What do you think of my Asset Allocation? (UK Investor)

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spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Sun Jan 07, 2018 4:22 am

I've designed my asset allocation and would really appreciate thoughts from other bogleheads, along with advice to my questions at the end.

- I'm 24
- Vanguards risk calculator suggested 80 stocks/20 bonds (I've opted for 75stocks/25bonds)
- Born and live in the UK
- I have a student loan which I'm paying back monthly with my salary
- I have £30,000 to invest currently with 6 months living saved in case I lose my job (albeit minimalist living)

Asset Allocation
40% USA Total Stock Market Index
30% Total International Stock Market Index (excluding USA)
5% REIT Index
25% UK Total Government Bonds

Questions

- I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
- Should I diversify bonds more? (If so how?)

Thank you.
Last edited by spope2 on Sun Jan 07, 2018 4:34 am, edited 1 time in total.

minimalistmarc
Posts: 290
Joined: Fri Jul 24, 2015 4:38 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by minimalistmarc » Sun Jan 07, 2018 4:31 am

Use ETFs. You only need 2.

VWRL (vanguard all world)
VGOV (bonds)

Forget individual shares, and don’t bother tilting to the uk.

Check out these videos
http://kroijer.com

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Sun Jan 07, 2018 8:01 am

spope2 wrote:
Sun Jan 07, 2018 4:22 am
I've designed my asset allocation and would really appreciate thoughts from other bogleheads, along with advice to my questions at the end.

- I'm 24
- Vanguards risk calculator suggested 80 stocks/20 bonds (I've opted for 75stocks/25bonds)
- Born and live in the UK
- I have a student loan which I'm paying back monthly with my salary
- I have £30,000 to invest currently with 6 months living saved in case I lose my job (albeit minimalist living)

Asset Allocation
40% USA Total Stock Market Index
30% Total International Stock Market Index (excluding USA)
5% REIT Index
25% UK Total Government Bonds

Questions

- I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
- Should I diversify bonds more? (If so how?)

Thank you.
You have seen my other posts on order of investment.

If you are in a (public sector) Final or Career Average Salary Scheme then fine. If you can buy additional years service (teacher) then you should think about it. It is the same as a low risk investment in bonds, effectively.

If not make sure you get full employer match on pension *before* any other investing. (Defined Contribution schemes).

Do the rest in ISA. You can do 20k this year and wait until after 5 April and do other 10k.

You want to track the world market. Then as per other poster above :

World equity index etf - do not overweight nor underweight UK USA etc

Bonds either a global government bond etf or a UK govt bond one (ie Gilts).

2 funds saves you dealing charges when you invest and or rebalance. Also easier to keep track of.

Repay any non student loan debt w APR above say 3.5 per cent before investing *unless* you have not used your full ISA allowance that year.
Last edited by Valuethinker on Sun Jan 07, 2018 8:07 am, edited 1 time in total.

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Sun Jan 07, 2018 8:06 am

minimalistmarc wrote:
Sun Jan 07, 2018 4:31 am
Use ETFs. You only need 2.

VWRL (vanguard all world)
VGOV (bonds)

Forget individual shares, and don’t bother tilting to the uk.

Check out these videos
http://kroijer.com
Very good advice.

I have not checked those ETFs. But London listed?

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Sun Jan 07, 2018 11:25 am

Valuethinker wrote:
Sun Jan 07, 2018 8:06 am
I have not checked those ETFs. But London listed?
Yes.
spope2 wrote:
Sun Jan 07, 2018 4:22 am
I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
You appear to be taking a somewhat US-centric view of things. Not really surprising given that this is the main viewpoint on this forum, but it's better to pare things back to what is appropriate for a UK investor and then work forwards from there, rather than trying shoehorn a US investor's round peg pre-selected portfolio into a UK square hole.

