Vanguard funds for a new investor

Cococatdog

Hi - probably a really silly question.  I'm looking to take control of my workplace SIPP and want to start investing in index tracker funds to forget about for the next 30 years.  

I see Vanguard Funds Plc FTSE All-World UCITS ETF (USD) Accumulating (VWRP) recommended and think it would suit my needs but just wanted to check what the significance of "USD" in the title is?

It's priced in GBP on the SIPP platform so just slightly confused as to what the USD part means.  As an all world tracker I assume its performance from a UK perspective will be quite heavily influenced by the USD/GBP exchange rate but just wanted to check if there's some other exposure I haven't considered / understood?

TIA!

Albermarle

The global index it tracks is priced in Dollars.
So it is converted into Pounds for UK investors.

As an all world tracker I assume its performance from a UK perspective will be quite heavily influenced by the USD/GBP exchange rate

Correct

It is possible to buy hedged index funds, that remove that uncertainty.
However the uncertainty can be to your advantage as well as to your disadvantage, so by hedging you are kind of gambling with exchange rates, plus the hedged funds are more expensive and I am not sure of Vanguard offer one or not.

Hoenir

Cococatdog said:

  I'm looking to take control of my workplace SIPP and want to start investing in index tracker funds to forget about for the next 30 years.  

Wouldn't recommend this route. Either be fully active yourself. Or pass control over to a fund manager that uses passive funds in an active manner (a multi asset fund). For example as a well known brand - Vanguard Life Strategy. Investing is cyclical in nature. Better to have the portfolio tweaked as events unfold. 

Sam_666

Why ETF? If to save on platform fees, there are better options.
It would be better to invest in global tracker fund domiciled in UK, many cheap options.

InvesterJones

Hoenir said:

Cococatdog said:

  I'm looking to take control of my workplace SIPP and want to start investing in index tracker funds to forget about for the next 30 years.  

Wouldn't recommend this route. Either be fully active yourself. Or pass control over to a fund manager that uses passive funds in an active manner (a multi asset fund). For example as a well known brand - Vanguard Life Strategy. Investing is cyclical in nature. Better to have the portfolio tweaked as events unfold. 

When was the last time Vanguard Life Strategy was 'tweaked' as events unfolded?

Labtebricolist

VWRP is a perfect set and forget ETF.  It is the main ETF in my pension fund - I have around 75% in this with 20 per cent in bonds and 5 per cent in a gold ETF.  As you get older there may be an argument for complementing it with a bond fund or other non-stock assets, but not 30 years out.

Bear in mind that active management and/or fund of funds are very unlikely to beat the market average over a 30 year time horizon, especially when their significantly higher fees are taken into account.  Almost all of the research supports this and, for the majority of people, a passive approach tracking a well diversified index (such as the FTSE all world tracked by VWRP) is the most sensible approach.

Cococatdog

Sam_666 said:

Why ETF? If to save on platform fees, there are better options.
It would be better to invest in global tracker fund domiciled in UK, many cheap options.

Yes exactly - to save on platform fees.  I have employer matched contributions so new money going in needs to go into Hargreaves Lansdown - they have unlimited fund fees but ETF fees are capped at £200 per year so seemed like a good idea.  What do you mean by better options?  Better ETFs or something other than an ETF that would be better?

Could you give an example of a "global tracker fund domiciled in UK" so I can see what you mean? 

Thanks for your help!

Cococatdog

Hoenir said:

Cococatdog said:

  I'm looking to take control of my workplace SIPP and want to start investing in index tracker funds to forget about for the next 30 years.  

Wouldn't recommend this route. Either be fully active yourself. Or pass control over to a fund manager that uses passive funds in an active manner (a multi asset fund). For example as a well known brand - Vanguard Life Strategy. Investing is cyclical in nature. Better to have the portfolio tweaked as events unfold. 

I've been reading around and thought a completely passive index tracker was the best option over the long term but maybe I've been influenced by the FIRE community on reddit a bit too much?  Isn't any tweaking only as good as the fund manager?  Will have a look at Vanguard life strategy though - thanks.

Cococatdog

Labtebricolist said:

VWRP is a perfect set and forget ETF.  It is the main ETF in my pension fund - I have around 75% in this with 20 per cent in bonds and 5 per cent in a gold ETF.  As you get older there may be an argument for complementing it with a bond fund or other non-stock assets, but not 30 years out.

Bear in mind that active management and/or fund of funds are very unlikely to beat the market average over a 30 year time horizon, especially when their significantly higher fees are taken into account.  Almost all of the research supports this and, for the majority of people, a passive approach tracking a well diversified index (such as the FTSE all world tracked by VWRP) is the most sensible approach.

Thanks - super helpful!  When you say 20% in bonds, do you mean directly invested in bonds, or in a bond based fund? 

I was also aiming for 80% equity approach for now, would you count cash in ISAs towards the 20% if I'm willing to earmark it as retirement funds?

Labtebricolist

@Cococatdog - you can do either, and there are significant differences in risk profile between the two, before even getting into different types of bonds.  As a general rule, when you get closer to retirement there is a good argument for buying individual bonds and holding to maturity, on account of interest rate risk.  

If you are just looking to use bonds to try and reduce the volatility of the portfolio / resilience to an equities crash then funds will work just fine.  Research shows that holding up to 20% in bonds is a good volatility dampener - without having a very significant impact on the upside.  Vanguard have various bond ETFs, but there are plenty of other good options.  If memory serves there is a decent list on the bankeronwheels website.

Hoenir

InvesterJones said:

Hoenir said:

Cococatdog said:

  I'm looking to take control of my workplace SIPP and want to start investing in index tracker funds to forget about for the next 30 years.  

Wouldn't recommend this route. Either be fully active yourself. Or pass control over to a fund manager that uses passive funds in an active manner (a multi asset fund). For example as a well known brand - Vanguard Life Strategy. Investing is cyclical in nature. Better to have the portfolio tweaked as events unfold. 

When was the last time Vanguard Life Strategy was 'tweaked' as events unfolded?

Believe it to be quarterly. The internal fund allocations are far from fixed / rigid. VLS is an actively managed fund of passive funds. Hence why they've never benchmarked the range against any indices.  

As far as the UK is concerned. Vanguard only arrived on these shores in 2010. Pretty much a one way street in the time period since.