Investment period VLS

Thrugelmir

Your success or failure depends very much on Vanguards fund allocations and choice of investments. 

sixpence.

Thrugelmir said:

Your success or failure depends very much on Vanguards fund allocations and choice of investments. 

So what would be appropriate counters to a VLS allocation failure? They are missing property and Asia ex Japan, but as far as I am aware these don't grow inversely to the VLS asset choices.

Thrugelmir

sixpence. said:

Thrugelmir said:

Your success or failure depends very much on Vanguards fund allocations and choice of investments. 

So what would be appropriate counters to a VLS allocation failure? They are missing property and Asia ex Japan, but as far as I am aware these don't grow inversely to the VLS asset choices.

Purely an observation. Not renowned as asset managers. 

dont_look_now

Thrugelmir said:

Not renowned as asset managers. 

You must be using the term "asset managers" in some sense I'm not familiar with

TBC15

sixpence. said:

The reason that VLS has done so well is that the fund was started on the back of the 2008/9 recession.
However, there is going to be a recession soon. The value the stock market is currently estimated at doesn't reflect the economic losses that have come about as a result of the global pandemic. Boom and bust. It just depends what side of it you enter the market on, right? It's impossible to time the market though (we know this). So this leaves the question: what would an average 20-30 year time span for a VLS 20 (or any VLS) look like, all things considered? 

Has VLS done well? In relation to what?

Thrugelmir

dont_look_now said:

Thrugelmir said:

Not renowned as asset managers. 

You must be using the term "asset managers" in some sense I'm not familiar with

Asset Management - the management of investments on behalf of others. The goal is to grow a client's portfolio over time while mitigating risk.  

album_song

They're the second biggest asset manager in the world and if you buy a VLS fund they aren't "choosing" anything so I don't know how you can say they aren't renowned as great ones.
Their funds are not missing property, they own every REIT in the world, and many of the bonds are mortgage backed securities or propery/infrastructure related.
They have no "goals", VLS are passive mixed stock/bond funds with set allocations from 20% to 100%. The purpose is to provide a fund with that allocation, which they do.

TBC15

The comment sounds reasonable though. Doesn’t Vanguard do a lot of managed funds as well?

Audaxer

sixpence. said:

I'm not actually a teacher but I was using that as an example. It does seem like thrifty living is the way forward... 
What do people think of a strategy like this. You would split up a larger portfolio say 6-7 figures in this way:

• 1-2 years in cash (emergency fund)
• 3-5 years in VLS 20 (for more immediate use: emergency or if you want to make a big purchase)
• 6-10 years VLS 60
• 11-15 years VLS 80
• 15+ years VLS 100

The number of years is based on a persons yearly spending money. Does that make sense? So If you calculated that you want to live off 25K per year then you would have 50K in cash and 75K in the VLS 20.

That doesn't seem like a good strategy if you plan to spend all your cash in the first two years, and then by the end of year 10 only have investments in VLS80 and VLS100. If that is the plan your investments would be well over your risk profile by the end of year 10 and the portfolio would be hit badly if there was an equity crash at that time. I think a better and simpler strategy would to have all the investments in VLS60 with a couple of years cash buffer.

bowlhead99

Audaxer said:

sixpence. said:

I'm not actually a teacher but I was using that as an example. It does seem like thrifty living is the way forward... 
What do people think of a strategy like this. You would split up a larger portfolio say 6-7 figures in this way:

• 1-2 years in cash (emergency fund)
• 3-5 years in VLS 20 (for more immediate use: emergency or if you want to make a big purchase)
• 6-10 years VLS 60
• 11-15 years VLS 80
• 15+ years VLS 100

The number of years is based on a persons yearly spending money. Does that make sense? So If you calculated that you want to live off 25K per year then you would have 50K in cash and 75K in the VLS 20.

That doesn't seem like a good strategy if you plan to spend all your cash in the first two years, and then by the end of year 10 only have investments in VLS80 and VLS100. If that is the plan your investments would be well over your risk profile by the end of year 10 and the portfolio would be hit badly if there was an equity crash at that time. I think a better and simpler strategy would to have all the investments in VLS60 with a couple of years cash buffer.

Yes, agreed.

Presumably the intention is to keep it balanced so that the coming 1-2 years is always in cash and the 3-5 years/emergency use is always in VLS20 and so on, so as you consume the cash and the VLS20 becomes smaller as a percentage of the whole, you top it up.  

However, as the asset mix (other than equity ratio) is broadly consistent between the 4 Vanguard funds (they would all be positively correlated on a chart rather than one going up one going down) there is little to be gained by keeping topping up one bucket to another and rebalancing as one goes along.

It would make more sense to reduce the buckets from four to one or two (probably two if a particular blend of assets is sought) and then just have cash in one hand and the 'investment portfolio' in the other - no need to have four buckets that each hold differing shades of grey from the same pallet, when the overall mix of them simply gives you one mid-shade of grey which you could already mix from any two of them.   

However if it helps someone to organise and compartmentalise their life by doing something like this, it's not necessarily 'wrong', just overcomplex IMHO.