Advice on Vanguard funds

metrobus

Apart from buying 8 FTSE100 blue chips about 6 years ago for dividend return I have little experience in investing.

I plan to put £40k into a vanguard stocks & shares ISA to buy a few passive funds,£20k prior to April and £20k when the new tax year begins.

Very sure the money will not be needed for at least 10 years and my risk factor is medium.

I would be very happy to average a 4% return but obviously know some years I will take a lose.

I would be grateful of your opinions of combining these 3 funds Lifestrategy 60%,FTSE global all cap index fund and Pacific ex-Japan stock index fund.Would that give a good diversification?

If I am missing something glaringly obvious please point it out.

Thank you.

arwain

One of the experts will answer you soon I am sure but if it was me I think I would just put the £40k into something like LS 60 or similar and leave it there and not have to worry about rebalancing etc and just keep an eye on it once a year or so.

I would also consider going down the Iweb route. £25 one off payment to open a S&S account and then just £5 every time you make a purchase. So you can get your £40k invested in LS 60 for a tenner and then no more on going charges.

If your 8 FTSE blue chip holdings are of a decent size I would also consider selling them too and putting the money into something like the LS funds or similar multi asset funds. The consensus seems to be one needs at least 20 individual companies to be invested in to have a reasonable chance of diversification. Having just 8 large FTSE companies is probably fairly risky unless we are not talking about much money.

Linton

The idea of diversification is to broaden the range of underlying investments you hold. In the case you give any equity in VLS60 or the Asia Pacific Index fund will also be held by the FTSE All Cap fund. So all you are doing by holding all 3 is to modify the % allocated rather than bringing in something new.



The missing 40% in VLS60 is held as bonds which are not included in either of the other funds. So I suggest a 3 stage process


1) Decide what % of share investments you wish to hold. Over the long term shares (equity) will give the best returns but will be volatile, possibly giving rise to temporary losses over a year or more.


2) You can then choose one of the appropriate VLS funds or fairly similar ones from several other fund managers. There can be arguments as to the particular merits of the various funds but in practice the differences in return of funds with the same % equity are not likely to be large.


3) The fund you choose in (2) may well be sufficient for your needs, but if you wish to increase diversification you need to look for areas not well represented by your choice and put a relatively small part of your pot there. Common examples include small companies or emerging markets funds.

bowlhead99

metrobus wrote: »

I plan to put £40k into a vanguard stocks & shares ISA to buy a few passive funds,£20k prior to April and £20k when the new tax year begins.

Is there a particular reason you want to buy a 'few' passive funds? Especially if one of the funds will be a mixed asset fund (LifeStrategy series) which holds a whole load of passive funds?

I would be grateful of your opinions of combining these 3 funds Lifestrategy 60%,FTSE global all cap index fund and Pacific ex-Japan stock index fund.Would that give a good diversification?

The Lifestrategy fund is already a diversified fund which invests in bond indexes and equity indexes (both developed and emerging markets) around the world.

If you are going to add more Pacific ex-Japan, you need to have a reason for doing that. The Lifestrategy fund already contains a 'developed world ex-UK' fund which includes companies in the Pacific ex-Japan region, and it also has a percent or so directly in the Pacific ex-Japan index fund. You are considering buying more exposure to global equities (via Global All Cap), which will still include the Pacific ex-Japan region, and then also buying even more of the dedicated Pacific ex-Japan fund. What is the fascination with that region? Generally speaking, if you already have an allocation to a region, you don't 'diversify' by putting more into it.

If you buy the '60% equities' fund, it has 60% equities, of which a quarter are UK stockmarket listed, and three quarters are non UK listed. If you buy more equities funds on top, your total allocation to equities as a proportion of the total portfolio will go higher than 60% - perhaps quite a lot higher if you are spreading the money evenly between the three funds you propose, as the second and third funds are 100% equity.

If I am missing something glaringly obvious please point it out.

You haven't said what you are hoping to achieve other than long term growth, nor why the Vanguard Lifestrategy 60% equity or 80% equity funds are inadequate for your needs. So it's difficult to comment on whether the portfolio is appropriate, but it's not what I would do.

Maybe if you tell us why you want extra global equities exposure and extra pacific ex-Japan exposure (that region is basically 60% Australia, 30% HK, 10% Singapore), we might understand what glaringly obvious thing you are trying to achieve, because it is not obvious to me. Are you an Australian who really wants lots of extra exposure to Aussie banks and insurance companies, and deliberately picked a lifestrategy fund with only 60% equities so that you could buy a lot more on the side, picking your own regions? Why don't you like the regions that Vanguard selected for their off-the-shelf packaged mixed-asset investment product?

I don't disagree with Linton's comments, just a different way of putting it.

dd95

soi have just opened by Vanguard S and S ISA - how do dividend payments work? are they paid annually? say i invest 5k in one year for example...

metrobus

Thanks for the amazing replies.

arwain,thanks for the iweb tip,since ill just be making one purchase each tax year it makes sense, and yes maybe just plumping for LS60% or 80% would be best since it does give the required diversification.i take it i can buy and sell vanguard LS60 or 80 at the same unit cost with them or when it comes to it would there be a charge to sell with iweb?

Linton,that sounds a good,logical selection process,thanks.

bowlhead99,thanks for pointing out the much higher equity exposure, something i do not mind so maybe LS80% will be my route,Ive probably been guilty of over thinking the whole process and LS60 OR 80 is adequate for my needs which is to give myself a chance to beat the low interest rates the banks give on my cash over the next 10 years.

Thrugelmir

metrobus wrote: »

I would be very happy to average a 4% return but obviously know some years I will take a lose.

A return before or after inflation.

metrobus

iweb also quote the 0.22% OGC when i take a look at vanguard lifestrategy60% on there website.
How is this actually paid?

metrobus

Thrugelmir wrote: »

A return before or after inflation.

before,i am not greedy and happy to tread water,just do not want to drown.

Tom99

metrobus wrote: »

iweb also quote the 0.22% OGC when i take a look at vanguard lifestrategy60% on there website.
How is this actually paid?

It's reflected in the daily fund price, you don't see a separate charge. It will be the same OGC for this fund whatever platform you are using.

metrobus

Thank you Tom I knew I was missing something.

Sorry for all the questions but one other thing what's the typical spread between buying and selling price on the Lifestrategy 80% fund?
Thank you.