Invest entirely in vanguard life strategy fund? UK investor looking for advice

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Topic Author
drldrl
Posts: 5
Joined: Fri Apr 16, 2021 3:44 pm

Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by drldrl »

I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.

Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
TedSwippet
Posts: 3637
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by TedSwippet »

Welcome.
drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible?
Yes! It's one of the options suggested in the wiki: Investing from the UK - Bogleheads
drldrl wrote: Fri Apr 16, 2021 4:09 pm It seems very simple and almost too easy, is there something I'm missing?!
The potential for boredom and itchy fingers? Starting out on this path is really the easy part. It's the sticking to it that some people find hard.
Topic Author
drldrl
Posts: 5
Joined: Fri Apr 16, 2021 3:44 pm

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by drldrl »

TedSwippet wrote: Fri Apr 16, 2021 4:50 pm Welcome.
drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible?
Yes! It's one of the options suggested in the wiki: Investing from the UK - Bogleheads
drldrl wrote: Fri Apr 16, 2021 4:09 pm It seems very simple and almost too easy, is there something I'm missing?!
The potential for boredom and itchy fingers? Starting out on this path is really the easy part. It's the sticking to it that some people find hard.

Thanks!
Yes I can imagine that being hard so I hope by investing and forgetting that I can remove temptation as much as possible.
Is there any point in spreading assets to different providers giving low cost index equity and bond funds?
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.
You don't tell us your age. If you are over 50, 80% equities is heroic. Sticking to that in the next bear market will be hard.

If you are employed by someone else, there will be a company pension scheme (NEST by default, I believe). Usually there is a perfectly sensible default scheme in there. NEST is perfectly fine and run in line w Boglehead principles (very low cost, diversified).

Often employers match contributions - whatever up to that limit is, you should grab it (usually something like 5% of gross salary if your employer does a match. They are legally obligated to contribute 4% I believe). Also if they practice "salary surrender" then your contribution goes in gross of tax and possibly gross of National Insurance. That's like throwing a bonus 13.8% of your contribution in for free (ie employer NI on your contribution).

Particularly if you are in the 40% tax rate band, then pensions start to look quite attractive.
Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
As Ted Swippet notes, the hard part is sticking to the core disciplines:

- no matter how bad the news in the world & the stock market, keep contributing
- no matter how bad/ good the news, keep buying (selling) equities to rebalance

Vanguard Lifestrategy funds are excellent ways to keep the discipline. All you have to do is make sure the direct debit keeps running, and not to pay any attention to your actual balance, except say once a year to benchmark your progress against your financial goals.

Example w my spouse. We did ISA into Lifestrategy 60:40 on about 1st April 2020. Which was more or less the market bottom so that has gone up +24% ish - and of course I wish we had done 80:20 or 100:0. This year, I feel markets have had a run that they will not repeat easily, and also that her long term risk/ return goals are more like 50: 50. She is reasonably near full retirement in a few years, and this is mainly funded from a small inheritance.

So we did this year's contribution around 25th March at 40:60, thus averaging to about 50:50.

My own view is the new strains of the virus are loose and spreading rapidly - P1 from Brasil in particular, that the vaccines don't seem to work on (or at least not as well). So a lot of the optimism re economic recovery will proved to be misplaced, and we will have renewed lockdowns. And that the markets are not pricing that bad news in, as yet. Of course, that also means more stimulative action by Central Banks and governments -- so markets could even go up.

Fire and forget.
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

drldrl wrote: Sat Apr 17, 2021 2:19 am
TedSwippet wrote: Fri Apr 16, 2021 4:50 pm Welcome.
drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible?
Yes! It's one of the options suggested in the wiki: Investing from the UK - Bogleheads
drldrl wrote: Fri Apr 16, 2021 4:09 pm It seems very simple and almost too easy, is there something I'm missing?!
The potential for boredom and itchy fingers? Starting out on this path is really the easy part. It's the sticking to it that some people find hard.

