Vanguard Lifestrategy UK

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Topic Author
Luvchenko
Posts: 10
Joined: Fri Aug 09, 2019 4:09 am

Vanguard Lifestrategy UK

Post by Luvchenko » Mon Sep 16, 2019 4:58 pm

Hi fellas,

I'm considering putting my money on the Vanguard Lifestrategy 80%, but wanted to hear some of your opinions about it.

I'm 31 and willing to leave the money invested for 15+ years. I am tempted to even go with the 100%, but even though I think I'd be resilient even facing a nasty bear market, the fact is I've never seen my money go through one, so those 20% in bonds are probably a good idea to help my future self not stress that much.

One technical question, is the Lifestrategy the same as other robo advisors like Wealthyfy or Nutmeg?

Cheers.

actuallyxy
Posts: 35
Joined: Wed May 24, 2017 6:25 am

Re: Vanguard Lifestrategy UK

Post by actuallyxy » Mon Sep 16, 2019 5:47 pm

Vanguard Lifestrategy is as great fund-of-funds designed to constitute your whole portfolio.

The main criticism some people have is that it has a significant UK overweight, because it holds 25% of its stocks in UK companies, while the UK market weight is about 7%.

Another smaller problem is that sometimes holding stocks and bonds in the same fund can be less tax efficient - but that should only affect you if you have significant amounts outside ISAs and SIPPs.

You are right that for long term investment a stock heavy portfolio is a good idea. 20% bonds will make the portfolio slightly less volatile without hurting returns too much. Still, you should be aware that a 80% stock portfolio could lose up to 40% of its value in a severe bear market.

Roboadvisors are websites that assess your risk tolerance with a questionnaire and then allow you to invest in a set portfolio of funds. They can be useful for a lot of people, but they charge a significant annual fee to help you invest in a portfolio that you could easily build yourself (for example, buy buying Vanguard Lifestrategy), so you end up effectively paying for a pretty website.

Vanguard Lifestrategy delivers a similar portfolio, wrapped up in a fund. It's a cheaper and better option than roboadvisors.

xxd091
Posts: 101
Joined: Sun Aug 21, 2011 4:41 am
Location: UK

Re: Vanguard Lifestrategy UK

Post by xxd091 » Mon Sep 16, 2019 5:58 pm

Your idea is right but the U.K. bias of this fund is a no no for me
I believe Vanguard is aware of this and U.K. bias is getting less
Many UK investors want a home bias
Probably a Vanguard Fund or ETF of Global Equities plus a Vanguard Global Bond Fund Hedged to the Pound is the way to go
Cheap and simple and hold forever amending Asset Allocation as you get older if required
xxd09

Topic Author
Luvchenko
Posts: 10
Joined: Fri Aug 09, 2019 4:09 am

Re: Vanguard Lifestrategy UK

Post by Luvchenko » Tue Sep 17, 2019 2:47 am

Why the UK over representation? If the fund invests globally why not giving a bigger weight to, say, the US market? If it's just to "please" the UK local investors wouldn't they be more pleased the more accurately represented were the assets in the fund? I had heard this comment before and it's always confused me...

As for the asset allocation you propose, how much fiddling would that require? Would it be a matter of just rebalancing the percentages once a year?

actuallyxy
Posts: 35
Joined: Wed May 24, 2017 6:25 am

Re: Vanguard Lifestrategy UK

Post by actuallyxy » Tue Sep 17, 2019 4:32 am

Most investors like to overweight their home country. A lot of American investors here in bogleheads invest 100% or 80% of their stocks in the US.

If you look up the Lifestrategy fund in www.morningstar.co.uk or in the UK Vanguard website and go to the portfolio section, you can find more information about its composition. It probably has about 35% in US.

It's a matter of personal preference. If you'd rather have the UK at its market weight, you can invest 80% in Vanguard FTSE Global All Cap and 20% in Vanguard Global Bond Index Fund, and rebalance yearly. Other funds may work too.

Valuethinker
Posts: 39215
Joined: Fri May 11, 2007 11:07 am

Re: Vanguard Lifestrategy UK

Post by Valuethinker » Tue Sep 17, 2019 4:49 am

Luvchenko wrote:
Mon Sep 16, 2019 4:58 pm
Hi fellas,

I'm considering putting my money on the Vanguard Lifestrategy 80%, but wanted to hear some of your opinions about it.

I'm 31 and willing to leave the money invested for 15+ years. I am tempted to even go with the 100%, but even though I think I'd be resilient even facing a nasty bear market, the fact is I've never seen my money go through one, so those 20% in bonds are probably a good idea to help my future self not stress that much.

One technical question, is the Lifestrategy the same as other robo advisors like Wealthyfy or Nutmeg?

Cheers.
The heavy weighting to UK is something of a concern. Of course poor past performance may mean revert ;-).

If you want just a one decision, then this is probably it. Otherwise 80/20 a global equity index fund (currency unhedged) and a global bond fund (almost certainly GBP hedged).

Topic Author
Luvchenko
Posts: 10
Joined: Fri Aug 09, 2019 4:09 am

Re: Vanguard Lifestrategy UK

Post by Luvchenko » Tue Sep 17, 2019 8:07 am

Why the unhedgding on stocks? Is that to maximize the potential returns (which would also entail worst losses)?

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