Switching Vanguard funds

Aylesbury_Duck

My wife and I have got a mix of VLS funds. We're in our late 40s and have built up these funds over the last 20 years (transferred old ISAs into Vanguard last year). We have no intention of touching the money for at least 5 years, possibly not even for 10 years because we have decent cash savings for anything that might crop up. We're considering de-risking slightly and taking what are currently gains from the VLS100 and moving them into the VLS80 because in my mind, VLS100 is really for a 10+ year horizon. Does that sound sensible? As far as I can see from the Vanguard site, there are no fees for switching between funds - is that correct?

Current funds (between us):
VLS20 - £2,000
VLS40 - £19,000
VLS80 - £18,000
VLS100 - £34,000 - We're thinking about moving this into VLS80 entirely.

Another option is to use the target retirement funds I suppose, but I quite like the small amount of DIY involved in de-risking. If what I'm proposing is a sound plan, I can imagine that in a few years I might be moving it from VLS80 to VLS60.

El_Torro

Currently you have roughly a VLS 77, so moving all those funds to a VLS 80 makes sense, to simplify if nothing else.

In your position if I was likely to need the money in 5 years time I would probably take the opportunity to invest in a VLS 60 instead of 80, just to reduce the risk a bit.

Alexland

Agree - there's no reason to hold all these funds. In particular I don't see the point of VLS20 or 40 when a good cash account is likely to provide a similar return (after fees) without any risk.

If you are willing to take some risk and think there will be a realistic chance of needing to withdraw in about 5 years then VLS60 is probably the most appropriate. If you think your existing cash buffer means you will not need to withdraw for 10+ years then maybe VLS80. Also consider if moving to a pension wrapper might be more beneficial than ISAs.

Vanguard Investor only charge trade fees if you want live ETF pricing.

If you want some enjoyable DIY account administration then you could do a 2 fund portfolio of the Vanguard All World ETF or All Cap fund and the Vangaurd Global Bond Hedged fund which on your portfolio size would give you some modest cost savings compared to VLS. The ETF gives 'added mindless fun' of reinvesting the dividends.

Alex

Albermarle

I don't see the point of VLS20 or 40 when a good cash account is likely to provide a similar return (after fees) without any risk.

VLS 40 ( and other similar funds ) have grown by around 30 % in the last 5 years ( dividends reinvested minus fees) so somewhat more than cash .
Even if the next 5 years are more subdued , I would think/hope they would still beat cash savings/inflation by a couple of percent a year .

Aylesbury_Duck

Alexland wrote: »

Agree - there's no reason to hold all these funds. In particular I don't see the point of VLS20 or 40 when a good cash account is likely to provide a similar return (after fees) without any risk.

If you are willing to take some risk and think there will be a realistic chance of needing to withdraw in about 5 years then VLS60 is probably the most appropriate. If you think your existing cash buffer means you will not need to withdraw for 10+ years then maybe VLS80. Also consider if moving to a pension wrapper might be more beneficial than ISAs.

Vanguard Investor only charge trade fees if you want live ETF pricing.

If you want some enjoyable DIY account administration then you could do a 2 fund portfolio of the Vanguard All World ETF or All Cap fund and the Vangaurd Global Bond Hedged fund which on your portfolio size would give you some modest cost savings compared to VLS. The ETF gives 'added mindless fun' of reinvesting the dividends.

Alex

Thanks Alex. We're both already putting substantial amounts of pension contributions aside - AVCs to my wife's LGPS and enough deductions from my salary to take me out of the higher tax rate. That's our long term planning, the S&S ISAs are medium-long and the cash for anything shorter-term.

Alexland

Albermarle wrote: »

VLS 40 ( and other similar funds ) have grown by around 30 % in the last 5 years ( dividends reinvested minus fees) so somewhat more than cash .
Even if the next 5 years are more subdued , I would think/hope they would still beat cash savings/inflation by a couple of percent a year .

Sure but if you exclude the circa 10% boost seen in summer 2016 caused by the Brexit currency devaluation you would be looking at more like a 20% gain over 5 years. Given current valuations for both bonds and equities I doubt it's realistic to expect the 20% return to repeat over the next 5 years. Even the Vanguard published 10 year forcasts are only expecting a VLS40 asset mix to achieve a less than 3% pa nominal return (2% for global bonds and 4% for equities) which after considering fees is comparable to a good fixed term cash product.

