Vanguard funds - which to choose

Albermarle

jwelly said:

So as Monevator always advises go with simple and low fees (costs) 

Yet it recommends VLS over cheaper alternatives that have been performing better.

Such as? Any suggestions I can look into would be appreciated, keeping in mind the following about me:

• No previous investing experience

• In my early thirties

• £20k + savings

• Mid term investment (around 5 years)

• Planning a £1,500 initial investment, then drip feed around £100 monthly max.
• Med risk. I only want to be checking on my fund every few weeks or months.
• Low cost ideal. Hence my initial interest in Vanguard.

You were already sent this link. Fund-of-funds: the rivals - Monevator

bostonerimus

We are splitting hairs. HSBC or Vanguard or any other reputable, inexpensive tracker or multi-asset funds consisting of a stable selection of tracker funds with an asset allocation that is appropriate for your circumstances and goals will be just fine for most people. The asset allocations will differ and so there will be differences in performance and there will be competition on fees. It's just another example of there being so much choice that "you can't see the wood for the trees". You can create a successful financial plan using HSBC, Vanguard or hundreds of other funds. I use a simple, mostly, Vanguard index fund portfolio and stopped worrying about league tables and performance a long time ago.

Audaxer

Linton said:

Eyeful said:

Linton I have done as you suggested and compared the Trustnet graphs of VLS 60 against the HSBC nearest equivalent.

To my eyes for 4 years they seem the same until about 2021. This out performance may of course just be temporary.

There is no arguing that the HSBC is cheaper.

HSBC Global Strategy Balanced currently at 52% equity out performed both VLs60 and VLS40 in 4 out of the past 5 years. The largest difference is over the past two troubled years.

This could be explained  by better management of the non-equity where simple fixed allocations do not make sense to me.

in any case I thought the theory was that lower charges always win out over the long term..

I was a bit surprised when you said HSBC GS Bal is only 52% equity, as all the figures I've seen had shown equity at just over 60%. However that includes property in some figures as looking at the recent factsheet it shows 53% equity and 7% property, with around 37% bonds and just under 3% cash. I therefore still think it's around the same risk level as VLS60.

The HSBC GS Bal fund has slightly better returns at 7.59% annualised over 10 years, compared to VLS60 at 7.21% annualised over the same period. It might be down to the cost of HSBC being slightly cheaper, but clearly there is not much in it, so I'm still happy to hold both of these multi asset funds.

HCIMbtw

I am mid 30's, circa 20k in savings.. majority in vanguard global all cap 

Its basically the cheapest for making regular contributions to

Its simple and mostly boring 

dunstonh

HCIMbtw said:

I am mid 30's, circa 20k in savings.. majority in vanguard global all cap 

Its basically the cheapest for making regular contributions to

Its simple and mostly boring 

The problem with focusing on lowest cost is how much that more that is costing you compared to options that may be just a tiny bit more expensive but have a better tracking error or where sampled replication is not delivering the results compared to full replication.


Or in monetary terms, putting in £5,000 initially and then £250pm on the first of the month (total £22k)

JohnWinder

It’s a good point that tracking error and index replication are relevant, as fees are.

Regarding the first chart: did we have tracking error and replication data, as we had fee data, in 2016 that would have informed us as which of those funds might have been expected to perform better? 

For chart 2: has the analysis included fees to contribute monthly?

k_man

jwelly said:

Thanks a lot for all your comments.

Eyeful said:

If you are going to look into the Vanguard Life Strategy Fund, the following may be of interest to you.
https://monevator.com/passive-fund-of-funds-the-rivals/

An interesting read, so thanks very much. I'm leaning more towards VLS now for sure. Either 40 or 60.

Aminatidi said:

Your appetite for volatility is probably the most important thing here.

If you're comfortable with the sort of swings you could see with 100% equities FTSE Global All Cap is a perfectly sensible choice.

At the risk of patronising you I would say to bear in mind that what you think you can stomach and what you can actually stomach can turn out to be two different things.