Thanks!
Yes I can imagine that being hard so I hope by investing and forgetting that I can remove temptation as much as possible.
Is there any point in spreading assets to different providers giving low cost index equity and bond funds?
Almost certainly not.

If one is sophisticated one can do that BUT even (especially?) those people who like to tinker and hold lots of different funds, then fail to observe the basic disciplines. They let their equity percentage drift up in bull (rising) markets, and down in bear (falling) markets. I hold up my hand. My best strategy has tended to be benign neglect (pensions are a pain to look up, so I wind up only checking them once a year or so).

Rather, Vanguard is a solid company, one of the world's largest fund managers. Your assets have separate custody, so if something happened to VG then the Official Receiver or the FCA would simply arrange for another fund management company to take over management of the fund (this has happened before).

The Vanguard platform is not the cheapest (that annoying 0.15% extra fee on all assets). Nonetheless I use it, because the User Interface is quite simple and easy to understand, and the fees are transparent. To just hold 1 Vanguard fund, there is undoubtedly a cheaper platform out there - Ted Swippet may have some ideas.

I would just invest in the 80:20, on a regular monthly basis, and forget about it.

But do make sure you are using employer pension benefits to its full extent. And, if you are in the 40% tax bracket, and in particular if your employer uses Salary Surrender, then consider upping your pension contribution.

Your big enemy in this will be your own behaviour. It is the strategy of precommitment, and then holding to that commitment, which is really tough. LS 80:20 is a good way to hold yourself to that commitment. However when the fund is down say -20% in a bear market*, then you will really find out whether you can hold to your precommitment.


* technically a bear market ceases to be a "correction" and becomes a "bear" when markets have fallen 20%. Thus in the 80-20 fund, potentially you would be down -16% (or a bit more if bond markets also fall at the same time) at that point. Rest assured, if you check your balance, it will hurt.

Most of us just shut off our screens in 2008/09 because markets were down nearly 50% at one point. Half my retirement savings ... wiped out. Almost by accident, for tax reasons, I made a big pension contribution in January 2009 -- "first, you must be lucky" was Napoleon's advice to his generals.
Topic Author
drldrl
Posts: 5
Joined: Fri Apr 16, 2021 3:44 pm

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by drldrl »

Valuethinker wrote: Sat Apr 17, 2021 2:37 am
drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.
You don't tell us your age. If you are over 50, 80% equities is heroic. Sticking to that in the next bear market will be hard.

If you are employed by someone else, there will be a company pension scheme (NEST by default, I believe). Usually there is a perfectly sensible default scheme in there. NEST is perfectly fine and run in line w Boglehead principles (very low cost, diversified).

Often employers match contributions - whatever up to that limit is, you should grab it (usually something like 5% of gross salary if your employer does a match. They are legally obligated to contribute 4% I believe). Also if they practice "salary surrender" then your contribution goes in gross of tax and possibly gross of National Insurance. That's like throwing a bonus 13.8% of your contribution in for free (ie employer NI on your contribution).

Particularly if you are in the 40% tax rate band, then pensions start to look quite attractive.
Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
As Ted Swippet notes, the hard part is sticking to the core disciplines:

- no matter how bad the news in the world & the stock market, keep contributing
- no matter how bad/ good the news, keep buying (selling) equities to rebalance

Vanguard Lifestrategy funds are excellent ways to keep the discipline. All you have to do is make sure the direct debit keeps running, and not to pay any attention to your actual balance, except say once a year to benchmark your progress against your financial goals.

Example w my spouse. We did ISA into Lifestrategy 60:40 on about 1st April 2020. Which was more or less the market bottom so that has gone up +24% ish - and of course I wish we had done 80:20 or 100:0. This year, I feel markets have had a run that they will not repeat easily, and also that her long term risk/ return goals are more like 50: 50. She is reasonably near full retirement in a few years, and this is mainly funded from a small inheritance.

So we did this year's contribution around 25th March at 40:60, thus averaging to about 50:50.