A simple VWRL and VGOV two-ETF portfolio would do you nicely. Even simpler would be a single holding in Vanguard's LifeStrategy 80 fund. This is 80% global stocks with somewhat of a UK bias accompanied by a 20% diversified bonds and gilts. This 80% to stock is a touch more than you chose, but the difference is likely to be minimal. To get to exactly 75/25 you could hold 3/4 of your money in LifeStrategy 80 and 1/4 in LifeStrategy 60 -- not quite as simple, but hardly complicated. The moderate UK bias in Vanguard UK's LifeStrategy funds doesn't suit everyone.

One thing to watch for is fund platform costs. Even going direct to Vanguard UK will cost you an additional 0.15% in 'platform fee', on top of the fund charges. Flat fee providers such as iWeb, Halifax Sharedealing and Lloyds are often the cheapest for funds -- yes, in the UK it is cheaper to hold Vanguard funds on a non-Vanguard platform rather than on Vanguard's own! -- and Hargreaves Lansdown at an additional 0.45% for funds the most expensive. For the moment it is often possible to avoid fund charges by using ETFs instead. At smaller investment levels these platform fees don't have much effect, but once you get above around £30-£40k or so the percentage-based ones become corrosive. So choose your platform and ETF/fund selection carefully so that you don't incur unnecessary platform charges.
spope2 wrote:
Sun Jan 07, 2018 4:22 am
- Should I diversify bonds more? (If so how?)
A UK government index linked gilt fund or ETF such as INXG? Or perhaps a corporate bond fund or ETF such as SLXX or IS15? Beyond that, non-sterling bonds. Bear in mind, though, that holding bonds in a currency other than the one in which you will spend adds extra currency risk that might not be compensated by return. The same effect isn't as prevalent with equities as their general out-performance relative to bonds tends to swamp it.

Really though, the best thing is probably to keep it simple for now. If you look into what LifeStrategy 80 holds you will find plenty enough of both equity and bond diversity in there.

Finally, always invest through an ISA wrapper where possible. If you haven't already used your ISA allowance you can put £20k in before April 6, and the remaining £10k to £20k after. Unless you cannot use an ISA there is no reason not to.

TL;DR -- Open an ISA at iWeb, put £20k into LifeStrategy 80 or VWRL+VGOV before April 6, put another £10-20k after, done.

minimalistmarc
Posts: 290
Joined: Fri Jul 24, 2015 4:38 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by minimalistmarc » Sun Jan 07, 2018 12:29 pm

One further point, Hargreaves Lansdown is a fantastic website. They are extremely cheap for ETFs, capped at £45 / year

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Sun Jan 07, 2018 1:44 pm

minimalistmarc wrote:
Sun Jan 07, 2018 12:29 pm
One further point, Hargreaves Lansdown is a fantastic website. They are extremely cheap for ETFs, capped at £45 / year
What about their other fees and charges?

When I have looked at them, they have always come out quite expensive.

minimalistmarc
Posts: 290
Joined: Fri Jul 24, 2015 4:38 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by minimalistmarc » Sun Jan 07, 2018 2:22 pm

Valuethinker wrote:
Sun Jan 07, 2018 1:44 pm
minimalistmarc wrote:
Sun Jan 07, 2018 12:29 pm
One further point, Hargreaves Lansdown is a fantastic website. They are extremely cheap for ETFs, capped at £45 / year
What about their other fees and charges?

When I have looked at them, they have always come out quite expensive.
12 pounds per trade. Very cheap.

Even to transfer between my wife and I’s non ISAs they only charge about 15. Just don’t use them for funds. They charge uncapped 0.45%.

SIPP is slightly worse, capped at £250 per year for non funds.

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Sun Jan 07, 2018 2:33 pm

Valuethinker wrote:
Sun Jan 07, 2018 1:44 pm
What about their other fees and charges?
Assuming an ISA, listed here. For a total £30k holding the platform charge would come to £135/year for holding funds, or £45/year for ETFs. Trading in funds is free, and in ETFs it is £11.95.

By comparison, iWeb charge a £25 one-off 'joining' fee and then £5/trade and nothing annually. You would have to trade an additional 27 times a year to exceed Hargreaves Lansdown's funds platform charge, or 9 times a year in ETFs. Alternatively, Lloyds Sharedealing Direct is a flat £40/year for an ISA, and then just £1.50 for fund trades, or £11 for ETFs.

