Newbie Investor / VSL100

Smidgey86

Hi.

I'm 33 and looking at opening a Vanguard VSL100 with a £500 lump sum followed by monthly contributions of £200.

Would someone mind giving me a realistic estimate for what my stocks would be worth in 20 years?

fun4everyone

If you can truly leave it for 20 years without touching it you should average somewhere between 7%-10% annualised. That is before fees. There will be a lot of volatility in the short term. 7% annualised is massively less than 10% annualised over 20 years. That's just down to luck as the global market return can vary that much generation to generation. You will certainly beat inflation though.

I'd expect on average about 8.5-9% annualised before fees.

System

So going on the above and working on 7% you'd be hoping for something around this:

Opening balance £500, £200 deposited monthly with no increase in deposit for inflation, period 20 years:

Total deposits £48,000
Total interest £55,516.05
Total final value: £104,016,05.

Use this site for rough calculations: https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

But be aware this is nothing like guaranteed. The market could tank before you withdraw so you could be left with £10,000s less.

System

fun4everyone wrote: »

If you can truly leave it for 20 years without touching it you should average somewhere between 7%-10% annualised. That is before fees. There will be a lot of volatility in the short term. 7% annualised is massively less than 10% annualised over 20 years. That's just down to luck as the global market return can vary that much generation to generation. You will certainly beat inflation though.

I'd expect on average about 8.5-9% annualised before fees.

Is this in nominal terms or in real terms? The real return to equities in the long run is about 5% pa on average (using the geometric mean).

fun4everyone

Economic wrote: »

Is this in nominal terms or in real terms? The real return to equities in the long run is about 5% pa on average (using the geometric mean).

If you mean taking into account inflation or not then it's the actual range of returns I would expect before inflation is taking into account.

Assuming an average inflation rate of about 3.2% I would agree with 5% being the "real" annualised average return, as in the amount your purchasing power increases.

KonkyWonky

If you look at the last five years performance figures for VLS 100 as of today the returns are:

2014-15 - 13.62%
2015-16 - -1.27%
2016-17 - 31.42%
2017-18 - 9.33%
2018019 - 1.38%

It's impossible to predict to any accuracy what your investment will be worth, particularly at a specific future date. The 20th year may provide a return of 30%, but equally it could be -30%. Either of those scenarios would obviously have a huge impact on the value of your investment, but over the next few years you would expect it to correct itself.

webjaved

2016-17 was a good year!

[Deleted User]

Vanguard LS100 have Standard Deviation of 15%. That means, your investment will, on average, go up or down as much as 15% every year. But as you seen in previous post, this could well be +30% one year and -1% another.

That's why for your last 5 or 10 years of planned investment, you should slowely scale equity part down, year by year, by deinvesting from LS100 and investing some percentage of capital per year into, for example, LS20, so you not hit by -20% swing in last year.

Thrugelmir

Smidgey86 wrote: »

Would someone mind giving me a realistic estimate for what my stocks would be worth in 20 years?

Could be any value. Might be the year of a market correction , or worse still a recessionary period. Investing in markets is not smooth sailing.

Set your goals first. Along with your apptitude towards risk.

TCA

pioruns wrote: »

Vanguard LS100 have Standard Deviation of 15%. That means, your investment will, on average, go up or down as much as 15% every year.

Not quite. Standard deviation is how much the return deviates from its historical average. It's a measure of volatility.

If a fund has a 10% historical average rate of return and a standard deviation of 15%, its return will range from -5% to +25%.

A_T

webjaved wrote: »

2016-17 was a good year!

Sterling crashed after the referendum.