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VLS100 and 60

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  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    500 Posts Second Anniversary Name Dropper
    edited 17 June 2020 at 9:56AM
    Linton said:
    Audaxer said:

    < 5 years = all cash
    5-7 years = VLS20 (low risk)
    7-10 years = VLS80 (high risk)
    10+ years = VLS100 (highest risk).

    DairyQueen, I'd be interested to know what percentage of your portfolio you keep in each bucket if you care to share?
    Happy to do so.

    I am front loading drawdown so current allocation of pension portfolio reflects that. As at today:

    < 5 years = all cash (21.1%)
    5-7 years = VLS20 (6.6%)
    7-10 years = VLS80 (28.4%)
    10+ years = VLS100 (43.9%).

    The drawdown rate will drop to <2% of the balance in 2027 so these allocations will change over time. I also have the option to suspend drawdown if required. Belt and braces :)  
    How is that different to just holding VLS60 or whatever the average is?
    Explained very well by Pete Matthew in this vid https://youtu.be/EfKoFIo9hcw, he uses the term Pound Cost Ravaging and the bucket scenario is one way of avoiding this in drawdown.
    And my holdings mentioned earlier are aligned with this strategy
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Interesting.  I've short circuited your approach. <5 years, cash, > 5 years equities 
     :D 
    Pretty much how I have positioned OH's portfolio except for a smidge of bonds/WP for 5-7 year. 

    More difficult to establish risk timeframes when you are decades from retirement as, tbh, it's tough to determine how much you may need to access within a medium-term timeframe. With decades to go to retirement we adopted the same bucket approach as you.

    I'm retired. But high risk / sanguine attitude so big drops dont phase me. Probably not many people with my attitude, the money i have will outlast me unless i deliberately bought stuff i dont need and more importantly dont want, since its always possible to justify buying something you dont need if you want it. I dont need a £3k new Mac but I'll be getting one.  OTOH i dont need a £4k new bike though I'd like one, but i cant justify it to myself so i haven't bought it ...... yet.     :D
    Indeed i probably should spend more than i do, "no pockets in a shroud" etc  :D
  • DairyQueen
    DairyQueen Posts: 1,855 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper
    Audaxer said:
    Linton said:
    Audaxer said:

    < 5 years = all cash
    5-7 years = VLS20 (low risk)
    7-10 years = VLS80 (high risk)
    10+ years = VLS100 (highest risk).

    DairyQueen, I'd be interested to know what percentage of your portfolio you keep in each bucket if you care to share?
    Happy to do so.

    I am front loading drawdown so current allocation of pension portfolio reflects that. As at today:

    < 5 years = all cash (21.1%)
    5-7 years = VLS20 (6.6%)
    7-10 years = VLS80 (28.4%)
    10+ years = VLS100 (43.9%).

    The drawdown rate will drop to <2% of the balance in 2027 so these allocations will change over time. I also have the option to suspend drawdown if required. Belt and braces :)  
    How is that different to just holding VLS60 or whatever the average is?
    I think the main difference is that it allows DairyQueen to withdraw from the VLS20 bucket before touching the higher risk VLS funds. 

    In my case I hold VLS40 and VLS60. I have more in VLS60 which effectively give me roughly 53% equities between the two funds. My thinking is that if I do need to withdraw from my VLS funds during a downturn, I would be better to draw from the VLS40 as it would have suffered a smaller loss that the VLS60.
    Out of the loop for a few days so just caught up with this thread.

    Audaxer is correct. My portfolio is invested using timeframe buckets because I have different risk tolerances over different timescales and wish to avoid selling equities into a downturn anytime, and definitely within the next 5-7 years.

    I would rather take the inflation hit on cash than risk any reduction in the value of the amount that I intend withdrawing over this period. I have a very low tolerance to risk for this part of the portfolio. The cash forms a fundamental part of our income throughout this period and each year's withdrawal has been calculated with variation dependant only on changes in tax allowances. 

    If it was IHT-optimum to withdraw five years of income upfront (as a TF lump sum) then I would do so but I have reduced life expectancy so keeping the IHT-protection provided by the pension wrapper is a consideration.