Provided the OP is not a hyperactive funds-only trader(!), both are probably going to come out cheaper than Hargreaves Lansdown for a £30k portfolio. And with funds and not ETFs, the annual saving over Hargreaves Lansdown increases as the funds gain value.
Valuethinker wrote:
Sun Jan 07, 2018 1:44 pm
When I have looked at them, they have always come out quite expensive.
They can be cheap-ish for some ETF portfolios and for some small accounts. Other than these though, definitely expensive.

Their web site is okay for 'research' -- although not that much of this is needed once you settle on using trackers and other passives -- but in practice quite a bit of it is usable by non-customers anyway. Their customer service is reputedly also good, but again once you've settled on the investments you're intending to use there shouldn't be much in the way of hand-holding required.

Comparing UK platform charges is ridiculously complex. If used properly a tool such as this one can take some of the drudgery out.
minimalistmarc wrote:
Sun Jan 07, 2018 2:22 pm
12 pounds per trade. Very cheap.
But iWeb is cheaper still, less than half of this at £5/trade for either funds or ETFs. And no annual holding charge on top, either.

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Sun Jan 07, 2018 5:41 pm

TedSwippet wrote:
Sun Jan 07, 2018 2:33 pm
Valuethinker wrote:
Sun Jan 07, 2018 1:44 pm
What about their other fees and charges?
Assuming an ISA, listed here. For a total £30k holding the platform charge would come to £135/year for holding funds, or £45/year for ETFs. Trading in funds is free, and in ETFs it is £11.95.

By comparison, iWeb charge a £25 one-off 'joining' fee and then £5/trade and nothing annually. You would have to trade an additional 27 times a year to exceed Hargreaves Lansdown's funds platform charge, or 9 times a year in ETFs. Alternatively, Lloyds Sharedealing Direct is a flat £40/year for an ISA, and then just £1.50 for fund trades, or £11 for ETFs.

Provided the OP is not a hyperactive funds-only trader(!), both are probably going to come out cheaper than Hargreaves Lansdown for a £30k portfolio. And with funds and not ETFs, the annual saving over Hargreaves Lansdown increases as the funds gain value.
Valuethinker wrote:
Sun Jan 07, 2018 1:44 pm
When I have looked at them, they have always come out quite expensive.
They can be cheap-ish for some ETF portfolios and for some small accounts. Other than these though, definitely expensive.

Their web site is okay for 'research' -- although not that much of this is needed once you settle on using trackers and other passives -- but in practice quite a bit of it is usable by non-customers anyway. Their customer service is reputedly also good, but again once you've settled on the investments you're intending to use there shouldn't be much in the way of hand-holding required.

Comparing UK platform charges is ridiculously complex. If used properly a tool such as this one can take some of the drudgery out.
minimalistmarc wrote:
Sun Jan 07, 2018 2:22 pm
12 pounds per trade. Very cheap.
But iWeb is cheaper still, less than half of this at £5/trade for either funds or ETFs. And no annual holding charge on top, either.
Thank you for your (yet again) wealth of information!

That compare web site is handy.

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Sun Jan 21, 2018 12:33 pm

minimalistmarc wrote:
Sun Jan 07, 2018 4:31 am
Use ETFs. You only need 2.

VWRL (vanguard all world)
VGOV (bonds)

Forget individual shares, and don’t bother tilting to the uk.

Check out these videos
http://kroijer.com
Hi Marc,

Thank you very much for commenting. I'm still somewhat of a newbie to investing, can I ask you a couple of things regarding your suggestion.

1. Why do you suggest ETF's over Index Funds?
2. The VWRL ETF seem to only include mid and large cap. What do you think about investing in something like the VTWSX index which also covers small cap instead?

Thank you
Last edited by spope2 on Sun Jan 21, 2018 12:41 pm, edited 1 time in total.

User avatar
randomizer
Posts: 1540
Joined: Sun Jul 06, 2014 3:46 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by randomizer » Sun Jan 21, 2018 12:36 pm

Valuethinker wrote:
Sun Jan 07, 2018 8:01 am
spope2 wrote:
Sun Jan 07, 2018 4:22 am
I've designed my asset allocation and would really appreciate thoughts from other bogleheads, along with advice to my questions at the end.

