Vanguard Lifestrategy 60% equities: bunch of questions!

caper7

Thanks for the article, does seem to be an ongoing charge, but also a variable one. 

Another_Saver

caper7 said:

Researching what to put in a stocks and shares Isa with I Web. Considering Vanguard LS 60%
Any help on the following greatly appreciated: 

* Transaction cost of 0.5% on the investment, wasn't expecting that on top of the OCF of 0.22%.
Real ongoing charge is 0.72% in fact then, is this considered reasonable?

That's wrong. iWeb charge you £5 every time you trade, and ontop of the OCF the fund has additional expenses of 0.05% a year in transaction costs for when it buys and sells things (https://www.vanguardinvestor.co.uk/content/documents/legal/vanguard-full-fund-costs-and-charges.pdf). So it's £5 every time you buy or sell the fund, and the "real" OCF is 0.27%. vanguard are better than most other fund houses for making it very easy to find the transaction costs. That 0.05% varies over time it is not fixed like the 0.22%.

* How does one actually pay the charges? Preferably from outside the ISA.

You only pay the £5 dealing fee every time you buy or sell the fund and it is just added onto your buy or taken off your sell order. Vanguard take the OCF out of the assets/income within the fund ( say the fund has £100m in, Vanguard take out £270k a year, you don't pay that, you don't even see it it's all internal to the fund).

* On I web LS60 doesn't come up when searching index trackers, ie passive funds. 
When looking at Hargreaves Landsdown, I Web and Vanguard's own site the allocations are all slightly different, presumably from different dates, but if it changes a lot, is the fund really passive or active?

It's not an index tracker, it's a fund of index trackers, often called a multi asset fund. It is a fund that Vanguard have actively chosen to be 60% equities 40% bonds, and about 25% UK instead of 5% UK as a "vanilla" index fund would be. But the funda within the fund are all index trackers.

* As to the make up of the fund, I don't think it has:
-Commodities 
-Property
-Small cap shares
-Value shares
-Is it a little low on emerging markets and maybe developed Asia excluding Japan? 
From things I've been reading, I'm minded to forget about property and commodities, unless you all think otherwise? I can't research everything, so which areas should I prioritise? 
Should I find tracker funds for the other four and do you have any recommendations?

It does not own commodities, but it does own mining and commodity trading companies. Commodities are impossible to index, including them would be an active decision. It owns real estate investment trusts which are publicly listed real estate holding companies, and some of the 40% bonds are to banks to fund mortgages, or direct mortgage backed securities. It does have small cap and value shares. Its EM and Asia weights are just because EM and Asia are smaller stock markets than the US, Europe and Japan. There is no real need to go out and buy EM, small cap, value and Asia ex Japan. This fund tracks the market, all those 4 areas are in the market just smaller parts of it. If you feel those areas are under represented or have higher return potential you could go out and buy specific funds for that.

* I believe LS60 is an OEIC, are these FSCS protected in a stocks and shares Isa?

Yes but this is generally considered a negligible concern on the forum. Stock markets have survived world wars, 2008/09 and Covid. Vanguard is the second biggest asset manager in the world and they are owned by ~30 million Americans (vanguard UK is owned by vanguard us, vanguard us is owned by its funds, it's funds are owned by the investors) and if they can't even agree about who their next president is, I don't see them being able to agree to steal from their British subsidiary. Vanguard are as close to unbankruptable as you can get (but you know what they said about the Titanic). iWeb is owned by Lloyds, the biggest bank in the country. The government bailed them out once they can do it again.

* Does anyone know if all the corporate bonds are investment grade? No junk bonds? They have quite a few different bond funds.

All the corporate bond funds in LS60 are investment grade. Whether or not you agree with that rating is upto you.

* Are all the global government bonds from developed countries?

No but I think it's about the same weight as stocks, about 90% developed 10% emerging so not a major concern and their interest rates are much higher to reflect that risk.

* I was under the impression one was to avoid derivatives, but this has some. It does say only a small percentage and not used speculatively, so should I be concerned?

The derivatives are mainly hedging the foreign currency exposure of the bonds in the fund. The foreign stocks are not hedged. This was a decision made by vanguard to reduce the volatility of its bond funds offering. You should avoid getting involved in derivatives yourself because they're basically gambling but can be useful for funds.

