Vanguard life strategy
Discussion
At the moment I'm invested via a 3rd party in vanguard lifestrategy 20 risk profile 4. I'll soon be transferring this and dealing with vanguard direct.
I notice lifestrategy 20 is performing worse than 40/60/80/100. Why would I not swap to one or a combination of these funds?
Once dealing directly with vanguard is it easy enough to change between funds on their platform?
I notice lifestrategy 20 is performing worse than 40/60/80/100. Why would I not swap to one or a combination of these funds?
Once dealing directly with vanguard is it easy enough to change between funds on their platform?
Second question first - it's very straightforward to swap betwen funds once you have direct control. You don't say what type of account it is (pension/ISA/GIA) but note if it is a GIA there may be CGT due if you change funds. Are you doing an in-specie transfer?
As to which of the funds to go for in theory the risk rises as you go up the funds from 20 to 100 as the percentage allocated to stocks increases but the supposedly safer mix with a higher percentage of bonds has failed to serve it's purpose recenly & as you say is currently performing poorly. Depending on your circumstances & aims you migh consider moving to a "riskier" level.
As to which of the funds to go for in theory the risk rises as you go up the funds from 20 to 100 as the percentage allocated to stocks increases but the supposedly safer mix with a higher percentage of bonds has failed to serve it's purpose recenly & as you say is currently performing poorly. Depending on your circumstances & aims you migh consider moving to a "riskier" level.
Mr Pointy said:
Second question first - it's very straightforward to swap betwen funds once you have direct control. You don't say what type of account it is (pension/ISA/GIA) but note if it is a GIA there may be CGT due if you change funds. Are you doing an in-specie transfer?
As to which of the funds to go for in theory the risk rises as you go up the funds from 20 to 100 as the percentage allocated to stocks increases but the supposedly safer mix with a higher percentage of bonds has failed to serve it's purpose recenly & as you say is currently performing poorly. Depending on your circumstances & aims you migh consider moving to a "riskier" level.
Thx, pension and ISA. As to which of the funds to go for in theory the risk rises as you go up the funds from 20 to 100 as the percentage allocated to stocks increases but the supposedly safer mix with a higher percentage of bonds has failed to serve it's purpose recenly & as you say is currently performing poorly. Depending on your circumstances & aims you migh consider moving to a "riskier" level.
Riskier stocks seem to have outperformed safer over the last few yrs. Including 2022 whee normally I'd expect safe funds to benefit.
ETA
Bonds have tanked this Yr, I suppose the gamble is will they come back?
Edited by PositronicRay on Friday 23 December 15:44
As there is only 10 years data on VLS you will see that performance is weighted to the higher % equities funds.
Its because during that period the markets have gone up. If we were in a long down turn you might see the lower % equities funds doing better.
However. You have to remember that its actually quite unusual to get a period of more than 18 - 24 months of downward movement. If there is a long period of downward movement its almost always followed by a strong upward movement. So, in reality, unless you are in or about to get into the drawdown phase then the 20 and 40 funds are, IMVHO, not really suitable for "investing". Also if you are investing on say 5+ years timeline then again the 20 and 40 are not, IMVHO, suitable.
BUT, I am not an expert...
Also consider the Vanguard Target Retirement funds. You could also look at their S&P offering if you wanted to take some more risk.
IANAFA. (I do self invest my SIPP and ISAs with Vanguard for myself and my wife, FWIW)
Its because during that period the markets have gone up. If we were in a long down turn you might see the lower % equities funds doing better.
However. You have to remember that its actually quite unusual to get a period of more than 18 - 24 months of downward movement. If there is a long period of downward movement its almost always followed by a strong upward movement. So, in reality, unless you are in or about to get into the drawdown phase then the 20 and 40 funds are, IMVHO, not really suitable for "investing". Also if you are investing on say 5+ years timeline then again the 20 and 40 are not, IMVHO, suitable.