- I'm 24
- Vanguards risk calculator suggested 80 stocks/20 bonds (I've opted for 75stocks/25bonds)
- Born and live in the UK
- I have a student loan which I'm paying back monthly with my salary
- I have £30,000 to invest currently with 6 months living saved in case I lose my job (albeit minimalist living)

Asset Allocation
40% USA Total Stock Market Index
30% Total International Stock Market Index (excluding USA)
5% REIT Index
25% UK Total Government Bonds

Questions

- I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
- Should I diversify bonds more? (If so how?)

Thank you.
You have seen my other posts on order of investment.

If you are in a (public sector) Final or Career Average Salary Scheme then fine. If you can buy additional years service (teacher) then you should think about it. It is the same as a low risk investment in bonds, effectively.

If not make sure you get full employer match on pension *before* any other investing. (Defined Contribution schemes).

Do the rest in ISA. You can do 20k this year and wait until after 5 April and do other 10k.

You want to track the world market. Then as per other poster above :

World equity index etf - do not overweight nor underweight UK USA etc

Bonds either a global government bond etf or a UK govt bond one (ie Gilts).

2 funds saves you dealing charges when you invest and or rebalance. Also easier to keep track of.

Repay any non student loan debt w APR above say 3.5 per cent before investing *unless* you have not used your full ISA allowance that year.
Isn't dividend reinvestment a bit of a nuisance with ETFs?
87.5:12.5, EM tilt — HODL the course!

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Sun Jan 21, 2018 12:40 pm

Valuethinker wrote:
Sun Jan 07, 2018 8:01 am
spope2 wrote:
Sun Jan 07, 2018 4:22 am
I've designed my asset allocation and would really appreciate thoughts from other bogleheads, along with advice to my questions at the end.

- I'm 24
- Vanguards risk calculator suggested 80 stocks/20 bonds (I've opted for 75stocks/25bonds)
- Born and live in the UK
- I have a student loan which I'm paying back monthly with my salary
- I have £30,000 to invest currently with 6 months living saved in case I lose my job (albeit minimalist living)

Asset Allocation
40% USA Total Stock Market Index
30% Total International Stock Market Index (excluding USA)
5% REIT Index
25% UK Total Government Bonds

Questions

- I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
- Should I diversify bonds more? (If so how?)

Thank you.
You have seen my other posts on order of investment.

If you are in a (public sector) Final or Career Average Salary Scheme then fine. If you can buy additional years service (teacher) then you should think about it. It is the same as a low risk investment in bonds, effectively.

If not make sure you get full employer match on pension *before* any other investing. (Defined Contribution schemes).

Do the rest in ISA. You can do 20k this year and wait until after 5 April and do other 10k.

You want to track the world market. Then as per other poster above :

World equity index etf - do not overweight nor underweight UK USA etc

Bonds either a global government bond etf or a UK govt bond one (ie Gilts).

2 funds saves you dealing charges when you invest and or rebalance. Also easier to keep track of.

Repay any non student loan debt w APR above say 3.5 per cent before investing *unless* you have not used your full ISA allowance that year.
VT, thank you for your continuous advice. I have a meeting with finance at work to discuss investing in my pension as per your recommendation.

Regarding your bonds advice, what do you think about the global government bond vs UK govt bond? What are the pro's and con's of each, is one better than the other?

Thanks again

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Sun Jan 21, 2018 1:05 pm

spope2 wrote:
Sun Jan 07, 2018 4:22 am
I'd like to invest in UK stock as well like the FTSE all share index, but wasn't sure how to work this out because the Total International index covers the UK. Shall I just not bother?
You appear to be taking a somewhat US-centric view of things. Not really surprising given that this is the main viewpoint on this forum, but it's better to pare things back to what is appropriate for a UK investor and then work forwards from there, rather than trying shoehorn a US investor's round peg pre-selected portfolio into a UK square hole.