    Around 72% of the portfolio ( >7 year timeframe) is currently invested in the equivalent of 'VLS90'. Taking such a high risk on this part of the portfolio is possible as drawdown will be optional in the future. I could suspend selling those funds indefinitely if necessary.

    Tbh, the decision to split between VLS80 and VLS100 or, indeed, to invest this chunk with Vanguard rather than another provider, was mostly the outcome of balancing asset classes, regions and sectors across a combined portfolio that includes Mr DQ's investments. I manage both as a single portfolio. I could have chosen to invest 90% in a 100% equity fund and the other 10% in a bond fund. The only reason I am not 100% equities for the >7 year bucket is to slightly reduce volatility. Not that a 45% rather than 50% drop makes much difference. I guess that I am slightly beyond my comfort zone to go all out equities.

    Mr DQ's portfolio is structured more conventionally.  HRT and a LTA breach are both considerations for him so how much he will withdraw annually is a function of his other income (some very variable), tax and portfolio performance. He has the luxury of being able to suspend withdrawals throughout a bear market.

    His portfolio is high equities and all funds are targeted at a specific asset class and/or region. Core global passives (Vanguard FTSE Global All Cap and L&G International Trust ex UK) plus actively managed peripherals. He has small %ages in bonds and WP and is currently overweight cash as a hedge against an unexpected, short-term drop in his other income. He is self-employed so this was a possibility even before the virus struck. All first world problems.

    Given the complexities of our circumstances I feel comfortable with the approach I have taken with the sub and combined portfolios. My portfolio is split firstly by investment timeframe. Each timeframe has a specific risk and asset allocation. Over time, and as circumstances change, this strategy will likely be revised but, for now, it is meeting our aims I am sleeping comfortably regardless of the market shenanigans.
  • Audaxer
    Audaxer Posts: 3,547 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    Audaxer said:
    Linton said:
    Audaxer said:

    < 5 years = all cash
    5-7 years = VLS20 (low risk)
    7-10 years = VLS80 (high risk)
    10+ years = VLS100 (highest risk).

    DairyQueen, I'd be interested to know what percentage of your portfolio you keep in each bucket if you care to share?
    Happy to do so.

    I am front loading drawdown so current allocation of pension portfolio reflects that. As at today:

    < 5 years = all cash (21.1%)
    5-7 years = VLS20 (6.6%)
    7-10 years = VLS80 (28.4%)
    10+ years = VLS100 (43.9%).

    The drawdown rate will drop to <2% of the balance in 2027 so these allocations will change over time. I also have the option to suspend drawdown if required. Belt and braces :)  
    How is that different to just holding VLS60 or whatever the average is?
    I think the main difference is that it allows DairyQueen to withdraw from the VLS20 bucket before touching the higher risk VLS funds. 

    In my case I hold VLS40 and VLS60. I have more in VLS60 which effectively give me roughly 53% equities between the two funds. My thinking is that if I do need to withdraw from my VLS funds during a downturn, I would be better to draw from the VLS40 as it would have suffered a smaller loss that the VLS60.
    Around 72% of the portfolio ( >7 year timeframe) is currently invested in the equivalent of 'VLS90'. Taking such a high risk on this part of the portfolio is possible as drawdown will be optional in the future. 
    Bear in mind that as you have more in VLS100 (43.9%) than VLS80 (28.4%) it works out as just over 92% equities between these two funds according to my calculations. Not much difference from a VLS90 equivalent, but I just thought I'd point it out in case you hadn't taken that into account when looking at your overall position.
  • DairyQueen
    DairyQueen Posts: 1,855 Forumite
    Ninth Anniversary 1,000 Posts Name Dropper
    Audaxer said:
    Audaxer said:
    Linton said:
    Audaxer said:

    < 5 years = all cash
    5-7 years = VLS20 (low risk)
    7-10 years = VLS80 (high risk)
    10+ years = VLS100 (highest risk).

    DairyQueen, I'd be interested to know what percentage of your portfolio you keep in each bucket if you care to share?
    Happy to do so.

    I am front loading drawdown so current allocation of pension portfolio reflects that. As at today:

    < 5 years = all cash (21.1%)
    5-7 years = VLS20 (6.6%)
    7-10 years = VLS80 (28.4%)
    10+ years = VLS100 (43.9%).