BUT, I am not an expert...
Also consider the Vanguard Target Retirement funds. You could also look at their S&P offering if you wanted to take some more risk.
IANAFA. (I do self invest my SIPP and ISAs with Vanguard for myself and my wife, FWIW)
PositronicRay said:
At the moment I'm invested via a 3rd party in vanguard lifestrategy 20 risk profile 4. I'll soon be transferring this and dealing with vanguard direct.
I notice lifestrategy 20 is performing worse than 40/60/80/100. Why would I not swap to one or a combination of these funds?
Because past performance is no indication of future performance, and because usually when you think 'Woo this product is going like Max Verstappen I'll buy some' you'll be just in time to catch the plateau and fall as the earlier investors take profits. Go 50:50 and see what happens.I notice lifestrategy 20 is performing worse than 40/60/80/100. Why would I not swap to one or a combination of these funds?
gotoPzero said:
As there is only 10 years data on VLS you will see that performance is weighted to the higher % equities funds.
Its because during that period the markets have gone up. If we were in a long down turn you might see the lower % equities funds doing better.
However. You have to remember that its actually quite unusual to get a period of more than 18 - 24 months of downward movement. If there is a long period of downward movement its almost always followed by a strong upward movement. So, in reality, unless you are in or about to get into the drawdown phase then the 20 and 40 funds are, IMVHO, not really suitable for "investing". Also if you are investing on say 5+ years timeline then again the 20 and 40 are not, IMVHO, suitable.
BUT, I am not an expert...
Also consider the Vanguard Target Retirement funds. You could also look at their S&P offering if you wanted to take some more risk.
IANAFA. (I do self invest my SIPP and ISAs with Vanguard for myself and my wife, FWIW)
ThxIts because during that period the markets have gone up. If we were in a long down turn you might see the lower % equities funds doing better.
However. You have to remember that its actually quite unusual to get a period of more than 18 - 24 months of downward movement. If there is a long period of downward movement its almost always followed by a strong upward movement. So, in reality, unless you are in or about to get into the drawdown phase then the 20 and 40 funds are, IMVHO, not really suitable for "investing". Also if you are investing on say 5+ years timeline then again the 20 and 40 are not, IMVHO, suitable.
BUT, I am not an expert...
Also consider the Vanguard Target Retirement funds. You could also look at their S&P offering if you wanted to take some more risk.
IANAFA. (I do self invest my SIPP and ISAs with Vanguard for myself and my wife, FWIW)
Yes I'm in drawdown. I've double checked, actually in LS 40, in the spirt of adventure
I may go into LS60, which is also risk 4 of 7.Be careful whose advice you listen to. Since 2008 we have been in an environment of money printing, lower and lower interest rates and QE. That has now all stopped because inflation has gone sky high. 2022 was the worst year in history for a long long time where shares and bonds both dropped. This never normally happens. The whole premise behind Vanguard Life Strategy portfolios is they spread your risk between shares and bonds because if one falls the other normally rises. And therefore 2022 is unique in that this didn't happen as per usual. Now you are in drawdown and you think this will bounce back because thats what has happened before. These valuations might not return for at least 10 years so you could be in drawdown for a long long time.
ATM said:
2022 was the worst year in history for a long long time where shares and bonds both dropped. This never normally happens.
The 1970s weren't that long ago. And if you look at the overall portfolio rather than the underlying assets, a global 60/40 portfolio is down around 10% YTD. 2002, for example, was worse.ATM said:
And therefore 2022 is unique in that this didn't happen as per usual.
Global equities are only off around 8% YTD. I don't see that as a particularly bad year. If equities had been hammered, then it would be a different conversation.PositronicRay said:
Why would I not swap to one or a combination of these funds?
Realistically, without having visibility of your retirement plan, which would determine how much return is required (and therefore risk you need to take), no one is really going to be able to give you a definitive answer.Derek Chevalier said:
Global equities are only off around 8% YTD. I don't see that as a particularly bad year. If equities had been hammered, then it would be a different conversation.
