Vanguard Index Funds

JustinEvans9964

Hi, very new here and very raw where investing is concerned. Posted a previous thread about best place for some spare cash (both lump sum and monthly) and had some great responses and advice. Couple of you guys put me onto the Vanguard Index Funds and Life Strategy products as I am looking for something that I don't need to spend a great deal of time managing, so many thanks for that. Also happy to look longer term (minimum 5 but most likely 10 years) with it.
Hoping that we can go with the "No such thing as a stupid question" thing here, so forgive me if this sounds a little ridiculous but:
Looking on the website at both those products it would seem from a layman's perspective like very easy money. Reason I say this is that if you look at the 5 year  pattern on pretty much everything there the picture in one of growth. Each of the funds has a graph outlining what your investment would look like now if you had deposited £10k in 2016 and they range from balances now from anywhere between £13 - £20k, and I don't think I have seen one at any time drop below the original £10k initial investment. I know there is the usual disclaimer of past performance not being an indicator of future performance but it seems to me that if those funds have grown year on year (with the odd dip thrown in) then they would be a pretty safe bet to invest. Or is this too simplistic a view?
Also (and lets stick with index funds for now), if I was to choose one of the options available (and there isn't a great deal of difference in the risk value on the ones I am looking at) is it again too simplistic to just look at the best performing fund across the past five years and go for that?

Thanks in advance.

dunstonh

Couple of you guys put me onto the Vanguard Index Funds and Life Strategy products as I am looking for something that I don't need to spend a great deal of time managing, so many thanks for that. 

There is more to life than Vanguard.   And Vanguard do not have the best trackers in every area.     If you are a novice, then you dont want to be using index trackers unless its a global equity tracker.    A portfolio of trackers would need work.

Also happy to look longer term (minimum 5 but most likely 10 years) with it.

That is not long term.  That is short to medium.   So, that could impact on the level of risk you should take.

Reason I say this is that if you look at the 5 year  pattern on pretty much everything there the picture in one of growth.

It would be.   Whilst volatility has been higher over a lot of the last 5 years, there has not been a sustained loss period.    That is why you shouldn't look at short term performance as an indication of how it could perform in future.  

 Each of the funds has a graph outlining what your investment would look like now if you had deposited £10k in 2016 and they range from balances now from anywhere between £13 - £20k, and I don't think I have seen one at any time drop below the original £10k initial investment.

The Brexit referendum saw sterling fall and that pushed the value of global assets up.   So, for a lot of post 2016 period, you saw overseas asset grow by more than their home currency valuation.   Sterling, more recently, has been going back up again. That will create a negative drag on global assets.

but it seems to me that if those funds have grown year on year (with the odd dip thrown in) then they would be a pretty safe bet to invest. Or is this too simplistic a view?

How about looking at periods when losses have gone on longer?      - yes you are being too simplistic by using a short term period that happens not to have suffered a sustained loss period going over a year or more.

Also (and lets stick with index funds for now), if I was to choose one of the options available (and there isn't a great deal of difference in the risk value on the ones I am looking at) is it again too simplistic to just look at the best performing fund across the past five years and go for that?

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.    That is not likely to be suitable for you with your lack of knowledge and desire not to do much.     If you were to pick just one of those, then it would be bad investing.

It is also worth noting that the best performing area in one cycle is rarely the best in the next cycle.  US equity, for example has been the best in this period.    However, it was amongst the worst in the previous.   So, it had a bit of catching up to do and benefitted from Sterling falling along with the more recent tech boom.    All events that have happened. Not events that will happen again.    US equity PE Ratios are now higher  than the global depression and only second highest in history to the original dot.com boom (which went on to a major crash and, in conjunction with other events, led to 3 negative years in a row).

DrSyn

1. The warnings about  investing in shares are there for a good reason. The stockmarket does not always go up and when they fall they can take some time to recover. Have a look here:-
https://www.getrichslowly.org/bull-bear-markets/

2. If this your  first investment I suggest you go through and study the items below

First watch both of these:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/

Then consider investing in a low cost Global Multi Asset Fund. They have wide diversification while minimizing risk, at low cost.

