First Time DIY Portfolio

Prism

Just a quick addition, that bond fund does actually use hedging but it you need to dig into the Key Investor Info Document to find it. I use the Vanguard short term bond index which also hedges.

RichardS

I’m wondering now, having seen how complex this can be and how easily it might be to get things wrong, if I might be better off just creating two LifeStrategy funds with Vanguard - maybe an LS60 for the Pension and an LS40 for the ISA.  I’d certainly save some money on charges (particularly on my pension). 

RichardS

I just came across this video and found it really useful. Maybe the VLS route is not the answer and I was on the right track anyway https://youtu.be/y87aYPWAdas?si=MCub3IuSmD0dMoU2

dunstonh

RichardS said:

I’m wondering now, having seen how complex this can be and how easily it might be to get things wrong, if I might be better off just creating two LifeStrategy funds with Vanguard - maybe an LS60 for the Pension and an LS40 for the ISA.  I’d certainly save some money on charges (particularly on my pension). 

VLS funds are not bad.    However, you should check with your IFA (assuming its an IFA and not an FA).  Many IFA portfolios outperform the VLS funds.    So, in your hope to reduce charges, you may end up reducing returns.       Alternatively, consider some of the other multi-asset fund solutions.

For example, below is VLS60 in red and a popular IFA MPS in grey that uses underlying passives and is slightly cheaper (0.20 vs 0.22)than VLS at the same risk level.  Even if you add in the adviser fee, it has returned more.  So, don't assume that saving charges will improve returns.  It may but it may not.





And there is really no point mixing and matching VLS40 and VLS60.   The differences will be minimal.  But just noting that your 3 fund solution was high risk, and vls 40 and vls 60 are cautious to moderate and moderate, respectively.   This moving around the risk scale would be something you need to fix.

JohnWinder

Grain of salt and critical thinking needed when watching that video. At 1.45 they’re talking about the VLS series most of which hold bonds for their diversification benefit, then they say you only need one global (equity, not said but implied) fund for all the diversification you need. They’ve ignored the bonds diversification benefit. Sloppy script editing or a bit careless with the free talk I suggest. They completely dismiss ‘home bias’; they’re likely right but we should hear the arguments for it, and they seemed overcome with recency bias as they come down on bonds like a ton of bricks. You’ll hear equally persuasive presentations coming to different conclusions.

JohnWinder

Many IFA portfolios outperform the VLS funds. 

We all write it but be careful reading it. There’s no ‘present tense’ when it comes to returns. There are past returns and future returns. Thus, ‘many IFA portfolios have outperformed the VLS funds’. The future….who knows.

RichardS

Thanks @JohnWinder - it’s very easy to watch and read all of this stuff and simply believe it if (like me) you are coming from a starting point of very little knowledge. 

JohnWinder

Portfoliovisualizer.com is your friend for picking up some historical knowledge. You’d think bonds were a death sentence listening to that video. Back test an asset allocation of 100% US stocks vs 100% US bond market or even boring old 10 year Treasuries from 2000 to 2016. Bonds beat stocks with a whole lot less volatility. Not everyone can leave their portfolio, untouched, to its gyrations for 17 years while they wait for what’s supposed to happen to happen.

RichardS

So I get how one global index fund will give me full diversification in that basically I’m buying a share in every stock across the world.

But what about bonds?  Is there a standard global bonds index that gives you full diversification or is it just not that simple with bonds?  Can anyone recommend a bond index that’s available on InvestEngine that I could select alongside a Global Equities Index and which would give me a reasonable starting point. I’m thinking 60/40 split for my ISA.   I can see some bond indexes on there but nothing that screams GLOBAL BOND INDEX or anything like that 😀

MK62

Vanguard do a range of global bond index funds and ETFs.......perhaps the one that best fits best with the single diversified bond fund theme, is the Vanguard Global Bond Index fund.

BTW, that fund is held in the Lifestrategy series of "fund of funds" offerings (apart from VLS100 of course as thats 100% equities)