The SP500 is down around 20% for 2022 and US Bonds around 30% i think. I'm not quoting exact numbers because nit pickers will correct - its easy to look for yourself. So I'm mainly focused on US markets as that's where my focus is - they are the biggest and the most liquid. I know you Derek Chevalier like very precise language and details but I'm generalising. You also like global funds. It was a bad year for US Equity Bond mixed portfolios as both dropped.Does Vanguard life strategy invest in global markets or is it primarily UK and / or USA. I have no idea. I don't invest in funds. I'm only short nowadays.
Surely it would be easy to check their performance in 2022, how they did with equities and bonds - Vanguard Life Strategy portfolios. The OP said he [she] is in drawdown. But expects to return to profit. Someone else here advised that these things usually bouce back hard if they go negative. So the usual buy the dip advice which has done well the last few years as [US] markets have flown up rapidly until the last year when that all changed.
The OP said 20 is down more than 40/60/80/100 so probably because the equities part is down less than the bonds part. Surely we can agree on that. Therefore bonds are down more. If OP wants to choose the percentage mix then the decision must be about bonds continuing to drop more than equities or not.
Do you have a view on this Derek for the OP? Do you see bonds continuing to go down more or less than equities in Vanguard LS portfolios?
My view on bonds is this - Central Banks were the biggest buyers of bonds in US and UK and Europe and lots of other Countries under QE which started in 2008. That has now all stopped and some are talking about QT or selling them off. Bonds got hit hard by this but why would their downward trajectory stop and turn around now? Do you think Central Banks will go back to QE soon - I do not, definitely not in 2023. So the Bull Market in Bonds for the last 40 years is now over. Could we see a Bear market in Bonds for 10 or 20 or more years? What would make bonds become a good investment now compared to 2022? I believe interest rates will stop going up so fast and its possible that will help bonds stop going down so fast but I don't see then going up. Can you make money just collecting the coupon on bonds yes - but I don't do it myself so don't know. Surely the risk there is companies defaulting on their debt. Surely as the financial outlook gets worse and economies struggle and businesses struggle then defaults are coming. No way I'd want to own bonds at all. For me the answer is - absolutely not - unless you can be very picky over the company or sector on the other side of the bond and with Vanguard that's just not possible.
Would I want to equities - same answer - absolutely not - unless you can be very picky over the company or sector and with Vanguard that's just not possible.
My mum's in LS40 and it's obviously been a horrible year and arguably an outlier compared to many others (a US 60/40 stocks and bonds apparently had pretty much the worst year ever).
Sometimes it's the "investments will go down" thing that people seem unprepared for rather than "how much will they go up by?" especially if you're a newer investor who may not realise that stocks and bonds can be volatile.
Vanguard say they expect the LS range to recoup their losses presumably as bonds "cycle" through.
You can get 3-4% on cash and equities and bonds are supposed to be a long term investment.
I'd continue to diversity (and do) but hopefully ensure you have sufficient a cash buffer that you can ignore the short term noise.
Sometimes it's the "investments will go down" thing that people seem unprepared for rather than "how much will they go up by?" especially if you're a newer investor who may not realise that stocks and bonds can be volatile.
Vanguard say they expect the LS range to recoup their losses presumably as bonds "cycle" through.
You can get 3-4% on cash and equities and bonds are supposed to be a long term investment.
I'd continue to diversity (and do) but hopefully ensure you have sufficient a cash buffer that you can ignore the short term noise.
ATM said:
.. 2022 was the worst year in history for a long long time where shares and bonds both dropped. This never normally happens. The whole premise behind Vanguard Life Strategy portfolios is they spread your risk between shares and bonds, because if one falls the other normally rises. And therefore 2022 is unique, in that this didn't happen as per usual. ...
I am puzzled why so many posters, have been surprised by the eventual fall in bond prices.
