How many funds needed to replicate Vanguard LS60?

Ibrahim5

It's interesting combining a VLS fund with a cheap global tracker. Instead of buying VLS80 you can use 50% VLS60 plus 50% cheap global tracker eg HSBC FTSE All world. You end up with lower fees, less UK but still 80% equity. Whenever you buy or sell you just try and keep the two funds at the same value which keeps your portfolio balanced.

Dazed_and_C0nfused

Ibrahim5 said:

It's interesting combining a VLS fund with a cheap global tracker. Instead of buying VLS80 you can use 50% VLS60 plus 50% cheap global tracker eg HSBC FTSE All world. You end up with lower fees, less UK but still 80% equity. Whenever you buy or sell you just try and keep the two funds at the same value which keeps your portfolio balanced.

Interesting info.

Have you ever thought about becoming an IFA 😉

Ibrahim5

IFAs always have to have lots more than two funds, to show that they are really clever and to demonstrate to the customer that they wouldn't be able to do it themselves.

leosayer

The beauty of the Life Strategy funds is that it forces you to stick to your chosen allocation whatever the market is doing. 

This is generally seen to be a good thing because it avoids 'active' decision making which can be get influenced by things like loss aversion, market timing and making predictions.

Personally, I don't like the UK home bias of these funds which seems to be done for marketing reasons.  However I remember Vanguard wrote a paper justifying home bias because of evidence it reduced volatility which I found hard to believe. I think Ben Felix did a YouTube video on this topic 

Pat38493

Keep in mind that if your platform has transaction fees, rebalancing your portfolio will cost more in charges, the more funds you have, although the fees are usually pretty low.

Personally I don't have anything in lifestyle funds, or even mixed asset funds - I have a combination of global trackers, global bonds, with small additional doses of small cap and emerging markets (and a significant amount in cash / money markets as I am planning to start decumulation within the next year).

dunstonh

Ibrahim5 said:

IFAs always have to have lots more than two funds, to show that they are really clever and to demonstrate to the customer that they wouldn't be able to do it themselves.

Your solution has more than two funds.  So, how does your reasoning apply to you?   Indeed, you have increased fund count to 18 funds compared to 17 with VLS alone.

So your advice must be bad going by your own reasoning.

vacheron

leosayer said:

The beauty of the Life Strategy funds is that it forces you to stick to your chosen allocation whatever the market is doing. 

This is generally seen to be a good thing because it avoids 'active' decision making which can be get influenced by things like loss aversion, market timing and making predictions.

Personally, I don't like the UK home bias of these funds which seems to be done for marketing reasons.  However I remember Vanguard wrote a paper justifying home bias because of evidence it reduced volatility which I found hard to believe. I think Ben Felix did a YouTube video on this topic 

I was listening to this in the car literally yesterday.

I believe they mentioned that a high home bias in average default UK pension funds and other fund providers was simply because it makes it easier to sell to the average UK consumer. 

What they also mentioned (at around 2 minutes 30 in) is that the average UK home bias in pension funds is nowhere near as high as many countries. I believe they mentioned many that were 30-50% that Australia has a 66% home bias with a 2% global market allocation, and many of these are mining companies, so a very high sector risk to boot! 

Personally, I started an ISA to Invest my son's child allowance (plus a bit) into a Vanguard ISA when he was born 12 years ago as it worked well for automatic monthly drip-feeding. At the time I couldn't decide between VLS60 or 80 so put 50% in each to make a kind of bespoke VLS 70.

However, as I continue to lean more about long term investing, I am also considering switching his monthly VLS 60 contribution to somethink like their FTSE Global All Cap which will slowly dilute both the bond allocations and the UK Bias of his current portfolio as time progresses. 

bolwin1

If you are happy with the general Vanguard LS funds / approach, isn't it just a case of selling some of your VLS60 funds & buying VLS80 or VLS40 to maintain whatever equity / bond split you are aiming for ? Seems more straightforward than trying to recreate VLS. 

dunstonh

I believe they mentioned that a high home bias in average default UK pension funds and other fund providers was simply because it makes it easier to sell to the average UK consumer. 

Home bias has long been present in portfolios.  However, with US market cap increasing and most incentives for investing in UK equity being removed,  large numbers of portfolios have moved closer to market cap and home bias has gone away.    The scale of the removal of home bias is staggering and has had a massive impact on UK share prices and perception of the UK stockmarket.

The home bias argument has gone away.      And as I mentioned before, since June 2022, Vanguard have given IFAs a version of VLS without home bias but yet to do so for retail investors.

Pat38493

dunstonh said:

I believe they mentioned that a high home bias in average default UK pension funds and other fund providers was simply because it makes it easier to sell to the average UK consumer. 

The home bias argument has gone away.      And as I mentioned before, since June 2022, Vanguard have given IFAs a version of VLS without home bias but yet to do so for retail investors.

Slight aside but what is the reason why some of these funds are only available to IFAs?  I heard the same is true for most of the Dimensional funds.  I would have thought that the more people buy the fund, whether retail investors or advisers, the happier they will be.