Vanguard Lifestrategy - fees and popularity

MarkBargain

Am I right in thinking that if I opened a Vanguard Lifestrategy ISA the annual fee would be 0.15%+0.22%=0.37%? So £37 a year on a £10k investment?

I have seen Lifestrategy suggested a lot on here. I appreciate the fees are pretty low, but I understand it is not an actively managed fund and read on iWeb that there are many trackers with fees of 0.06%. I believe iWeb charge £25 to open an account and £5 a trade, so that seems a lot cheaper than Lifestrategy longer term.

I appreciate Lifestrategy offers convenient bond/equity splits, but it is easy enough to put say 40% bonds / 60% equity through iWeb (they sell investments from 1/7 to 7/7 risk levels).

What make Lifestrategy so attractive to investors on here? Past performance perhaps? I might consider it, just interested in the pros and cons.

msallen

Are you just going to invest £10K in one go and then never add any more to it? In that case the fixed fee model such as that offered by iWeb will be cheapest.

Are you going to add to it monthly and split each new month's addition across a number of different trackers. In that case a percentage fee model such as offered by Vanguard will be cheaper.

It depends on your plans.

As for the benefits of Vanguard LS. Using LS (or similar alternatives) means your investment is automatically split (and rebalanced) across a range of trackers - which is just not viable to do manually on a sub £100K portfolio.

Mr.Saver

Vanguard LifeStrategy (VLS) is a passive fund with choices of fixed allocation between bonds and stocks and auto balance between them, it also has bigger allocation to the UK market than the global market.

Surly you can achieve the same goal with lower fees by buying 2 or 3 low cost funds, but that leaves you more management work to do. If you buy 2 or 3 low cost index tracker funds instead of VLS, it would require you to keep an eye on your portfolio and rebalance it periodically (say, annually). For example, if the stock market does well over a year, you would have to sell some of your stock funds and buy more bound funds to get back to your initial allocation. Alternatively, you can pay VLS for this, it saves your time and allows you to simply buy and forget.

MarkBargain

Thanks for the responses. I will probably invest 2 x £10,000 each year to hit the ISA allowance, so I think iWeb would work out cheaper in my case as it would be £25 to join, then £10 a year for trades (buying two funds a year) + fund fees (£12 per £20k per year if I bought the cheapest ones).



Up to now I have been using Charles Stanley Direct for my ISA but their 0.35% fee doesn't seem value for money compared to iWeb. I will probably keep the CSD fund but not add to it, so I can get a new ISA elsewhere from April.

londoninvestor

msallen wrote: »

As for the benefits of Vanguard LS. Using LS (or similar alternatives) means your investment is automatically split (and rebalanced) across a range of trackers - which is just not viable to do manually on a sub £100K portfolio.

With the availability of world trackers this isn't too hard for smaller portfolios now.

Let's say you wanted a VLS80-style portfolio (including the UK bias) on a £50k investment.

You could get something pretty close with:
£32k HSBC FTSE All World Index
£8k Fidelity Index UK
£10k Vanguard Global Bond Index (GBP Hedged)

That's pretty viable to set up or to keep managing. Of course as Mr Saver says, if you want something that's really fire-and-forget, VLS funds give you the advantage that you can leave it for years and years without needing to manually adjust the allocation.

MarkBargain

londoninvestor wrote: »

You could get something pretty close with:
£32k HSBC FTSE All World Index
£8k Fidelity Index UK
£10k Vanguard Global Bond Index (GBP Hedged)

Thanks, I was thinking of similar funds. The equity ones are only 0.06% fee and the Vanguard bond index is 0.15% fee with iWeb.

londoninvestor

MarkBargain wrote: »

Thanks, I was thinking of similar funds. The equity ones are only 0.06% fee and the Vanguard bond index is 0.15% fee with iWeb.

The Fidelity UK is 0.06% and the HSBC All World is 0.16%.

To take the same kind of analysis one level further, instead of the All World tracker you could reduce your percentage cost by buying individual regional trackers. That means you'll pay more in trading costs though, which might work out more expensive for your size of portfolio.

MarkBargain

londoninvestor wrote: »

The Fidelity UK is 0.06% and the HSBC All World is 0.16%.

To take the same kind of analysis one level further, instead of the All World tracker you could reduce your percentage cost by buying individual regional trackers. That means you'll pay more in trading costs though, which might work out more expensive for your size of portfolio.

Ah yes, sorry, I was looking at HSBC all share at 0.06% rather than all world. I agree with you, and at £5 a trade it won't break the bank to buy a few more funds if I choose to. All part of the fun.

bostonerimus

A multi-asset fund like VLS60 will automatically rebalance and you also get exposure to a lot of passive indexes. If you go with a few individual indexes you’ll pay less in fees, but you’ll also have to rebalance your portfolio yourself and some will argue that not having an EM fund or a Japan fund that might be one of the many index funds inside the multi-asset fund means you are missing out.

A multi-asset fund is an off the shelf slice and dice fund for the retail investor and is probably the best way to go for most people. But if you want to minimize fees and keep things simple 3 or 4 broad index trackers are a popular approach...particularly with Bogleheads. Most of my money is in just 3 funds. A global equity index, a domestic equity index and a domestic bond index.

londoninvestor

bostonerimus wrote: »

some will argue that not having an EM fund or a Japan fund that might be one of the many index funds inside the multi-asset fund means you are missing out.

Doesn't a world tracker give you that exposure though?

What some of the multi-asset funds do seem to offer that's attractive is exposure to a broader range of non-equity assets, such as property. VLS don't though - the non-equity exposure is all in bonds. And Vanguard already offer a well-diversified Global Bond Index fund which would do pretty well for that.

arnoldy

Don't forget that none of the fund fees quoted above include dealing costs. The 'OCF' does not include dealing costs - which to my mind is a bit like buying a package holiday that doesn't include accommodation.


Dependent on share type, market, and frequency of trading these costs can be low but significant. Remember if the fund buys a share in FTSE they pay 0.5% stamp duty straight away , spreads and commission on top of that.