LifeStrategy Moderate Growth fund or its components?

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Kelly
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LifeStrategy Moderate Growth fund or its components?

Post by Kelly » Mon May 02, 2016 7:42 pm

Folks

The Vanguard portfolio builder recommended 4 funds which are the exact components and weights of the LifeStrategy Moderate Growth fund . Is there any reason why the LifeStrategy fund wouldn't produce nearly the same results if held in an IRA (assuming the individual funds were rebalanced to target every year)?

VSMGX: https://personal.vanguard.com/us/funds/ ... IntExt=INT

Many Thanks

Kelly

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Re: LifeStrategy Moderate Growth fund or its components?

Post by dharrythomas » Mon May 02, 2016 8:20 pm

Kelly,

It will be close. There are two factors that will make it a little different. 1) If you have enough for Admiral shares, LifeStrategy funds are a little more expensive. 2) LifeStrategy Funds are rebalanced continuously as new money flows into the fund, while you would rebalance periodically or manage a rebalancing band.

Both differences should be slight and you don't have to worry about it. I like the LifeStrategy and Target Retirement Fund series. People can and most do significantly worse.

Good luck

Harry

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Re: LifeStrategy Moderate Growth fund or its components?

Post by jjface » Mon May 02, 2016 8:22 pm

If you value simplicity the results are close enough - go for the lifestrategy fund.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by nisiprius » Mon May 02, 2016 8:44 pm

Try this. Enter these values into the Get A Recommendation tool and see what it recommends. Try it. I think you will be amused. (The key here is that I am telling it to invest only $30,000).

Length of time before withdrawals: >15 years. Period of withdrawals: >15 years.
Prefer little or no fluctuation: Somewhat agree. During market declines, I tend to sell: Disagree.
Prefer medium volatility.
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Re: LifeStrategy Moderate Growth fund or its components?

Post by Toons » Mon May 02, 2016 9:53 pm

Moderate Growth.
One Fund Solution.
Keep It Simple
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: LifeStrategy Moderate Growth fund or its components?

Post by livesoft » Mon May 02, 2016 9:57 pm

I asked the same question in this thread: viewtopic.php?t=160958 which should be interesting for you to read.

I think that emotions and behavior will prevent most investors from rebalancing at the best times, so they will fall further and further behind LS Moderate Growth. Some investors will be able to do the necessary rebalancing at the best times. Are you one of those investors? You can know by trying to beat the performance of LS Moderate Growth. But you will have to track carefully and accurately which most people are not prepared to do.

And I don't think yearly rebalancing will do the trick since once-a-year cannot possibly be the best rebalancing method.
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Re: LifeStrategy Moderate Growth fund or its components?

Post by dkturner » Tue May 03, 2016 2:45 pm

Toons wrote:Moderate Growth.
One Fund Solution.
Keep It Simple
:happy
LifeStrategy Moderate Growth is a horrible fund. The STAR fund, which has about the same equity/fixed income allocation, has performed about 100 basis points per year better since the LifeStrategy inception.

We use the LifeStrategy Moderate Growth Fund as a benchmark for our portfolio. We beat it by an average of 178 basis points per year since the beginning of 2000.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Da5id » Tue May 03, 2016 2:56 pm

Kelly wrote:Folks

The Vanguard portfolio builder recommended 4 funds which are the exact components and weights of the LifeStrategy Moderate Growth fund . Is there any reason why the LifeStrategy fund wouldn't produce nearly the same results if held in an IRA (assuming the individual funds were rebalanced to target every year)?

VSMGX: https://personal.vanguard.com/us/funds/ ... IntExt=INT
I recently switched my Roth and traditional IRA from LifeStrategy Moderate Growth to 3 of the 4 components, removing international bond which I found a mixed case for including. That let me switch to Admiral versions of the all of funds, with I think something like half the final expense ratio. That saved me enough for it to be worth it to rebalance manually once per year by my estimation.

That said, there is an argument for simplicity too. LifeStrategy is one decision and forget about it. Also the automatic balancing lets you not be tempted to tinker.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by jjface » Tue May 03, 2016 3:29 pm

dkturner wrote:
Toons wrote:Moderate Growth.
One Fund Solution.
Keep It Simple
:happy
LifeStrategy Moderate Growth is a horrible fund. The STAR fund, which has about the same equity/fixed income allocation, has performed about 100 basis points per year better since the LifeStrategy inception.