A simple VWRL and VGOV two-ETF portfolio would do you nicely. Even simpler would be a single holding in Vanguard's LifeStrategy 80 fund. This is 80% global stocks with somewhat of a UK bias accompanied by a 20% diversified bonds and gilts. This 80% to stock is a touch more than you chose, but the difference is likely to be minimal. To get to exactly 75/25 you could hold 3/4 of your money in LifeStrategy 80 and 1/4 in LifeStrategy 60 -- not quite as simple, but hardly complicated. The moderate UK bias in Vanguard UK's LifeStrategy funds doesn't suit everyone.

One thing to watch for is fund platform costs. Even going direct to Vanguard UK will cost you an additional 0.15% in 'platform fee', on top of the fund charges. Flat fee providers such as iWeb, Halifax Sharedealing and Lloyds are often the cheapest for funds -- yes, in the UK it is cheaper to hold Vanguard funds on a non-Vanguard platform rather than on Vanguard's own! -- and Hargreaves Lansdown at an additional 0.45% for funds the most expensive. For the moment it is often possible to avoid fund charges by using ETFs instead. At smaller investment levels these platform fees don't have much effect, but once you get above around £30-£40k or so the percentage-based ones become corrosive. So choose your platform and ETF/fund selection carefully so that you don't incur unnecessary platform charges.
spope2 wrote:
Sun Jan 07, 2018 4:22 am
- Should I diversify bonds more? (If so how?)
A UK government index linked gilt fund or ETF such as INXG? Or perhaps a corporate bond fund or ETF such as SLXX or IS15? Beyond that, non-sterling bonds. Bear in mind, though, that holding bonds in a currency other than the one in which you will spend adds extra currency risk that might not be compensated by return. The same effect isn't as prevalent with equities as their general out-performance relative to bonds tends to swamp it.

Really though, the best thing is probably to keep it simple for now. If you look into what LifeStrategy 80 holds you will find plenty enough of both equity and bond diversity in there.
Finally, always invest through an ISA wrapper where possible. If you haven't already used your ISA allowance you can put £20k in before April 6, and the remaining £10k to £20k after. Unless you cannot use an ISA there is no reason not to.

TL;DR -- Open an ISA at iWeb, put £20k into LifeStrategy 80 or VWRL+VGOV before April 6, put another £10-20k after, done.
[/quote]

Hi Ted,

Thanks for your guidance, really appreciate it as I'm still a newbie to investing (even having read numerous books). If you don't mind, I have a few questions based on your suggestions.

1. Like minimalistmarc, you also suggest the VWRL ETF which only covers mid and large cap stocks. What do you think of that compared to the VTWSX index which also includes small cap stocks?
2.Your comment to valuethinker regarding iWeb's fee's. Does this quote on London Stock Exchange's website apply to investing in a world index:
"Please note that foreign currency conversions apply to international trades and include a charge of 1.5%" .... If so, is it still cheaper than HL?
3. Lastly, when you refer to "funds" in your comment to valuethinker, are you referring to index funds?

Thanks TS.

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Sun Jan 21, 2018 2:09 pm

spope2 wrote:
Sun Jan 21, 2018 1:05 pm
1. Like minimalistmarc, you also suggest the VWRL ETF which only covers mid and large cap stocks. What do you think of that compared to the VTWSX index which also includes small cap stocks?
Well, VTWSX is a Vanguard US mutual fund, so not something a non-US investor could easily invest in (or even at all, in general).

There is a Monevator article that talks about choices in All-World funds for UK investors, and it might help you sift through the options a bit, or if nothing else at least illuminate the comparison points. It's a couple of years old but things haven't moved on that much, except perhaps that a few of the OCFs shown should now be lower.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
2.Your comment to valuethinker regarding iWeb's fee's. Does this quote on London Stock Exchange's website apply to investing in a world index: "Please note that foreign currency conversions apply to international trades and include a charge of 1.5%" .... If so, is it still cheaper than HL?
If you as a UK investor buy an ETF that is priced in GBP and listed on the London Stock Exchange, this isn't an 'international trade', so no foreign currency conversion would happen here. VWRL ticks these boxes.

