Vanguard LS 60 fund - performance going forward

longleggings

Hi All

Just received an inheritance sum of 200K and have put it all into an NS&I bond paying 1.16% while I decide what to do with it.

I would like to secure some income from this in the short to medium term, say between

1-3% pa if poss. I am definitely a passive vest so have been looking at the Vanguard LS 60% equity fund. If I remember correctly the year to July 20 paid approx. 0.60%, lower than NS&I. However, the current year to Aug 2020 paid 2.57%, better than NS&I.

 

My question is regarding future performance of the LS 60% fund - I understand that some contributors on here are quite familiar with Vanguard and was wondering whether LS is likely to match the year on year Aug increase of 2.57% going forward or will the current volatility affect performance. I am referring particularly to USA Nov election and Covid recovery or not. Both these events seem hard to call at  the moment. I am not particularly concerned with Brexit.

I suppose I am trying to time the market (not always advised) and would be grateful on any informed opinions about when, or if to shift my monies into LS 60%.
My current thinking is to wait until the end of the year when some of the volatility issues may have started to play out.

 

Thanks in advance

 

LL

A_T

Since it started in 2011 Lifestrategy 60 has returned on average 7.8% per year. The US equivalent Lifestrategy Moderate Growth has returned on average 7.5% per year since 1994.

eskbanker

longleggings said:

I would like to secure some income from this in the short to medium term, say between

1-3% pa if poss. I am definitely a passive vest so have been looking at the Vanguard LS 60% equity fund. If I remember correctly the year to July 20 paid approx. 0.60%, lower than NS&I. However, the current year to Aug 2020 paid 2.57%, better than NS&I.

It really makes no sense to compare performance between a fund investment (intended for long-term growth) and an easy-access deposit account - they're different products for different purposes over different timescales.

longleggings said:

My question is regarding future performance of the LS 60% fund - I understand that some contributors on here are quite familiar with Vanguard and was wondering whether LS is likely to match the year on year Aug increase of 2.57% going forward or will the current volatility affect performance. I am referring particularly to USA Nov election and Covid recovery or not. Both these events seem hard to call at  the moment. I am not particularly concerned with Brexit.

I suppose I am trying to time the market (not always advised) and would be grateful on any informed opinions about when, or if to shift my monies into LS 60%.
My current thinking is to wait until the end of the year when some of the volatility issues may have started to play out.

You should only invest for the long term, so what might currently look like volatility is practically irrelevant in the big picture (>10 years) - it's pointless trying to time the market, based only on what you currently perceive as significant, so if this investment is right for you then get your money into it at the earliest opportunity....

barnstar2077

If you wait for volatility to die down you will be waiting a really, really long time!  You never know when it may go up or down, if it was that easy everyone would just time the market too.  Just pick a fund that matches your risk level and put it in as soon as you can.  Although, as has been said above, these are not like bank accounts and you should not invest unless you are prepared to leave your money in for many years, preferably ten years or more (That's not to say you couldn't take some out every now an then, assuming you mean to use an ISA, but you need to be prepared for the worst.)  How would you feel if you paid in and there was a 20% dip next February?  Or maybe it will be up, who knows!  Would you be okay leaving it alone if it went down, or would you want to get the money out asap?  

masonic

longleggings said:

My question is regarding future performance of the LS 60% fund - I understand that some contributors on here are quite familiar with Vanguard and was wondering whether LS is likely to match the year on year Aug increase of 2.57% going forward or will the current volatility affect performance. I am referring particularly to USA Nov election and Covid recovery or not. Both these events seem hard to call at  the moment. I am not particularly concerned with Brexit.

Yes, market volatility will affect the performance of this fund, there is no doubt about that. The value of the fund will go down when markets go down and the value of the fund will go up when markets go up. It won't be as volatile as the markets themselves because it holds 40% bonds, but it is still capable of a rather bumpy ride - look at the performance chart over the past year.

longleggings said:

I suppose I am trying to time the market (not always advised) and would be grateful on any informed opinions about when, or if to shift my monies into LS 60%.