Global Multi-Asset Funds:

Vanguard Life Strategy

HSBC Global Strategy

L&G Multi Index Funds

Blackrock Consensus

Architas Passive

You chose the risk level or share/bond split you are comfortable with, pay them the money & they do the rest.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

With this you chose the share/bond split. They then will re-balance to maintain it at that split. You have to accept the market risk that goes with the split.

https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/

With this you chose the risk level (say balanced) you are comfortable with. They then re-balance the funds assets to maintain it at that risk level. This is called a “Risk Targeted Fund”

Alternatively Vanguard Target Retirement Fund :

A better name might be “ Special Year Fund”. You just chose your year and pay them your money.

https://www.youtube.com/watch?v=Sr-IFxRGT88

https://www.vanguard.co.uk/adviser/adv/investments/about-funds/target-retirement-funds

3. Global Multi Asset Funds continued : 

Baillie Gifford Managed B. This holds individual shares, rather than index funds,so charges are a little higher.

https://www.trustnet.com/factsheets/p/bym9/baillie-gifford-managed-pn

Thrugelmir

JustinEvans9964 said:

Looking on the website at both those products it would seem from a layman's perspective like very easy money. 

Vanguard may appear warm and cuddly. They are as hard nosed as any other investment banker. As make their money from the funds they have under administration. No risk to them at all. Whether it shines or rains they remorselessly collect their fees. 

dunroving

Rather than just looking at performance over the past 5 years, look at several 5-year windows to see what *can* happen over a 5-year period. Bear in mind that the past 5 years isn't a predictor of the next 5 years. There are no guarantees in investing. ;-)

aroominyork

dunstonh said:

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.   

I don't agree with that. VLS are designed to be held as a single index fund for people who want home country bias. If you want 20%-25% invested in the UK then VLS is an adequate one stop shop.

dunstonh

aroominyork said:

dunstonh said:

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.   

I don't agree with that. VLS are designed to be held as a single index fund for people who want home country bias. If you want 20%-25% invested in the UK then VLS is an adequate one stop shop.

VLS is a multi-asset fund (with the exception of VLS100 but that is not a particularly good fund anyway but that is a whole different subject). VLS is not an index tracker. 

My response about trackers followed the bit quoted by the op that said "(and lets stick with index funds for now)". So, that is what I did.

JustinEvans9964

Guys, thanks so much for the advice and the educational links. I will continue digging! Cheers

Thrugelmir

aroominyork said:

dunstonh said:

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.   

 If you want 20%-25% invested in the UK then VLS is an adequate one stop shop.

That's a totally inaccurate statement.  The true weighting is nearer 5%. 

eskbanker

Thrugelmir said:

aroominyork said:

dunstonh said:

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.   

 If you want 20%-25% invested in the UK then VLS is an adequate one stop shop.

That's a totally inaccurate statement.  The true weighting is nearer 5%. 

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/portfolio-data shows VLS100 as having 25% in UK-specific funds (other variants of VLS will have similar proportions of their equities in the UK), or are you making the case that much of the revenue of FTSE100 companies originates from outside the UK, or misreading the post you were replying to?

Thrugelmir

eskbanker said:

Thrugelmir said:

aroominyork said:

dunstonh said:

There is only one index tracker that should be held in isolation and that's a global tracker.    All other index tracker funds are designed to be held in a portfolio of index tracking funds with weightings to suit your risk profile and investment views.   

 If you want 20%-25% invested in the UK then VLS is an adequate one stop shop.

That's a totally inaccurate statement.  The true weighting is nearer 5%. 

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/portfolio-data shows VLS100 as having 25% in UK-specific funds (other variants of VLS will have similar proportions of their equities in the UK), or are you making the case that much of the revenue of FTSE100 companies originates from outside the UK, or misreading the post you were replying to?

The "invested in the UK" . Spread of currency exposure is part of sound portfolio construction.  Gets forgotten in the haste to compare returns from individual country indexes when investing. Nor is it just FTSE100 companies that trade overseas with a brass plate in the UK. Goes down to micro company level as well. 

There'll be considerable depth to Vanguard's portfolio construction process.