One slight niggle with several All-World ETFs though, VWRL included, is that some pay dividends in USD even though they trade in GBP. This means a bit of friction on your dividends that is equivalent to an additional perhaps 0.04% or so on the TER.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
3. Lastly, when you refer to "funds" in your comment to valuethinker, are you referring to index funds?
Ambiguous phrasing on my part, sorry.

Hargreaves Lansdown charge account holders handsomely if they invest through any unit trusts or OEICs (both of which fall into the bucket of 'funds'). However, ETFs (even though the F here is 'fund!) are treated as individual shares and investment trusts, and so escape Hargreaves Lansdown's rather grasping 0.45% additional 'platform fee'. For a passive investor this is a completely arbitrary and nonsensical distinction in pricing, but Hargreaves Lansdown are not alone in this; several other platforms apply percentage-based fees to 'funds' but not to shares and ETFs.

By way of example, you could hold a FTSE 100 tracker OEIC or a FTSE 100 tracker ETF -- with these you hold the exact same underlying assets, but in Hargreaves Lansdown you would pay 0.45% more for the first than for the second, for no reason other than somebody in their Marketing Department sees fund investors as cash generators (and in a way they are not entirely wrong in taking that view either; unlike passive investors, people who want to hold actively managed funds cannot just switch to ETFs in the same way).

Once you have decided what your options are for holding the assets and the mix you want, the platform charges comparison tool I linked to upthread will let you know how the various platforms you could use stack up in terms of pricing. (Spoiler: Hargreaves Lansdown is very rarely the most cost-effective choice.)

minimalistmarc
Posts: 290
Joined: Fri Jul 24, 2015 4:38 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by minimalistmarc » Sun Jan 21, 2018 2:20 pm

Regarding ETFs vs funds, the only reason I choose ETFs is that it avoids holding fees charged by brokers ( including vanguard)

I currently have my wife and I’s ISA with Hargreaves, 2 x 6 figure portfolios at 45 pounds per year.

Even if they were 7 figures the cost would still be 45/year and I find Hargreaves website and customer service head and shoulders above the rest so 100% happy to recommend them.

I am too lazy to bother adding small cap :)

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Sun Jan 21, 2018 3:17 pm

TedSwippet wrote:
Sun Jan 21, 2018 2:09 pm
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
1. Like minimalistmarc, you also suggest the VWRL ETF which only covers mid and large cap stocks. What do you think of that compared to the VTWSX index which also includes small cap stocks?
Well, VTWSX is a Vanguard US mutual fund, so not something a non-US investor could easily invest in (or even at all, in general).

There is a Monevator article that talks about choices in All-World funds for UK investors, and it might help you sift through the options a bit, or if nothing else at least illuminate the comparison points. It's a couple of years old but things haven't moved on that much, except perhaps that a few of the OCFs shown should now be lower.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
2.Your comment to valuethinker regarding iWeb's fee's. Does this quote on London Stock Exchange's website apply to investing in a world index: "Please note that foreign currency conversions apply to international trades and include a charge of 1.5%" .... If so, is it still cheaper than HL?
If you as a UK investor buy an ETF that is priced in GBP and listed on the London Stock Exchange, this isn't an 'international trade', so no foreign currency conversion would happen here. VWRL ticks these boxes.

One slight niggle with several All-World ETFs though, VWRL included, is that some pay dividends in USD even though they trade in GBP. This means a bit of friction on your dividends that is equivalent to an additional perhaps 0.04% or so on the TER.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
3. Lastly, when you refer to "funds" in your comment to valuethinker, are you referring to index funds?
Ambiguous phrasing on my part, sorry.

Hargreaves Lansdown charge account holders handsomely if they invest through any unit trusts or OEICs (both of which fall into the bucket of 'funds'). However, ETFs (even though the F here is 'fund!) are treated as individual shares and investment trusts, and so escape Hargreaves Lansdown's rather grasping 0.45% additional 'platform fee'. For a passive investor this is a completely arbitrary and nonsensical distinction in pricing, but Hargreaves Lansdown are not alone in this; several other platforms apply percentage-based fees to 'funds' but not to shares and ETFs.