We use the LifeStrategy Moderate Growth Fund as a benchmark for our portfolio. We beat it by an average of 178 basis points per year since the beginning of 2000.
It was a different fund prior to 2012. It used to have an asset allocation portion that allowed it to vary the amount of equities in market timing moves. Glad they removed that. Now it is a simple 4 fund index all in one fund.

Star is made up of a bunch of almost random actively managed funds. These can outperform or underperform but who knows over the long term. To me Star is a 'horrible' fund. My Wellington fund beat that since 2000 by a wide margin. You will always find a better fund looking at past performance. No one knows the future which is why many choose index funds - you don't need to gamble on which fund will perform better than the market since you own the market.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Toons » Tue May 03, 2016 3:46 pm

Star Fund Since Inception 03/29/1985- 9.39%
Not Shabby. :mrgreen:
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Re: LifeStrategy Moderate Growth fund or its components?

Post by jjface » Tue May 03, 2016 3:50 pm

Toons wrote:Star Fund Since Inception 03/29/1985- 9.39%
Not Shabby. :mrgreen:
But hey Vanguard Wellington would have $213,528 with $10k invested on that inception date and Star would have $163,188.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Toons » Tue May 03, 2016 3:51 pm

jjface wrote:
Toons wrote:Star Fund Since Inception 03/29/1985- 9.39%
Not Shabby. :mrgreen:
But hey Vanguard Wellington would have $213,528 with $10k invested on that inception date and Star would have $163,188.
You are exactly right.
I am just commenting that there are worse places to park your money than Star.
Horrible might be the wrong adjective :mrgreen:
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Re: LifeStrategy Moderate Growth fund or its components?

Post by ogd » Tue May 03, 2016 4:31 pm

dkturner wrote:LifeStrategy Moderate Growth is a horrible fund. The STAR fund, which has about the same equity/fixed income allocation, has performed about 100 basis points per year better since the LifeStrategy inception.
It was a horrible fund because it had a horrible component, the market-mistiming tactical Asset Allocation fund. It will stink up its performance record for decades, unfortunately, but it is gone.

What makes a fund good or terrible is its structure and expenses, not its performance record. LSMG is an excellent fund, by that standard. The "performance record" standard (or what I call "5 star investing") is something we know doesn't work; in fact following it leads the typical investor to lose substantial performance compared to the very funds they invest in, the so-called "behavioral gap".

I suppose the past composition of the fund could leave the question of whether it will become terrible again, if Vanguards tinkers with it the wrong way. If it does, we'll let everyone know. For the record, the LifeStrategy funds were disliked around here while they had a market-timing component.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by dkturner » Wed May 04, 2016 5:07 am

ogd wrote:
dkturner wrote:LifeStrategy Moderate Growth is a horrible fund. The STAR fund, which has about the same equity/fixed income allocation, has performed about 100 basis points per year better since the LifeStrategy inception.
It was a horrible fund because it had a horrible component, the market-mistiming tactical Asset Allocation fund. It will stink up its performance record for decades, unfortunately, but it is gone.

What makes a fund good or terrible is its structure and expenses, not its performance record. LSMG is an excellent fund, by that standard. The "performance record" standard (or what I call "5 star investing") is something we know doesn't work; in fact following it leads the typical investor to lose substantial performance compared to the very funds they invest in, the so-called "behavioral gap".

I suppose the past composition of the fund could leave the question of whether it will become terrible again, if Vanguards tinkers with it the wrong way. If it does, we'll let everyone know. For the record, the LifeStrategy funds were disliked around here while they had a market-timing component.
Since LifeStrategy Moderate Growth was "fixed" it has produced an annualized return of 8.07% (12/31/11 - 5/3/16). STAR's annualized return has been 9.03% for this period and Wellington has produced an annualized return of 10.26%. The LifeStrategy funds are lousy funds overseen by a group of people who change the asset allocation like most people change their cars. If you like hitching your wagon to the LifeStrategy star (pun intended) more power to you. :oops:

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Re: LifeStrategy Moderate Growth fund or its components?

Post by fortyofforty » Wed May 04, 2016 5:55 am

My only complaint with the LifeStrategy funds (besides relatively high expense ratios) is the need to rebalance almost daily. If Vanguard would set a strategy of rebalancing less frequently (ideally, based on changes in the underlying fund performance over time) they'd be nearly perfect. I think even a quarterly rebalancing would probably produce better results. I don't know what the idea of constant rebalancing is, since you almost guarantee to lock in losses while limiting gains.
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Re: LifeStrategy Moderate Growth fund or its components?

