Vanguard funds - which to choose

Albermarle

What is more suitable depends on your situation and your risk profile.
Normally for someone quite young the 100% equity fund is better as it should grow more in the long term.
However if
1) If it dropped a lot short term and you think you might panic and pull out 
2) If your time horizon was a bit more medium term 
For these two scenarios you may be better off with a more medium risk product.

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

However this statement really changes the scenario, as overall if you have 95% in cash savings and 5% in the most risky investment in the world. Your overall profile is still very low risk.

You should look at your financial position in the round, not as individual issues.

dunstonh

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? 

We did but that Vanguard fund launched in 2016.  So, we wouldn't have known how Vanguard was going to fare back then.  However, it would have been possible to look at the ones already in existence. 

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

In the UK there is no difference for paying monthly, ad-hoc or any other method with the vast majority of platforms for OEICs/UT.   ETFs tend to carry small dealing costs but typically you wouldn't use ETFs with regular contributions (generalisation as there is the odd platform with no dealing costs but that usually comes with a higher platform charge).

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.

I didn't do a deep dive so I just grabbed a handful of the more well-known trackers that would typically have been used by mainstream investors looking at global trackers.

Jami74

jwelly said:

Any input would be greatly appreciated!

I know you've got loads of answers from some of the experienced MSE investors. Thought you might want some input from a small novice investor. I'm probably 15 years older than you, with nowhere near as much in cash savings. Like you, I scoured these forums looking for an easy answer and the answer I got was it probably didn't matter whether I chose a global cap or a lifestrategy or something else similar, the important thing was to get started. I eventually made my choice and invested £500. A couple of weeks later it was down £20 That was fine, I knew it might happen from all the reading I had done. Since then I've been drip feeding £50 a month in. The value goes up and down, at one point it was about 17% up and at another it was at -2%. It's currently at about 3%. I'm planning to leave it there for as long as I can, it seems that over a long enough time period they nearly always go up. I do look at it every day because I get excited by numbers and graphs and keep hoping it drops in price so I can buy more (parts of) units for my £50 each month. 

Eyeful

For a beginner like you.

1. Watch this:- https://www.kroijer.com/

2. You already have been told about these two:-
https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link
https://www.hsbc.co.uk/investments/isas/hsbc-global-strategy-portfolios/#balanced

3. If you want to sleep at night and not worry about your investments then 
(a) Invest within your risk tolerance.
(b) Only look at your investments a few times a year. Say 4 times a year.

4. Understand investing is for the long term (longer the better.). 

5. Understand market corrections (i.e. falls) of between 10% & 20% are common, so expect to see many.

6. If you ever think you will need the money within 5 years, keep it in a savings account. Do not invest it.

7. You can make investing as simple or as complex as you like. This is the simple approach.

8. You might like to put your money into the market over one or two years, if that makes you happier.

9. Make sure you have an emergency fund, so you do not have to sell when the value of your fund is low.

10. You can now get on with life and enjoy yourself!

bostonerimus

JohnWinder said:

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.

I very much agree. Investing and saving for the future is not "rocket science", however much people want to make it seem like it. Take Shia LeBoeuf's advice and "Just do it!" Your plan should be robust enough so that whether you use an HSBC fund or the equivalent Vanguard fund it won't be a factor in your ultimate success. Far more important is the amount that you invest. So rather than worrying about tracking error worry about your budget and how much you are actually investing.

Albermarle

 Far more important is the amount that you invest. So rather than worrying about tracking error worry about your budget and how much you are actually investing.

Same as with savings accounts . Better to have £50K earning 1.5% , than £10 K earning 1.6%.

In other words the focus should be more on increasing the actual saved/invested amount, rather than worrying about 0.1% here or there.

bostonerimus

Albermarle said:

 Far more important is the amount that you invest. So rather than worrying about tracking error worry about your budget and how much you are actually investing.

Same as with savings accounts . Better to have £50K earning 1.5% , than £10 K earning 1.6%.

In other words the focus should be more on increasing the actual saved/invested amount, rather than worrying about 0.1% here or there.

Yes, we often get our priorities wrong. I think people concentrate on investment return because the financial industry/media promote fund "league tables" and the mantra of "beating the market" is still strong. It's boring, and potentially painful, to be frugal so that you have more to save and invest, but it's far more important that choosing between HSBC or Vanguard.

plumb1_2

I was very much in the same boat as the OP about 14 months ago, knew very little about investing.
But started reading threads on mse and decided to go with vanguard opening a vls60 with 10k.
A matter of a few weeks I was up £400 odd, (whoohoo) so decided to sell and invest in the vls100, and sticking another 9k in there.Most probably the wrong thing to do. 

It’s almost 1 full year now and hardly check how it’s going on, but checked a few days ago. And it’s down 7%🙈, but did see a figure that it had been up 23%.
So I bought another 2k in vls 100, and will continue to add when spare cash comes along.
To me it’s a 5-7yrs investment (isa) 
Graphs and charts etc are double Dutch to me, Just made my mind up to do it and went for it, most probably people will say iam foolish, and I can understand that.
Del boy he who dares and all that bolony.

JohnWinder

https://investingroadmap.wordpress.com/

There you go, free, until you can get Hale's book from the library.

CHAPTER 1: The Essentials
CHAPTER 2: Understanding Risk and Asset Allocation
CHAPTER 3: How Diversification Works
CHAPTER 4: Diversifying A Portfolio With Asset Classes
CHAPTER 5: Costs are a BIG DEAL
CHAPTER 6: Building Your Portfolio – A look at the Options
CHAPTER 7: Rebalancing
CHAPTER 8: Formalize Your Investment Plan
CHAPTER 9: Behavioral mistakes
CHAPTER 10: On Your Own Or Hire An Advisor

CHAPTER 11: Final thoughts and References

And here’s a dad’s e-book written for his adult children (40 pages, without any fluff): https://drive.google.com/file/d/14gCYdHY6LudcKoftQZDgqHMHIfbRkCMU/view

JohnWinder

And if 40 pp is too much, try these 16 sassy pages by a smart old fellow who writes like a Hoxton hipster and might appeal to your generation. ‘If you can’ http://flip4u.org/docs/If You Can Millenials-Bill Bernstein.pdf