Good Investment Decision? S&P 500 with Vanguard?

Audaxer

ESonic wrote: »

Investment is for long term - 5 Years.

If we have an equity crash within the next 5 years, which is very possible considering the bull return we've seen over the last 10 years, your £10k investment could drop to £6k and possibly not recover within the 5 years. So if you are only investing for 5 years it is very risky, especially if your investment is 100% equities.

Alexland

Audaxer wrote: »

If we have an equity crash within the next 5 years, which is very possible considering the bull return we've seen over the last 10 years, your £10k investment could drop to £6k and possibly not recover within the 5 years. So if you are only investing for 5 years it is very risky, especially if your investment is 100% equities.

Yup possibly more than 40% drop and even if we don't get an equity crash the OP could also suffer short term adverse currency movement. Or worse still the nightmare of both issues occuring! The bonds in VLS60 are mostly hedged or in sterling to reduce the currency risk. It is well suited to the shorter end of medium term investing such as 7 years.

Alex

Iain_For

5 years is not long term. As you’re new to investing, why not look at Vanguard’s own tools on asset allocation, it’s on their US site, but the general guidance is widely applicable:

https://personal.vanguard.com/us/FundsInvQuestionnaire

FDa65rdk

Warren Buffett is a strong advocate of the S&P500 and he said he would arrange for 90% of his wealth to be invested in an S&P500 index fund after his death.

It's very difficult to argue with someone with his track record.

You might also wish to consider the Vanguard Lifestrategy 100% Equity fund. This is a diversified portfolio that combines many of Vanguard's index funds, including the one you mentioned in your original post.

I've outlined the fund's top 10 holdings here:

Vanguard U.S Equity Index 19.52%

Vanguard FTSE Developed World ex-U.K Equity Index 19.32%

Vanguard FTSE U.K. All Share Index Unit Trust 17.98%

Vanguard ETFs S&P 500 UCTIS ETF 12.90%

Vanguard FTSE Developed Europe ex-U.K Equity Index 8.55%

Vanguard Emerging Markets Stock Index 7.60%

Vanguard ETFs FTSE 100 UCITS ETF 5.74%

Vanguard Japan Stock Index 4.88%

Vanguard Pacific ex-Japan Stock Index 2.32%

Vanguard ETFs FTSE 250 UCITS ETF 1.09%

Alexland

FDa65rdk wrote: »

Warren Buffett is a strong advocate of the S&P500 and he said he would arrange for 90% of his wealth to be invested in an S&P500 index fund after his death.

It's very difficult to argue with someone with his track record.

Did he say someone in the UK with an investment horizon of only 5 years should do it? No because he knows markets get 'frothy' (his word). He might recommend it for his wife's management of the money after he dies but, even after the majority charitable disposal, she will be left with such a large amount of money the withdrawal rate may not exceed the dividends. The OP is in a very different position so it is not comparable or suitable.

Alex

dunstonh

ESonic wrote: »

I went with S&P 500 because the past performance has been really good.

I will put some money into Global Fund. Thanks for the advice guys.

Oh boy. That is bad investing.

In this cycle, US equity has outperformed global. In the previous cycle it underperformed global equity. It is rare for the best performer in one cycle to be best in the following one.

Warren Buffett is a strong advocate of the S&P500 and he said he would arrange for 90% of his wealth to be invested in an S&P500 index fund after his death.

Of course he is. His "audience" is US investors. However, he himself does not invest that way.

It's very difficult to argue with someone with his track record.

His track record is based on value investing. Nothing to do with the S&P500.

FDa65rdk

Alexland wrote: »

Did he say someone in the UK with an investment horizon of only 5 years should do it?

Good point but I don't think Buffett is thinking of this as a decades long investment for his wife.

She isn't exactly a spring chicken!

Alexland

FDa65rdk wrote: »

Good point but I don't think Buffett is thinking of this as a decades long investment for his wife.

She isn't exactly a spring chicken!

Yes but her investment horizon is the rest of her life and she is not exposed to much currency risk and can live of the dividends if the stock prices swing like a pendulum between under and overvalued as she will never need to sell anything. A quick search suggests WB's second wife is 16 years younger than him.

For whatever reason the OP has suggested they might need to withdraw all the money in 5 years possibly at a loss.

Alex

FDa65rdk

dunstonh wrote: »

His "audience" is US investors. However, he himself does not invest that way.

His track record is based on value investing. Nothing to do with the S&P500.

I agree but isn't that because Buffett is an incredibly successful investor and a supreme expert in his field?

Very few if any people will have the time, inclination or ability to invest in the way he has. So for them he has advocated this passive approach and if he has sufficient confidence in it to leave 90% of his wealth in an S&P 500 index fund then that's a pretty ringing endorsement.

Also, I did suggest the LifeStrategy fund as a diversified alternative ;-)

Alexland

FDa65rdk wrote: »

Also, I did suggest the LifeStrategy fund as a diversified alternative ;-)

Yes but wrong one - unless the OP has balls of steel VLS100 is not appropriate for 5 years as a 100% equities fund is around 10% likely to result in an actual loss over 5 years. It has an even greater chance of not performing as well as a savings account and as discussed the potential loss can be quite large.

I find the below graph quite useful.

https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing/

How long would I be allowed to sell toasters that gave 1 in 10 customers a heart attack?

Alex