Post by ogd » Wed May 04, 2016 1:38 pm

dkturner wrote:Since LifeStrategy Moderate Growth was "fixed" it has produced an annualized return of 8.07% (12/31/11 - 5/3/16). STAR's annualized return has been 9.03% for this period and Wellington has produced an annualized return of 10.26%. The LifeStrategy funds are lousy funds overseen by a group of people who change the asset allocation like most people change their cars. If you like hitching your wagon to the LifeStrategy star (pun intended) more power to you.
This is primarily the underperformance of international stocks. It affected the 3 fund portfolio similarly. STAR has less of it and Wellington almost none. The presence of international stocks is an advantage of LifeStrategy, despite recent performance. Fund construction trumps recent performance, because one works and one doesn't. If international outperforms over the next decade, there'll be a dkturner pointing to another set of funds with more international, always concluding that the slow index funds / 3 fund portfolio is a loser. This is what I call 5-star investing and it hurts investors grievously. I've done it myself for a long time before realizing recent perfomance simply doesn't work.

(Secondary factors are that STAR and Wellington have more stocks and riskier bonds. So yes, they have a right to slightly outperform on an ongoing basis, at the expense of risk)

I did agree with you that the past construction/changes are a black mark on LifeStrategy, but hopefully they've learned their lesson. The AA fund was a mistake dating back to the fund inception (and we weren't recommending the fund while that mistake was in effect), and the int'l bonds is a Vanguard-wide move that included TR funds and recommendations to individual investors and Advisor services, so I wouldn't call it a LifeStrategy mobility thing. Ironically, it's Wellington that retains the right to vary AA within certain limits (much like the AA fund component of LS), and the hodgepodge that is the STAR fund doesn't fill me with confidence that its AA will stay unchanged.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by livesoft » Wed May 04, 2016 1:42 pm

fortyofforty wrote:My only complaint with the LifeStrategy funds (besides relatively high expense ratios) is the need to rebalance almost daily.
I think that what we actually know about how these funds rebalance is not much. I do not think there is any need at all to rebalance almost daily. Things just don't get out of whack that much at all. Purchases and redemptions would offset and the little bit that does not offset could be used to stay in balance.

In the thread I linked, I think I showed that a just rebalancing the underlying funds by yourself probably does not do as well as LifeStrategy does on its own. Run the numbers yourself.
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Re: LifeStrategy Moderate Growth fund or its components?

Post by ogd » Wed May 04, 2016 1:46 pm

fortyofforty wrote:My only complaint with the LifeStrategy funds (besides relatively high expense ratios) is the need to rebalance almost daily. ... I don't know what the idea of constant rebalancing is,
It is the most reasonable reasonable thing to do. Unlike your portfolio, LS has money moving in and out daily. One day it's more money coming in, another it's more going out. The fund uses both types of days to move towards the target allocation -- what else is it supposed to do, intentionally buy stuff that it has too much of already? So this has the effect of daily rebalancing -- my understanding is that forced rebalancing is relatively rare.
fortyofforty wrote:since you almost guarantee to lock in losses while limiting gains.
You rebalance out of stuff that's grown recently, so if anything you lock in gains not losses.
fortyofforty wrote:If Vanguard would set a strategy of rebalancing less frequently (ideally, based on changes in the underlying fund performance over time)
If you mean simply "This fund hasn't done well recently and I have too little of it, need to get more", than that's how it works although inflows and outflows do the bulk of the rebalancing work like I said above.

If you mean a form of tactical allocation ("this fund is on the rise"), then that would be terrible and I'd avoid the fund like the plague. It's exactly the type of thing that was so troublesome before 2011, with the tactical allocation component that misfired badly during the financial crisis.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by 1210sda » Wed May 04, 2016 2:27 pm

ogd wrote: This is primarily the underperformance of international stocks. It affected the 3 fund portfolio similarly. STAR has less of it and Wellington almost none. The presence of international stocks is an advantage of LifeStrategy, despite recent performance. Fund construction trumps recent performance, because one works and one doesn't. If international outperforms over the next decade, there'll be a dkturner pointing to another set of funds with more international, always concluding that the slow index funds / 3 fund portfolio is a loser. This is what I call 5-star investing and it hurts investors grievously. I've done it myself for a long time before realizing recent perfomance simply doesn't work.
(Secondary factors are that STAR and Wellington have more stocks and riskier bonds)
Agree with ogd. Star has 63% in equities and Wellington has 66% in equities. Comparing to LS mod growth with it's 60% in stocks is not a good comparison.

