Comparing IFA managed portfolio to Vanguard LS60

Thrugelmir

aroominyork said:

bowlhead99 said:

aroominyork said:

IanManc said:

aroominyork said:

Everything is an active decision. Choosing a market cap weighted index, instead of an equal weighted index, is an active decision.

VLS isn't a passive fund. It doesn't follow an index. It is a tied fund of funds, where the proportions of the investments in tied funds are chosen by active decision, and those proportions have been changed over time. The proportion invested in the UK is now considerably less than in the past.

VLS100 is now 20%-21% UK. It was closer to 25% not long ago, wasn't it? Did they publish a rationale for this change?

Likely just a mistake on your part. AFAIK, they are still at 25% of equities being UK stockmarket, for all their UK Lifestrategy products, and have not announced a change since they moved from the original 40 at launch to 25 by 2014.

The most recent factsheet is for November (as December hasn't finished yet) which is at LifeStrategy® 100% Equity Fund - Accumulation (vanguardinvestor.co.uk)

That shows
19.3% in Vanguard FTSE UK All Share Index Unit Trust
4.7% Vanguard FTSE 100 UCITS ETF
0.8% Vanguard FTSE 250 UCITS ETF

Give or take rounding, that's the 25% as expected.  I suspect you overlooked the FTSE100 ETF and only noticed the other two funds adding to 20-21%ish.

I was going with HL's country summary which says 20.68% UK. Looks like they got their maths wrong. 

Often unreliable and out of date. 

bowlhead99

aroominyork said:

bowlhead99 said:

aroominyork said:

IanManc said:

aroominyork said:

Everything is an active decision. Choosing a market cap weighted index, instead of an equal weighted index, is an active decision.

VLS isn't a passive fund. It doesn't follow an index. It is a tied fund of funds, where the proportions of the investments in tied funds are chosen by active decision, and those proportions have been changed over time. The proportion invested in the UK is now considerably less than in the past.

VLS100 is now 20%-21% UK. It was closer to 25% not long ago, wasn't it? Did they publish a rationale for this change?

Likely just a mistake on your part. AFAIK, they are still at 25% of equities being UK stockmarket, for all their UK Lifestrategy products, and have not announced a change since they moved from the original 40 at launch to 25 by 2014.

The most recent factsheet is for November (as December hasn't finished yet) which is at LifeStrategy® 100% Equity Fund - Accumulation (vanguardinvestor.co.uk)

That shows
19.3% in Vanguard FTSE UK All Share Index Unit Trust
4.7% Vanguard FTSE 100 UCITS ETF
0.8% Vanguard FTSE 250 UCITS ETF

Give or take rounding, that's the 25% as expected.  I suspect you overlooked the FTSE100 ETF and only noticed the other two funds adding to 20-21%ish.

I was going with HL's country summary which says 20.68% UK. Looks like they got their maths wrong. 

For HL they try to do a limited lookthrough of the companies held by the index trackers held by the fund; as an example, the Vanguard FTSE 250 tracker ETF has only 67% allocated to United Kingdom equities (with e.g. 4% allocated to 'REITs' and 26% to 'Non Classified') on HL's analysis, while the Vanguard FTSE UK All Share Unit Trust that Lifestrategy holds is only 81% United Kingdom with a smattering of other European countries such as Netherlands or Ireland and a good slug of over 10% 'Non-Classified').  The non-classified will be things like Channel Islands, Cayman / BVI or where the domicile of companies is missing from the data feed.

Albermarle

Interesting to look at the Blackrock multi asset funds as we are on the subject.
The Consensus range at a similar equity level ( mix of 70 and 85 gives 60% equity currently ) Last 12 months growth - only 4 % with UK portion at 40% ( so high)
Mymap 5 has had growth of 11% with UK portion at 13%, so it has done very well albeit with only a very short track record. 

fred246

The FTSE hasn't changed for 20 years. The S&P500 looks like a ski slope. If the FTSE regains it's COVID loss and the S&P500 drops 20% things will be different next year.

eskbanker

fred246 said:

The FTSE hasn't changed for 20 years.

As is usually pointed out in response to assertions like that, it's true that the simple value of the FTSE 100 index specifically is similar to what it was twenty years ago, but the inclusion of dividend reinvestment paints a different picture in terms of total return on an investment in that index, and other parts of the FTSE, such as the 250, have performed significantly better....

fred246

My impression is that everyone wants to invest in the US and prices are sky high. Nobody wants to invest in the UK and the prices are really low. I could imagine the UK doing better than the US next year but it's anybody's guess.

BananaRepublic

fred246 said:

My impression is that everyone wants to invest in the US and prices are sky high. Nobody wants to invest in the UK and the prices are really low. I could imagine the UK doing better than the US next year but it's anybody's guess.

One of my UK funds has returned almost 100% in less than five years. Others have done well. The FTSE 100 provides much lower returns but it’s not that bad as pointed out above when you factor in dividends. The US market may be going through a FAANG bubble, time will tell. 

fred246

I was just pointing out that the US won't do better every year. This year it's way ahead but it can't be every year.

Prism

fred246 said:

I was just pointing out that the US won't do better every year. This year it's way ahead but it can't be every year.

Well the big US companies are currently a lot more profitable than the UK ones and that could continue for many years to come. The only thing that makes that unlikely is if the optimism of the investors has got ahead of that and pushed the US stock market too high too early. Thats the unknown.

JohnWinder

enthusiasticsaver said:

I think it is bringing the volatility down but as said previously I don't have enough investment knowledge to know for sure hence why we are using an IFA. The performance of the bonds is not great (average 5% to 8%) but I assume they are there to balance the portfolio against the equities but the experts would know this better than me. 

There is a view, not mine so I hope I do it justice, with a certain 'ring' to it, that it's not too hard for the average joe to make a fair fist of choosing an 'ok' investment portfolio.

At it's heart is the idea that returns come at the cost of risk, as it makes sense that no one will pay an investor good returns for taking little risk because they can get away with paying less risk averse investors lower returns. If you have a very risky business that you want folk to lend to or invest in, you must offer high returns (whether they're realised or not). And to simplify, as an investor you either lend money (bonds), or buy a share in the business to get some of the profit (shares). You can complicate it with private equity, or derivatives, or commodities, or real estate but you don't need to.

So, the investor's tasks are to decide how much in bonds and how much in equities, and to keep costs down unless the investment period is short. Conveniently, if we restrict ourselves to safe, government bonds carrying little risk, and to shares carrying more risk but better returns, then we just need to get these two roughly in the right proportion - and not that hard with only two. You could do that by looking at a long history of how equities' values fluctuate, and a long history of how (little) government bonds fluctuate in value over short periods of time, thus giving you a sense of what your 70/30 or 20/80 stocks/bonds mix would give in terms of volatility and total returns. Once bought, you hardly have to touch it.

Because diversification adds safety, you might choose diversified, (low cost, 0.2%/yr) stock and bond funds in suitable proportions.

Now, why do some financial advisors choose a dozen funds for their clients? Is it to bamboozle the client into thinking investing is beyond ordinary folk; so make it look like a substantial yearly fee is justified?

Some bond funds we’ve had listed here have half a dozen categories of funds in them: corporate, government, high yield, investment grade, other(!). A lot of ordinary folk would struggle to get a handle on how safe/risky such a fund would be, feeling an advisor is essential. And a fund like that might cost 0.8%/yr. As helpful as a ‘risk score’ of 3 on a scale of 7 for such a fund is, does it really tell you how you’ll feel when the next financial crisis comes, in the way that knowing your fund will likely drop 25-40% in value does?

Of course, drawdown is more complicated than accumulation.