Vanguard Stocks and Shares ISA 6 February 2021 at 4:13PM in ISAs & tax-free savings 33 replies 3.3K views

Mick70

Afternoon all. 

I have been reading few posts similar to my own scenario .  My spouse has a vanguard sipp which I set up recently and find it easy to manage .
i would like to open a stocks and shares ISA to help support our pensions .
vanguard do a lifestyle strategy one so don’t need to choose funds myself . You get 5 options of mixing the shares and bonds 20:80, 40:60, 60:40, 80:20 0r 100% shares .  

I take it bonds are much safer than shares but less reward ? 

If I am wanting to invest for only 7-9 year would a 60:40 balance seem right ?  What do most people opt for?
many thanks 
mick 

Albermarle

The theory is that shares give good growth in the long run but can be very volatile . Bonds give more limited growth but are much less volatile . So the % blend is down to your own risk appetite and the time scales you are working to . 60:40 is the classic mix for the average UK investor, moving to 40:60 in later life . However 
1) Traditionally bonds are less volatile than shares but they are still an investment and should not be thought of as 100% safe, apart from Gilts and similar. .
2) There are a lot of different type of bonds .
3) A lot of people think bonds could struggle in the coming years to fulfil their normal stabilising role as well as in the past.
4) A split of equities and cash is an alternative
5) Many opinions differ on all these subjects .

dunstonh

vanguard do a lifestyle strategy one so don’t need to choose funds myself . 

Its a common mistake but the lifestrategy funds are not lifestyling funds.  They are multi-asset funds.

I take it bonds are much safer than shares but less reward ? 

Depends on what type of bonds you are talking about. There are bond funds that are equal or higher risk than equity funds.   Investment grade bonds are considered as having more risk than gilts.    Plus, a number of other variations.

If I am wanting to invest for only 7-9 year would a 60:40 balance seem right ?  What do most people opt for?

You are only looking at investing for around three quarters of a cycle.   So, you are going to need to derisk on phased basis.  Probably starting in about 2-3 years time.

Mick70

How do you de risk ?
do you mean you then buy more at say 40:60 ?   Or  do you contact vanguard to sell the shares and buy bonds ?
genuinely don’t know 

dunstonh

How do you de risk ?

If you are sticking to multi-asset funds, you would move some into VLS40 progressively and then VLS20 and then cash.

A crash may take 5 years to recover.  So, you don't want a crash happening in the years before you need the money as you may not have the time to recover.   

Mick70

I was looking into the vanguard lifestyle funds online and it found argument that because they are a fixed allocation they may not be a good thing if crash happened and also high exposure to the US markets which have performed well in recent years but will dip at some point.  Whereas they offer retirement funds i.e a 2030 fund,  which will automatically change in allocation as you near that year , although it didn't specify if again a large proportion is invested in US?

dunstonh

I was looking into the vanguard lifestyle funds online and it found argument that because they are a fixed allocation they may not be a good thing if crash happened and also high exposure to the US markets which have performed well in recent years but will dip at some point. 

Some people like fixed allocations. Some do not.  That is an opinion that can be argued either way and neither be right or wrong.  I personally prefer the fluid allocations.  Some say they prefer the fixed allocations as it reduces the level of management.  However, the decision to stick with a fixed allocation throughout the economic cycle is a management decision.
The VLS funds main weakness over the last 5 years has been home bias.  i.e. too much UK equity. (another management decision).    

eskbanker

Mick70 said:

I was looking into the vanguard lifestyle funds online and it found argument that because they are a fixed allocation they may not be a good thing if crash happened and also high exposure to the US markets which have performed well in recent years but will dip at some point.  Whereas they offer retirement funds i.e a 2030 fund,  which will automatically change in allocation as you near that year , although it didn't specify if again a large proportion is invested in US?

Just to be clear, their target retirement funds are the lifestyle ones, as this is the generic term for funds whose allocation changes over time, such as towards retirement - the fixed allocation ones you were labelling as such were presumably the (different) LifeStrategy ones....

Mick70

yes sorry , i meant comparison of the Lifestrategy (fixed allocation) funds vs the Target Retirement funds , where allocation changes 

MFW2026

https://www.youtube.com/watch?v=TRPhNev-hdE Mick this video may help-it helped me to understand what was right for me.

Albermarle

and also high exposure to the US markets

All of these types of funds have a large % in US , as it is such a dominant player in terms of financial markets.

Usually somewhere between 55 and 65% .