Vanguard LS vs buying the underlying funds

bowlhead99

wiseonesomeofthetime wrote: »

It looks like you don't actually invest your £10k and forget about it for ten years as there appears to be regular costs or charges that need to be paid.

I have read all the documents and they talk about a 0.15% account (platform) fee. I read this as I will need to pay an additional sum to them each year to avoid an automatic reduction in my fund's value by it being taken from it directly.

So that could be £15 (based on £10k @ 0.15%). I can obviously manage that from my bank account.

Is that correct?

Yes basically. The fund has ongoing running costs which are taken from the fund itself; these will be the same no matter whose fund platform you use, and they won't need to be paid separately in cash because it is the fund itself which has the obligation to pay them out of the profits it makes.

Then, different investment platforms would charge you different levels of fees to buy the investment in the fund. Vanguard's own 'vanguardinvestor' website is what you have probably seen as the place that charges you a 0.15% annual fee to run the ISA account and hold your investment for you inside that account.

The 0.15% fee is calculated daily based on your investment value and then charged quarterly. To avoid needing to sell the odd part of a share in the fund to raise a few pounds of cash for fees each quarter, you could either leave an extra bit of cash in the account when you do the initial purchase, or add a bit of cash by debit card from time to time, if you remember, or simply set up a direct debit.

How do I pay the account fee?

There are three ways to pay – by Direct Debit, by debit card, or direct from your Vanguard account. You can choose how to pay it in the ‘My Profile’ section of your account. If you want to pay by Direct Debit you’ll need to add a bank account first.

SonOf

It looks like you don't actually invest your £10k and forget about it for ten years as there appears to be regular costs or charges that need to be paid.

Fund charges are taken within the fund. No action from you required. However, the investment platform you use to buy the fund will have it's charges and they will be funded by you externally of the fund. Some platforms have a cash account where you can take the charges from and you hold say 2% in cash and 98% in the fund. Others can take it via your current account or will sell units in the fund to pay charges.

e.g. the old endowment policy promises

Endowments never promised anything. However, endowments had never failed to hit target and pay out massive surpluses until the early 2000s. The problem with endowments was a lack of flexibility when the economy moved from short term boom/busts with high inflation to more stable low inflation basis. This brought the gross returns down but the endowment premiums were set at a level that assumed higher returns. What should have happened is that as mortgage interest payments came down, endowment premiums should have risen to increase the investment element. However, they couldn't. The returns were often still good relative to the level of investment risk and the period in question. Just not high enough to hit target. There are other influences but they would have hit ISAs and other tax wrappers equally.

MarkCarnage

Checkout CGT between 01/07/2008 and 30/06/2009 during the GFC. It barely skipped a beat, of course next time it could be different

Back then sovereign debt performed well not just in relative but in absolute terms in the flight to safety. I'm not so sure that would be true in a future adverse scenario.

MarkCarnage

yes I have given up with stock pickers for now to focus on managing asset allocation with low cost funds/etfs.

The two are not mutually exclusive of course.....

If you don't mind me asking, when and why did you decide to sell Monks? Disclosure - I have held it for quite a long time. I sold some as it had become too large a component of my portfolio, but it's still one of my bigger holdings.

[Deleted User]

cloud_dog wrote: »

I apologise, I was a little bored... and as logic didn't seem to be helping I thought sarcasm might.

No need to apologise for a questioning attitude, cloud_dog; I probably should have made a clearer reference.

The contention that a handful of investments is an unsafe portfolio, or worse, came up last summer when someone called jellydream invited suggestions over the allocation of a SIPP.

In the upshot, Bowlhead and I have an ongoing challenge on a dedicated thread where we measure the performance oh his selected multi-asset fund against four stocks chosen by me.

Anyway, depending how we fare, one of us will be paying £100 to a charity of the other's choice. And that will be in August.

Eco_Miser

wiseonesomeofthetime wrote: »

It looks like you don't actually invest your £10k and forget about it for ten years as there appears to be regular costs or charges that need to be paid.

That is true if you have your ISA with Vanguard, or most S&SISA providers, but with Iweb you pay £25 to open the account, £5 to buy the fund, then nothing more until you sell the fund, or buy some more (£5 per transaction).

As explained above, the fund manager takes their fees without any action on your part.

Crashy_Time

bowlhead99 wrote: »

Yes, on the face of it, clearly the wrong move because over 95% of the world's investible investor equity capital is outside the UK, so you should invest mostly outside the UK.

Likewise, 99% of the people live outside the UK, so you should live mostly outside the UK.

But wait! You chose not to live mostly outside the UK, so perhaps it is reasonable not to choose where to invest based purely on where other people choose to live or put their money.

That implies an edge in the markets though (as discussed in the LK book, and we also discussed on the other thread about costs) and most people don`t have that "Edge".

Alexland

MarkCarnage wrote: »

If you don't mind me asking, when and why did you decide to sell Monks? Disclosure - I have held it for quite a long time. I sold some as it had become too large a component of my portfolio, but it's still one of my bigger holdings.

I was holding Monks via a BG children's savings plan so it was never a material amount. With the impending closure of the BG direct model then it wouldn't have made sense to continue the plan after the account had migrated to HL even though they offered to delay the new charges for a few years.

Alex

bowlhead99

Crashy_Time wrote: »

That implies an edge in the markets though (as discussed in the LK book, and we also discussed on the other thread about costs) and most people don`t have that "Edge".

It doesn't imply an edge. It implies that you you may get a more suitable result by thinking about your needs rather than the needs of the average citizen of the world, who may not share your circumstances.

badger09

wiseonesomeofthetime wrote: »

As this thread features Vanguard LifeStrategy Funds quite heavily, I thought I would ask my question here, rather than start another thread on Vanguard.

I am looking at investing £10k in LS60 or LS80 in April under the ISA wrapper.

I am trying to get my head around how this all works as I have only ever held Cash ISAs before.

It looks like you don't actually invest your £10k and forget about it for ten years as there appears to be regular costs or charges that need to be paid.

I have read all the documents and they talk about a 0.15% account (platform) fee. I read this as I will need to pay an additional sum to them each year to avoid an automatic reduction in my fund's value by it being taken from it directly.

So that could be £15 (based on £10k @ 0.15%). I can obviously manage that from my bank account.

Is that correct?

I feel I need to dip my toe in the market as my savings at the moment are not even worth face value, with interest rates below inflation .

This looks the "safest" bet.

I am aware that my capital is at risk. Never won on anything yet where it has been (e.g. the old endowment policy promises), however, my luck has to change some time, yes?

If you are looking to invest £10k in Vanguard Lifestrategy in a lump sum and leaving it invested, have a look at IWEB as a platform.

Fund charges will be exactly the same but IWEB has a different charging model.

charges IWEB:
Year 1 £25 account opening fee + £5 purchase fee =£30
Year 2 £0
Year 3 etc £0

charges Vanguard 0.15% pa:
Year 1 £15 (hopefully a bit more as value of fund rises)
Year 2 £15 (as above)
Year 3 etc £15 (as above)

IWEB is great for buy & hold. Vanguard good for drip feeding.