My own view is the new strains of the virus are loose and spreading rapidly - P1 from Brasil in particular, that the vaccines don't seem to work on (or at least not as well). So a lot of the optimism re economic recovery will proved to be misplaced, and we will have renewed lockdowns. And that the markets are not pricing that bad news in, as yet. Of course, that also means more stimulative action by Central Banks and governments -- so markets could even go up.

Fire and forget.
Thanks for the advice!

I'm turning 30 this year and have spent the latter half of my 20s sorting my life and financial affairs out.
House purchase, wedding, 1 child and one on the way, overdrafts and cards from student days.

I am in the 40% band (my wife currently receives a salary of less than the personal tax allowance whilst she works part time to complete our family) and we are both part of the NHS pension scheme so contribute 12.5% and 5% each and get the generous employer contributions ontop.

I'll do my best not to look then. Checking once a year is a good idea, I'll just have to fight the temptation. I think I'll set it at the time the ISA allowance renews.
Topic Author
drldrl
Posts: 5
Joined: Fri Apr 16, 2021 3:44 pm

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by drldrl »

Valuethinker wrote: Sat Apr 17, 2021 2:47 am
drldrl wrote: Sat Apr 17, 2021 2:19 am
TedSwippet wrote: Fri Apr 16, 2021 4:50 pm Welcome.
drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible?
Yes! It's one of the options suggested in the wiki: Investing from the UK - Bogleheads
drldrl wrote: Fri Apr 16, 2021 4:09 pm It seems very simple and almost too easy, is there something I'm missing?!
The potential for boredom and itchy fingers? Starting out on this path is really the easy part. It's the sticking to it that some people find hard.

Thanks!
Yes I can imagine that being hard so I hope by investing and forgetting that I can remove temptation as much as possible.
Is there any point in spreading assets to different providers giving low cost index equity and bond funds?
Almost certainly not.

If one is sophisticated one can do that BUT even (especially?) those people who like to tinker and hold lots of different funds, then fail to observe the basic disciplines. They let their equity percentage drift up in bull (rising) markets, and down in bear (falling) markets. I hold up my hand. My best strategy has tended to be benign neglect (pensions are a pain to look up, so I wind up only checking them once a year or so).

Rather, Vanguard is a solid company, one of the world's largest fund managers. Your assets have separate custody, so if something happened to VG then the Official Receiver or the FCA would simply arrange for another fund management company to take over management of the fund (this has happened before).

The Vanguard platform is not the cheapest (that annoying 0.15% extra fee on all assets). Nonetheless I use it, because the User Interface is quite simple and easy to understand, and the fees are transparent. To just hold 1 Vanguard fund, there is undoubtedly a cheaper platform out there - Ted Swippet may have some ideas.

I would just invest in the 80:20, on a regular monthly basis, and forget about it.

But do make sure you are using employer pension benefits to its full extent. And, if you are in the 40% tax bracket, and in particular if your employer uses Salary Surrender, then consider upping your pension contribution.

Your big enemy in this will be your own behaviour. It is the strategy of precommitment, and then holding to that commitment, which is really tough. LS 80:20 is a good way to hold yourself to that commitment. However when the fund is down say -20% in a bear market*, then you will really find out whether you can hold to your precommitment.


* technically a bear market ceases to be a "correction" and becomes a "bear" when markets have fallen 20%. Thus in the 80-20 fund, potentially you would be down -16% (or a bit more if bond markets also fall at the same time) at that point. Rest assured, if you check your balance, it will hurt.

Most of us just shut off our screens in 2008/09 because markets were down nearly 50% at one point. Half my retirement savings ... wiped out. Almost by accident, for tax reasons, I made a big pension contribution in January 2009 -- "first, you must be lucky" was Napoleon's advice to his generals.
Thanks!
I think I will use their platform as the overall net fees including the fund seem reasonable, especially compared to others. For the ease and "neatness" I quite like the idea of it all being in one place too.
As in previous reply I am in the NHS pension scheme. I just have to be careful as I am likely to max the lifetime allowance.