It has nothing to do with, 'if one falls the other normally rises'.
Jon39 said:
I am puzzled why so many posters, have been surprised by the eventual fall in bond prices.
It has nothing to do with, 'if one falls the other normally rises'.
Many people haven't invested in anything other than a low rate environment and simply didn't appreciate the speed and magnitude of the impact of rates rising.
Now I'm not "blaming" Vanguard for this but I'm not sure I remember too many articles from Vanguard highlighting that when interest rates rise here's what will happen to bonds so how else is the novice investor who wants to do something useful with their money but who doesn't want to spend their life reading up on bonds supposed to know this?
From the sites I use many people who've invested for a long time still don't "get" bonds whilst I think just about everyone "gets" equities and appreciates they can be and will be volatile.
b
hstewie said:
hstewie said:Jon39 said:
I am puzzled why so many posters, have been surprised by the eventual fall in bond prices.
It has nothing to do with, 'if one falls the other normally rises'.
Because they aren't all as smart as you are Jon.
Many people haven't invested in anything other than a low rate environment and simply didn't appreciate the speed and magnitude of the impact of rates rising.
Now I'm not "blaming" Vanguard for this but I'm not sure I remember too many articles from Vanguard highlighting that when interest rates rise, here's what will happen to bonds, so how else is the novice investor who wants to do something useful with their money, but who doesn't want to spend their life reading up on bonds supposed to know this?
From the sites I use many people who've invested for a long time still don't "get" bonds, whilst I think just about everyone "gets" equities and appreciates they can be and will be volatile.
Thank you for your undeserved compliment.
Certainly not smart, but many years ago I took an interest in financial markets and then struggled along trying to learn as much as I could.
It is such a vast subject, that I only know about a small part of it, and consequently will only invest in assets that I have at least some understanding about. As you have intimidated, for anyone interested in the subject, years of practical experience is what really helps.
Everyones first equity market crash is a nasty shaker, but I eventually realised, those rare events can present good buying opportunities for the brave.
From reading your post, it is clear that you do understand the important principle of gilt/bond pricing.
As you know, when savings account interest rates move from say 1% to 4%, nobody is then going to continue buying bonds or gilts at 1%, unless the price moves down.
Often these basic underlying principles are quite simple, but I suppose such things can become hidden amongst all the mystery jargon used in the financial world.
You make an interesting point about the apparent lack of communication.
The industry probably relies on their frequent warnings, about might go up, might go down.
Best of luck with your investing this year. I never know what is going to happen, but have no plans to change any holdings.
Oils did remarkably well last year, so they might come down in 2023, but I keep them anyway. I am hopeless at 'timing'. -
Jon39 said:
As you know, when savings account interest rates move from say 1% to 4%, nobody is then going to continue buying bonds or gilts at 1%, unless the price moves down.
Does anything else affect Bond prices?What about inflation?
What about default risk - is this a factor across the market or only specific to individual names or sectors?
Genuine question/s as I am a newbie to Bonds.
If we assume interest rates are near their top - yes top picking - could we therefore assume bond prices have bottomed - yes bottom picking?
Consumers don't have much choice do they? Either mostly bonds or mostly stocks. If bonds are in a long term bear market as ATM postulates, then presumably the only choice is to move to stocks; remaining in 20/40/60 lifestrategy is bad idea. I guess it's more difficult if you are in the final phase of your working life and winding down to retirement. Personally I'd stick it in 100% stocks even so!
lizardbrain said:
If the market is judged to have changed, will there be active changes go the fund approach?
I dont think so. We saw the big pension fund blow up just after the PM change. This shows that the pension funds are all still balls deep in long dated bonds and gilts. If they knew interest rates were starting to rise and therefore bond values would fall why didnt they get out of these long dated bonds and gilts in advance? What are these active fund managers doing?Gassing Station | Finance | Top of Page | What's New | My Stuff