Nutmeg, Vanguard Lifestrategy or Ready-Made Portfolio?
Comments
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Consider the case where you have £1000 in VLS 80 and £1000 in VLS 20. Overall, you start with a 50:50 allocation of equities to bonds.While I agree with everyone that the OP should just have the one VLS60, I wouldn't have thought that having all 5 would get out of balance as they are all automatically rebalanced on an ongoing basis to keep their original percentage splits?
Then the value of the equities holdings rapidly doubles in value, while the value of the bonds stay static. You now have £1800 in VLS 80 and £1200 in VLS 20. You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.
The drift is small, but not nothing.0 -
Yes, thinking it through I was wrong as it would get out of balance, but I think in your example the split would actually be bigger at 67% equities and 33% bonds?Consider the case where you have £1000 in VLS 80 and £1000 in VLS 20. Overall, you start with a 50:50 allocation of equities to bonds.
Then the value of the equities holdings rapidly doubles in value, while the value of the bonds stay static. You now have £1800 in VLS 80 and £1200 in VLS 20. You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.
The drift is small, but not nothing.0 -
No.
Yes, thinking it through I was wrong as it would get out of balance, but I think in your example the split would actually be bigger at 67% equities and 33% bonds?You now have a 56:44 allocation of equities to bonds, even after both funds have rebalanced internally.
The drift is small, but not nothing.
In the example there is £1800 in VLS 80. So 80% of that is £1440 of equities and the rest of it is not.
There is also £1200 in the VLS 20. So 20% of that is £240 of equities and the rest of it is not.
So altogether you can see there is a total of £1680 of equities, and the rest is not.
As there is £3000 of total assets (one fund worth £1800 and another worth £1200), you can see that the £1680 of equities would represent 56% of the £3000 total.
The maths is the same as what I was using back in post #28
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I do think it will be interesting to see how the funds perform against each other, will make it a bit more exciting rather than just having the one at 60%.
&Can anyone see any other real issues with keeping my 5 vanguards
Something to consider...
Many investment newcomers achieve poor results; one of the reasons is that they pursue things that are 'exciting' rather than things that are sensible. Exciting investments often prove more volatile, which can mean they move up quickly but can also mean they move down quickly. All investors, but newcomers in particular, are very good at chasing markets that have already risen a lot and running away from markets that have already fallen a lot. This behaviour ruins many people's returns.
If you keep hold of all 5 LifeStrategy funds, then come the next major market downturn it may well, as you indicate, prove interesting to observe how they behave differently. But, there' also a possibility that, faced with a large and highly visible drawdown on your LS100 fund (as the most volatile of the 5), you become fearful about it as a result. Fear causes investors to sell things (things that they rightly should be buying). That selling is often rationalised as 'protecting capital' or 'adjusting risk appetite' and so on, but it's usually just an attempt to make the emotional pain induced by the loss-making position go away.
Sensible investing is principally about avoiding making avoidable mistakes. I think that by retaining 5 separate LS funds instead of simplifying to the single fund you've unnecessarily increased your chances of making this sort of avoidable mistake. You may not think you'd do what I describe above, and you might not do, but why take on a risk you don't need to. As a newbie investor with little or no prior experience you need all the protection from yourself that you can get.0 -
Fair enough - when he said the equity value had doubled I took that to mean that the VLS80 now had £1600 equity and still £200 bonds, but I suppose in a situation like that, the automatic rebalance would have meant £160 of these equities would be sold and bonds to that value bought to get back to the 80/20 split?bowlhead99 wrote: »No.
In the example there is £1800 in VLS 80. So 80% of that is £1440 of equities and the rest of it is not.:)0 -
Can someone confirm that i wont be charged anything by Hargreaves Lansdown if i sell off 4 of my 5 Vanguards and put all the money into the Vanguard 60? From all the advice given on here ive decided i might as well do that, as long as it wont cost me anything in fees.
Also, would it be a sensible thing for me to just have that Vanguard 60 and to put next years ISA allocation into it? Id probably drip feed my money into it over the year.
Being new to this i just want to make sure that i am giving myself a decent chance of making some good returns over the long term. If it would make sense to buy another form that perhaps has other assets not in the vanguard had anyone got any recommendations?0 -
Yes, HL don't charge for buying or selling funds such as the Vanguard ones. There used to be a tiny levy on new purchases but that's now gone. If you want to be out of the market for the least time choose the 'Switch into another fund' option instead of the Sell option. I've never tried it on 4 funds all at once but the worst that can happen is you have to do them one at a time
If I were in your shoes I'd stick with the VLS60 for the time being until you gain some more experience. It's a fund constructed in such a way that it's fine to use on its own0 -
Can someone confirm that i wont be charged anything by Hargreaves Lansdown if i sell off 4 of my 5 Vanguards and put all the money into the Vanguard 60? From all the advice given on here ive decided i might as well do that, as long as it wont cost me anything in fees.
Also, would it be a sensible thing for me to just have that Vanguard 60 and to put next years ISA allocation into it? Id probably drip feed my money into it over the year.
Being new to this i just want to make sure that i am giving myself a decent chance of making some good returns over the long term. If it would make sense to buy another form that perhaps has other assets not in the vanguard had anyone got any recommendations?
yep, and as suggested, use the "switch" option its just easier, unless you wanted with some or all of the money to "emphasise" some areas (perhaps only in minor way) that VLS wont be in to much extent. Or you might want to dial back the UK element (VLS is 25%) by bumping up your L&G fund at the same time. (Or you might not want to. But now would be a good time to do it if you are going to.)
Speaking of tweaks like that, because I'm investing for 15-20 years out, I think that longer term Biotech and Far East will do better than the generality so i have about 5% in those two*. Others do similar with property and smaller companies (because VLS is by its nature large companies)
Just throwing all these considerations in now whilst you are making this change. Not suggestions, just thoughts.
* they are also more volatile = risky. So maybe dont fit your risk profile. OTOH 5% wont hurt
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The question of "Robo Advisors" appears to be outside of the regular contributors experience and dismissed without discussionhttps://uk.trustpilot.com/review/nutmeg.com I have read a number of articles recently that suggest returns are significantly better than their human counterparts and significantly cheaper.0
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Ive been educatinf myself on investing over the last month or so and have set up a stocks and shares ISA via HL. I have the following:
Legal and General International Index Trust Accumulation
Vanguard Lifestrategy 20% equity accumulation
Vanguard lifestrategy 40% equity acc
Vanguard lifestrategy 60% equity acc
Vanguard lifestrategy 80% equity acc
Vanguard lifestrategy 100% equity acc
My money is more or less spread equally between these 6.
Just to play devils advocate here: it is often suggested that one has several pots of money, especially when approaching or in retirement, with different investment horizons. Near term cash pot, through to long term high-equity proportion pot.
OK, six pots may be too many, but would it not be reasonable to use different LS's for these pots? LS 100 for the pot that you plan not to touch for quite some time, LS 20 for fairly near term use pot? In theory, performance would equal LS60, but practically and emotionally, maybe not.
C0
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