Vanguard S&S ISA investment choice

masonic

Collyflower1 said:

Whether bonds offer as much protection now?

Almost certainly not, after a 30 year bull market there is little if any room for capital upside. They will smooth out the ride, but those expecting them to appreciate in value as they have done so in past decades will be disappointed.

dunstonh

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.

VLS100 is the odd one out in the VLS range.   All the other VLS funds are multi-asset funds.   VLS100 is a global managed fund.  

With VLS100 being 100% global equities, it then gets compared with other 100% global equity funds.  That includes global tracker funds at half the cost of VLS100.    

Some people may like the management decisions made by Vanguard (which includes the UK bias).  Others may prefer the more natural weightings of the markets.   There is nothing wrong with either option (or many others).  That is as long as you understand what you are doing and why.

Far more important is investment risk.    The average consumer sits around VLS40 or VLS60.   This is your first time investing and you have jumped in with VLS100.      Again, that is not a bad thing as long as you understand that you are going to have periods where your value halves.  If you can handle your value dropping by half and having recovery periods that may last 5 years or more then that is fine.     Assuming it doesn't interfere with your personal objectives and you can afford that.

GeoffTF

ericlered7 said:

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!

VLS 100 is more risky, but will most likely be OK. If it is not OK, then you will probably be better off in VLS 80 or VLS 60. Time frame is only one of the variables here. Other relevant factors are your income, outgoings, pensions, age, other investments...

tebbins

VLS100 "is" one of those global options, IMHO a balanced and sensible approach. Considering how relatively poorly VLS has fared over mainly the past ~5 years, due more to the implied lower weighting of US equity, which has performed spectacularly well lately, because of the home bias, than because of the UK element lagging the world ex-US, there is a valid argument that as what does well in one period tends to do less well in the next, to expect some VLS outperformance of a more "pure/vanilla" global tracker over the foreseeable future. Though ultimately no-one knows.

On a trustnet chart you can compare the FTSE 100 or All-Share with the FTSE world, FTSE world ex-US, and add in the S&P500 by typing ",NSP500" at the end of the URL.

GeoffTF

ericlered7 said:

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?

That would not make much sense. People buy VLS 100 because they believe that Vanguard knows best, and pay a premium price for that. If you decide that you want to make your own choices, it makes no sense to pay that premium price. It would be cheaper to buy a global tracker and whatever proportion you fancy of FTSE 100 (or FTSE All Share).

Thrugelmir

ericlered7 said:

It took me a long time to get over my caution first approach, but now I'm definitely comfortable in accepting more risk, 

Never wise to become over complacent. Risk takes many many forms.  Markets are known to rip the shirt off your back. 

ericlered7

masonic said:

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.

When I used the generic term global, I was indeed referring to global trackers, sorry if this was not obvious.

ericlered7

Thanks everyone, much food for thought.

dunstonh said:

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.

VLS100 is the odd one out in the VLS range.   All the other VLS funds are multi-asset funds.   VLS100 is a global managed fund.  

With VLS100 being 100% global equities, it then gets compared with other 100% global equity funds.  That includes global tracker funds at half the cost of VLS100.    

Some people may like the management decisions made by Vanguard (which includes the UK bias).  Others may prefer the more natural weightings of the markets.   There is nothing wrong with either option (or many others).  That is as long as you understand what you are doing and why.

Far more important is investment risk.    The average consumer sits around VLS40 or VLS60.   This is your first time investing and you have jumped in with VLS100.      Again, that is not a bad thing as long as you understand that you are going to have periods where your value halves.  If you can handle your value dropping by half and having recovery periods that may last 5 years or more then that is fine.     Assuming it doesn't interfere with your personal objectives and you can afford that.

Thinking back a couple of years when i opened the ISA, I was going to go with the VLS60/80, but ended up going for VLS100 as I knew I also had some decent cash reserves, and this balanced the risk in my eyes, as I wasn't putting all of my eggs into the ISA basket.

As I gradually move some of my cash reserves into the ISA maybe I should consider this risk level again.

If the value of my ISA were to drop by half in the next 2 or 3 years it would be difficult to swallow, but I view this as a longer term investment of my savings, that I won't need in the next 5 to 10 years (hopefully).

Out of interest, when you say global tracker funds can be found at half the cost, is this if you invest using other providers, as they aren't seemingly any cheaper using Vanguard.

dunstonh

If the value of my ISA were to drop by half in the next 2 or 3 years it would be difficult to swallow, but I view this as a longer term investment of my savings, that I won't need in the next 5 to 10 years (hopefully).

If you can accept the loss, then that has half the battle.

Out of interest, when you say global tracker funds can be found at half the cost, is this if you invest using other providers, as they aren't seemingly any cheaper using Vanguard.

Vanguard does not offer the best trackers in every area (no fund house offers the best in all areas).  If you restrict yourself to just one fund house, you will always have to accept some limitations.  

GeoffTF

ericlered7 said:

Out of interest, when you say global tracker funds can be found at half the cost, is this if you invest using other providers, as they aren't seemingly any cheaper using Vanguard.

With Vanguard, VEVE plus a market weight of VFEM (about 10%) works out to 0.13% OCF. There is an HSBC All World trackers at the same price. UK trackers are cheaper, so if you add a UK bias, that brings the cost down further.

People often add a UK bias because it reduces portfolio volatility and there is no withholding tax on UK shares. Currently, UK shares are less expensive than overseas shares, particularly US shares. The UK market weight is about 4%. VLS 100 has about 25% UK. Vanguard's economists recommend about a third UK. Others favour a global tracker because they do not want their investments to do badly when their country does badly. Nobody knows what will do best.