Vanguard LifeStrategy index fund

[ReaderScars]

Looking at the performance of the blended fund, what are the likely reasons for the apparent poor performance when comparing this year to last?

https://www.vanguard.co.uk/uk/portal/investments/m...

[z4RRSchris99]

ReaderScars said:

Looking at the performance of the blended fund, what are the likely reasons for the apparent poor performance when comparing this year to last?

https://www.vanguard.co.uk/uk/portal/investments/m...

loads and loads, pick some

market conditions,
talented staff leaving
fund grown in size, unable to be as flexible as before
etc
etc
etc

[ReaderScars]

z4RRSchris99 said:

loads and loads, pick some

market conditions,
talented staff leaving
fund grown in size, unable to be as flexible as before
etc
etc
etc

Market conditions - woulda thought they were better this year than last?
Talented staff leaving - couldn't they be replaced?
Fund grown in size - would have expected that to be a benefit

My name isn't Jon Snow but feel free to point and say, 'you know nothing...etc' (my name isn't etcetera either).

[Ginge R]

Large funds make the management far more unwieldy - the bigger the fund gets, the harder it is to manage and the danger is that funds can become market makers. If you want to get into a small high risk fund at creation, look for those which have the mandate to bin it all when it gets to a certain size.

A £3 billions UK large cap fund or even a £5 billions US large cap fund might be ok, but a £50 million UK small or micro cap could be too big for the market. Why? Because the fund is so big, for it to make investments into its chosen market at levels that will show a decent return in relation to the size of the fund, are nigh on impossible in small/micro caps/start ups. Liontrust Special Situations is a great example of a fund growing quickly and the managers issuing a returns warning.

I was involved with a civil war in the Congo about 20 years ago, we gave chocolate to the local kids so they wouldn't stray into minefields or leave their shelters (the local inclination!) when attacks were coming in. The kids started bouncing off the walls because they couldn't cope with the sugar. A fund that's too big for the market is like a developer going to those African villages and plonking a Maccy D in it, a shopping centre, a multiplex etc.. it ruins things because the market isn't ready for it, or able to cope.

The fund manager and his/her team is vital. Ask Crystal Palace tonight how it feels.

Passives work better (in relation to actives) when the market is in the ascendancy and not when stodgy or in decline. It's an investment as well, don't take took much notice of a snapshot. I spoke with my Vanguard rep the other week and we spoke of new lower prices soon, in order to compete with Fidelity. Buying and hoarding units when the market is low CAN help you later if you have a long view and expect the market to rise and costs to reduce.

Not for everyone of course so take advice you trust, etc. I like Vanguard - also, Black Rock does a good range of similar funds.

[z4RRSchris99]

what he said above me, but I couldn't be arsed to type on an iphone.

[z4RRSchris99]

what he said above me, but I couldn't be arsed to type on an iphone.

[Ginge R]

[ReaderScars]

z4RRSchris99 said:

what he said above me, but I couldn't be arsed to type on an iphone.

There's a guy with exactly the same name as you just posted exactly what you did - how freaky is that! AND he owns an iphone!!

[ReaderScars]

Ginge R said:

Read this properly and digest it, because at least some of it will come in useful

Thanks for that interesting info, I'll read it properly and digest it, looks very useful.

[jeff m2]

ReaderScars said:

Looking at the performance of the blended fund, what are the likely reasons for the apparent poor performance when comparing this year to last?

https://www.vanguard.co.uk/uk/portal/investments/m...

The objective of a blended fund is preservation of cap/value.
It will never be at the top of any charts.

Not everyone wants a high flyer that has the potential to drop 30% in another 08.
If you consider the current situation with little or no return from Treasuries or Gilts a lot of money that would be "there" is forced into the market. Insurance and pension funds that have foreseeable obligations in 20 and 30 years would normally be very happy to be in fixed income as would the mega and moderately rich. 4 to 5% income is great, fuel the boat and off to Monaco for the Summer.
But with inflation above the treasury return they would eventually be spending their Summers in Surrey.

So if the int rates rise a lot of money currently in the market could return to Bonds.
You must also consider the Bond Market is larger than the stock market!!!!

