LifeStrategy 40

masonic

You don't need to make any assumption about returns from Government bonds over the next 10 years. You can buy a Gilt with maturity of close to 10 years today with a yield to maturity of 0.5%, or an index linked Gilt with a yield to maturity of -2.5% (that's after inflation, so zero nominal return if inflation were 2.5%). Whereas a 10 year US treasury bond yields 1.6% but carries currency risk.

So it should be clear that bonds cannot continue to deliver historic returns of 2% above inflation in the next decade following their huge capital growth in the last decade. Probably best to assume about 1% below inflation.

Equities may continue to deliver historic returns of ~5% above inflation, in which case a 40:60 bonds to equities mix would deliver 1.4% above inflation or ~4% nominal return, again assuming inflation is around 2.5%.

Aminatidi

MPN wrote: »

Recently on another thread members were debating whether VLS40 (or even VLS20) would perhaps perform as well as some of the wealth preservation funds during a market downturn. Funds/IT's such as Trojan O, Capital Gearing and Personal Assets. There is also the HSBC Global Strategy Conservative or Cautious to consider as an alternative to the VLS range.

Yes sort of had that dilemma and came out thinking that for a simple "one stop" solution for my mum keeping fees low and having it as something she can overview/manage herself if she wants to is important.

Long story short this would be going from being in a Standard Life MyFolio II Managed fund and paying (including all fund and IFA fees) 2.2% for it to paying 0.4% so I'm comfortable that the fees part is covered and that Vanguard are about as safe as it gets.

patient_investor

Aminatidi wrote: »

Long story short this would be going from being in a Standard Life MyFolio II Managed fund and paying (including all fund and IFA fees) 2.2% for it to paying 0.4% so I'm comfortable that the fees part is covered and that Vanguard are about as safe as it gets.

You'll be better off 1.8% right from the start, each year. Wow.

MarkCarnage

Ten year view......3% nominal, 1% real. That assumption may be prudent, but it's not safe. My feeling is that it could be lower.

Aminatidi

pioruns wrote: »

You'll be better off 1.8% right from the start, each year. Wow.

Well yes that feels like a given assuming the Vanguard fund performs comparably to the MyFolio II Managed fund.

Which doesn't appear to be asking too much looking at the MyFolio fund

Albermarle

Recently on another thread members were debating whether VLS40 (or even VLS20) would perhaps perform as well as some of the wealth preservation funds during a market downturn

Also other threads have discussed reducing bond allocation ( to varying degrees depending on the view of the poster ) and replacing them by increasing cash holding instead.

Aminatidi

Albermarle wrote: »

Also other threads have discussed reducing bond allocation ( to varying degrees depending on the view of the poster ) and replacing them by increasing cash holding instead.

There's £45k (ish) as cash in the bank so not much chance of that

CRAIGSVILLE

Hi,


I have had 1 x VLS 20 + 3 x VLS 40 , giving approx. VLS 35 which has an annualised performance over nearly 10 yrs of 6.9 % minus the fees , so well over 6% minus inflation.
VLS 40 on its own has an annualised performance of 7.2 % over 10 yrs according to Trustnet.

Aminatidi

Yes it's whether that's sustainable long term that I was interested in opinions on.
Realistically I don't think it's appropriate to be suggesting my mum goes heavier on equities so this is more about expectation than need if that makes sense.
It's easy to start second guessing yourself when looking at multi-asset funds and ending up looking at all sorts of asset allocations rather than keeping it simple.

Thrugelmir

In backtesting the return on bonds. One needs to take into account the effects of a 40 year bull market (declining interest rates) . Along with the impact of QE. Bonds ultimately revert to the mean. As are fixed coupon. There's nothing magical.