Vanguard Direct site - which fund in case of stock market crash?
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I suppose the global bond index fund is a kind of VLS 0
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Although VLS funds weren't around during previous equity crashes, individual index funds were, and investors previously did and still do buy individual index funds in equities and bonds and rebalance the funds themselves. With Vanguard LifeStrategy funds the allocations are professionally selected, regularly rebalanced and more diversified than a few individual indexes, so no reason to think that they would not do as well or better than individual indexes have done in previous equity crashes.
It depends what you want your fixed income allocation to do. When capitalism has a crisis investors flock to state bonds (and gold). I don't believe corporate bonds will help much in a crash, which is what the OP was asking about0 -
I think sometimes newer investors must be frustrated by the advice about investing according to their risk tolerance and other slightly abstract concepts.
I can remember my IFA going through his list of profiling questions; "Would you go skateboarding with knee pads, elbow pads, both or none" etc etc..."You come out as medium with a bit of income and a bit of growth".
It wasn't until I went online and researched the historical returns of different asset class allocations, max draw downs, draw down durations etc that I had some numbers I could use as a starting point to having an honest discussion with myself.
To try and give the OP a direct-ish answer assuming this is long-term investing...
1. If you're starting out (20s) and plan on investing monthly then i'd be socking it away in equities and let the market do its thing over multi-decades.
2. If I was older and it was a lump sum i'd be mentally working out what sort of figure I could lose from my savings before i'd start getting jumpy and thinking about crystallizing losses.
Accepting that bonds are in a slightly unusual place at the moment there is a wealth of information on how the market has behaved historically which should be able to guide you in your asset allocations.
Off the top of my head I think the average bear market fall is a touch over 30% although 00-03 and 08-09 weren't far off 50%.
Good luck in whatever you decide.0 -
It depends what you want your fixed income allocation to do. When capitalism has a crisis investors flock to state bonds (and gold). I don't believe corporate bonds will help much in a crash, which is what the OP was asking about
i think it very much depends on the situation. In a sovereign debt crisis people might think they have overpaid for government bonds and would prefer to move their money into corporates. But yes on average I agree corporate bonds are riskier but you get rewarded with a higher return.0 -
I think it very much depends on the situation. In a soverign debt crisis people might think they have overpaid for government bonds and would prefer to move their money into corporates.
Possibly but I think I would be working on the basis that corporate bonds will tend to correlate very closely to equities in a time of real market stress. Very short duration (ERNS etc) may be a little safer.0 -
It depends what you want your fixed income allocation to do. When capitalism has a crisis investors flock to state bonds (and gold). I don't believe corporate bonds will help much in a crash, which is what the OP was asking about
But as I pointed out, LifeStrategy funds are skewed towards government bonds.0 -
I see they do 100% bond funds as well...?
Are bond funds immune to a correction? More money has been invested by UK investors in bond funds than equity funds in recent months. Sometimes there's no where to hide. Though if one is investing for the longer term. Riding out the waves is simply part of being an investor.0 -
ValiantSon wrote: »But as I pointed out, LifeStrategy funds are skewed towards government bonds.
There is still a high proportion of corporate bonds - which won't help in an equity crash. Again the OP was specifically asking about a crash - not whether bonds (of all kinds) are generally a good thing to have in your portfolio.0 -
There is still a high proportion of corporate bonds - which won't help in an equity crash. Again the OP was specifically asking about a crash - not whether bonds (of all kinds) are generally a good thing to have in your portfolio.
Well, initially I was correcting an implicit error that you made by suggesting that LifeStrategy funds were full of corporate bonds and that you would be better with government bonds, so my point still stands.
The whole point of having a mix of both is exactly because they may well behave differently at different times. It is all part of diversification. Holding just government bonds could be just as bad as holding just corporate bonds. There is no guarantee with any investments, but diversification is really important in minimising exposure to risks.
It is also not a fact that corporate bonds will fall in line with falls in the value of equities. This may happen, but it may not.0 -
ValiantSon wrote: »It is also not a fact that corporate bonds will fall in line with falls in the value of equities. This may happen, but it may not.
Both equities and corporate bonds will be influenced by the future direction of interest rates.
Unless there perpetual in nature. Bonds mature. Refinancing of corportate bonds for companies is currently very cheap. Does little for medium to longer term returns.0
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