Generally speaking a blended fund, often called allocation funds will give people what they want with much less risk.
These funds will lose much less in a down year, beating the indexes by a decent margin in those years. (and will trail the by a similar in the good years)

I use allocation funds as my core holdings and I am not even close to spending my Summers in Monaco

[ReaderScars]

Thanks for the additional info jeff, good to be able to start to build up a picture.

Can I ask, do you know of any good websites which gives concise definitions to the many savings and investment-related 'stuff' which is discussed in these parts?

I'd like to try to get an understanding of the differences between the types of bonds, gilts, shares, stocks, equity, investments, funds, index funds, forex, etc etc - do you happen to know where I could start please?

[Ginge R]

This is noddy, but start here:

https://www.moneyadviceservice.org.uk/en/articles/...

You will find lots of similar material from most fund managers:

http://www.blackrock.co.uk/individual/compliance/t...

[ReaderScars]

Thanks for the links Ginge.

[Pheo]

Lifestrategy is a tracker fund, is it not? So what did the markets the fund is comprised of do in that period?

[Ginge R]

Pheo, it's not always that straightforward - all trackers are equal.. but some are more equal than others! Trackers are getting more sophisticated - and many now do noticeably better than others.

Trackers can diverge from their intended path, it's referred to as tracking error and depends on many things - such as when the managers track only a non representative selection of shares in the index rather than every single one - that would be pure tracking. It would however, be expensive and contrary to the principle of cheapness.

Many baskets don't include the fastest-growing companies and a lot depends on *how* fund managers will track the underlying assets. Poorly performing shares are excluded and that depends on the guile of the manager (the Royal London UK All Share tracker has not just tracked, but beaten the benchmark for three years on the spin for this very reason).

Edit: This is what I wrote about it in March:

http://www.pistonheads.com/gassing/topic.asp?h=0&a...

Edited by Ginge R on Monday 18th August 19:15

[jeff m2]

Pheo said:

Lifestrategy is a tracker fund, is it not? So what did the markets the fund is comprised of do in that period?

Making the assumption you are using your Ipad on a very bumpy road...
It is because of the bond component.

[Pheo]

Interesting, I hadn't thought about the impacts of cap waiting. I am currently trickle
Investing into Lifestrategy 80/20 product. Hope that's ok!

[Ginge R]

If you are drip feeding in (pound cost averaging?) for an extended period of time, and if you like the punchy allocation, you should be ok. If you're just starting out, you could take a view on shadowing the Vanguard performance with a (broadly speaking) contemporary and then making a more informed choice.

http://www.trustnet.com/Factsheets/Factsheet.aspx?...

[ReaderScars]

Ginge R said:

If you are drip feeding in (pound cost averaging?) for an extended period of time, and if you like the punchy allocation, you should be ok. If you're just starting out, you could take a view on shadowing the Vanguard performance with a (broadly speaking) contemporary and then making a more informed choice.

http://www.trustnet.com/Factsheets/Factsheet.aspx?...

That BR NURS II COns 85 looks quite tasty to my untrained eye. Shame when you click 'Buy it now' it takes you to a 404 page!

[Pheo]

Ginge R said:

If you are drip feeding in (pound cost averaging?) for an extended period of time, and if you like the punchy allocation, you should be ok. If you're just starting out, you could take a view on shadowing the Vanguard performance with a (broadly speaking) contemporary and then making a more informed choice.

http://www.trustnet.com/Factsheets/Factsheet.aspx?...

Not specifically trying to pound cost average necessarily, although I guess thats a byproduct and possible benefit of my approach. More just a regular investment approach, not tonnes of money (dipping my toe in at the moment), at £75 a month.

Deliberately went aggressive with the bond/equity mix as I'm looking at a 15+ yr timeline for this, so don't mind the volatility, and looking for the larger returns.

Any particularly compelling reason to get out of Vantage and into something else? Currently using HL as a platform so with their revised fee structure I could alter my investment approach to another similar fund without a big cost penalty.

PS at last count I was 3.75% up, over approx 1 yr, but its a small holding so I'm not reading much into that.