What's wrong with vanguard lifestrategy?

Alexland

mr_munchem wrote: »

It's good to see some younger people investing; I feel like I'm the only 20 year old that does!

I'm not that young but do still qualify for a LISA. I feel a lot older than my age as I had a high pressure period of employment and have spent years working with mostly older colleagues. I keep seeing them retire on generous DB schemes and it gets me into a mindset that it must be my turn soon. Still it's good to see 20 years olds showing an interest and thinking deeply about investment.

mr_munchem

Ah didn't catch on that it's the max HL fee doesn't apply to funds! However, as I'm planning on monthly investing I think that might make HL for attractive than AJB but I'll do the sums!

Thanks all for your advice, and good luck to the OP too. Happy to talk about this any time.

bostonerimus

VLS is an ok range of one stop shop multi-asset funds with a slight UK bias. It's designed for the UK retail investor with a preference for UK over weighting. There are many other worse/equal/better options depending on your criteria. Many times the investor is paralyzed by choice and gets too bogged down in details, just set your asset allocation and keep fees to a minimum.

Audaxer

bostonerimus wrote: »

VLS is an ok range of one stop shop multi-asset funds with a slight UK bias. It's designed for the UK retail investor with a preference for UK over weighting. There are many other worse/equal/better options depending on your criteria. Many times the investor is paralyzed by choice and gets too bogged down in details, just set your asset allocation and keep fees to a minimum.

bostonerimus, as you have had very good returns over the years with your 3 index trackers balanced to a 60/40 allocation, I would think that the VLS60 with a bigger range of professionally selected allocation of index funds has as good a chance, or better, of getting similar long term returns. I thought that your view was that the passive route, via separate indexes or VLS, would do better than most active portfolios over the long term, so I'm a bit surprised you are now saying that VLS is just okay. Have you changed your view?

sixpence.

I love how Bowlhead99 just kills it everytime :T:j Very well put.

I am thoroughly tempted to invest as much as possible outside of the UK due to the economic uncertainty of Brexit. Having said that my current portfolio plan places 22% of overall assets in the UK so...

bowlhead99 wrote: »

Note that owning a buy-to-let apartment is quite a different exposure to owning a commercial property fund which owns office blocks, shopping centres, warehouses, factories etc which have different dynamics and not affected by changes to residential stamp duties, tax breaks for residential landlords, help-to-buy schemes etc.

Still, if you are OP with a low four-figures balance, a 5% allocation to commercial property is perhaps only fifty quid right now, so it is not going to change your life whether that bit of money is invested in property vs uk equities vs overseas equities. These sort of considerations are more interesting when you have six figures instead of four.

If building your assets for retirement or some other goal is a 20 year journey, it's perhaps personally satisfying to know you 'got it right' from the very beginning but in practice the vast majority of your money will be deployed later and there is no need to worry about micromanaging your £200pm allocation until you're several more years into it.

As such, there is nothing 'wrong' with VLS as a tool to spread your cash around, although other fund management groups with rival products will do it differently. Once you have the level of assets where their different approaches make a material difference to your eventual retirement pot, you could worry about it then. 'Set and forget' for twenty years sounds nice and easy but in reality, products change over time and so do people's expectations of their needs (and their understanding of investments). So even if you buy VLS today you might decide after some more years that actually you'd prefer something else.

If it's allocating all its money to the equities markets through indexes, how is it overweight in tech? It is taking the tech allocation from the various regional market-cap weighted indexes in which it invests. And then the allocation to places with high tech concentrations is diluted down with the 'overallocation' to the UK index which is largely devoid of tech firms. So that doesn't seem like you'll get too much tech by reference to how much tech there is within a global index.

The 'overallocation' or overweight / underweight considerations are comments which people make by reference to looking at indexes composed of companies weighted by their market capitalisation (e.g. Apple having a lot more allocation than WH Smiths). If you want to allocate your assets cheaply, you can use products which follow those market weights; however the amount of money you have in one particular 'basket' by following that method will of course not give you the best result if certain sectors with high allocations in the index perform poorly, even if following an index appeared at first glance to be a sensible thing to do. So having a higher or lower allocation to particular areas is not necessarily 'wrong' unless it gives you a very skewed portfolio.


It is 'overweight' by reference to the aforementioned global market-cap-weighted index. But it is not necessarily 'overweight' in terms of how much money a person living in the UK wants to have in their home stockmarket versus foreign stockmarkets. Some 'home bias' is natural and if you look at some of the other products which are risk-targeted (e.g. the L&G MI funds) they are not afraid to have larger UK allocations than the 6-7% you would find within a world equity index; similarly the Blackrock 'consensus' funds taking the consensus of how other people allocate their capital, also have a good slug in the UK.

