[deleted.]

SonOf

People who buy Vanguard LS buy a single fund. The fund holds 1000s of stocks under different wrappers. The number of wrappers within the fund is utterly irrelevant because it has no impact on diversification or complexity of managing this fund.

People who buy VLS buy a portfolio of funds under one fund of funds. People who build their own portfolios are doing the same as VLS except not having the extra layer of charges that a fund of funds has.

The wrappers in VLS are assigned allocations based on cap weightings rather than arbitrary “4% micro cap growth”. The recommended portfolio has a lot of small allocations to exotic things while missing massive chunks of the market altogether.

Vanguard make management decisions on the allocations they make. Its not based on cap weightings.

If you wish to hold a portfolio of single sector funds (whether directly or in a fund of funds) then it is inevitable that you will have some funds with a single digit weighting.

[Deleted User]

SonOf wrote: »

People who buy VLS buy a portfolio of funds under one fund of funds. People who build their own portfolios are doing the same as VLS except not having the extra layer of charges that a fund of funds has.


Vanguard make management decisions on the allocations they make. Its not based on cap weightings.

If you wish to hold a portfolio of single sector funds (whether directly or in a fund of funds) then it is inevitable that you will have some funds with a single digit weighting.

Again, this is incorrect information. Vanguard funds like VLS, which hold other Vanguard funds do not double charge one fee on top of another.

Also, “The sub-asset allocations, with the exception of UK equities and bonds, are intended to be Target sub-asset allocation as at 31 December 2018 market capitalisation weighted to help avoid taking a significant bet on any one segment of the market.” https://www.vanguard.co.uk/documents/adv/literature/lifestrategy-brochure.pdf UK is overweight based on solid research for home markets but otherwise it’s cap weighted.

Andrew31

bostonerimus wrote: »

I'm dubious of any portfolio that includes single digit percentages of funds, the more the merrier I suppose.

Really? I would suggest the more diversification the better. 3% Woodford would be better than 20%:money:

Moe_The_Bartender

SonOf wrote: »

No it doesn't. Returns come through income and growth. Income reinvested gives you a gain.

Am I misunderstanding you? Income in the shape of dividends comes out of the share price which drops on the ex-dividend date so you’re just putting the same money back in, not having gained anything.

SonOf

Again, this is incorrect information. Vanguard funds like VLS, which hold other Vanguard funds do not double charge one fee on top of another.

No. You are incorrect. VLS charges are 0.22% whereas the underlying funds are around 0.1x%. Holding VLS is more expensive than holding the underlying investments directly.

Also, “The sub-asset allocations, with the exception of UK equities and bonds, are intended to be Target sub-asset allocation as at 31 December 2018 market capitalisation weighted to help avoid taking a significant bet on any one segment of the market.” https://www.vanguard.co.uk/documents/adv/literature/lifestrategy-brochure.pdf UK is overweight based on solid research for home markets but otherwise it’s cap weighted.

Or putting it another way, they have made a management decision to set their own weightings. Just the same as every model has a reason for choosing x% into the various areas.

SonOf

Moe_The_Bartender wrote: »

Am I misunderstanding you? Income in the shape of dividends comes out of the share price which drops on the ex-dividend date so you’re just putting the same money back in, not having gained anything.

You are talking about income units. Not income funds.

Personally, I always pick income units regardless of whether the objective is income or growth. It makes no difference in the returns. However, the questioning wasn't on whether it was inc or acc units but whether income-focused funds should be used. I have no problem with that as yielding assets is a valid investment strategy for growth.

[Deleted User]

No. You are incorrect. VLS charges are 0.22% whereas the underlying funds are around 0.1x%. Holding VLS is more expensive than holding the underlying investments directly.

1. Vanguard Japan charges 0.23%. Bond fund charges 15 bp. EM fund charges 27bp
2. Buying and selling, rebalancing incurs extra costs.

There is no double charging and an investor would save nothing at all by buying the same constituents himself.

[Deleted User]

Or putting it another way, they have made a management decision to set their own weightings.

In the one and only case of allocation to UK which is a fixed overweight allocation to a home market. Otherwise cap weighted.

SonOf

Deleted_User wrote: »

1. Vanguard Japan charges 0.23%. Bond fund charges 15 bp. EM fund charges 27bp
2. Buying and selling, rebalancing incurs extra costs.

There is no double charging and an investor would save nothing at all by buying the same constituents himself.

I'm afraid you are incorrect. There is a margin on the VLS funds compared to the underlying funds. Its not a great amount (about 0.1% overall) and is a lot less than many other fund of funds. But it is an extra cost compared to an individual holding the underlying funds directly. Same goes for Architas, HSBC, L&G and others on their versions.

In the one and only case of allocation to UK which is a fixed overweight allocation to a home market. Otherwise cap weighted.

It is still an active decision to change the weightings to suit a particular objective.

[Deleted User]

SonOf wrote: »

I'm afraid you are incorrect. There is a margin on the VLS funds compared to the underlying funds. Its not a great amount (about 0.1% overall) and is a lot less than many other fund of funds. But it is an extra cost compared to an individual holding the underlying funds directly. Same goes for Architas, HSBC, L&G and others on their versions.


It is still an active decision to change the weightings to suit a particular objective.

There will be a very small delta between weighted average of constituent funds and VLS TER. That’s because every time when shares are sold and repurchased in the course of rebalancing, there will be a cost.

If you want to define “passive investing” as “the world stock market cap weighted” then you are correct. Vanguard has no passive funds. And the father of passive investing was not a passive investor, nor did he recommend passive investing.