Vangaurd life strategy 40

adindas

Well, I am pretty sure people could easily see the difference, and thus will treat the data from Bloomberg, J.P Morgan and Monevator (another fact below) differently with the data, the argument from random people on internet, on social media such as Twitter, FB, YT, etc

 

masonic

Nobody is disputing that over the long term equities have outperformed bonds by a significant margin. That doesn't mean equities are the only asset class anyone should ever put money into. This is a good example of the failure of a graph to convey the nuances of investment strategy and how data can easily be misused.

That image above is from the Monevator site, which is a great place to do your research about investments - but you have to read the words, not just look at the pictures.

eskbanker

Since this seems to be turning into yet another Groundhog Day thread....

https://forums.moneysavingexpert.com/discussion/comment/79957994/#Comment_79957994

GeoffTF

adindas said:
If you could currently get a Regular saving account paying 7%, 6.25%, a reasonable number of RSA paying 5.5%+, a reasonable number of one year fix rate around 5% risk free, why on earth  take unnecessary risk for a lower return in Bond ??

There are low limits to the amount of money that you can hold in those accounts, or they are illiquid. You can get a higher return from bonds. You can hold bonds in a tax free account. If your savings are outside a tax free account you may be paying 40% or 45% tax on the interest. You pay much less tax with low coupon gilts.

adindas

GeoffTF said:

adindas said:
If you could currently get a Regular saving account paying 7%, 6.25%, a reasonable number of RSA paying 5.5%+, a reasonable number of one year fix rate around 5% risk free, why on earth  take unnecessary risk for a lower return in Bond ??

There are low limits to the amount of money that you can hold in those accounts, or they are illiquid. You can get a higher return from bonds. You can hold bonds in a tax free account. If your savings are outside a tax free account you may be paying 40% or 45% tax on the interest. You pay much less tax with low coupon gilts.

You mention the obvious. People who keep so much  cash in the long term is not an investor. It is only a naive investor will do that as the inflationary rate which is higher than your interest will keep eating your return.

Cash saving is only for short term.  You could have up to £20k earning 5% and pay no tax on interest for single person. Also do not forget if you put another £20k into one year saving fixed rate saving earning around 5% it will fall into the next tax year. Put it into two years fixed rate saving it will fall into other tax years. Not to mention maturity date of your RSA might fall into different months, different tax year. Not enough You could get ISA for 4.41% no tax due. You could always recycle your lower interest saving to higher interest RSA. Savings will be allocated using DCA (dripfed) to Equity, so it will keep flowing to equity. Doing this you could manage your taxable interest on saving  below taxable interest threshold.

The main point here is that Equity outperform bond in the Long run and it is not a good strategy to have so many bond percentage in the portfolio. In the OP case VLS40 means 40% Equity and 60% Bond.

I have shown the evidence that holding so much bond in your portfolio is not a good strategy based on:

1. Statistical evidence. Evidence is not to be compared with argument from random people on the internet.

2. No single wall street strategist has ever suggested a portfolio to comprise 60% bonds

3. No single proven Billionaires investor has ever suggested that. Even Ray Dalio, the main proponent of multi assets fund has never suggest to have 60% bond in your portfolio.

4. No  Investing literature has ever suggested a portfolio to comprise of 60% in Bond in the long run.

Fact and proven strategy especially if come from wall street, proven billionaires investors is always better than pointless argument. Let alone the argument comes from random people on the internet.

In the past until today there are already reasonable number of people complaining about their bond performance. How many more will complain the performance of their VLS40, their bond in the future ??

InvesterJones

By showing graphs from 1870 and 1900, are you saying that equities are best invested in for periods of 150+ years? I can't wait that long!

Elum29

Thanks everyone. 

A lot of very clued up people on this forum for sure. 

I think the general feeling I’m getting from all the responses is that selling at a loss probably wouldn’t be the best idea so I think I should hang it out at least until I get to break even.

I think it would be interesting to report back here once things start going the other way. 

TheBanker

Elum29 said:

Thanks everyone. 

A lot of very clued up people on this forum for sure. 

I think the general feeling I’m getting from all the responses is that selling at a loss probably wouldn’t be the best idea so I think I should hang it out at least until I get to break even.

I think it would be interesting to report back here once things start going the other way. 

I think this is a mistake. If the investment you hold is not right for you, then cut your losses and move to something that is. 

There is no guarantee that you will break even - there are no guarantees of anything (other than death and taxes...)

GeoffTF

adindas said:

GeoffTF said:

adindas said:
If you could currently get a Regular saving account paying 7%, 6.25%, a reasonable number of RSA paying 5.5%+, a reasonable number of one year fix rate around 5% risk free, why on earth  take unnecessary risk for a lower return in Bond ??

There are low limits to the amount of money that you can hold in those accounts, or they are illiquid. You can get a higher return from bonds. You can hold bonds in a tax free account. If your savings are outside a tax free account you may be paying 40% or 45% tax on the interest. You pay much less tax with low coupon gilts.

You mention the obvious. People who keep so much  cash in the long term is not an investor. It is only a naive investor will do that as the inflationary rate which is higher than your interest will keep eating your return.

Cash saving is only for short term.  You could have up to £20k earning 5% and pay no tax on interest for single person. Also do not forget if you put another £20k into one year saving fixed rate saving earning around 5% it will fall into the next tax year. Put it into two years fixed rate saving it will fall into other tax years. Not to mention maturity date of your RSA might fall into different months, different tax year. Not enough You could get ISA for 4.41% no tax due. You could always recycle your lower interest saving to higher interest RSA. Savings will be allocated using DCA (dripfed) to Equity, so it will keep flowing to equity. Doing this you could manage your taxable interest on saving  below taxable interest threshold.

The main point here is that Equity outperform bond in the Long run and it is not a good strategy to have so many bond percentage in the portfolio. In the OP case VLS40 means 40% Equity and 60% Bond.

I have shown the evidence that holding so much bond in your portfolio is not a good strategy based on:

1. Statistical evidence. Evidence is not to be compared with argument from random people on the internet.

2. No single wall street strategist has ever suggested a portfolio to comprise 60% bonds

3. No single proven Billionaires investor has ever suggested that. Even Ray Dalio, the main proponent of multi assets fund has never suggest to have 60% bond in your portfolio.

4. No  Investing literature has ever suggested a portfolio to comprise of 60% in Bond in the long run.

Fact and proven strategy especially if come from wall street, proven billionaires investors is always better than pointless argument. Let alone the argument comes from random people on the internet.

In the past until today there are already reasonable number of people complaining about their bond performance. How many more will complain the performance of their VLS40, their bond in the future ??

Past performance in markets in which equities did exceptionally well tells us little about the future. There is no guarantee that equities will outperform bonds over the next 100 years, and most of us cannot wait that long anyway. The purpose of saving for most of us is to meet our future financial liabilities. It is essential that we do not fail at that, and it does not matter much whether or not we do any better. Globally, the average portfolio is about 40% equities and 60% bonds. Clearly, most of the money believes that your chosen pundits are either wrong or trying to answer the wrong question.

Tondrive

Elum29 said:

Thanks everyone. 

A lot of very clued up people on this forum for sure. 

I think the general feeling I’m getting from all the responses is that selling at a loss probably wouldn’t be the best idea so I think I should hang it out at least until I get to break even.

I think it would be interesting to report back here once things start going the other way. 

I think this is a sensible move. Returns from equities over the next few years are expected to be lower so i certainly don't think its wise to change you portfolio to a lower bond content after the recent repricing. I think bonds look better value than shares at the moment and i'm heading to a 60 percent holding of them myself.