Moving to Vanguard LifeStrategy

missymouse

I have VLS60 but it’s only down 11% today;so there has been some improvement 

it’s never been down as 26%

crisisinchina

Doesn't history show that it's more profitable being in 100% equities rather than 60/40?

InvesterJones

crisisinchina said:

Doesn't history show that it's more profitable being in 100% equities rather than 60/40?

And more variable, so you need longer in the market to return average performance.

adindas

crisisinchina said:

Doesn't history show that it's more profitable being in 100% equities rather than 60/40?

Billionaires investors do not see the bonds as a good investment. Similarly to many hedge fund managers. If they invest in bond, it is just for short term and not for long term. The fund managers who like to invest in bonds generally are the pension fund manager. 
I myself never have bond in my investment right from the begining. As a retai investor we have the option to put our money to high interest esy access saving account and/or RSA and to DCA to equity. Now there are a few easy acces, RSA  area paying 4-5% waiting allocation using DCA to equity. Compare it to the retrun you currently get from bond.

Prism

crisisinchina said:

Doesn't history show that it's more profitable being in 100% equities rather than 60/40?

Over the long term yes - over the short to mid term possibly not. It all depends on if you can wait for the equity returns or not.

Cus

adindas said:

crisisinchina said:

Doesn't history show that it's more profitable being in 100% equities rather than 60/40?

Billionaires investors do not see the bonds as a good investment. Similarly to many hedge fund managers. If they invest in bond, it is just for short term and not for long term. The fund managers who like to invest in bonds generally are the pension fund manager. 
I myself never have bond in my investment right from the begining. As a retai investor we have the option to put our money to high interest esy access saving account and/or RSA and to DCA to equity. Now there are a few easy acces, RSA  area paying 4-5% waiting allocation using DCA to equity. Compare it to the retrun you currently get from bond.

In my experience many hedge funds solely focus on fixed income assets and their derivatives. They may be have a high turnover but it isn't a short term position in general. It what's they do. Making a few percent more than the market on very large amounts is highly sort after by hnw clients.

deltrotter

Buy an S&P tracker every month for 25 years, never deviate.

It is that simple.

So simple in fact that very few folks can do it.

dunstonh

deltrotter said:

Buy an S&P tracker every month for 25 years, never deviate.

It is that simple.

So simple in fact that very few folks can do it.

When Sterling and the Dollar go through the next phase, you may regret being heavy in US equities unhedged.   

P933alilli

My vls 60 is down 9.5% since i opened it in january. Just another 9.25 years to go! I wondered what the outlook is for the 40% bonds part of the fund or is it the great unknown and just wait and see?

I found this citywire report from a week ago and at least the vanguard LS funds with less bond proportions are down less than their equivalent funds.

The £1.7bn Vanguard LifeStrategy 20% Equity fund, which has an 80% weighting to bonds, had fallen 16.8% in 2022 by the end of Wednesday. That is a worse result than the 12.1% average in the Investment Association (IA) Mixed Investment 0-35% Shares sector that it is pitted against.

The £13.2bn LifeStrategy 60% Equity fund, the most popular in the range, has held up a bit better. It is down 11% year to date, while the IA Mixed Investment 40-85% sector is down by an average of 11.7%.

The range’s long-term performance has still been still, with each multi-asset portfolio beating its comparable benchmark. But as the table below shows, the more each fund has in supposedly safe bonds, the greater the drubbing it has come in for this year.

LifeStrategy struggles in 2022

	Returns since 15/08 (%)	Year-to-date returns (%)	5-year total return (%)
Vanguard LifeStrategy 20% Equity	-8.3	-16.8	1
IA Mixed Investment 0-35% Shares	-6.4	-12.1	0.2
Vanguard LifeStrategy 40% Equity	-7.3	-13.9	10.8
IA Mixed Investment 20-60% Shares	-6.2	-11.9	5.7
Vanguard LifeStrategy 60% Equity	-6.2	-11	22.2
Vanguard LifeStrategy 80% Equity	-5.1	-8	34.3
IA Mixed Investment 40-85% Shares	-6	-11.7	17.2
Vanguard LifeStrategy 100% Equity	-4	-5	47.2
IA Global	-4.5	-9.9	47.9

Source: Morningstar. Data as at 28 September 2022

Peering under the bonnet of Vanguard LifeStrategy 20% Equity gives some idea why, with not just big bond holdings but a leaning to UK assets, which have particularly underperformed. Most of the holdings in other Vanguard tracker funds are also hedged, meaning they have not benefitted from the weakening pound.

The largest position in the portfolio at 19.3% of assets, the Vanguard Global Bond Index fund, held in sterling, has fallen 14.4% in 2022, while Vanguard UK Government Bond Index, a 10.7% position, has fallen 28.8%, according to the latest Morningstar data.

The extent of gilt derating is emphasised by its fall of 15.6% since 15 August, making it the portfolio’s worst performer aside from the UK Inflation-Linked Gilts Index, another Vanguard tracker, which has slumped a whopping 31.8%.

In that time gilt yields for 10-year bonds have more than doubled, leaping from around 2% to their current level of 4%. Even at the start of last week, the yield was closer to 3.1%.

The rocky performance has sparked rare outflows from LifeStrategy 20% Equity. Consistent monthly outflows from the new year to the end of August total £183m according to Morningstar estimates.

‘It is important to remember that the primary role of bonds in an investment portfolio is as ballast to equities, not as a driver of performance. Our research indicates that bonds remain the best asset class to act as a counterweight for equities over the long-term,’ a Vanguard spokesperson said.

Balanced conundrum

Vanguard’s 60% Equity fund, on the other hand, has benefited from a smaller exposure to bonds. This is largely because its positions in gilts are much smaller. Gilts make up 5.4% of assets and inflation-linked gilts 3.4%.

Top holdings include a 19.5% position in the Global Bond Index and a 19.4% position in the Vanguard FTSE Developed World ex-UK Equity Index tracker.

The juggernaut fund has continued to attract consistent – but fluctuating – net inflows over the year, peaking at £173m in April and bottoming out at £62m in July, indicating that investors are still buying. Year to date, the net inflow has been £885m, according to Morningstar estimates.

The Vanguard spokesperson defended their fixed approach versus short-term tactical attempts to move between different asset classes.

‘We anticipate markets will remain volatile in the short term, both for investors with sterling assets and for international investors with unhedged exposure to UK assets.

‘However, it is precisely because nobody can see around corners, that Vanguard guides investors with a well-considered investment plan to look to the long term. Volatility does not last forever, and asset class returns historically have rebounded toward long-term trajectories.’

Aminatidi

VinceAshbySmith said:

So here's my thinking; I've been invested in various active funds for the past 5 years or so, which has done well. However, they've needed some careful adjustments and I've probably over-tinkered with them instead of just riding the bumps out. I'm in my late 30s with a little guy on the way and two older children and a wife who has a full on, stressful job. My thought is to sell all my active funds and gradually buy into a Vanguard Life Strategy fund, I was thinking the 80/20 fund as the overall goal is to grow a pot of cash for the foreseeable so happy to take on the higher risks. The reason is that my time is precious and I know that the small amount of "free" time I have is going to get eaten away with family life, so the time I used to have to research and adjust funds, just isn't going to be there. 

The alternative is that I select index trackers to replace my active funds. I would be interested to hear people's thoughts and if anyone else has done similar 

I'm doing similar.

I have a big chunk in Capital Gearing Trust and Ruffer which won't be going anywhere for a while but I moved most of the money from my 100% equity funds across to Vanguard and that and monthly new money is slowly and repeatedly buying Vanguard FTSE Global All Cap.