Also, does anyone know where we can find tracking error stats for the funds in question? This too might shed light on the funds performance.
1210

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Re: LifeStrategy Moderate Growth fund or its components?

Post by dkturner » Wed May 04, 2016 3:43 pm

ogd wrote:
dkturner wrote:Since LifeStrategy Moderate Growth was "fixed" it has produced an annualized return of 8.07% (12/31/11 - 5/3/16). STAR's annualized return has been 9.03% for this period and Wellington has produced an annualized return of 10.26%. The LifeStrategy funds are lousy funds overseen by a group of people who change the asset allocation like most people change their cars. If you like hitching your wagon to the LifeStrategy star (pun intended) more power to you.
This is primarily the underperformance of international stocks. It affected the 3 fund portfolio similarly. STAR has less of it and Wellington almost none. The presence of international stocks is an advantage of LifeStrategy, despite recent performance. Fund construction trumps recent performance, because one works and one doesn't. If international outperforms over the next decade, there'll be a dkturner pointing to another set of funds with more international, always concluding that the slow index funds / 3 fund portfolio is a loser. This is what I call 5-star investing and it hurts investors grievously. I've done it myself for a long time before realizing recent perfomance simply doesn't work.

(Secondary factors are that STAR and Wellington have more stocks and riskier bonds. So yes, they have a right to slightly outperform on an ongoing basis, at the expense of risk)


I did agree with you that the past construction/changes are a black mark on LifeStrategy, but hopefully they've learned their lesson. The AA fund was a mistake dating back to the fund inception (and we weren't recommending the fund while that mistake was in effect), and the int'l bonds is a Vanguard-wide move that included TR funds and recommendations to individual investors and Advisor services, so I wouldn't call it a LifeStrategy mobility thing. Ironically, it's Wellington that retains the right to vary AA within certain limits (much like the AA fund component of LS), and the hodgepodge that is the STAR fund doesn't fill me with confidence that its AA will stay unchanged.
International Stocks. For the years 2002-2009 international stocks performed much better than domestic stocks. LifeStrategy Moderate Growth produced an annualized return of 6.35%, while Wellington produced an annualized return of 7.97%. Maybe Wellington had more international stocks during those years or maybe it's managers did a better job of investing their clients money, or some combination of the two.

Changing asset allocation. The LifeStrategy attempts at changing asset allocations didn't work out so well. The ever changing asset allocation at Wellington worked better. We're really comparing poor asset allocation decisions made by the LifeStrategy managers to the superior asset allocation decisions made by the Wellington managers. It's all active management. Some managers execute their changes better than others.

More Equity holdings. The Wellington managers chose to hold about 5 percentage points more equity than the LifeStrategy Moderate Growth portfolio. They didn't have to hold that much, but they did and it worked out for them.

Face it. The LifeStrategy funds have been a big disappointment for Vanguard - and should be for its clients.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by azanon » Wed May 04, 2016 3:52 pm

dkturner wrote:
Toons wrote:Moderate Growth.
One Fund Solution.
Keep It Simple
:happy
LifeStrategy Moderate Growth is a horrible fund. The STAR fund, which has about the same equity/fixed income allocation, has performed about 100 basis points per year better since the LifeStrategy inception.

We use the LifeStrategy Moderate Growth Fund as a benchmark for our portfolio. We beat it by an average of 178 basis points per year since the beginning of 2000.
The VG managed payout is worth a look too, since it has a comparable mix (60/25/5). If you don't need the payment feature, you can just reinvest it. You get the additional diversificaiton of commodities, and also some absolute return strategies that actually haven't performed all that bad lately, in comparison to the relatively low risk. I seem to recall the 5-year return being very close to those other 2 options listed above.