By way of example, you could hold a FTSE 100 tracker OEIC or a FTSE 100 tracker ETF -- with these you hold the exact same underlying assets, but in Hargreaves Lansdown you would pay 0.45% more for the first than for the second, for no reason other than somebody in their Marketing Department sees fund investors as cash generators (and in a way they are not entirely wrong in taking that view either; unlike passive investors, people who want to hold actively managed funds cannot just switch to ETFs in the same way).

Once you have decided what your options are for holding the assets and the mix you want, the platform charges comparison tool I linked to upthread will let you know how the various platforms you could use stack up in terms of pricing. (Spoiler: Hargreaves Lansdown is very rarely the most cost-effective choice.)
Thanks TS! I'll go through the monevator post and will properly digest this tonight and will revert here :)

Appreciate your help!

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Mors » Sun Jan 21, 2018 7:43 pm

I also second Lifestrategy 80. I find the UK tilt justified, for currency risk reduction and possible tax benefits. From a speculative side, we could argue that currently UK stocks are undervalued too.

However, here you will find the cheapest index funds and etfs.

https://www.google.gr/amp/www.telegraph ... -cost/amp/

Also check here for cheap Isa.

https://www.google.gr/amp/www.telegraph ... n-isa/amp/

And Sipp. Sipp is more tax efficient compared to ISA, but it locks your money. You may also have already a pension plan with your employer.

http://www.telegraph.co.uk/investing/si ... ting-5000/

Also check about Lifetime Isa.
Last edited by Mors on Sun Jan 21, 2018 9:45 pm, edited 1 time in total.

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Tue Jan 23, 2018 5:15 pm

TedSwippet wrote:
Sun Jan 21, 2018 2:09 pm
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
1. Like minimalistmarc, you also suggest the VWRL ETF which only covers mid and large cap stocks. What do you think of that compared to the VTWSX index which also includes small cap stocks?
Well, VTWSX is a Vanguard US mutual fund, so not something a non-US investor could easily invest in (or even at all, in general).

There is a Monevator article that talks about choices in All-World funds for UK investors, and it might help you sift through the options a bit, or if nothing else at least illuminate the comparison points. It's a couple of years old but things haven't moved on that much, except perhaps that a few of the OCFs shown should now be lower.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
2.Your comment to valuethinker regarding iWeb's fee's. Does this quote on London Stock Exchange's website apply to investing in a world index: "Please note that foreign currency conversions apply to international trades and include a charge of 1.5%" .... If so, is it still cheaper than HL?
If you as a UK investor buy an ETF that is priced in GBP and listed on the London Stock Exchange, this isn't an 'international trade', so no foreign currency conversion would happen here. VWRL ticks these boxes.

One slight niggle with several All-World ETFs though, VWRL included, is that some pay dividends in USD even though they trade in GBP. This means a bit of friction on your dividends that is equivalent to an additional perhaps 0.04% or so on the TER.
spope2 wrote:
Sun Jan 21, 2018 1:05 pm
3. Lastly, when you refer to "funds" in your comment to valuethinker, are you referring to index funds?
Ambiguous phrasing on my part, sorry.

Hargreaves Lansdown charge account holders handsomely if they invest through any unit trusts or OEICs (both of which fall into the bucket of 'funds'). However, ETFs (even though the F here is 'fund!) are treated as individual shares and investment trusts, and so escape Hargreaves Lansdown's rather grasping 0.45% additional 'platform fee'. For a passive investor this is a completely arbitrary and nonsensical distinction in pricing, but Hargreaves Lansdown are not alone in this; several other platforms apply percentage-based fees to 'funds' but not to shares and ETFs.

By way of example, you could hold a FTSE 100 tracker OEIC or a FTSE 100 tracker ETF -- with these you hold the exact same underlying assets, but in Hargreaves Lansdown you would pay 0.45% more for the first than for the second, for no reason other than somebody in their Marketing Department sees fund investors as cash generators (and in a way they are not entirely wrong in taking that view either; unlike passive investors, people who want to hold actively managed funds cannot just switch to ETFs in the same way).