Aylesbury_Duck wrote: »

Thanks Alex. We're both already putting substantial amounts of pension contributions aside - AVCs to my wife's LGPS and enough deductions from my salary to take me out of the higher tax rate. That's our long term planning, the S&S ISAs are medium-long and the cash for anything shorter-term.

Unless you are concerned by the lifetime allowance it's still worth considering making contributions from basic rate income too as if you are late 40s you could have acccess to the money from a pension in the medium term. Especially if you can do it via an employer who operates salary sacrifice to avoid the national insurance.

Alex

Simon.Edmunds

Aylesbury_Duck wrote: »

My wife and I have got a mix of VLS funds. We're in our late 40s and have built up these funds over the last 20 years (transferred old ISAs into Vanguard last year). We have no intention of touching the money for at least 5 years, possibly not even for 10 years because we have decent cash savings for anything that might crop up. We're considering de-risking slightly and taking what are currently gains from the VLS100 and moving them into the VLS80 because in my mind, VLS100 is really for a 10+ year horizon. Does that sound sensible? As far as I can see from the Vanguard site, there are no fees for switching between funds - is that correct?

Current funds (between us):
VLS20 - £2,000
VLS40 - £19,000
VLS80 - £18,000
VLS100 - £34,000 - We're thinking about moving this into VLS80 entirely.

Another option is to use the target retirement funds I suppose, but I quite like the small amount of DIY involved in de-risking. If what I'm proposing is a sound plan, I can imagine that in a few years I might be moving it from VLS80 to VLS60.

Go on to Morningstar and compare the performance of your GBP 73,000 over the last 5 years compared to SMT.

If you had put it in VLS80 it would be worth c. GBP 102,000.

If you had put it in SMT it would be worth c. GBP 190,000.

I will leave you to do the 10-year comparison yourself but you'll need a stiff drink first.

After that stiff drink, pour 2 more and do the comparison with LTI. (It's over GBP 400,000)

Albermarle

After that stiff drink, pour 2 more and do the comparison with LTI. (It's over GBP 400,000)

Would have been good to choose this 10 years ago! However it would have been just as easy to have bought a turkey and regretted it.
I wouldn't buy this now though . Apart from a fantastic run that will end sometime , it is trading at a >90% premium , which in pretty unbelievable really.

Aylesbury_Duck

Simon.Edmunds wrote: »

Go on to Morningstar and compare the performance of your GBP 73,000 over the last 5 years compared to SMT.

If you had put it in VLS80 it would be worth c. GBP 102,000.

If you had put it in SMT it would be worth c. GBP 190,000.

I will leave you to do the 10-year comparison yourself but you'll need a stiff drink first.

After that stiff drink, pour 2 more and do the comparison with LTI. (It's over GBP 400,000)

Wow. Thanks, but that doesn't worry me. I did what I did with my money because I was comfortable with it (the risk) at the time and I'm happy with the returns. With hindsight I made some "wrong" financial decisions over the last 20 years but I made all of them because they felt comfortable and right at the time. For example, I overpaid my mortgage for years to get rid of it when it would have been financially advantageous to invest in S&S ISAs and pensions but that's put me in a position where I'm happy to take some more risk now and I don't have to worry about work/salary pressures.

Simon.Edmunds

Albermarle wrote: »

Would have been good to choose this 10 years ago! However it would have been just as easy to have bought a turkey and regretted it.
I wouldn't buy this now though . Apart from a fantastic run that will end sometime , it is trading at a >90% premium , which in pretty unbelievable really.

Yep - the premium is extraordinary. As is the trust's performance.

Buy a Ferrari or a Ford. Both will (probably) get you there but the Ferrari quicker. More chance of crashing though.

Simon.Edmunds

Aylesbury_Duck wrote: »

Wow. Thanks, but that doesn't worry me. I did what I did with my money because I was comfortable with it (the risk) at the time and I'm happy with the returns. With hindsight I made some "wrong" financial decisions over the last 20 years but I made all of them because they felt comfortable and right at the time. For example, I overpaid my mortgage for years to get rid of it when it would have been financially advantageous to invest in S&S ISAs and pensions but that's put me in a position where I'm happy to take some more risk now and I don't have to worry about work/salary pressures.

Yep Vanguard are great but you have 100s of better opportunities going forward particularly where research on this is clear (well managed funds/ITS outperform all ETF markets except USA) and perhaps inform your strategy going forward.

If I was in your position today and with 20 years' investing experience behind me, I would do the following:

32k in Fundsmith Equity (direct from Fund so no fees)
26k in LTI
15K in iShares S&P 500 ETF