Oh and let me at least list one more "simple solution"; A betterment portfolio with the mix set to 60/40. Sure there's the 0.15% wrapper fee (for 100K+ portfolio) but that's an aweful nifty portfolio of Vanguard ETFs that they put you in and auto rebalance, and lots of other fancy stuff like tax-loss harvesting. I have that exact mix with them now for a smaller account, and the combined ER of the portfolio is only 0.15%, so that plus their wrapper fee. With their value tilt, and international emphasis, I'd pit their 60/40 even with the wrapper fee vs. a VG life strategy moderate any day. 5 years from now, i'd guess betterment wins.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by jjface » Wed May 04, 2016 3:59 pm

dkturner wrote:
ogd wrote:
dkturner wrote:Since LifeStrategy Moderate Growth was "fixed" it has produced an annualized return of 8.07% (12/31/11 - 5/3/16). STAR's annualized return has been 9.03% for this period and Wellington has produced an annualized return of 10.26%. The LifeStrategy funds are lousy funds overseen by a group of people who change the asset allocation like most people change their cars. If you like hitching your wagon to the LifeStrategy star (pun intended) more power to you.
This is primarily the underperformance of international stocks. It affected the 3 fund portfolio similarly. STAR has less of it and Wellington almost none. The presence of international stocks is an advantage of LifeStrategy, despite recent performance. Fund construction trumps recent performance, because one works and one doesn't. If international outperforms over the next decade, there'll be a dkturner pointing to another set of funds with more international, always concluding that the slow index funds / 3 fund portfolio is a loser. This is what I call 5-star investing and it hurts investors grievously. I've done it myself for a long time before realizing recent perfomance simply doesn't work.

(Secondary factors are that STAR and Wellington have more stocks and riskier bonds. So yes, they have a right to slightly outperform on an ongoing basis, at the expense of risk)


I did agree with you that the past construction/changes are a black mark on LifeStrategy, but hopefully they've learned their lesson. The AA fund was a mistake dating back to the fund inception (and we weren't recommending the fund while that mistake was in effect), and the int'l bonds is a Vanguard-wide move that included TR funds and recommendations to individual investors and Advisor services, so I wouldn't call it a LifeStrategy mobility thing. Ironically, it's Wellington that retains the right to vary AA within certain limits (much like the AA fund component of LS), and the hodgepodge that is the STAR fund doesn't fill me with confidence that its AA will stay unchanged.
International Stocks. For the years 2002-2009 international stocks performed much better than domestic stocks. LifeStrategy Moderate Growth produced an annualized return of 6.35%, while Wellington produced an annualized return of 7.97%. Maybe Wellington had more international stocks during those years or maybe it's managers did a better job of investing their clients money, or some combination of the two.

Changing asset allocation. The LifeStrategy attempts at changing asset allocations didn't work out so well. The ever changing asset allocation at Wellington worked better. We're really comparing poor asset allocation decisions made by the LifeStrategy managers to the superior asset allocation decisions made by the Wellington managers. It's all active management. Some managers execute their changes better than others.

More Equity holdings. The Wellington managers chose to hold about 5 percentage points more equity than the LifeStrategy Moderate Growth portfolio. They didn't have to hold that much, but they did and it worked out for them.

Face it. The LifeStrategy funds have been a big disappointment for Vanguard - and should be for its clients.
If you want to see what taking international out looks like then look at vanguard balanced index vbiax. It has done pretty well and is competitive with Star. Star actually has quite a bit of international stocks though 30-35% of equity. I just always look at star and think if I want active management why would I choose it over Wellington? Though star is a good fund in itself. Perhaps if I want more international stocks vs wellington.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by pingo » Wed May 04, 2016 4:21 pm

jjface wrote:I just always look at star and think if I want active management why would I choose it over Wellington? Though star is a good fund in itself. Perhaps if I want more international stocks vs wellington.
Bouncing off that I'll add that I break down the decision roughly in those terms. LifeStrategy, STAR, Wellington and Balanced Index Fund are all great options. But if I want 40% of equities to be international (that's 24% of the fund's portfolio), LifeStrategy is the answer. Or, STAR if 33%-ish (of equities) feels more sensible. Wellington for just a smack of international; Balanced to avoid international altogether.

Or if one prefers for active-management (some people feel safer with it), STAR and Wellington move up in priority.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Kuckie » Wed May 04, 2016 4:31 pm

Kelly wrote: Is there any reason why the LifeStrategy fund wouldn't produce nearly the same results if held in an IRA (assuming the individual funds were rebalanced to target every year)?
Nope. Actually the Life Strategy Funds should probably do better since they are automatically rebalanced every day, while owning the individual funds requires periodic manual balancing which is subject to the influence of market noise.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by ogd » Wed May 04, 2016 6:53 pm

dkturner wrote:International Stocks. For the years 2002-2009 international stocks performed much better than domestic stocks. LifeStrategy Moderate Growth produced an annualized return of 6.35%, while Wellington produced an annualized return of 7.97%. Maybe Wellington had more international stocks during those years or maybe it's managers did a better job of investing their clients money, or some combination of the two.
This was while the fund had Asset Allocation, which was at its worst during the financial crisis. We weren't recommending the fund then. We don't have a period with international performance and a "clean" LSMG fund, which would be instructive.
dkturner wrote: The ever changing asset allocation at Wellington worked better. We're really comparing poor asset allocation decisions made by the LifeStrategy managers to the superior asset allocation decisions made by the Wellington managers. It's all active management. Some managers execute their changes better than others.