My current thinking is to wait until the end of the year when some of the volatility issues may have started to play out.

There will always be new sources of uncertainty to replace those that have worked their way out of the system. Volatility is normal and it is unusual for it to be absent - there have been periods of time when it has been absent, but it was impossible to predict them, and those times have not necessarily been the best times to invest.

If you don't have the stomach to invest £200k all at once, spread it over 6-12 months. Statistically this will lead to a poorer outcome than investing it all immediately, but you'll insure against the risk of investing it all just before a major downturn (though there is nothing to stop that downturn happening just as you invest your final tranche of funds).

Prism

It might continue to return around 7% a year or it might return 0% (or lower) for the next 10 years. Impossible to say

longleggings

Thanks for all of your comments - the consensus seems to be to get it in asap or drip feed it in.
As i indicated earlier I am really looking for a short term 5-10yr investment, not the 10yr + as some on here have suggested.
Given this, is the LS 60 still worth an immediate punt ?. I accept that there will always be volatility, it just seems to me that the current situation especially re. virus is unprecedented in modern times and hard for the markets to factor that in.
One question, Masonic suggested that holding 40% bonds is less volatile. Can someone explain why this is so, i am a novice when it comes to the main differences between bonds and shares.

grumiofoundation

If you don't understand the difference between bonds and stocks what made you pick on VLS 60? The fact it is often talked about/recommended on this forum is not a reason to invest in it, it may not be suitable for your aims. I would suggest reading some basic investing articles to get a grounding in the basics. 
https://investor.vanguard.com/investing/how-to-invest/
https://monevator.com/the-investing-basics/

You may want to consider seeing an Independent financial advisor if you are not confident managing your own investments.

You say you want between 1-3% per annum income - you can lock the money away for 5 years and get 1.5%, no risk to capital. 
https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#3yrfixtable

Out of interest where does the 0.6% mentioned in your OP come from. the 2.57% seems to be the growth of VLS in last 12 months (not income). Is it income you are looking for or investment growth?

Albermarle

I would like to secure some income from this in the short to medium term,

If your time scale is less than 5 years , stay away from investments . Ideally should be over 10 years . The longer the time scale the more time you have to ride out any short term volatility .

1-3% pa if poss.

Is that after inflation ? In which case you need a return of 3 to 6% approx.

Also once you have maybe done some more background reading and you still want to invest in a low cost multi asset fund , then you should consider alternatives to Vanguard. The LS range is popular but not necessarily the best performer.

https://monevator.com/passive-fund-of-funds-the-rivals/

MaxiRobriguez

longleggings said:

One question, Masonic suggested that holding 40% bonds is less volatile. Can someone explain why this is so, i am a novice when it comes to the main differences between bonds and shares.

Bonds prices move more slowly than equity prices.

However too many people nowadays think that bonds being less volatile simply means that you get less profit than shares, but with zero risk of loss. That is wrong.

I think if you put your inheritance into the VLS60 for 5 years you have a relatively large chance of losing money. The fund will be made up mostly of US stocks (overpriced, could get taken out with interest rate rises), bonds (overpriced, could get taken out with interest rate rises) and UK stocks (not many compelling stocks to invest in).

You seem to want a low/no risk investment that generates 3,4,5,6% returns annually. They don't exist at the moment. 

longleggings

Thanks again for the  comments. In response to grumio the 0.6% was the Vanguard growth performance for the year on year ended July 20. It appears to have risen to 2.57% in August. I am looking for income not investment growth. Do I assume that the figure of 2.57% is growth and will not necessarily equal income?
Maxi - thanks for your input - looks like VLS could lose money over next 5 years which is worrying. Maybe grumio's suggestion of locking money away in a fixed rate for 3 or 5yrs would be a better short term option.