Agreed, thanks for the tip..

I've basically decided that I don't really want high risk for the time being. I would just like to start my journey investing without keeping tabs of my funds every hour, but also to not rely on savings accounts given the interest rate and inflation.

Still, I will research other options a bit more before committing to Vanguard.

More an observation, but within a day you have moved from

FTSE Global All Cap

To

VLS 40 or 60

These are quite different risk/volatility.

Neither (if that works for three) are necessarily right or wrong for you, although VLS 40 or 60 (or similar allocated multi asset) would be unusual at the start of a long term investment.

Changing investments frequently (especially if reactionary) can prove costly, and negate any benefits of the potentisl 'better' option.

So I suggest you take some time to decide, as these type of investments are for the long term

That said, by some time, I mean do some further research over a few weeks or even months, not put it off for years!
In the meantime, put that money somewhere, so you don't spend it, and you get used to the habit.

JohnWinder

The wise-heads might have seen it coming from the first post, but it’s now more obvious, the problem of paralysis by analysis.

the initial enquiry, ‘is this very modest investment approach suitable?’ Could have been answered with:

• After 2 years you’ll have only £6000 invested at age 35, so it hardly matters what you choose during those years, and your suggestion(s) is fine.
• Spend the next 2 years getting some self-education about investing (easily done if you have the inclination), and you’ll be more than capable of managing your own money however large amount it turns out to be. Otherwise you can flail around forever.

Instead, we’re down to the minutiae of synthetic replication by fund managers as a relevant issue. The road to putting people off is paved with good intentions.

MK62

Those funds don't all track the same thing though......the ishares and Lyxor funds have 1513 and 1517 constituent holdings, Fidelity 1546, L&G 2491, HSBC 3315, and Vanguard 7196 - so it's no real surprise the performance of each is slightly different.

The ishares and Lyxor ETFs supposedly track the same thing though - MSCI World Index - on the face of it, the Lyxor fund show the charges are 0.12% v ishares 0.2%, so the difference is either tracking error, securities lending (if used), or maybe the quoted charges figure isn't entirely accurate......

jwelly

bostonerimus said:

We are splitting hairs. HSBC or Vanguard or any other reputable, inexpensive tracker or multi-asset funds consisting of a stable selection of tracker funds with an asset allocation that is appropriate for your circumstances and goals will be just fine for most people. The asset allocations will differ and so there will be differences in performance and there will be competition on fees. It's just another example of there being so much choice that "you can't see the wood for the trees". You can create a successful financial plan using HSBC, Vanguard or hundreds of other funds. I use a simple, mostly, Vanguard index fund portfolio and stopped worrying about league tables and performance a long time ago.

Thanks, this sounds like what I'm after. I'm at the very beginning of investing, so with the research I've done so far in the last couple of months, I just want to start out with a £1,000 investment and small monthly deposits over the next few months or even years, in the hope that I make a little bit of money.

As I do more research over the years and learn more, I can potentially increase my risk with a different fund. Bottom line, I don't want to spend hours a day of my life checking my investments, stocks, buying and selling etc. I just don't want all my savings sitting in a low-interest account going stale.

k_man said:
More an observation, but within a day you have moved from

FTSE Global All Cap

To

VLS 40 or 60

Yes. Based on feedback from my original post, it sounded like All Cap was quite a high risk, and upon reflection I felt that medium risk at most is probably where I should start. I also felt that I should start with short-medium term goals, i.e. within the next 5 years. Hence VLS seemed like a more suitable option.

I probably should have been clearer, but about 95% of my savings would not be allocated towards investing right now..

VLS 40 or 60 (or similar allocated multi asset) would be unusual at the start of a long term investment.

Changing investments frequently (especially if reactionary) can prove costly, and negate any benefits of the potentisl 'better' option.

So I suggest you take some time to decide, as these type of investments are for the long term

The idea is that I don't want to change investments frequently, but rather get started with investing with just small amounts.

Also, can you please clarify whether VLS is more ideal for long term or short/medium term? See bold.