More Equity holdings. The Wellington managers chose to hold about 5 percentage points more equity than the LifeStrategy Moderate Growth portfolio. They didn't have to hold that much, but they did and it worked out for them.
No. I (would) choose to have 60% equity, not the fund; if I wanted more I can move up the scale.

As far as I'm concerned, the ability of Wellington to change allocations -- to the extent they use it -- is as bad of an idea as it was to have Asset Allocation in the LS. It just hasn't misfired yet. If they use it, it very likely will -- this stuff just doesn't work, as we can see widely in the statistics of the funds that attempt it. It's better to not give the managers any leeway. It's also better to not give them the ability to pick stocks, but that's a different problem with Wellington.

Your panning of LSMG is based on one bad initial decision (regarded with plenty of suspicion around here at the time) and a giant rear view mirror. It's a bad idea to use that mirror for investing.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by pingo » Wed May 04, 2016 10:28 pm

ogd wrote:As far as I'm concerned, the ability of Wellington to change allocations -- to the extent they use it -- is as bad of an idea as it was to have Asset Allocation in the LS. It just hasn't misfired yet. If they use it, it very likely will -- this stuff just doesn't work, as we can see widely in the statistics of the funds that attempt it. It's better to not give the managers any leeway. It's also better to not give them the ability to pick stocks, but that's a different problem with Wellington.
In Wellington's defense I have no reason to believe that it's flexibility to hold 60-70% equities means they allocate tactically.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by fortyofforty » Fri May 06, 2016 6:45 am

Of all the actively managed funds in which one could invest, Wellington seems to be one of the best. Year after year, the managers display a superior knowledge of stockpicking. They shouldn't be able to do it, but they do. Perhaps comparing LifeStrategy Moderate Growth (which is forced to hold Total Stock Market as a major component, along with good chunks of Total Bond Market and Total International Stock Market) is unfair. Wellington is a large cap value fund, with a tactical allocation to bonds across the spectrum of credit quality and duration. With LSMG, you know what it holds, for better or worse. With Wellington, you put your faith in active managers (and it's been well-placed, for decades).
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Re: LifeStrategy Moderate Growth fund or its components?

Post by dkturner » Fri May 06, 2016 8:12 am

fortyofforty wrote:Of all the actively managed funds in which one could invest, Wellington seems to be one of the best. Year after year, the managers display a superior knowledge of stockpicking. They shouldn't be able to do it, but they do. Perhaps comparing LifeStrategy Moderate Growth (which is forced to hold Total Stock Market as a major component, along with good chunks of Total Bond Market and Total International Stock Market) is unfair. Wellington is a large cap value fund, with a tactical allocation to bonds across the spectrum of credit quality and duration. With LSMG, you know what it holds, for better or worse. With Wellington, you put your faith in active managers (and it's been well-placed, for decades).
Actually you may know what LSMG holds today, but you might discover tomorrow that it has been "improved", again. The LifeStrategy funds have always been actively managed, just not actively managed very well. They have been great examples of how not to passively "manage" money.

Da5id
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Re: LifeStrategy Moderate Growth fund or its components?

Post by Da5id » Fri May 06, 2016 8:22 am

dkturner wrote: Actually you may know what LSMG holds today, but you might discover tomorrow that it has been "improved", again. The LifeStrategy funds have always been actively managed, just not actively managed very well. They have been great examples of how not to passively "manage" money.
That is only a problem in taxable, where if they change the composition you may have adverse tax consequences switching to something more to your liking. But the LifeStrategy funds are a weaker choice in taxable anyway, as you basically lose ability to do any tax loss/gain harvesting.

