Vanguard funds and investment approach

bostonerimus

Thrugelmir said:

bostonerimus said:

dunstonh said:

in the UK, Vanguard do not have the best trackers in every area.   They have a decent range but HSBC, L&G and iShares come out better in some areas.   In my portfolio, there are 3 vanguard trackers, 2 HSBC trackers, 2 iShares trackers and a Fidelity tracker and 5 managed funds.

I agree you should avoid many of the funds that platforms push.  That is more marketing than anything else.  Often they do it to try and generate enough through them to justify or obtain superclean share classes.  Not because they are any good.

For most people a simple strategy that they can effectively implement themselves will work just fine. 

The world is changing. Pricing is increasingly competitive. Vanguard are likely to become squeezed. Even their actively managed passive products may have seen their best days pass. Reputation alone (not as strong in the UK as in the US ) is no longer sufficient. 

Good. If something better comes along then use it. The strategy still does not need to be overly complicated.

whatstheplan

dunstonh said:
If the OP is happy to be 100% equity based and has restricted himself to the church of Vanguard then he may as well go with their global tracker.   The amounts do not really justify building a portfolio that includes single sector funds that require weightings decisions.   If he has an ESG preference (which appears not), then use the ESG version.

Thanks to everyone for their replies.  I find dunstonh's point above quite interesting.  I know we shouldn't take everything we see on YT vids as gospel, however one investor did assert if people want to 'set it and forget it' then they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required.  I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

I need to give all of this a bit of thought.  On reading your replies, I now realise simply saying 'I'll allocate 50% to this and 50% to that' isn't the correct approach.  I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund. 

dunstonh

Thanks to everyone for their replies.  I find dunstonh's point above quite interesting.  I know we shouldn't take everything we see on YT vids as gospel, however one investor did assert if people want to 'set it and forget it' then they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required.  I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

Shades of grey.    A global tracker following global weightings is about as pure as you can get.  However, that is actually a management decision.  You are deciding to track the global market weightings exactly.     Deviating from those weightings and using something different is a management decision.

Picking regions/countries to deviate from a global tracker makes you more active.    However, dont see that as a bad thing. It can lead to better outcomes if you do it well and the areas you choose do better or you can get worse if you do it badly or go heady in the wrong areas.     The issue that building a portfolio of funds needs structure, process and understanding.     When you start ot go heavy in areas you wouldnt normally do or leave regions/countries out then you are becoming more heavily active.

Albermarle

I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

These types of definitions are not fixed . Many posters refer to multi asset funds as passive, but in fact they are made up of passives but somewhere along the line the fund management have decide what weightings to use ( geographically for example).

Even with a global tracker they are not all the same - some have more emerging markets % than others for example.

underground99

they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required

That could give quite a worse result than a global tracker or professionally allocated portfolio fund, especially as your relatively low level of knowledge and experience means you are unlikely to guess right in guessing when changes are 'required'. The relatively small amounts involved means it's unlikely to be worth a lot of effort. You might enjoy the effort of gambling what to chop and change when, but you can understand why people would well-intentionally tell you not to bother trying to become an overactive portfolio manager

I need to give all of this a bit of thought.  On reading your replies, I now realise simply saying 'I'll allocate 50% to this and 50% to that' isn't the correct approach

Yes - a haphazard or random approach that excludes a bunch of markets just because you don't really fancy them, or puts arbitrary percentages into just two or three things, seems like it's going to give a result that will only be good if you get lucky. For example:

  I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund

Yes. Why pick 2 or 3 markets only? What about all the other markets that aren't USA or emerging? What do you know that others with more experience -including those who build portfolio products to sell to you, at low cost, for a living - don't?

Thrugelmir

whatstheplan said:

dunstonh said:
If the OP is happy to be 100% equity based and has restricted himself to the church of Vanguard then he may as well go with their global tracker.   The amounts do not really justify building a portfolio that includes single sector funds that require weightings decisions.   If he has an ESG preference (which appears not), then use the ESG version.

 I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund. 

Exposure to the US economy itself would be better achieved by investing in a US small cap orientated fund. With large cap indexes you are going to be by default buying companies with global exposure. As an example around 60% of Apple's annual revenues are generated outside of the USA. 

bostonerimus

whatstheplan said:

dunstonh said:
If the OP is happy to be 100% equity based and has restricted himself to the church of Vanguard then he may as well go with their global tracker.   The amounts do not really justify building a portfolio that includes single sector funds that require weightings decisions.   If he has an ESG preference (which appears not), then use the ESG version.

