Vanguard Life Strategy funds Versus Vanguard Target Retirement funds

singhini

Hoping someone can enlighten me with regards to the difference between Vanguard's Life Strategy (LS) funds and their Target Retirement (TR) funds?

Aren't they in essence the same same things i.e. instead of calling them TR funds they could have called them LS funds ( e.g. their TR 2035 fund could have been called LS 70% equity fund and been shoehorned in between their existing LS 60% fund and their LS 80% fund).

The reason i ask is because back in Feb 2018 i put £20k into LS60% and watched it grow by about 22% and then Covid happened and i panicked and took everything out (well i got back £19,400 - never mind!). Now the money is just sat there as cash and going down due to ongoing charges for holding money. The LS 60% is now back up and due to stubbornness i don't want to buy back in at £217 having sold back in march last year at £169
Therefore if the TR funds are in essence the same as the LS funds i could potentially buy back into something like the TR 2030, TR2035 and TR2040 funds which are all roughly £169 i.e. i'm buying back in at the rate i sold out in the hope that these funds will eventually go above £200 (just like the LS60% fund has).

PS - i have really basic knowledge of investing (if you hadn't already guessed)  

eskbanker

singhini said:

Hoping someone can enlighten me with regards to the difference between Vanguard's Life Strategy (LS) funds and their Target Retirement (TR) funds?

Aren't they in essence the same same things i.e. instead of calling them TR funds they could have called them LS funds ( e.g. their TR 2035 fund could have been called LS 70% equity fund and been shoehorned in between their existing LS 60% fund and their LS 80% fund).

No, they aren't the same thing, which is of course why TR2035 wasn't called LS70!  LifeStrategy is constructed using a fixed allocation between equities and bonds, so VLS60 has been 60% equities since it was launched and will continue to be.  The TR funds are variable allocation, where the equity content will be reduced in the years leading up to its maturity date.

singhini said:

The reason i ask is because back in Feb 2018 i put £20k into LS60% and watched it grow by about 22% and then Covid happened and i panicked and took everything out (well i got back £19,400 - never mind!). Now the money is just sat there as cash and going down due to ongoing charges for holding money. The LS 60% is now back up and due to stubbornness i don't want to buy back in at £217 having sold back in march last year at £169
Therefore if the TR funds are in essence the same as the LS funds i could potentially buy back into something like the TR 2030, TR2035 and TR2040 funds which are all roughly £169 i.e. i'm buying back in at the rate i sold out in the hope that these funds will eventually go above £200 (just like the LS60% fund has).

Unit prices don't work in the way you seem to think either - just because a TR fund unit happens to be priced the same as a LS60 unit was last year, that doesn't imply that they're equivalent intrinsic value or that similar growth should be expected.  I suspect you know that you did exactly the wrong thing in selling when you did but don't compound that by making more regrettable moves, so do your research properly about what, if anything, you wish to invest in next and pile in when you're ready, without arbitrarily constraining yourself by valuations from last year....

dunstonh

The reason i ask is because back in Feb 2018 i put £20k into LS60% and watched it grow by about 22% and then Covid happened and i panicked and took everything out (well i got back £19,400 - never mind!).

So you invested above your risk profile and by pulling out you created a loss.  Had you waited it out, as is always recommended, you would be several thousand pounds higher now.

The LS 60% is now back up and due to stubbornness i don't want to buy back in at £217 having sold back in march last year at £169

You showed irrational thinking last year and you are doing it again now.   That said, it does indicate you dont have the risk behaviour to be suited to VLS60.  So, you shouldn't buy it.

Albermarle

and then Covid happened and i panicked and took everything out (

If it is likely that you will do the same in future , then you should reconsider whether investing is suitable for you .

Although you may have 'learnt your lesson' ( the hard way ) and next time you will hang on ?

singhini

Thankyou you all explaining the difference (i.e. TR funds reduce equity in the years leading upto maturity) and for the general comments with regards to investing (i have taken all your advice and ploughed £83,000 into Asia Pacific FTSE equities with the remaining £57,000 going into German all cap UCTIS    Only Joking).
Joking aside, i agree with you all that i should reconsider weather investing is suitable for me which is why i tend to do cash ISA's and not S&S ISA's (infact VLS60% is the only S&S Isa i have, everything is is cash ISA or straight cash in the bank [infatct he VLS60% is now in theory a cash ISA aswell, just costing me money for holding it as cash).

Anyhow, this is now causing me a problem, holding cash as cash or in a cash ISA is dismal with returns such as 0.5% to 1% over 3 to 5+ years. If i stick the money into a S&S Isa and should it go up by just a few % in a few years i've out performed anything i would traditionally be investing in (Note to myself: can't believe i think a few % is a great return)
Anyhow, ive got to do something with this cash 

eskbanker

singhini said:

Thankyou you all explaining the difference (i.e. TR funds reduce equity in the years leading upto maturity)

I'm not sure how you do your research but, out of curiosity, I just googled 'vanguard target retirement' and the first result was, unsurprisingly, https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds, which repeatedly explains the concept of equity proportion reduction in simple verbal and pictorial form.

It's entirely possible that investing will meet your financial objectives better than cash will, but you have to be able to get to grips with the basics, unless you're able and willing to pay someone else to do it for you....

ivormonee

singhini said:

Now the money is just sat there as cash and going down due to ongoing charges for holding money.

On which platform are you holding your cash?

Virtually all platforms do not levy charges for the cash element of customers' S&S ISAs so -

- are you sure you're getting charged for the cash
- if so, perhaps transfer your S&S ISA to another platform that doesn't charge.

singhini

The money that was invested in VLS60% is still sat with Vanguard as cash (just not invested) and they take £8-ish every 3 months (about £32 a year)

ivormonee

singhini said:

The money that was invested in VLS60% is still sat with Vanguard as cash (just not invested) and they take £8-ish every 3 months (about £32 a year)

Ah I see. Yes, well some providers do levy a charge even on cash in an ISA and Vanguard happens to be one of them. Some other platforms do also charge; there just isn't a consistency amongst platforms and indeed all their charges and charging structures vary enormously, making like-for-like comparisons nigh on impossible!
In your case though, a bigger decision will be how you handle the amount longer term, as per the previous posts in this thread - that's a bigger consideration than the relatively modest current charge which, for short term parking, shouldn't really be much of an issue.

Albermarle

(infact VLS60% is the only S&S Isa i have, everything is is cash ISA or straight cash in the bank [

It might help you to think in future of your total financial position rather than just what happens with an investment.

For example 

1) You have £20K in VLS 60 . It drops 20% . OMG I have lost £4,000 !!

2) You have £20K in VLS 60 + £60K in cash savings + £150K equity in the house + £35K in a pension etc 

The VLS 60 loses £4K but overall this is less than 2% of my overall financial worth so no need to panic.

Note to myself: can't believe i think a few % is a great return)

When inflation is less than 1% , then a few per cent gain is very good. You should always think in terms of return above inflation . In the past you could make 15% and still be behind inflation .

A product like VLS 60 should normally produce a return of around 2 - 5% above inflation - on average in the long term and not guaranteed of course.

virenque

SMT is down a few percent, put it all in that ;-)