    The drawdown rate will drop to <2% of the balance in 2027 so these allocations will change over time. I also have the option to suspend drawdown if required. Belt and braces :)  
    How is that different to just holding VLS60 or whatever the average is?
    I think the main difference is that it allows DairyQueen to withdraw from the VLS20 bucket before touching the higher risk VLS funds. 

    In my case I hold VLS40 and VLS60. I have more in VLS60 which effectively give me roughly 53% equities between the two funds. My thinking is that if I do need to withdraw from my VLS funds during a downturn, I would be better to draw from the VLS40 as it would have suffered a smaller loss that the VLS60.
    Around 72% of the portfolio ( >7 year timeframe) is currently invested in the equivalent of 'VLS90'. Taking such a high risk on this part of the portfolio is possible as drawdown will be optional in the future. 
    Bear in mind that as you have more in VLS100 (43.9%) than VLS80 (28.4%) it works out as just over 92% equities between these two funds according to my calculations. Not much difference from a VLS90 equivalent, but I just thought I'd point it out in case you hadn't taken that into account when looking at your overall position.
    Thanks for that; exact calculation appreciated.Given current market volatility 90% is a daily approximation.
  • michaels
    michaels Posts: 29,114 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Linton said:
    Audaxer said:

    < 5 years = all cash
    5-7 years = VLS20 (low risk)
    7-10 years = VLS80 (high risk)
    10+ years = VLS100 (highest risk).

    DairyQueen, I'd be interested to know what percentage of your portfolio you keep in each bucket if you care to share?
    Happy to do so.

    I am front loading drawdown so current allocation of pension portfolio reflects that. As at today:

    < 5 years = all cash (21.1%)
    5-7 years = VLS20 (6.6%)
    7-10 years = VLS80 (28.4%)
    10+ years = VLS100 (43.9%).

    The drawdown rate will drop to <2% of the balance in 2027 so these allocations will change over time. I also have the option to suspend drawdown if required. Belt and braces :)  
    How is that different to just holding VLS60 or whatever the average is?
    Isn't the difference in rebalancing, VLSxx will do it automatically how ever often they do it, holding asset classes separately and you can chose when/whether to rebalance?
    I think....
  • lescarp88
    lescarp88 Posts: 31 Forumite
    10 Posts First Anniversary Name Dropper
    This is an interesting thread. I've got a similar strategy with different buckets in VLS20 (£10k), VLS40 (£14k), and VLS80 (£14k) on Vanguard platform, plus VLS60 (£32k) and Capital Gearing Trust (£40k) on iweb. The intention is to have 'lower-risk' investments in case I need earlier access to funds, but I can't help thinking I've got myself into a right mixup.

    Any ideas on how to implement a 'bucket' strategy across different platforms? considering the 85k FSCS limit at each. Or is it more optimal to consider the overall asset allocation and possibly drawdown from that if needed?

    I was thinking of consolidating to VLS60 on iweb for lower flat fees. Also, maybe having CGT on x-o platform.

    Would rather not pay 0.25% platform fees plus fund costs. Hargreaves and AJ Bell both seem to have quite high transaction fees.

  • Swipe
    Swipe Posts: 5,622 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    I wouldn't worry about the 85K limit if your money is invested
  • barnstar2077
    barnstar2077 Posts: 1,650 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    lescarp88 said:
    This is an interesting thread. I've got a similar strategy with different buckets in VLS20 (£10k), VLS40 (£14k), and VLS80 (£14k) on Vanguard platform, plus VLS60 (£32k) and Capital Gearing Trust (£40k) on iweb. The intention is to have 'lower-risk' investments in case I need earlier access to funds, but I can't help thinking I've got myself into a right mixup.

    Any ideas on how to implement a 'bucket' strategy across different platforms? considering the 85k FSCS limit at each. Or is it more optimal to consider the overall asset allocation and possibly drawdown from that if needed?

    I was thinking of consolidating to VLS60 on iweb for lower flat fees. Also, maybe having CGT on x-o platform.

    Would rather not pay 0.25% platform fees plus fund costs. Hargreaves and AJ Bell both seem to have quite high transaction fees.

    Sounds like just having everything on Vanguard would make your life a lot easier.  You couldn't have any non Vanguard funds though.
    Think first of your goal, then make it happen!
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