It must have been difficult at the time and taken a lot of discipline to keep following the principles. I hope that having a solid plan, sticking with it from the start and having the support of Bogleheads I'll be able to as well!
Genghis
Posts: 61
Joined: Fri Jun 26, 2020 6:53 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Genghis »

I’d argue that as your balances grow, it is prudent to have some division in terms of brokers and fund providers. For instance, I use one broker with one fund provider, my wife uses another with another. Assets remain yours and segregated. There’s FSCS protection up to £85k. I remember reading in an example of a broker going bust the administrator took a 10% haircut on assets so in this example you’d have been safe up to say £850k assets.

It sounds like you’re starting out, however, so plough cash into yours and wife’s ISA (£2k x 12 months = £24k so there’ll have to be some split) with the same broker if you wish.
xxd091
Posts: 261
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by xxd091 »

Cannot but agree with the very good advice you have received above
With both of you working hard and kids on the horizon you need a “fire and forget” Investment Plan
Your efforts and time should be directed to you wife kids and job with micromanaging a portfolio low on your list of priorities
You have a good pension-your wife’s will be good too when she returns to work (when kids go to school?)
Your extra savings are a nice bonus
(The current NHS pension scheme seems to be incentivising early retirement due to LTA limits being reached sooner rather than later-those savings may be needed!)
Make sure and buy past added NHS pension years for your wife at this point ie on her return to work -before you get used to 2 large salaries again
A written Investment Plan helps you stay the course during stockmarket ups and downs
Reading about investing also empowers you not to meddle surprisingly -Monevator.com is a interesting financial website
It is very counterintuitive not to make “adjustments “ to your portfolio but if you can restrain yourself and let Mr Market do the heavy lifting-you will do well and better than most investors
Well done for getting your ducks in a row so early in your career
xxd091
TedSwippet
Posts: 3637
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by TedSwippet »

Genghis wrote: Sat Apr 17, 2021 4:53 am I’d argue that as your balances grow, it is prudent to have some division in terms of brokers and fund providers. For instance, I use one broker with one fund provider, my wife uses another with another. Assets remain yours and segregated. There’s FSCS protection up to £85k. I remember reading in an example of a broker going bust the administrator took a 10% haircut on assets so in this example you’d have been safe up to say £850k assets.
While I don't disagree, I see the main danger of broker or fund provider failure being a delay in getting access to your money, rather than any actual financial loss. The time it takes to sort out failures of this type seems to be measured in months. As far as assets are concerned though, broker and fund manager segregation rules mean that client assets are held separately from the broker's or fund manager's own, so that claims against the latter should not affect customers.

Beaufort's failure is probably the recent case you're thinking of. In this case, even though client assets were protected, the potential customer losses came from the (excessive?) charges levied by PwC to wind things up, which UK rules allow to be recovered from investors. In the end I think PwC relented somewhat, and the FSCS covered the cracks. Still, a lesson that even with full segregation rules scrupulously followed, there is a gap in UK law that permits client losses in some cases.

But then, Vanguard, HSBC, BlackRock and so on are much larger and more stable than an operation like Beaufort. Personally, I hold more than £85k in several brokers and funds, and don't worry overly about this. I'm aware of it as a consideration, but it falls well down the list of risk I try to manage away.
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.

Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
Given NHS pension membership 80% equities is entirely appropriate

If your wife can buy extra years she should. Although the tax implications might be horrible, I would be tempted in your shoes, too (prudence would say save more in ISAs).

