Vanguard S&S ISA investment choice

ericlered7

Hi all, looking for a bit of advice if anyone can help.

This has been my first experience of putting money into anything other than savings accounts, after I finally got fed up with the low interest rates. It took me a long time to get over my caution first approach, but now I'm definitely comfortable in accepting more risk, and see the ISA as a medium to long term investment.

For the last two tax years I have put the max £20k per year into a Vanguard S&S ISA, and invested all of this into the Life Strategy 100% Equity Fund.

I'm hoping to be able to feed this amount in again in 2022/23

I've read a few posts on here the last few days from regular posters, saying why invest into this option, when you could invest into one of Vanguard's global options instead.

Can anyone explain the main deemed benefits of the global options, over the Life Strategy 100%?

Then I suppose my question is two fold I guess. Firstly is there any point putting this years money into a global choice instead of the LS, and secondly if the global option is deemed "better" would it be wise to move money already invested in the LS into a global one as well over time, and is this practical?

If anyone can give me a little bit of guidance, it would be very much appreciated, thanks.

GeoffTF

ericlered7 said:

Can anyone explain the main deemed benefits of the global options, over the Life Strategy 100%?

None at all. VLS 100 is a perfectly reasonable choice, if you can risk 100% equity. A global tracker is also a perfectly reasonable choice. Nobody knows which choice will turn out to be better. It does not matter which one you choose. The important decision is the percentage of equities.

masonic

I think there must be some confusion. Vanguard LifeStrategy is invested globally.

grumiofoundation

I've read a few posts on here the last few days from regular posters, saying why invest into this option, when you could invest into one of Vanguard's global options instead.

Can anyone explain the main deemed benefits of the global options, over the Life Strategy 100%?

Then I suppose my question is two fold I guess. Firstly is there any point putting this years money into a global choice instead of the LS, and secondly if the global option is deemed "better" would it be wise to move money already invested in the LS into a global one as well over time, and is this practical?

If anyone can give me a little bit of guidance, it would be very much appreciated, thanks.

As above LS is invested globally. 

The confusion may come from reading posts talking about lifestrategy's UK 'bias'. This simply means VLS holds ~20% UK rather than the ~5% held in a simple global tracker such as  https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-acc

This does not mean VLS is invested solely in the UK.  One is not in any way guaranteed to outperform the other!


You can see what VLS 100 is invested in by looking on vanguards website - can see is invested globally!
https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/portfolio-data

Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc	19.6%
Vanguard U.S. Equity Index Fund GBP Acc	19.4%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc	19.3%
Vanguard S&P 500 UCITS ETF (USD) Accumulating	15.2%
Vanguard Emerging Markets Stock Index Fund GBP Acc	8.0%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc	7.2%
Vanguard FTSE 100 UCITS ETF (GBP) Accumulating	4.8%
Vanguard Japan Stock Index Fund GBP Acc	3.7%
Vanguard Pacific ex-Japan Stock Index Fund GBP Acc	1.9%
Vanguard FTSE 250 UCITS ETF (GBP) Accumulating	0.9%

GeoffTF

masonic said:

I think there must be some confusion. Vanguard LifeStrategy is invested globally.

By a global tracker we mean a market capitalisation weighted equity tracker that invests globally, usually including the emerging markets. It would take all day if we kept repeating that. VLS 100 is not market capitalisation weighted. Vanguard chooses the weights, mostly for marketing reasons it appears. Mostly that is not a good idea, except for over weighting the UK, which probably is a good idea, but it does not really matter which you choose. There is no good reason the change.

Albermarle

In recent years , index trackers that do not have the UK bias of LS100 , have performed better. However nobody knows whether that will continue in future , or even be reversed.

ericlered7

Thanks all for your very quick responses.

Is the UK bias of the VLS100 deemed a good thing or a bad thing, or I'm guessing nobody really knows, as we can't predict the future thing.

Would putting this years money into something with less UK focus, like the FTSE Global All Cap Index Fund, help dilute the UK bias of my ISA investment? Hedging my bets so to speak?

If I keep all my monies going into the VLS100, with regard to the risk of the VLS100, if I'm looking at this with at least a 15 to 20 year timeframe, is it significantly more risky than say the VLS80 or VLS60? Or in theory would the consensus be that that over this period of time, it's likely to be ok? Sorry if these are stupid questions!

masonic

GeoffTF said:

masonic said:

I think there must be some confusion. Vanguard LifeStrategy is invested globally.

By a global tracker we mean a market capitalisation weighted equity tracker that invests globally, usually including the emerging markets. It would take all day if we kept repeating that. VLS 100 is not market capitalisation weighted. Vanguard chooses the weights, mostly for marketing reasons it appears. Mostly that is not a good idea, except for over weighting the UK, which probably is a good idea, but it does not really matter which you choose. There is no good reason the change.

The OP does not use the term "global tracker", only "one of Vanguard's global options", "the global options", "a global choice", and "a global one". I hope there is no disagreement that VLS 100 is indeed "one of Vanguard's global options", [one of] "the global options", "a global choice", and "a global one". All of these terms could be used to refer to any fund, either active or passive, investing worldwide.

If there is some other discourse with the OP elsewhere, it might be helpful to link it for context, but otherwise, I only see "global tracker" being mentioned in your replies to the OP's post. I agree with you that global tracker should refer to an index tracker following one of the well known global indexes, but this is not the terminology being used by the OP.

masonic

ericlered7 said:

Thanks all for your very quick responses.

Is the UK bias of the VLS100 deemed a good thing or a bad thing, or I'm guessing nobody really knows, as we can't predict the future thing.

Would putting this years money into something with less UK focus, like the FTSE Global All Cap Index Fund, help dilute the UK bias of my ISA investment? Hedging my bets so to speak?

If I keep all my monies going into the VLS100, with regard to the risk of the VLS100, if I'm looking at this with at least a 15 to 20 year timeframe, is it significantly more risky than say the VLS80 or VLS60? Or in theory would the consensus be that that over this period of time, it's likely to be ok? Sorry if these are stupid questions!

Personally I have been increasing my UK bias of late, but nobody knows what the future holds. Over a 15-20 year timeframe it would be highly unlikely that VLS100 will perform worse than VLS80 or VLS60, but it might be a reasonable choice to switch to one of the latter funds (or just add a bond fund) towards the end of the period, depending on how you intend to use the capital after that point.

DoublePolaroid

OP it’s worth bearing in mind that many people, including Vanguard themselves and some knowledgable posters on this board, think that the U.K. may well outperform the global market over the coming decade. There is clearly no guarantee as nobody really knows and Vanguard’s own past projections don’t mark them out as reliable augers.

P933alilli

The first decade of the 2000's was one of the worst for stocks and involved two bear markets. A 100% equity investment would have incurred a loss by the end of the decade but a 60/40 portfolio would have grown by 25%.  The equity of both portfolios was U.S based , ie, S&P500 , so not strictly comparable! Whether bonds offer as much protection now?
  The 70's US was hit with stagflation and high interest rates with 60/40 outperforming 100% equities by the end of the decade but both portfolios still ended up between about 75-87% higher!
    I'm in VLS60 and pondering whether to risk LS100 bytheway! Are todays market conditions similar/worse to the above decades?