Wisdom sought on Vanguard funds

me107

I am interested in purchasing some Vanguard funds, on the basis of the low platform and OCF costs. Aiming to invest £1,000 a month on an on-going basis. When the pot reaches a certain amount and the fixed 0.15% rate is no longer cost effective, i was intending on switching platforms to keep costs low and to broaden non-vanguard options. Are there any drawbacks to this approach I might have overlooked, other than the general faff of having to transfer the pot at some point?

Secondly, I would like to avoid the LifeStrategy Funds. And was instead planning on buying a 70/30 combination of either

Global Bond Index and FTSE Global All Cap Fund

or

FTSE All World UCITS ETF and Global Aggregate Bond UCITS ETF

Is there much differnce between the two options? If i purchase the ETF option, i was planning on doing it on the 'next best price' function, rather than purchasing live prices (to avoid the £7.50 charge every month) Is there any particular reason to go for the ETF option? 

I'm avoiding the Life Strategy funds because i hold them in something else and it seems sensible not to have all eggs in one basket, even though i value the simplicity of the fund. I'm also not so keen on the home bias. 

HCIMbtw

Ur logic is fine, basically what I do, I invest in FTSE global all cap index

Was planning to switch to iweb in the future, maybe bout the 35k mark.. cost to open is £100 tho now (used to be £25!)

I have a chunk in ls100, but changed my new contributions over because it is very similar to my pension

All investing is done automatically, for me.. pretty sure I'm not getting docked any £7.50 for any trades

If u want to compare the two funds give the literature a look over, or the Morningstar website is really good

El_Torro

I don't think the all eggs in one basket problem is solved by avoiding VLS and investing in a combination of a Vanguard global tracker and a Vanguard global bond fund. You'll probably find that either way you're investing in much the same things. If VLS goes belly up then that means that Vanguard itself has gone belly up, so all their funds will be in trouble. You should still get your money back as another company will step in to administer your investments but I'm not sure what risk you're avoiding by doing what you suggest.

If you want to avoid VLS because they don't have a 70/30 fund then I don't think this is a very valid reason either, since their 80/20 fund will perform so similarly it's not worth worrying about. If you really want you can invest in a combination of VLS60 and VLS80 but not sure it's worth the bother.

If you want to avoid VLS because you want to avoid a 25% UK equity allocation that's more understandable. This can be solved by the solution you suggest. Personally I would avoid that issue by investing in a different multi asset fund, though that means not using Vanguard as your platform. 

redpete

I agree that avoiding 'eggs in the same basket' is not a reason to hold both VLS and V Glob Cap.  Each is a fund of funds split across funds covering different geographies, each constituent fund hold shares in many individual companies, so plenty of diversity already.
You might prefer the proportions held in one against another (e.g. the extent of home bias, or the % in emerging markets, or small cap...), or use a VLS with built-in bonds for the simplest way of achieving equity/bond balance.

MX5huggy

Global Bond Index and FTSE Global All Cap Fund for me ATM

This is what I do at 75/25 whenever I invest I rebalance back to 75/25 with a rule that if it ever gets more than 5% out of balance I would rebalance by selling one and buying the other. But I also have a plan to move to 80/20 or even 85/15 if there is an equity correction (it might be better to hold cash over bonds for this purpose). 

I Don’t use ETF’s because you have to buy whole units so there would always be small bits cash left after each transaction at your and mine levels it would make a difference. 

Once investment builds to I might swap to Fidelity or HL and go with ETF’s as both only currently charge £45 platform fee for ETF’s. 

bostonerimus

Avoiding the UK bias of VLS is a good reason not to buy it, but the "eggs in one basket" isn't a good reason as it's a very diverse fund and Vanguard isn't going to go bust and if it did you'd still own the shares in the funds.

Thrugelmir

bostonerimus said:

Avoiding the UK bias of VLS is a good reason not to buy it,

The UK markets have an international bias. The mantra rolls on and on. 

tebbins

You will notice almost no difference in returns between your two suggested options, I would go for VFTSEGAC and the global bond index fund.
1. VFTSEGAC has around 10-15% of its assets in smaller cap stocks (depends what you define as small). Historically have slightly outperformed though maybe not in future, and have been shown to diversify (ie lower the volatility of a large/mid cap portfolio).
2. These two funds will reinvest Dividends for you automatically if you pick the accumulating units, with the ETFs they pay dividends quarterly.
3. FSCS protection is a different (https://monevator.com/investor-compensation-scheme/)
4. You can fractional trade units in these funds, you can't with the ETFs.

A further thought. The yield to maturity on global bonds isn't much higher than what you can get in an easy access savings account, and below some of the top fixed term savings accounts. The only advantage to holding them then, is because they diversify the equity fund and make the total portfolio less volatile.

Your plan to switch to a cheaper platform later on sounds perfectly sensible.

HCIMbtw

MX5huggy said:

Global Bond Index and FTSE Global All Cap Fund for me ATM

This is what I do at 75/25 whenever I invest I rebalance back to 75/25 with a rule that if it ever gets more than 5% out of balance I would rebalance by selling one and buying the other. But I also have a plan to move to 80/20 or even 85/15 if there is an equity correction (it might be better to hold cash over bonds for this purpose). 

I Don’t use ETF’s because you have to buy whole units so there would always be small bits cash left after each transaction at your and mine levels it would make a difference. 

Once investment builds to I might swap to Fidelity or HL and go with ETF’s as both only currently charge £45 platform fee for ETF’s. 

have you been buying a lot of units in the bond index these past two years? 

GeoffTF

The Vanguard Global Bond ETF VAGS is cheaper than the OEIC version, but holds about half as many bonds. I use VAGS.

ETFs have the advantage that they are supported by more platforms - including the cheapest ones: Trading 212 and Freetrade. Both these platforms allow you to buy and hold fractional ETF shares (unlike Vanguard). Trading 212 has a higher foreign exchange cost, but does not charge for an ISA. Neither platform charges for trades or taxed accounts.

There is little point in paying Vanguard's 0.15% if you are using ETFs.

Albermarle

There is little point in paying Vanguard's 0.15% if you are using ETFs.

Unless you prefer the security of your money being held on a platform owned by a huge global financial firm .