Comparison Vanguards Life strategy (VLS) vs S&P 500 your opinion please!!

adindas

It seems to me Vanguards Life strategy (VLS is so popular here on MSE. I try to understand the reason for this!!!

Currency: You get it both funds in the UK priced on the same currency on many platforms e.g., GBP. So, transferring between the two how often you want to will cost you nothing in term of currency exchange fee.

Investment Charges: VLS are more expensive

Life Strategy 100% Equity Fund – Accumulation, OCF 0.22%

S&P 500 UCITS ETF Distributing (VUSA), OCF:0.07%

Performance wise:

Since the last five years (or even more) S&P have outperformed VLS (I attach the graph for comparison). I believe this is due to Weighting on Mega caps and high growth technologies stocks on S&P 500.

VLS100% equity is a more secure as it is more geographically diversified than S&P 500.

But arguably many companies on S&P 500 is actually also global companies as they operate in many countries and their revenues come from many countries around the world.

Imo five years, (or might be ten years?) performance is enough to conclude which one is performing better. Of course, need to bear in mind that the past performance is not a good indicator for future performance.

if you want to switch from one fund to another, you will have to close your position and open a new one and/or add it to the existing fund fund, but as I understand it, there is no fees to switch funds within the Vanguards Investor Platform (?)

I have not investigated it yet, but I believe there is a spread between buy/sell when you switch from one fund to another.

Is the spread being high enough making it not worthy to switch from one fund to another, say 2-3 times a year ??

FIVE YEARS COMPARISON

eskbanker

It's artificial to compare them in the way you have - they're different products aimed at different requirements.

One covers all major equity markets (including S&P 500) and the other is just a single market, so they're both valid answers but to different questions, i.e. you wouldn't weigh one up against the other, you'd define your requirements first and compare one of these products against its actual competitors....

grumiofoundation

Imo five years, (or might be ten years?) is enough to conclude which one is performing better. Of course, bear in mind that [HR1] the past performance is not a good indicator for future performance.

1 day is enough to conclude which has performed better. 

I am not really clear what your question is, or what your proposal is? 
I don't understand why you would switch between funds 2-3 time a year and not just pick one and stick with it? What would prompt the switch?

You will be out the market for a few days when switching, which when added up 2-3 times a year, will start to dent your returns, especially if you miss some of the best days.

I would also query that VLS 100 is often 'suggested' on MSE. Certainly nowhere near as much as other VLS options (20-80). VLS 100 is not a multi-assets fund (since it only holds equities).


If you are comparing the funds perhaps you should include a global tracker (VG FTSE All-cap chosen) which has ~5% UK versus ~25% in VLS 100. (since you appear to be using VG platform).
https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc 

tacpot12

The answer as to why VLS is so popular here, compared to say Vanguard's S&P 500 ETF, is that it is a global distributed fund, whereas the S&P 500 ETF is only holds assets in the USA. VLS is investing in many more markets that the S&P 500 ETF, and so its costs are higher (because it is relateively cheap to invest in the US stockmarket).

It might perform better over the next 5, 10 or 50 years, but by concentrating your investment in one region you are taking a risk with your money. Diversification is a proven strategy to maintain your wealth.

Thrugelmir

Any fund with a higher weighting of the monoliths over the past 5 years will have outperformed the majority of funds.  Given that the S&P500 is currently trading 35% above it's average PE ratio over the past 20 years.  There's a lot of future expectation already baked in. Which needs to be factored in when considering which markets may prove to be a better place to invest over the next decade. 

tebbins

adindas said:

It seems to me Vanguards Life strategy (VLS is so popular here on MSE. I try to understand the reason for this!!! f

Currency: You get it both funds in the UK priced on the same currency on many platforms e.g., GBP. So, transferring between the two how often you want to will cost you nothing in term of currency exchange fee.

Nothing

Investment Charges: VLS are more expensive

Life Strategy 100% Equity Fund – Accumulation, OCF 0.22%

S&P 500 UCITS ETF Distributing (VUSA), OCF:0.07%

Because buying shares in 500 companies is cheaper than several thousand.

Performance wise:

Since the last five years (or even more) S&P have outperformed VLS (I attach the graph for comparison). I believe this is due to Weighting on Mega caps and high growth technologies stocks on S&P 500.

It is. In the 2010s and through covid the S&P has done very well, it did sweet fa in the 2000s, and very well in the 90s, but from the 60s to the 80s global equities did better.

VLS100% equity is a more secure as it is more geographically diversified than S&P 500.

Yep

But arguably many companies on S&P 500 is actually also global companies as they operate in many countries and their revenues come from many countries around the world.

Yep, but only around half their revenues whereas in Europe it's more like 70-80% so relatively speaking you are getting a more US oriented (occidented?) investment.

Imo five years, (or might be ten years?) performance is enough to conclude which one is performing better.

Are you saying that because it has performed better over the last 5 years, it is performing better and you expect that continue? By that logic you would be buying bitcoin because "it's done well lately" 

Of course, need to bear in mind that the past performance is not a good indicator for future performance.

Recent performance is the worst indicator of future performance, last year's rainfall is a better predictor.

if you want to switch from one fund to another, you will have to close your position and open a new one and/or add it to the existing fund fund, but as I understand it, there is no fees to switch funds within the Vanguards Investor Platform (?)

You just buy and sell if you want to, and yes there are no costs to do that but Vanguard offer a £7.50 live trading service which is only available for the S&P 500 ETF.

I have not investigated it yet, but I believe there is a spread between buy/sell when you switch from one fund to another.

I don't think so...

Is the spread being high enough making it not worthy to switch from one fund to another, say 2-3 times a year ??

No, but if you're thinking of doing that you're not really investing sensibly 

FIVE YEARS COMPARISON

...

If you're unsure, bear in mind that more than half of VLS 100 is in the US anyway. Also if you're using trustnet charts, select indices, there's an index you can add call FTSE all world ex US but if only goes back to 2013.  This shows the difference between the US and the rest of the world.

Alexland

adindas said:

FIVE YEARS COMPARISON

5 years huh? How about the years before that?

tacpot12 said:

VLS is investing in many more markets that the S&P 500 ETF, and so its costs are higher (because it is relateively cheap to invest in the US stockmarket).

0.22% OCF is Vanguard's management price not their stock market cost. The market dealing costs are disclosed separately. The reason the OCF on multi asset funds are generally higher than an index fund is because the fund manager believes people will pay more for a well diversified portfolio.

tebbins

Alexland said:

adindas said:

FIVE YEARS COMPARISON

5 years huh? How about the years before that?

Ooh what's the source for this?

Alexland

tebbins said:

Ooh what's the source for this?

Google images..!

The actual article is below

https://www.factorinvestor.com/blog/investing-outside-the-us-purgatory-for-pessimists

Thrugelmir

Alexland said:

adindas said:

FIVE YEARS COMPARISON

5 years huh? How about the years before that?

tacpot12 said:

VLS is investing in many more markets that the S&P 500 ETF, and so its costs are higher (because it is relateively cheap to invest in the US stockmarket).

0.22% OCF is Vanguard's management price not their stock market cost. The market dealing costs are disclosed separately. The reason the OCF on multi asset funds are generally higher than an index fund is because the fund manager believes people will pay more for a well diversified portfolio.

If you buy your own investments then after the initial costs there's no ongoing fees. If the choosen investments don't perform then the marginal saving is ultimately worthless.  

dunstonh

Comparing VLS to an S&P500 tracker is like comparing apples and a fruit basket.  Nobody with any investment knowledge would be comparing them as that would be totally pointless.