Investing in funds - a little help needed

ValiantSon

Alexland wrote: »

They would within each fund but you would have more value in VLS60 than VLS40 so you would need to switch some fund units from VLS60 to VLS40 to retain the target 50% equities allocation within your account portfolio.

Alex

Oh yeah. Bit slow on the uptake this evening.

Alexland

ValiantSon wrote: »

Oh yeah. Bit slow on the uptake this evening.

Things would be easier if they just launched a VLS70, and to a lesser extent VLS50/90. Still when most equities and bonds are looking highly valued there is a role for some cash in a portfolio incase buying opportunities occur.

Alex.

Audaxer

Alexland wrote: »

From what I can tell you sound like a VLS60 kinda person and you should expect your investments, over the medium term, to broadly keep up with inflation.

Unfortunately to stand a realistic chance of beating inflation you would need to crank up the equities to a point where you might find yourself too uncomfortable and risk of making the behavioural error of selling low.

Maybe if markets fall you might want to gradually increase your equities exposure but given current valuations it's probably not the right time to be a hero anyway.

Another good reason for a 35 year old planning to contribute each month long term, to go for more equities, like at least a VLS60, is that when equity crashes occur as they will do, he will be buying units at cheaper prices. So in the accumulation phase with many years ahead, equity crashes should be seen as a good time to keep investing.

ValiantSon

Alexland wrote: »

Things would be easier if they just launched a VLS70, and to a lesser extent VLS50/90. Still when most equities and bonds are looking highly valued there is a role for some cash in a portfolio incase buying opportunities occur.

Alex.

Agreed on both counts.

I can't understand why they don't offer a VLS70, other than for aesthetic reasons. I've said before, and I doubt I am alone, that I would definitely be interested.

dunstonh

Things would be easier if they just launched a VLS70, and to a lesser extent VLS50/90.

Have you seen the difference in returns and volatility between each VLS? Its not great enough to split more.

However, if you do want to micromanage just that bit more, then there is always L&GMI and HSBC to consider. They are not rigid in equity count like VLS but risk targetted. So, you can find the equity content is 50% or whatever.

The more VLS versions in the range, the greater the costs. Costs that would be passed on.

AnotherJoe

Whilst personally i think 40 is way too "safe" for a 35 year old, how about this?

For now keep the VLS40, start investing in 100, and see how you get on. Initially the 100 will be at a low % of your overall investments so even a big fall will be small in absolute terms, and also you'll be buying more units at a low price so when a recovery happens you'll see it shoot up quicker

Over time your VLS40 / 100 mix will creep up to an effective 41, 42, 50 etc, see how you feel as it grows and you experience some dips and maybe you'll decide just to move it all to 60 or 80, or perhaps decide its all too much and stick with 40.

Manesova83

ValiantSon wrote: »

What is worth noting, however, is that the OP needs to give some serious thought to their goals, current financial position, commitments and attitude to risk, rather than simply relying on what well-meaning people on an internet forum suggest.

Fair point. *Just to put some meat on the bones, I currently find myself in a position where I'm earning significantly more than I have before. At the same time, it's reasonably likely that this opportunity won't last all that long (as is the way these days) and my next opportunity won't be as lucrative. So I'm trying to make hay while the sun shines by putting a large chunk of my salary away each month. If, in the future, I end up earning less - either through my choice or someone else's - I'll continue to put money away, but just much less. So I want to maximise the opportunity to make this money work for me, without risking throwing it all away. Of course there is always risk, I know that. It's just finding the level that I can live with.

Manesova83

AnotherJoe wrote: »

Whilst personally i think 40 is way too "safe" for a 35 year old, how about this?

For now keep the VLS40, start investing in 100, and see how you get on. Initially the 100 will be at a low % of your overall investments so even a big fall will be small in absolute terms, and also you'll be buying more units at a low price so when a recovery happens you'll see it shoot up quicker

Over time your VLS40 / 100 mix will creep up to an effective 41, 42, 50 etc, see how you feel as it grows and you experience some dips and maybe you'll decide just to move it all to 60 or 80, or perhaps decide its all too much and stick with 40.

That's what I was considering originally. Just stick a bit into the 100 to text the water/see how I feel. But keep the majority invested in the 40. It maybe worth noting that I also keep a chunk in a regular limited-access savings account, just in case it all goes horribly wrong.

Alexland

dunstonh wrote: »

Have you seen the difference in returns and volatility between each VLS? Its not great enough to split more.

Rather than just comparing recent past performance in generally positive market conditions I try and think deeper about the two different asset classes and how their values could diverge in future situations which may cause a material difference to the performance of 60/40 and 80/20 portfolios. Looking at the distribution of inflows for the VLS range there seems to be a case for a 70/30 option.

dunstonh wrote: »

The more VLS versions in the range, the greater the costs. Costs that would be passed on.

Given the size of the fund series I get the feeling there is 'plenty of fat' in the 0.22% OCF to cover the operational cost of running an additional fund. If the Blackrock Consensus 85 are happy to be discounted to 0.09% and my workplace pension institutional global equities fund runs at 0.02% then fund management industry product gross margins still seem pretty high.

Alex.

Audaxer

AnotherJoe wrote: »

Whilst personally i think 40 is way too "safe" for a 35 year old, how about this?

For now keep the VLS40, start investing in 100, and see how you get on. Initially the 100 will be at a low % of your overall investments so even a big fall will be small in absolute terms, and also you'll be buying more units at a low price so when a recovery happens you'll see it shoot up quicker

Over time your VLS40 / 100 mix will creep up to an effective 41, 42, 50 etc, see how you feel as it grows and you experience some dips and maybe you'll decide just to move it all to 60 or 80, or perhaps decide its all too much and stick with 40.

That sounds like a good plan for the OP, because when there is an equity crash he will just be investing in equities at low prices rather than buying more bonds as well. I think the system could work for the OP as long as when there is a lot of volatility and losses he considers the portfolio losses as a whole (i.e. the VLS40 and VLS100 together) rather than be overly-concerned with the VLS100 losses.