VLS limitation, is there a solution within the Vanguard 'stable'?

Notnewnotold

Although VLS funds are widely mentioned as a decent cheap diversified option, one criticism that gets made is that they are biased towards the UK, so not that good if you want more global coverage and the potential growth (and of course risk) that goes with it.

Assuming that's the case (and interested in views if not..), is there a way to achieve a more globally diverse version of VLS100, using a mix of Vanguard's other funds? And if so, in what proportion roughly (assuming no desire to constantly rebalance them, so accepting a margin of error)?

Or is that not possible? Or possible but with additional FX risk?

Partly an intellectual exercise/challenge to the regulars here, partly thinking about whether I should be more diversified, and if so can it be done within my current platform...

Ta...

dunstonh

One option is not to limit yourself to a restricted platform and pick a whole of market platform instead.   The order should be to pick the investments you want and then a platform that provides those investments.   Not the other way around.

Alexland

Vanguard Global All Cap fund - but by reducing the UK bias you are increasing everything else inc US

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

grumiofoundation

If you are looking for 100% equities no need for a mix of funds.

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc/overview

Alexland

Great minds!

Notnewnotold

dunstonh said:

One option is not to limit yourself to a restricted platform and pick a whole of market platform instead.   The order should be to pick the investments you want and then a platform that provides those investments.   Not the other way around.

Well yes I think we can take that point as read!

But, being on a platform right now that met my original needs, if my needs then change it's useful to know if those new needs could be met on that platform or if it necessitated a move.

Anyway. Alex/Grumio, I shall take a look, thank you!

JohnWinder

Isn't it as simple as mixing the VLS100 with the global cap weighted fund in the correct proportions to give you the UK representation you want?

Secondly, try some calculations to see how much difference in returns it might make. If global returns 6%/year and UK 3%/year, and you have 20% UK instead of 5% UK, you're losing out by about 0.5%/year (check the maths).

Thirdly, have a read of Vanguard's thoughts on 'home bias'; they're not fixed in stone, and might be flawed, but at least consider them. Search for 'Global Equity investing: the benefits of diversification and sizing your allocation, February 2019.

Also see: https://www.bogleheads.org/blog/2020/03/02/50-years-of-investing-in-the-world-part-3/

'The author believes that this study makes a convincing case to seek a high exposure to global (or international) equities, while keeping a tilt towards domestic equities. Some readers might perceive otherwise, but should by now have more factual material to refine their thinking and possible temptations of home country bias.'

Thrugelmir

Notnewnotold said:

one criticism that gets made is that they are biased towards the UK, so not that good if you want more global coverage and the potential growth (and of course risk) that goes with it.

Hindsight is what drives perceptions. In a decades time. There'll be a new bestseller.  

Alexland

JohnWinder said:

Secondly, try some calculations to see how much difference in returns it might make. If global returns 6%/year and UK 3%/year, and you have 20% UK instead of 5% UK, you're losing out by about 0.5%/year (check the maths).

UK has under performed in recent years but with more attractive valuations it might not going forward - who knows?

Johnnyboy11

There's a Vanguard Developed World Ex. UK Equity Index Fund, that you could hold in proportion to reduce any UK bias. I use this fund alongside VLS60, to land somewere nearer 70% equity. Anyhow, the UK is dominated by FTSE 100 companies with gobal operations, so I'm not sure the perceived UK bias really matters at the end of the day.

Thrugelmir

Alexland said:

JohnWinder said:

Secondly, try some calculations to see how much difference in returns it might make. If global returns 6%/year and UK 3%/year, and you have 20% UK instead of 5% UK, you're losing out by about 0.5%/year (check the maths).

UK has under performed in recent years but with more attractive valuations it might not going forward - who knows?

UK smaller companies have continued to perform well.