Revisiting the comment that Apple is a much bigger company than WH Smiths, it makes sense that more of your retirement funds are invested in Apple than Smiths. In a world index, that might be 280x more ($904bn company rather than $3.2bn company). By raising the UK allocation versus other countries (as Lifestrategy does) you might find your Apple allocation is now only 80x your Smiths allocation instead of 280x. But you still have less than 5p going into Smiths from your £200 each month while Apple takes a few pounds.

So, some will criticise Lifestrategy for having too much in the UK markets but if you went to the average UK independent financial advisor and asked them how much of their UK customers' equities money is allocated to their home stockmarket, they would probably not say 6% home, 94% away (which is what the world index would suggest). Allocating masses of money to foreign countries might be perfectly logical if you come from a small country but the returns are inherently more volatile (currency movements etc) and so can be beyond the risk tolerance of many investors.

Personally I agree with some others that it is not the UK allocation percentage which is too high, just the method by which the UK money is allocated within the UK market (i.e. by index, with most of the money in the biggest companies like BP and Shell and HSBC) produces high concentrations in certain sectors which are not properly representative of the UK economy. Still, indexing is cheap and if you are starting from a low level and throwing in £200 a month it is not going to give you an awful result

bostonerimus

Audaxer wrote: »

bostonerimus, as you have had very good returns over the years with your 3 index trackers balanced to a 60/40 allocation, I would think that the VLS60 with a bigger range of professionally selected allocation of index funds has as good a chance, or better, of getting similar long term returns. I thought that your view was that the passive route, via separate indexes or VLS, would do better than most active portfolios over the long term, so I'm a bit surprised you are now saying that VLS is just okay. Have you changed your view?

No I haven't changed my opinions, VLS is an ok fund. As with all multi-asset funds you will pay for the convenient diversity....that's why I use individual indexes. I don't know if the slice and dice portfolio of something like VLS will outperform a broader 3 fund index portfolio. I'm pretty confident that VLS will outperform a majority of active funds with a similar asset allocation.

ValiantSon

Alexland wrote: »

VLS60 and VLS80 are both very good funds and can be mixed together 50:50 to make 'VLS70' which if launched as a fund would be very successful and probably the best in the series.

Agreed. I'm surprised they haven't cottoned onto this yet. "VLS70" would, I'm sure, be very popular! They'd get my custom (but then they already have, so that probably isn't much of an incentive :rotfl:)

A_T

VLS is ok but over the longer term would more likely than not be beaten by a two fund portfolio of a global equity index tracker and a bond fund. Over the last 5 years a portfolio of 80% Fidelity Index World 20% Vanguard Global Bond Index would have significantly outperformed VLS80.

TheShape

A_T wrote: »

VLS is ok but over the longer term would more likely than not be beaten by a two fund portfolio of a global equity index tracker and a bond fund. Over the last 5 years a portfolio of 80% Fidelity Index World 20% Vanguard Global Bond Index would have significantly outperformed VLS80.

Fidelity Index World appears to have outperformed VLS100, Blackrock Consensus 100 and HSBC Global Strategy Dynamic (the three funds I mentioned earlier).

Am I right in saying that the Fidelity Index World Fund is designed to broadly track the MSCI World index which appears to be a benchmark for the performance of large and mid-cap companies in much (23 countries) of the developed world (I googled all this)?

Assuming I'm correct with the above, am I also correct that this is a passive fund and that it's designed to simply track the performance of those equity markets.

Assuming I'm also correct with the above, why, when the funds I've mentioned investing in are high in their equity component (I've mentioned the HSBC Global Strategy Adventurous Fund also), has someone not said - 'What about investing in this Fidelity Index World Fund? It will track the (developed) world equity market, it's cheaper than anything you've mentioned (other than the discounted Blackrock fund with HL) and it's outperformed all the funds you've mentioned.'

I can think of a possible answer but I'd like to know why someone wouldn't highlight this fund to someone like myself (accepting that it has been highlighted on the thread in general).

Audaxer

A_T wrote: »

VLS is ok but over the longer term would more likely than not be beaten by a two fund portfolio of a global equity index tracker and a bond fund. Over the last 5 years a portfolio of 80% Fidelity Index World 20% Vanguard Global Bond Index would have significantly outperformed VLS80.

If that is the case why have VLS made their allocations more complex with about 17 different indexes in some of the funds? I was previously advised on here by experienced investors that I would be much better with something like a professionally selected and balanced VLS fund than selecting 4 or 5 individual indexes myself.