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  • FIRST POST
    • Buddythomas
    • By Buddythomas 9th May 18, 10:02 PM
    • 3Posts
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    Buddythomas
    Is my investment too risky?
    • #1
    • 9th May 18, 10:02 PM
    Is my investment too risky? 9th May 18 at 10:02 PM
    Hi all

    Iím going to open an ISA on vanguard and was wondering If anyone else has invested in the 100% Lifestrategy fund?

    My goal is to invest £800-1000 a month into this for 10-15 years, am I right in thinking I can withdraw the dividends this will produce (only after year 10)? Or is this a massive rookie investor mistake....
Page 1
    • Drp8713
    • By Drp8713 9th May 18, 10:09 PM
    • 788 Posts
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    Drp8713
    • #2
    • 9th May 18, 10:09 PM
    • #2
    • 9th May 18, 10:09 PM
    In terms of absolute loss, the risk is extremely low, it is invested in thousands of underlying companies, diversified across sector and geography.

    In terms of volatility, the risk of a 40-50% drop is almost certain. As is the recovery afterwards.

    So the biggest risk is you. If you will shrug off the 50% drop and hang in there, its a sensible investment. If you are going to sell when you are 50% down and say stuff this for a game of soldiers, then it may not be for you.
    • BLB53
    • By BLB53 9th May 18, 10:16 PM
    • 1,266 Posts
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    BLB53
    • #3
    • 9th May 18, 10:16 PM
    • #3
    • 9th May 18, 10:16 PM
    It will depend on how you cope with volatility which is greater with 100% equities. However, until it happens you probably cannot know how you will react so it will be a learning curve. I would think it would be better to start off more conservative with say VLS 60 and take it steady.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • AnotherJoe
    • By AnotherJoe 9th May 18, 10:23 PM
    • 9,432 Posts
    • 10,435 Thanks
    AnotherJoe
    • #4
    • 9th May 18, 10:23 PM
    • #4
    • 9th May 18, 10:23 PM
    Hi all

    I!!!8217;m going to open an ISA on vanguard and was wondering If anyone else has invested in the 100% Lifestrategy fund?

    My goal is to invest £800-1000 a month into this for 10-15 years, am I right in thinking I can withdraw the dividends this will produce (only after year 10)? Or is this a massive rookie investor mistake....
    Originally posted by Buddythomas
    What do you mean "only after year 10 " ???? Are you under the impression you can only access the dividends after ten years? Or did you mean something else?

    FWIW if you do plan to access dividends this is likely the wrong fund for you, OTOH if you mean you dont plan to access dividends for ten years, you could start with this and then sell it in ten years time and buy a more dividends oriented fund.
    Or there are other things you could do which i wont go int here as its ten years off, perhaps.

    Many people, not just here have invested in the Lifestrategy funds, Vanguard are one of the biggest investment companies.

    Its not one I'd choose because I dont like its concentration in a few specific sectors in its somewhat artificial UK 25% so i'd pick a similar find that was more global without an artificial emphasis on the UK, but its "OK" and better than lots of other investments you could make.

    Whether its too risky is a matter of your attitude to risk, not the fund.
    If you will sell it all the first time it falls 30% or 20% or even 10%, then yes its too risky for you.

    Are you planning to buy the income or accumulation version?
    • Buddythomas
    • By Buddythomas 9th May 18, 10:24 PM
    • 3 Posts
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    Buddythomas
    • #5
    • 9th May 18, 10:24 PM
    • #5
    • 9th May 18, 10:24 PM
    Im not a panic seller I will quite happily hold and let it roll as the market has shown prices always go up

    Would this investment be better in an income or accumulation fund?

    After year 10 my plan is to be able to live off the dividends so would not be feasible before that (ran a compound calculation for a rough idea of returns)

    Thanks for the replies
    Last edited by Buddythomas; 09-05-2018 at 10:26 PM.
    • dunstonh
    • By dunstonh 9th May 18, 10:35 PM
    • 92,649 Posts
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    dunstonh
    • #6
    • 9th May 18, 10:35 PM
    • #6
    • 9th May 18, 10:35 PM
    I!!!8217;m going to open an ISA on vanguard and was wondering If anyone else has invested in the 100% Lifestrategy fund?
    Yes they have. Although its the second least popular fund (at just under £1bn) as you would expect given its high-risk profile and increased cost for what is effectively a global tracker (its not a tracker. its still a fettered fund of funds but it is the one fund in their multi-asset range that is closest to a tracker)

    am I right in thinking I can withdraw the dividends this will produce (only after year 10)
    Why would you draw the dividends if you are paying in monthly? You can draw what you like when you like but it defeats the purpose if you keep paying in monthly.

    My goal is to invest £800-1000 a month into this for 10-15 years,
    10 years is the absolute minimum you should really consider. There have been a number of 10 year periods where people have ended up with less than they paid in the bulk of the value at year 10 would have been there for less than 5 years. 15 years is considered a safer period.

    Or is this a massive rookie investor mistake....
    The most common mistake made by DIY investors is going in about their risk profile (either on behaviour, knowledge, understanding or capacity for loss). If you take a typical 1-10 risk scale, the average UK consumer falls between risk 4 and 7. You would be investing at risk 9 (some may even class it 10 but I allow space for bad diversification e.g. 100% into emerging markets or biotech funds). So, you would be investing higher than the average individual.

    Its one thing saying you accept the risk. Its another when you see the value fall by nearly a half. Whilst the value is low, that may not be an issue. However, as the value gets higher, the volatility will see periodic large falls. Can you handle that.

    I have a well trained client who suffered a £200k loss on a medium risk portfolio and they handled it. However, I have seen others suffer a £2k loss and cant handle it. Indeed, the ones that tend not to be able to handle it are the ones that are most vocal at the start saying they can.

    On this board, we have seen people say they can handle it and then when the recent minor fall occurred, they were getting worried after just 1-2% losses. So, think about it carefully.

    Would this investment be better in an income or accumulation fund?
    Makes no difference but I prefer income units. But then I wouldnt invest 100% into VLS100.

    After year 10 my plan is to be able to live off the dividends so would not be feasible before that (ran a compound calculation for a rough idea of returns)
    Did your model take into account nothing years and negative years or was it just straight line average return?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Buddythomas
    • By Buddythomas 9th May 18, 10:49 PM
    • 3 Posts
    • 1 Thanks
    Buddythomas
    • #7
    • 9th May 18, 10:49 PM
    • #7
    • 9th May 18, 10:49 PM
    Just a standard compound return of 5% each year,

    My goal is to be able to draw enough each year to live off and quit the rat race. simple in thought but endless factors that can change that in the future.

    Hmm maybe not the best choice to go all in on
    • AnotherJoe
    • By AnotherJoe 9th May 18, 11:34 PM
    • 9,432 Posts
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    AnotherJoe
    • #8
    • 9th May 18, 11:34 PM
    • #8
    • 9th May 18, 11:34 PM
    £1000 a month for 15 years might return you, at a guess, from dividends, £10k a year tops inflation adjusted. Can you live off that?

    In any case I wouldn't want to live off the dividends on Vanguard because it Isnt designed to pay out dividends, they are a by product, so you would also need to be selling units to get the "natural yield". If you want to live off dividends I'd have thought you'd need double what you are planning, and ina fund designed to pay out dividends,

    Nothing wrong though, as I said, in starting witha fund aimed at growth and then switching to one aimed at income when you want income. I just wouldn't start with VLS myself
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