Thanks to everyone for their replies.  I find dunstonh's point above quite interesting.  I know we shouldn't take everything we see on YT vids as gospel, however one investor did assert if people want to 'set it and forget it' then they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required.  I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

I need to give all of this a bit of thought.  On reading your replies, I now realise simply saying 'I'll allocate 50% to this and 50% to that' isn't the correct approach.  I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund. 

Don't overly complicate your asset allocation or definitions of active vs passive investing. I use a few broad inexpensive equity and bond trackers and while I'm now very passive in how I manage them there was a time when I rebalanced. So I was not entirely passive, but I was not active enough to break a sweat; that style is sometimes called the "couch potato" approach. It's important to be involved and to understand what you are doing and why, but don't think that there is some magic portfolio solution or that 10%  more or less of something will make a meaningful difference to you end point. There are thousands of ways to "skin a cat", the most important thing is that the cat gets skinned. A life strategy fund is an ok solution, 3 or 4 trackers that you periodically rebalance is ok and 12 funds with some active ones thrown in will work just fine for other people. Personally, I like the 3 or 4 trackers method as it minimizes fees and periodic rebalancing keeps you involved with the money and you can see if you are on target. This UK "Bogleheads" page has lots of good information. Following its strategy for about 30 years means that I was able to retire at age 52 and I am now financially independent because I simply don't have to think about my money anymore, other than inheritance and estate taxes, ...there's always something, but maybe those aren't really my problem.
https://www.bogleheads.org/wiki/Investing_from_the_UK

whatstheplan

bostonerimus said:

whatstheplan said:

dunstonh said:
If the OP is happy to be 100% equity based and has restricted himself to the church of Vanguard then he may as well go with their global tracker.   The amounts do not really justify building a portfolio that includes single sector funds that require weightings decisions.   If he has an ESG preference (which appears not), then use the ESG version.

Thanks to everyone for their replies.  I find dunstonh's point above quite interesting.  I know we shouldn't take everything we see on YT vids as gospel, however one investor did assert if people want to 'set it and forget it' then they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required.  I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

I need to give all of this a bit of thought.  On reading your replies, I now realise simply saying 'I'll allocate 50% to this and 50% to that' isn't the correct approach.  I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund. 

Don't overly complicate your asset allocation or definitions of active vs passive investing. I use a few broad inexpensive equity and bond trackers and while I'm now very passive in how I manage them there was a time when I rebalanced. So I was not entirely passive, but I was not active enough to break a sweat; that style is sometimes called the "couch potato" approach. It's important to be involved and to understand what you are doing and why, but don't think that there is some magic portfolio solution or that 10%  more or less of something will make a meaningful difference to you end point. There are thousands of ways to "skin a cat", the most important thing is that the cat gets skinned. A life strategy fund is an ok solution, 3 or 4 trackers that you periodically rebalance is ok and 12 funds with some active ones thrown in will work just fine for other people. Personally, I like the 3 or 4 trackers method as it minimizes fees and periodic rebalancing keeps you involved with the money and you can see if you are on target. This UK "Bogleheads" page has lots of good information. Following its strategy for about 30 years means that I was able to retire at age 52 and I am now financially independent because I simply don't have to think about my money anymore, other than inheritance and estate taxes, ...there's always something, but maybe those aren't really my problem.
https://www.bogleheads.org/wiki/Investing_from_the_UK

Thanks and I agree re: at some point you need to do something otherwise days turn into weeks into months into years and you're still at the starting gate.  Not as much of an issue if I was sitting here at 29 but I'm 49 so don't want to spend too long considering my approach.

I've found this thread interesting and informative.  I'm all for learning from those better placed to advise.  I think for me it boils down to do I essentially want to slap my cash into something like a LifeStrategy product or do I want to select specific funds myself.  Like many things in life, there's a LOT of information out there, much of it contradictory, you can easily end up with information overload.  For example I've just read a Morgan Stanley article from earlier this year saying investors have probably been underplaying emerging markets in terms of % allocated within portfolios.  This in a way sidetracks me as I then go off reading more on emerging markets.  However I get this is just an opinion and many would counter it.

I suppose, in the spirit of doing something, perhaps my best approach for now is to simply start investing in either the LifeStrategy 80 or 100 product.  At least I'm starting to put my savings to work.

