LifeStrategy 20% Accumulation

dunstonh

This is supposed to be a low risk fund which is why I bought it, everyone constantly says bonds are safe but clearly they aren't.

They are safer but not risk free.   And an extreme loss on fixed interest securities is less than an extreme loss on equities.   

Investments will perform within their typical volatility range 95% of the time.   However, 5% of the time they will be outside of that.    2022 saw multiple events that fell within that 5% (and for gilts, it was their worst year in over 100 years).

If you look a the period post credit crunch to date, fixed interest securities have outpeformed cash.   (that period is the cycle for bonds given the influences that caused their stronger-than-normal gains over the decade after the credit crunch to the unwinding that took place over 22/23 to bring it back to its long term average ballpark.

JohnWinder

Except Vanguard which rates it 4 out of 7 for risk.

Altior

Personally, I am rotating into bonds rather than away from them, but a decent VG option for the the OP, if they want (virtual) certainly is the Sterling Short-Term Money Market fund. Will recover to the original amount in just over two years most likely, and no losses of capital going forward. Quite possibly, the income will even flip inflation for a while. 

Would need to keep half an eye on the bank's base rate obviously. 

Or hedge a bit and go half and half.

PragueAddick

I have sold my entire holding, and it will be going into NSI one year @6.2%. I have been watching this for several months and finally lost patience. I don't believe that this fund will increase by more than 6.2%, we will see of course. I can understand that Vanguard were powerless to change the trajectory of performance of the fund, but they way it has been marketed is another matter and I am very unhappy about it. I now have 12 months to see how the markets move and what I will do with the money when the NS&I bond matures.

JohnWinder

Which bit of the marketing unhappied you, and by whom?

PragueAddick

JohnWinder said:

Which bit of the marketing unhappied you, and by whom?

They allowed the advisor community to present it as a safe option, an ideal "ballast" for a SIPP, one of two ways in which I deployed it. Because the 20% is part of a suite of LS products up to "100%" the clear implication Vanguard themsleves made was that the 20% was the safest option.

Yes I know the risk factor figure says otherwise.

Prism

PragueAddick said:

JohnWinder said:

Which bit of the marketing unhappied you, and by whom?

They allowed the advisor community to present it as a safe option, an ideal "ballast" for a SIPP, one of two ways in which I deployed it. Because the 20% is part of a suite of LS products up to "100%" the clear implication Vanguard themsleves made was that the 20% was the safest option.

Yes I know the risk factor figure says otherwise.

Its still pitched as the 'safest' option. Vanguard's global bond fund is risk level 3. LS20, LS40 and LS60 are risk level 4. LS80, LS100 and the global equity funds are risk level 5.

Thing is, risk level just means predictability of returns, which usually means less volatility and less of a drop during a crash. Bonds did fall less than equities last year (2022), however equities have recovered significantly since then. 

From this point forward, bond funds will likely do better than cash and short term fixed savings if interest rates begin to fall sooner than expected or not if interest rates rise more than expected. Its not the actual interest rate that matters - its what people think the interest rate is going to be.

JohnWinder

They allowed the advisor community to present it as a safe option, an ideal "ballast" for a SIPP, one of two ways in which I deployed it. Because the 20% is part of a suite of LS products up to "100%" the clear implication Vanguard themsleves made was that the 20% was the safest option’

I feel your pain. But to be annoying, I doubt Vanguard has any control over what the advisor community says to clients; and ‘safest’ of several options doesn’t make it ‘safe’, like the cleanest of several toilets is not something you’d like to eat your lunch off. What to do? Bone up on personal investing so you can look under the bonnet of funds like Vanguard’s and make your own judgment about how risky they are, and so you are not reliant on advisors who neither have your interest as their primary concern the way you do nor know you as well as you know yourself. Smarter Investing by Tim Hale is a good book. The stakes are too high not to take as much control of it yourself as you’re capable of. Good luck.
Lastly, you could well be right about VLS20 and NSI for the next year. But VLS20 with stocks and 8 year duration bond funds is an investment for 10 years plus; NSI less so. Horses for courses.

dunstonh

The SRRI PragueAddick said:

JohnWinder said:

Which bit of the marketing unhappied you, and by whom?

They allowed the advisor community to present it as a safe option, an ideal "ballast" for a SIPP, one of two ways in which I deployed it. Because the 20% is part of a suite of LS products up to "100%" the clear implication Vanguard themsleves made was that the 20% was the safest option.

Yes I know the risk factor figure says otherwise.

 The KIID information follows criteria set by the EU, which is still in place under UK law.  It is not to do with advisers.  As it happens, advisers do not use the SRRI (the KIID risk score) as its too limiting to meet advice standards.   SRRI is based on the volatility of the fund over the past five years, so the more volatile the fund, the higher the risk rating will be. For funds that do not have a 5 year history ESMA lay down what alternative methodologies can be used to create the risk rating. 

Funds will act within their volatility range around 90-95% of the time and the various risk score models go by that 90-95% band  (the further you get to 100% and the longer the timescale you use, the higher the risk score will be for that particular asset)

DennisTenus

Prism said:

PragueAddick said:

JohnWinder said:

Which bit of the marketing unhappied you, and by whom?

They allowed the advisor community to present it as a safe option, an ideal "ballast" for a SIPP, one of two ways in which I deployed it. Because the 20% is part of a suite of LS products up to "100%" the clear implication Vanguard themsleves made was that the 20% was the safest option.

Yes I know the risk factor figure says otherwise.

Thing is, risk level just means predictability of returns, which usually means less volatility and less of a drop during a crash. Bonds did fall less than equities last year (2022), however equities have recovered significantly since then. 

I think most people would agree that an almost 15% drop is not "less of a drop" and very significant and I didn't invest at the top either.

If I don't need the money at the moment is it best I sit tight and hope that it does recover in the coming however many years?