Year of VLS60

GazzaBloom

Ash_Pole said:

dunstonh said:

A negative year is brilliant news for those paying into their investments on a regular basis. 

Unless I'm missing something I'm not sure if a fund going down in value is ever brilliant news however you pay into it.

Do you prefer to go into Tesco to buy your weekly shop when everything is on sale at 10-20% off or do you prefer to buy when the prices keep going up week after week?

GeoffTF

It depends on why the value has fallen. If it is sentiment, that is likely to reverse. If the value has fallen because of worse fundamentals, and you have already bought, that is bad. It is no good rejoicing that your shares have fallen after a global nuclear war. Nobody knows the future, but if you are buying anyway, buying cheaper is good.

Cus

GazzaBloom said:

Ash_Pole said:

dunstonh said:

A negative year is brilliant news for those paying into their investments on a regular basis. 

Unless I'm missing something I'm not sure if a fund going down in value is ever brilliant news however you pay into it.

Do you prefer to go into Tesco to buy your weekly shop when everything is on sale at 10-20% off or do you prefer to buy when the prices keep going up week after week?

Depends on whether I plan to sell my weekly shop much later for a higher price

thriftylynny

I'm feeling the same as you Collyflower1 , I am 63 & held the  hopeful  intention of withdrawing within a safe withdrawal limit say 3% to top up my state pension at 66 .I have all my retirement savings in VLS60 , just over half in isa & half GIA ...really been concerned that I shouldn't have put all my eggs into the one basket ..it's the negative effect of the bonds within the 60/40 allocation I find a worry . I also have been pondering over withdrawal of what I hold in the GIA (54k at present) & putting into a 2 year fixed rate bond & just leaving the isa (63k) in VLS60 

Albermarle

..it's the negative effect of the bonds within the 60/40 allocation I find a worry

Bonds took a big hit in 2022, so if you were worried about bond allocation, you should have done something about it a year ago. ( hindsight is a wonderful thing ) They have most likely taken all the hit they are going to, and have in fact recovered to a limited extent.

At the same time though fixed term cash savings rates have improved, although the peak was a couple of months ago.

In theory at least if you move some VLS60 to cash, the remaining investment risk level should be increased, so you are not too low in equity % overall . 

So maybe from VLS 60 to 100% equity global index tracker? 

thriftylynny

Thanks Albemarle yes in hindsight I really  wish I had , just over a year ago now when my investment had a sudden leap of 6k ish which of course plummeted really rapidly . I just took Vanguards advice to strongly resist the urge to do anything but stay firm 

dunstonh

.really been concerned that I shouldn't have put all my eggs into the one basket 

And VLS60 means you havent put your eegs in one basket.

.it's the negative effect of the bonds within the 60/40 allocation I find a worry 

Although the bulk, if not all of the drop you are likely to see has already happened.   Time to look forwards now.

I also have been pondering over withdrawal of what I hold in the GIA (54k at present) & putting into a 2 year fixed rate bond & just leaving the isa (63k) in VLS60 

So, you have had a relatively average loss that the fund was always going to suffer at one point and you now are considering pulling ou tat a loss  because an event you knew could happen has happened?    

There were significant losses in 2020, 2018, 2015/16, 2008, 2002, 2001, 2000.     There were also smaller loss periods in a number of years in that period.   

It gets easier with the number of times you see a loss.   You go from panicking on the first one to "here we go again" after several of them.

I just took Vanguards advice to strongly resist the urge to do anything but stay firm 

I didn't think Vanguard used VLS60 on their advice service.   However, they are correct.     Close your eyes, stop looking at the values and get on with your life.  These events happen and nothing has changed in respect of investing.

Albermarle

There were significant losses in 2020, 2018, 2015/16, 2008, 2002, 2001, 2000.     There were also smaller loss periods in a number of years in that period.   

I think the above loss periods mainly related to falling stock markets, whilst the loss in 2022 was as much about drops in bond values, as it was about drops in equity.

The consensus ( if such a thing exists in investing ) seems to be that equity losses will recover at some point, hopefully within a couple of years, if they follow the usual cycle. However it will be a lot longer before bonds recover back to where they were. So holder of these 60:40 type portfolios could have a pretty long wait to see a full recovery and even growth?

I am not advocating the OP ( or anyone similar) should pull out of the investments, but the values will maybe be slower to bounce back, than we have seen in most previous recoveries.

thriftylynny

Thanks dunstonh & that has been my disciplined train of thought throughout same as you are pointing out  ....I have contacted Vanguard directly a couple of times  & they are fairly good at offering info  plus their newsletters of course but obviously won'the advise on what's best for me ...however  I have to agree with Albermarle with regard to the bonds on the 60/40 no longer being there really to prop it up ? 

InvesterJones

thriftylynny said:

Thanks dunstonh & that has been my disciplined train of thought throughout same as you are pointing out  ....I have contacted Vanguard directly a couple of times  & they are fairly good at offering info  plus their newsletters of course but obviously won'the advise on what's best for me ...however  I have to agree with Albermarle with regard to the bonds on the 60/40 no longer being there really to prop it up ? 

Bonds normally do dampen the volatility of equities - there's a nice video on pensioncraft modelling the effect they've had on the range of times it'd take to make a profit with x probability and it demonstrates nicely that the higher the bond proportion the lower the volatility and therefore the less the time you need to be invested to be very sure of generating a positive return. You pay for that in a lower maximum potential return - if you can stay in equities long enough.

That lower volatility is usually achieved by being inversely performant to equities, but not always - 2022 for certain was a bad year for bonds, but the reasons for that were very well understood and they performed exactly as expected. Those same performance expectations are some of the reasons the next few years could be good for bonds - in an environment where you've previously had high interest rates but where rates start to begin to fall bonds locked in at the higher rate are worth more. And if recession is the cause of interest rates being adjusted downwards then equities may not. But as ever, we're always going to be behind the market - equity valuations look to the future, and bond funds (as opposed to individual bonds) will have to churn through bonds they already bought and will sell them in line with the fund objectives (e.g. may not hold them to maturity, so trade on the value of bonds to whoever wants to buy them rather than the face value+coupon returns).

In short, if you had reasons for wanting to have a proportion of investments in bonds in the past, those reasons are likely to be more valid in coming years, not less.