I personally like the current composition of the Lifestrategy funds fairly well. I recently split holdings of the Moderate Growth in Roth/Traditional IRA into components anyway, dropping the international bond (for which the case seems murky, but I didn't really object to either). But I'd not have bothered if they had an Admiral version of LifeStrategy Moderate Growth, just didn't want to pay the higher fees. I don't see the value of paying Vanguard a fair bit extra to rebalance continually. While the single fund does encourage better behavior by investors who might be tempted to mess around with the rebalancing, I'll be doing it yearly without fail...

Tommy
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Re: LifeStrategy Moderate Growth fund or its components?

Post by Tommy » Fri May 06, 2016 11:44 am

Isn't way of daily re balancing apply to all fund of funds? TR or Star? In order to keep constant AA they have to re balance daily. Is it good or bad I don't know.

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fortyofforty
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Re: LifeStrategy Moderate Growth fund or its components?

Post by fortyofforty » Fri May 06, 2016 8:01 pm

If you believe the main determinant of overall portfolio performance is the mix of asset classes, not the specific underlying investments, then the LifeStrategy family is a great "one stop shop" for funds. The LifeStrategy funds have not, in recent history, changed their mixture of asset classes. LifeStrategy Growth is 80% stocks and 20% bonds, for example. It has been thus for many years. People can quibble since the underlying investments have now increased the weighting of Total International Stock and added International Bonds. Is that a good idea? Well, if you believe in capitalization weighting, then you should not regret moving towards a more "global neutral" outlook. Of late, international stocks have underperformed domestic equities, and international bonds have underperformed domestic bonds, so that change has been a drag on performance. However, if you don't like the mixture, you really are disagreeing with the efficient market theory and the notion of the free movement of capital across capital markets. Many smart people work at Vanguard, and they do have economics and investing theory on their side. Only (a long) time will tell.
"In a time of universal deceit, telling the truth becomes a revolutionary act." - George Orwell | Original Vanguard Diehard

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Re: LifeStrategy Moderate Growth fund or its components?

Post by pingo » Fri May 06, 2016 8:36 pm

And if a LifeStrategy fund's current asset allocation has the broad stock-bond ratio one is looking for (or close to it) and the same U.S.-International stock ratio one is looking for (or close to it), it is a reasonable, low cost option through which one may obtain a complete, uber-diversified portfolio with maximum simplicity.

For those who don't like the idea that Vanguard might fiddle with the portfolio again...well, as soon as the fund no longer meets the desired asset allocation of the investor (or close to it), that investor can exchange out of the fund into individual funds. If the fund series meets one's need currently, and all else being equal, opting for simplicity now doesn't preclude opting for complexity later.

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Dandy » Sat May 07, 2016 8:42 am

The choice is simplicity and some loss of control as to the actual allocation and/or composition vs DIY and manage the complexity of a 4 fund portfolio.
To many the simplicity rules, to others they would rather be in control and don't mind a bit more complexity.

Good case can be made for both. As one gets longer in the tooth simplicity is like the siren's call (especially is your spouse is not investment savvy) that is hard to resist. I hear the siren's call but so far have resisted the beautiful simplicity of TD or Life Strategy Funds - not crazy about current composition and hate that VG makes so many fundamental changes. So far Balanced Index and Wellesley Income and some fixed income is where I am now. No all in one or Balanced fund is going to fit perfectly. e.g. Balanced Index has no international equities and its allocation is a bit high for my TIRA. I guess you can come close to designing your own all in one fund substitute with services that include automatic rebalancing. Something to chew on would the extra expense be worth it??

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Re: LifeStrategy Moderate Growth fund or its components?

Post by Raven2 » Sat May 07, 2016 11:41 am

fortyofforty wrote:
"If you believe the main determinant of overall portfolio performance is the mix of asset classes, not the specific underlying investments, then the LifeStrategy family is a great "one stop shop" for funds. The LifeStrategy funds have not, in recent history, changed their mixture of asset classes. People can quibble since the underlying investments have now increased the weighting of Total International Stock and added International Bonds. Is that a good idea? Well, if you believe in capitalization weighting, then you should not regret moving towards a more "global neutral" outlook. Of late, international stocks have underperformed domestic equities, and international bonds have underperformed domestic bonds, so that change has been a drag on performance. However, if you don't like the mixture, you really are disagreeing with the efficient market theory and the notion of the free movement of capital across capital markets. Many smart people work at Vanguard, and they do have economics and investing theory on their side. Only (a long) time will tell."
Agreed with all.

But some people still think they can do better than following the efficient market theory and so they tilt, which is really another form of market timing.

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