Vanguard Strategy Options

fizio

I am looking to invest a few hunderd k i have in cash, intio the stockmarket and looking for a low risk/low maintenance investment strategy that will last the next 20 years in retirement. I also have some property income and DB pension so not totally dependent on the stock marketr for income but looking to simply take out and spend any growth on luxuries. Having done lots of reading I have decided to go with Vanguard for reasons of cost and simplicity and reputation. I see 3 options and was looking for any comments

1. Stick it all in VLS 80/20

2. Split between VWRL and BND ( worldwide index and worldwide bonds) - similar to above but less fees as far as i can tell

3. Worldwide exc US (VEU), US (VTI) and BND

I am fancying a more US bias than UK to be honest as UKL seems to in for a long haul of pain

Not sure of the split but maybe 80/20 for option 2 and 50/30/20 for option 3

AlanP_2

An 80% equity portfolio is not low risk by most people's definition I would think.

You will see a lot of volatility over 20 years with regular 15-20% drops in value along with some that might be as high as 40-50%.

As you aren't reliant on the investments that may not be an issue.

Bravepants

Generally a UK investor's average risk profile is 60% equities/40% bonds. Vanguard's Lifestrategy funds are weighted towards the UK , not by market capitalisation of nations. However, HSBC Global Strategy Balanced is more evenly weighted by market cap, and is roughly equivalent to VLS 60. 

fizio

AlanP_2 said:

An 80% equity portfolio is not low risk by most people's definition I would think.

You will see a lot of volatility over 20 years with regular 15-20% drops in value along with some that might be as high as 40-50%.

As you aren't reliant on the investments that may not be an issue.

I agree but I meant low risk as in its a worldwide index tracker versus riskier stock investments like individual shares. I would be happy with 4-5 % returns on average

fizio

Bravepants said:

Generally a UK investor's average risk profile is 60% equities/40% bonds. Vanguard's Lifestrategy funds are weighted towards the UK , not by market capitalisation of nations. However, HSBC Global Strategy Balanced is more evenly weighted by market cap, and is roughly equivalent to VLS 60. 

Indeed - part of the reason I am trying to avoid LS is to not have too much uk exposure. I do like the HSBC but I have decided to stay with Vanguard on balance

dunstonh

1. Stick it all in VLS 80/20


2. Split between VWRL and BND ( worldwide index and worldwide bonds) - similar to above but less fees as far as i can tell

3. Worldwide exc US (VEU), US (VTI) and BND

1 - Not low risk but is low maintenance.  It is way above the risk profile for someone referring to themselves as low risk.

2 - Risk depends on the split and global bonds may not be a good choice as a risk reducer.   Not as low maintenance as you need to rebalance (annually usually fine)

3 - You are starting to build a bespoke portfolio and that requires maintenance.      

I am fancying a more US bias than UK to be honest as UKL seems to in for a long haul of pain

The UK has always been better at small cap and medium cap (and has had many periods of outperformance compared to US).  Be careful of looking at US thinking it will better in future.  In the last cycle, the US was the best region.  In the previous cycle it was one of the worst.   It is rare for the best region in one cycle to be the best in the next cycle. 

BritishInvestor

fizio said:

AlanP_2 said:

An 80% equity portfolio is not low risk by most people's definition I would think.

You will see a lot of volatility over 20 years with regular 15-20% drops in value along with some that might be as high as 40-50%.

As you aren't reliant on the investments that may not be an issue.

I agree but I meant low risk as in its a worldwide index tracker versus riskier stock investments like individual shares. I would be happy with 4-5 % returns on average

What made you decide on 4-5%?

cfw1994

dunstonh said:

1. Stick it all in VLS 80/20


2. Split between VWRL and BND ( worldwide index and worldwide bonds) - similar to above but less fees as far as i can tell

3. Worldwide exc US (VEU), US (VTI) and BND

1 - Not low risk but is low maintenance.  It is way above the risk profile for someone referring to themselves as low risk.

2 - Risk depends on the split and global bonds may not be a good choice as a risk reducer.   Not as low maintenance as you need to rebalance (annually usually fine)

3 - You are starting to build a bespoke portfolio and that requires maintenance.      

I am fancying a more US bias than UK to be honest as UKL seems to in for a long haul of pain

The UK has always been better at small cap and medium cap (and has had many periods of outperformance compared to US).  Be careful of looking at US thinking it will better in future.  In the last cycle, the US was the best region.  In the previous cycle it was one of the worst.   It is rare for the best region in one cycle to be the best in the next cycle. 

How much maintenance would you suggest a "bespoke portfolio" requires?

dunstonh

How much maintenance would you suggest a "bespoke portfolio" requires?

Asset weighting models are usually fluid throughout the economic cycle. Weightings will go out of sync.  Fixed interest securities need to be updated throughout the cycle as certain types are better at certain stages.   So, rebalancing and adjusting.

Of course, if the OP is just going to be a random percentage into a handful of funds with no structure, research or reasoning then it doesn't really matter.

fizio

BritishInvestor said:

fizio said:

AlanP_2 said:

An 80% equity portfolio is not low risk by most people's definition I would think.

You will see a lot of volatility over 20 years with regular 15-20% drops in value along with some that might be as high as 40-50%.

As you aren't reliant on the investments that may not be an issue.

I agree but I meant low risk as in its a worldwide index tracker versus riskier stock investments like individual shares. I would be happy with 4-5 % returns on average

What made you decide on 4-5%?

Obviously I would be happy with more but looking historically a 4-5% yield on a global tracker seems gettable. I don't really need/want to take unneccessary risks by chasing highr returns.

fizio

dunstonh said:

How much maintenance would you suggest a "bespoke portfolio" requires?

Asset weighting models are usually fluid throughout the economic cycle. Weightings will go out of sync.  Fixed interest securities need to be updated throughout the cycle as certain types are better at certain stages.   So, rebalancing and adjusting.

Of course, if the OP is just going to be a random percentage into a handful of funds with no structure, research or reasoning then it doesn't really matter.

Thats a bit harsh as I have done quite a bit of research and given it plenty of thought - the goal being to generate 4-5% returns with low-ish risk and low-ish maintenance - though I admit I am not going to research this to death and there is plenty of evidence that having a simply investment portfolio with even 1 or 2 global/balanced funds is a decent strategy. The rebalancing is a fair point but i don't think its a big deal if my ratios vary by a few percent from year to year so adjusting every year/2 is fine.

My overall strategy is to have 3 income streams (property/stocks/DB pension) that will give me maximum diversification and any one of the 3 will be enough for my normal living expenses

Appreciate all the feedback though