Open an account at VG & make max ISA contribution that you can, as soon in the year as you can. Fire & forget.
Last edited by Valuethinker on Sat Apr 17, 2021 11:57 am, edited 1 time in total.
dylandog
Posts: 8
Joined: Sat Apr 10, 2021 5:01 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by dylandog »

Hello , investing in lifestrategy if for people whose really don't know anything about investing . You look to know a bit , as you told you read some books , with a bit more effort you could create a portfolio could give you more benefits , also in my opinion , considering your age , why don't you go to 100% equities? Bonds are useless now and in the next future. Maybe if later things will change you still have the possibility to leverage your portfolio.
with lifestrategy you cannot re-balance the portfolio as the year pass , this i believe is the main problem with them .
furwut
Posts: 1757
Joined: Tue Jun 05, 2012 8:54 pm

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by furwut »

Mike Piper, Bogelhead and author of the blog Oblivious Investor uses the Vanguard Life Strategy for his retirement investments.

What’s In My Portfolio? (Updated)

Are We Still Using the LifeStrategy Growth Fund?

When someone as savvy as he is on investing recognizes that the biggest risk of underperformance, after having adopted a low-cost total index approach, is what stares back at him every morning in the mirror I pay attention.
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

dylandog wrote: Sat Apr 17, 2021 9:07 am Hello , investing in lifestrategy if for people whose really don't know anything about investing . You look to know a bit , as you told you read some books , with a bit more effort you could create a portfolio could give you more benefits , also in my opinion , considering your age , why don't you go to 100% equities? Bonds are useless now and in the next future. Maybe if later things will change you still have the possibility to leverage your portfolio.
with lifestrategy you cannot re-balance the portfolio as the year pass , this i believe is the main problem with them .
1. don't leverage portfolios. Just. Don't. You only get to live your working life once, if you lose your capital, then you are out of the game (unless you are so well paid that you can restart from scratch).

(there's an exception with mortgage debt - but that doesn't mean it has always paid off).

2. 80%/20% is just about optimal for someone who has a high capability to take risk (that NHS pension). The big risk is a failure to execute on the investment plan.

Ben Graham said never be more than 75% in equities or less than 25% in equities. Old wisdom, forged in a time that could still remember the Crash of 1929 (and 1938, and ...). Old wisdom which seems ... wise.

3. Bonds will be useless, until we have our next equity bear market. Then, having part of your portfolio that doesn't inflict -35% returns on you, and gives you a way of rebalancing, is a very good thing.

Like in ... March of 2020 .. say?
Last edited by Valuethinker on Sat Apr 17, 2021 11:58 am, edited 1 time in total.
Valuethinker
Posts: 42499
Joined: Fri May 11, 2007 11:07 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

furwut wrote: Sat Apr 17, 2021 10:42 am Mike Piper, Bogelhead and author of the blog Oblivious Investor uses the Vanguard Life Strategy for his retirement investments.

What’s In My Portfolio? (Updated)

Are We Still Using the LifeStrategy Growth Fund?

When someone as savvy as he is on investing recognizes that the biggest risk of underperformance, after having adopted a low-cost total index approach, is what stares back at him every morning in the mirror I pay attention.
Good reference, and a good way of putting it.

Human nature is our worst enemy in this.
steveyg50
Posts: 52
Joined: Tue Jul 09, 2019 6:35 pm

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by steveyg50 »

Why not go a stage further in removing human nature and instead of LifeStrategy fund, go for a Target Retirement fund?

Its basically the same but is stepping down the equity for you as you get older, so you don't need to think about it.

Slightly more expensive at 0.24% compared to 0.22 %, but that's not a great deal.

I suppose the only objection to this apart from the xtra cost, is if one were not happy with the 'glidepath' (equity/bonds % with age)

https://www.vanguardinvestor.co.uk/inve ... ment-funds
LongTermInvestor88
Posts: 94
Joined: Mon Dec 25, 2017 9:18 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by LongTermInvestor88 »

drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.

Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
Well done for making a start on investing at relatively young age. I'll go against the consensus here and say if this money is intended for retirement alone and can commit to leaving well alone for 30 odd years the bonds are leaving some returns on the table. For what I know global bonds haven't returned better results than global equities for any 20+ year periods. This is worst case if buying at a peak. You will not be, you will be buying consistently at highs and lows. The trick is to increase bond allocation steadily in the 20 odd years leading upto retirement and be at the correct percentage on day of retirement. This negates crash risk and sequence of returns risk and for what it's worth the higher level of equities gives you the possibility of an earlier retirement. My thoughts on it anyway. Vanguard is expensive, interactive investors doesn't charge percentage of fund holdings. Sign up for flat fee £7.99 a month and get one free trade a month. Can hold vanguard funds within this. Global all cap a better fund no home bias tilt, add a global government bond fund with mainly A and A+ ratings, your done. Good luck
LongTermInvestor88
Posts: 94
Joined: Mon Dec 25, 2017 9:18 am

Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by LongTermInvestor88 »

drldrl wrote: Fri Apr 16, 2021 4:09 pm I am starting my investing career after spending a long time reading a lot of investment books including boggle heads guide and forum. I have decide my goals, reflected on my level of aversion to risk and thought about my asset allocation and investment strategy. I have been thinking about investing solely in the life strategy 80% equity fund offered by Vanguard.

My question is, does this sound sensible? It seems very simple and almost too easy, is there something I'm missing?! The only thing that I can see that may be an issue is having all assets in one fund from one company. I know that the fund itself is diversified but it doesn't seem diversified investing solely in that. On the other hand if I wasnt investing all my money in it I'd be looking to recreate a similar asset allocation ratio with the rest which seems counterintuitive.

I will have £2000 per month to invest so will max my ISA allowance and buy through that. Will have a little spare so might use this to buy holdings in companies I like.

Thoughts on this, advice or other ideas of what to with this money with 80% in equities would be greatly appreciated. Sorry about the lengthy post.
Well done for making a start on investing at relatively young age. I'll go against the consensus here and say if this money is intended for retirement alone and can commit to leaving well alone for 30 odd years the bonds are leaving some returns on the table. For what I know global bonds haven't returned better results than global equities for any 20+ year periods. This is worst case if buying at a peak. You will not be, you will be buying consistently at highs and lows. The trick is to increase bond allocation steadily in the 20 odd years leading upto retirement and be at the correct percentage on day of retirement. This negates crash risk and sequence of returns risk and for what it's worth the higher level of equities gives you the possibility of an earlier retirement. My thoughts on it anyway. Vanguard is expensive, interactive investors doesn't charge percentage of fund holdings. Sign up for flat fee £7.99 a month and get one free trade a month. Can hold vanguard funds within this. Global all cap a better fund no home bias tilt, add a global government bond fund with mainly A and A+ ratings, your done. Good luck
Valuethinker
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

steveyg50 wrote: Sun Apr 18, 2021 3:35 pm Why not go a stage further in removing human nature and instead of LifeStrategy fund, go for a Target Retirement fund?

Its basically the same but is stepping down the equity for you as you get older, so you don't need to think about it.

Slightly more expensive at 0.24% compared to 0.22 %, but that's not a great deal.

I suppose the only objection to this apart from the xtra cost, is if one were not happy with the 'glidepath' (equity/bonds % with age)

https://www.vanguardinvestor.co.uk/inve ... ment-funds
OP has an NHS pension. So does his spouse.

There's therefore a capacity to take risk. They know they will have a retirement income (I think the rules have changed to Career Average Salary, and age 67? -- was Final Salary and 65). Entirely predictable (in real terms - it is fully CPI adjusted).

So why not have a high equity weighting?

But 80/20 will have significantly lower volatility than 100% equities *and* returns will be quite close. That's the impact of the diversification benefit - the correlation of high credit quality bonds with equities is quite low. And it's very easy to stick to it -just keep contributing every month and ignore the actual value of the thing at any given time.

