. In simple terms, if you are the type of person that is less concerned about the downside and more concerned about upside, go VLS. If you are you more concerned about going down than going up, then go L&G.

Over last 5 years a 2 fund DIY 60/40 World Index/Bond portfolio has significantly outperformed VLS60. And that's because of the VLS bias to the FTSE All Share Index.

It isnt difficult to beat VLS60. It is fashionable on the internet and I have put millions in it for small investors. It is great for people with £10-£20k. (I also use L&G based on the glass half full. half empty approach). I wouldn't use it for large amounts though.

firestone

Audaxer wrote: »

I don't think I'd worry too much about one quarter as over the whole of 2015 I see that L&G MI 5 had a slightly better return than VLS60.

I was also looking at actively managed multi asset growth funds and saw that Royal London Sustainable Diversified Trust Class C, which has around 60% equities, seems a good option with a slightly better 5 year average than the VLS60. Also interested to see that Royal London Sustainable World Trust Class C with 84% equities has had a much better 5 year performance than the VLS80. I don't see much discussion on here about active multi asset growth funds, so not sure if long term they would be a good alternative to VLS, L&G MI, HSBC etc. or whether it is better to go for single sector funds if thinking about active growth funds?

my last company pension was with Royal London think the funds you mention had a good record and were offered about 3 or 4 years on RL after Co-op funds were taken over i believe

firestone

dunstonh wrote: »

The L&G decisions are to maintain a risk level more than to look for growth. In theory, the riskier investment should return more over the long term. L&G is more about reducing downside and VLS is more about increasing upside. In simple terms, if you are the type of person that is less concerned about the downside and more concerned about upside, go VLS. If you are you more concerned about going down than going up, then go L&G.



It isnt difficult to beat VLS60. It is fashionable on the internet and I have put millions in it for small investors. It is great for people with £10-£20k. (I also use L&G based on the glass half full. half empty approach). I wouldn't use it for large amounts though.

But would you use the HSBC ones for only smaller sums as well?

Audaxer

dunstonh wrote: »

It isnt difficult to beat VLS60. It is fashionable on the internet and I have put millions in it for small investors. It is great for people with £10-£20k. (I also use L&G based on the glass half full. half empty approach). I wouldn't use it for large amounts though.

dunstonh, do you ever choose active multi asset growth funds for large investors, or for six figure portfolios or is it always better to go for single sector growth funds?

For inexperienced investors with large portfolios, is there not more chance of getting the right balance of assets with active or passive multi asset funds, rather than trying to choose the right single sector funds?

BLB53

L&G is more about reducing downside and VLS is more about increasing upside.

Not sure how you come to this conclusion...the VLS 60 fund merely offers to maintain the equity exposure at precisely the level selected by the investor.

On the other hand with the L&G fund, the investor does not know precisely what level of risk the managers are taking as they are constantly reviewing levels of equity according to how they anticipate the markets will move in the future.

For this reason, I prefer the offer of the VLS fund which is certainty over speculation.

bostonerimus

VLS60 isn't difficult to beat, particularly when you are looking backwards and know the results. I probably wouldn't solely use VLS60 if I lived in the UK because of the UK weighting, but like A_T's suggestion of a 60/40 World Equity Index and Bond Index.

If tax planning becomes more important to you than investment return then I can see the need for more complex portfolios, but for the vast majority of people they simply aren't necessary to meet their goals. With a 60/40 US biased portfolio I managed an 8.5% average annual return over the last 30 years. Such a portfolio is easy to implement, gives a good framework for rebalancing and is inexpensive as you don't need an FA or IFA and the fees are low. Of course financial advisers are going to want to manage pots over $20k and for many people that can't or don't want to DIY their services will be necessary. But you can easily save 0.5% or 1% in advisor fees with a minimal amount of knowledge and effort and in any year you'll probably beat at least 50% of those advisor portfolios too.

Aggressive saving and 30 years of 8.5% average annual returns has given me a mid seven figure pension pot that is mostly in just 3 index tracker funds. I have them arranged for tax efficiency and I'm managing annual transfers between various accounts to minimize my lifetime tax bill and the tax issues for inheritance. My investments and their management are pretty simple and they have provided solid returns.

DropD

Thanks to everyone for their posts. A lot of information to absorb and several good points raised.
I’d been looking at the L & G funds as I did like the approach and had considered possibly doing as Alexland has suggested and going 50/50 with this and the Lifestrategy fund.
I’ll also look at the HSBC funds mentioned, thanks to A_T and Audaxer and others for highlighting these too.
Can I ask, has anyone moved away from Lifestrategy or other all in one funds to individual funds, for example to allow for more flexibility in managing their portfolio?
Or alternatively supplementing the Lifestrategy fund with other individual funds?

dunstonh

But would you use the HSBC ones for only smaller sums as well?

I switched to HSBC some time back in place of the VLS60. I prefer l&G over VLS40. However, I have not switched any existing investors as the differences are minimal.

dunstonh, do you ever choose active multi asset growth funds for large investors, or for six figure portfolios or is it always better to go for single sector growth funds?

I have some multi-asset investors with larger amounts. Some just dont have the knowledge and understanding to go with a bespoke portfolio. I tend to mix and match approaches with those. (i.e. some underlying passive, some active)

Not sure how you come to this conclusion...the VLS 60 fund merely offers to maintain the equity exposure at precisely the level selected by the investor.

The equity weighting is the only thing set. Where it invests the equity is not. The fund is known as return focused. Whereas L&G is known as risk targetted.

VLS60 FE risk score was 49 in Dec 2014. it is now 62. L&GMI5 was 56 at start and is now 56. It has moved a little in between but not by much.

On the other hand with the L&G fund, the investor does not know precisely what level of risk the managers are taking as they are constantly reviewing levels of equity according to how they anticipate the markets will move in the future.

You have it back to front. L&G gives greater certainty as they are not constrained to an equity level. They focus on a volatility range and make adjustments to ensure they do not exceed that range.

A more cautious/nervous investor is better placed with L&G over VLS

dunstonh

VLS60 isn't difficult to beat, particularly when you are looking backwards and know the results. I probably wouldn't solely use VLS60 if I lived in the UK because of the UK weighting, but like A_T's suggestion of a 60/40 World Equity Index and Bond Index.

I'm not looking backwards to pick the best. I am using real portfolios that have existed since 2008. The portfolios we run existed before launch of VLS and include any adjustments made. There are plenty of DIY investors that also beat VLS by taking a hybrid approach (mix of managed/passive).

But you can easily save 0.5% or 1% in advisor fees with a minimal amount of knowledge and effort and in any year you'll probably beat at least 50% of those advisor portfolios too.

Fee is not everything though. It is a secondary consideration to suitability.

If you ask someone if they would rather pay 0.22% or 0.75% then they will say 0.22%.

However, if you say would you rather have got 73.16% after charges of 0.22% or 91.65% after charges of 0.75% then the answer will likely be different.