Thrugelmir

Keep it simple initially. Keep reading contradictory viewpoints. In time you'll be better placed to reach your own balanced viewpoint. Many investors quickly discard anything which doesn't reinforce a currently held belief. Markets are akin to a constantly shifting sand dune. Wind can change direction before you know it. Though rarely does it change totally unexpectedly. 

bostonerimus

whatstheplan said:

bostonerimus said:

whatstheplan said:

dunstonh said:
If the OP is happy to be 100% equity based and has restricted himself to the church of Vanguard then he may as well go with their global tracker.   The amounts do not really justify building a portfolio that includes single sector funds that require weightings decisions.   If he has an ESG preference (which appears not), then use the ESG version.

Thanks to everyone for their replies.  I find dunstonh's point above quite interesting.  I know we shouldn't take everything we see on YT vids as gospel, however one investor did assert if people want to 'set it and forget it' then they could do worse than simply selecting a global tracker and leave it at that.  I quite like the idea of having a split portfolio and monitoring it perhaps not daily but on a regular basis, making changes if required.  I'm not sure if that would make me, in the true sense of the word, an active manager of my portfolio or more of a 'proactive passive investor'?

I need to give all of this a bit of thought.  On reading your replies, I now realise simply saying 'I'll allocate 50% to this and 50% to that' isn't the correct approach.  I like the idea of building a portfolio that is weighted between 2 or 3 specific markets  e.g. USA and emerging, however I take the point my investment levels maybe render this approach unnecessary or indeed foolhardy over simply putting it all in one fund. 

Don't overly complicate your asset allocation or definitions of active vs passive investing. I use a few broad inexpensive equity and bond trackers and while I'm now very passive in how I manage them there was a time when I rebalanced. So I was not entirely passive, but I was not active enough to break a sweat; that style is sometimes called the "couch potato" approach. It's important to be involved and to understand what you are doing and why, but don't think that there is some magic portfolio solution or that 10%  more or less of something will make a meaningful difference to you end point. There are thousands of ways to "skin a cat", the most important thing is that the cat gets skinned. A life strategy fund is an ok solution, 3 or 4 trackers that you periodically rebalance is ok and 12 funds with some active ones thrown in will work just fine for other people. Personally, I like the 3 or 4 trackers method as it minimizes fees and periodic rebalancing keeps you involved with the money and you can see if you are on target. This UK "Bogleheads" page has lots of good information. Following its strategy for about 30 years means that I was able to retire at age 52 and I am now financially independent because I simply don't have to think about my money anymore, other than inheritance and estate taxes, ...there's always something, but maybe those aren't really my problem.
https://www.bogleheads.org/wiki/Investing_from_the_UK

Thanks and I agree re: at some point you need to do something otherwise days turn into weeks into months into years and you're still at the starting gate.  Not as much of an issue if I was sitting here at 29 but I'm 49 so don't want to spend too long considering my approach.

I've found this thread interesting and informative.  I'm all for learning from those better placed to advise.  I think for me it boils down to do I essentially want to slap my cash into something like a LifeStrategy product or do I want to select specific funds myself.  Like many things in life, there's a LOT of information out there, much of it contradictory, you can easily end up with information overload.  For example I've just read a Morgan Stanley article from earlier this year saying investors have probably been underplaying emerging markets in terms of % allocated within portfolios.  This in a way sidetracks me as I then go off reading more on emerging markets.  However I get this is just an opinion and many would counter it.

I suppose, in the spirit of doing something, perhaps my best approach for now is to simply start investing in either the LifeStrategy 80 or 100 product.  At least I'm starting to put my savings to work.

With a Lifestrategy you'll get some emerging markets and a lot of other stuff too. It's very easy to be paralyzed by the amount of choice available so don't get stuck in the weeds of Morgan Stanley articles. The goal isn't necessarily to look back and come up with tweaks to optimize a portfolio for return, it's to come up with a holistic financial plan to achieve your goals with a reasonable amount of risk. If you can get sufficient return from a lower risk investment do you really want or need to invest in riskier stuff. The difficulty comes when you need big returns and so are tempted by riskier choices with the potential for big losses.

Don't worry about what other people's investments are returning, this isn't a competition. Over the last 10 years I've average 9% annual return, that's more than some and less than others, but the only thing that matters to me is that it is more than I needed to meet my financial goals. Remember Morgan Stanley has a vested interest in seeming to be on top of stuff and having the answers and need to keep producing prognostications; the future is as unknown to them as it is to you.