Apologies for the length of the post 😳

These are great questions!

tacpot12

This article explains a little more (although it is not a Vanguard document):
JPM50934_MiFID II Transaction Costs Guide_A5_FINAL.pdf (jpmorgan.com)

Basically this is saying that the Transaction Cost percentage is an indication of the expected level of the ongoing charge, and that in the annual report for the fund, the actual transaction costs incurred should be shown, so that consumers can see how closely the expected charge and the actual charge are aligned. I don't know what recourse we have if the charges are very different from the expected level. 

caper7

@Another_Saver
Thank you! 
Much appreciated 

Audaxer

tacpot12 said:

Reading this document Vanguard Personal Investor costs and charges information (vanguardinvestor.co.uk)
confirms that both the OCF and the Transaction Costs are deducted from the fund, thus reducing its performance and meaning that the customer is paying this as an ongoing charge. Add in the Bid/Offer spread, and Vanguard funds are not quite the "cheap" option they appear to be at first glance.

In the VLS60 there is only one or two small ETFs with Bid/Offer spreads, as most of the fund comprises of index funds. The document linked above shows that the only charges deducted from the fund are the OCF of 0.22% and Transaction Fees of 0.05%, so I would say the fund is a very cheap option for a globally diversified multi asset fund.

fryderykchopin

barnstar2077 said:

Have you compared the cost of buying LS60 with Vanguard instead of IWeb?  I'm not saying it would be better, I'm just interested myself, as Vanguard don't have an initial charge when you buy the fund.  Well, not in their SIPP or S&S ISA anyway, 

Interestingly it is cheaper to get LS60 (and any other Vanguard fund) from iWeb than from Vanguard. The fund’s ongoing charges are of course the same in both cases but Vanguard have a platform fee of 0.15% which in most cases is greater than the £25 you pay to iWeb when you open your account (this is for your account, not for every fund). Plus you pay that every year to Vanguard but only the first year to iWeb.

grumiofoundation

fryderykchopin said:

barnstar2077 said:

Have you compared the cost of buying LS60 with Vanguard instead of IWeb?  I'm not saying it would be better, I'm just interested myself, as Vanguard don't have an initial charge when you buy the fund.  Well, not in their SIPP or S&S ISA anyway, 

Interestingly it is cheaper to get LS60 (and any other Vanguard fund) from iWeb than from Vanguard. The fund’s ongoing charges are of course the same in both cases but Vanguard have a platform fee of 0.15% which in most cases is greater than the £25 you pay to iWeb when you open your account (this is for your account, not for every fund). Plus you pay that every year to Vanguard but only the first year to iWeb.

You do pay £5 every time you buy (or sell) the fund in iWeb so it may not be the best for someone who is going to invest regularly. 

In this case it is cheaper to invest into vanguard then make ad hoc transfers to iWeb. 

https://monevator.com/cheapest-stocks-and-shares-isa-hack/ (Credit to Alexland)

Also note  iWeb is going up to £100 in January. 

badger09

grumiofoundation said:

fryderykchopin said:

barnstar2077 said:

Have you compared the cost of buying LS60 with Vanguard instead of IWeb?  I'm not saying it would be better, I'm just interested myself, as Vanguard don't have an initial charge when you buy the fund.  Well, not in their SIPP or S&S ISA anyway, 

Interestingly it is cheaper to get LS60 (and any other Vanguard fund) from iWeb than from Vanguard. The fund’s ongoing charges are of course the same in both cases but Vanguard have a platform fee of 0.15% which in most cases is greater than the £25 you pay to iWeb when you open your account (this is for your account, not for every fund). Plus you pay that every year to Vanguard but only the first year to iWeb.

You do pay £5 every time you buy (or sell) the fund in iWeb so it may not be the best for someone who is going to invest regularly. 

In this case it is cheaper to invest into vanguard then make ad hoc transfers to iWeb. 

https://monevator.com/cheapest-stocks-and-shares-isa-hack/ (Credit to Alexland)

Also note  iWeb is going up to £100 in January. 

After the end of the tax year, if using an S&S ISA.

In other words, if investing on say a monthly basis, use Vanguard. Then after the end of the tax year, transfer to IWEB.
Next tax year, invest monthly in Vanguard. Then after the end of the tax year, transfer to IWEB. 

Rinse & repeat 

tel_

grumiofoundation said:

Also note  iWeb is going up to £100 in January. 

Really?

I was planning to transfer from Vanguard to iWeb at the end of the financial year.

I wonder if you can open an iWeb account early & pay the £25 up-front, and then transfer into them at the end/beginning of the financial year?

grumiofoundation

tel_ said:

grumiofoundation said:

Also note  iWeb is going up to £100 in January. 

Really?

I was planning to transfer from Vanguard to iWeb at the end of the financial year.

I wonder if you can open an iWeb account early & pay the £25 up-front, and then transfer into them at the end/beginning of the financial year?

You should be able to. 

Discussion here - 
https://forums.moneysavingexpert.com/discussion/6221555/iweb-increasing-the-account-opening-charge/p1