But as the NHS pension entitlement grows with each year, then the capacity to take equity risk is arguably increasing.
xxd091
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by xxd091 »

A slight refinement which would most probably pay off in the long run would be to use a Global Equities Index Tracker Fund for the equity portion of the portfolio
This would correct the U.K. bias of the Vanguard Life Strategy Fund
Bonds could be added as required-a Global Bond Index Fund hedged to the Pound would do the job
Something to think about as investor acquires more knowledge
Potentially 2 funds to handle instead of I but performance would be better over such a long investment period
xxd091
Valuethinker
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

xxd091 wrote: Mon Apr 19, 2021 4:53 am A slight refinement which would most probably pay off in the long run would be to use a Global Equities Index Tracker Fund for the equity portion of the portfolio
This would correct the U.K. bias of the Vanguard Life Strategy Fund
Bonds could be added as required-a Global Bond Index Fund hedged to the Pound would do the job
Something to think about as investor acquires more knowledge
Potentially 2 funds to handle instead of I but performance would be better over such a long investment period
xxd091
It's not clear it would be better. If we repeated 2000-03 and had a tech crash and a Chinese boom at the same time, FTSE100 would do well.

However it would be more diversified - the existing LS fund overweights UK equities.

We have nonetheless used the 60:40 and 40:60 fund for my spouse. On the principle that having to make *no* investment decisions (other than to commit to these funds) is best.

One can tell oneself one is committed to 80:20 and use the global equity fund and the global bonds (sterling hedged) fund. But, will one stick to it during the next stock market crash? How about the next boom?

Target percentages and rebalancing is one of the best investing tools there is, because it confronts human nature head on, in an effort to avoid destructive behaviour.

But that does not mean it is easy to adhere to.

Our greatest enemy to good investing, is, as someone said upthread, the person we see in the mirror every morning.

Go read some of the crypto currency threads for plenty of evidence of that :sharebeer
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drldrl
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by drldrl »

I think going with a life strategy fund and then trying the global equities and bond approach after a while sounds reasonable. I am not sure that funds will be purely for retirement as I should be well covered. It would be nice to have the funds to invest in something of interest in the future but then if everything is going well it might be nice to scale back on work days and draw a bit of an income so I can enjoy life a little more. I guess at this point I may have to rethink where funds are invested?

On the topic of holding funds in multiple places to be covered by FSCS what do people with a large amount of holdings do? Say with holdings worth 7500000 are there really 100 different places to hold it to be covered?

Sorry if it seems a silly question, I just have no idea. Although I don't anticipate having that much I just wonder what I will do when I hit 750000 and need to find 10 accounts.

Thanks in advance
Valuethinker
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Valuethinker »

drldrl wrote: Thu Apr 22, 2021 10:38 am I think going with a life strategy fund and then trying the global equities and bond approach after a while sounds reasonable. I am not sure that funds will be purely for retirement as I should be well covered. It would be nice to have the funds to invest in something of interest in the future but then if everything is going well it might be nice to scale back on work days and draw a bit of an income so I can enjoy life a little more. I guess at this point I may have to rethink where funds are invested?

On the topic of holding funds in multiple places to be covered by FSCS what do people with a large amount of holdings do? Say with holdings worth 7500000 are there really 100 different places to hold it to be covered?

Sorry if it seems a silly question, I just have no idea. Although I don't anticipate having that much I just wonder what I will do when I hit 750000 and need to find 10 accounts.

Thanks in advance
Your fund holdings will be separately custodied.

So if the broker or platform goes bust, they are just transferred to another broker or platform.

The 75k is basically money you have on account at the broker. If you put it in bond funds or money market funds, then the previous sentence applies.

At least that's how I understand it.

I wouldn't hold 10 accounts. 2 is OK, 3 just about manageable. More than that? Mehh...
Laurizas
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Re: Invest entirely in vanguard life strategy fund? UK investor looking for advice

Post by Laurizas »

Valuethinker wrote: Fri Apr 23, 2021 9:52 am So if the broker or platform goes bust, they are just transferred to another broker or platform.
With condition that there was no scam and illegal activities on broker side and numbers on the screen correspond to factual situation.
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