Once you have decided what your options are for holding the assets and the mix you want, the platform charges comparison tool I linked to upthread will let you know how the various platforms you could use stack up in terms of pricing. (Spoiler: Hargreaves Lansdown is very rarely the most cost-effective choice.)
Hey Ted,

I read the monevator article you shared above and have been doing some digging around.

What do you think about the FTSE All Cap Global Index (http://www.hl.co.uk/funds/fund-discount ... cumulation) FYI - I have only linked HL for info purposes, I read and understood your comment about them being very expensive!! I have found on iWeb as per your recommendation.

OCF is 0.24% and also covers small cap unlike VWRL.

Is this an ETF, unsure as it's referred to as index (so much lingo in this game!)?
EDIT: just noticed it's an OEIC... Which I think from your post is the same as an index fund?

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Tue Jan 23, 2018 6:39 pm

spope2 wrote:
Tue Jan 23, 2018 5:15 pm
Is this an ETF, unsure as it's referred to as index (so much lingo in this game!)?
Not an ETF.
spope2 wrote:
Tue Jan 23, 2018 5:15 pm
EDIT: just noticed it's an OEIC... Which I think from your post is the same as an index fund?
Yes, it is a fund, so would be subject to Hargreaves Lansdown's added 0.45% annual charge up to £250k held. If you click the 'Costs' tab on the page you linked to you can see where they add this charge. The warning sign is if 'Fund type' is OEIC or Unit Trust (or broadly, probably anything other than ETF or Investment Trust). You could hold this fund much more cheaply in just about every other UK platform.

As for the fund itself... it looks fine to me on a quick overview. I don't hold it and have never investigated it in detail because my portfolio is old and established (and with a fair few 'moving parts'), but I would certainly consider it more closely if I were starting over. For better or worse, it lacks the UK bias of the LifeStrategy fund range.

spope2
Posts: 16
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Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Thu Jan 25, 2018 3:03 pm

TedSwippet wrote:
Tue Jan 23, 2018 6:39 pm
spope2 wrote:
Tue Jan 23, 2018 5:15 pm
Is this an ETF, unsure as it's referred to as index (so much lingo in this game!)?
Not an ETF.
spope2 wrote:
Tue Jan 23, 2018 5:15 pm
EDIT: just noticed it's an OEIC... Which I think from your post is the same as an index fund?
Yes, it is a fund, so would be subject to Hargreaves Lansdown's added 0.45% annual charge up to £250k held. If you click the 'Costs' tab on the page you linked to you can see where they add this charge. The warning sign is if 'Fund type' is OEIC or Unit Trust (or broadly, probably anything other than ETF or Investment Trust). You could hold this fund much more cheaply in just about every other UK platform.

As for the fund itself... it looks fine to me on a quick overview. I don't hold it and have never investigated it in detail because my portfolio is old and established (and with a fair few 'moving parts'), but I would certainly consider it more closely if I were starting over. For better or worse, it lacks the UK bias of the LifeStrategy fund range.

Thanks Ted, really appreciate your (and everyone else who's contributed) advice.

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Tue Feb 13, 2018 9:07 am

spope2 wrote:
Thu Jan 25, 2018 3:03 pm
TedSwippet wrote:
Tue Jan 23, 2018 6:39 pm
spope2 wrote:
Tue Jan 23, 2018 5:15 pm
Is this an ETF, unsure as it's referred to as index (so much lingo in this game!)?
Not an ETF.
spope2 wrote:
Tue Jan 23, 2018 5:15 pm
EDIT: just noticed it's an OEIC... Which I think from your post is the same as an index fund?
Yes, it is a fund, so would be subject to Hargreaves Lansdown's added 0.45% annual charge up to £250k held. If you click the 'Costs' tab on the page you linked to you can see where they add this charge. The warning sign is if 'Fund type' is OEIC or Unit Trust (or broadly, probably anything other than ETF or Investment Trust). You could hold this fund much more cheaply in just about every other UK platform.

As for the fund itself... it looks fine to me on a quick overview. I don't hold it and have never investigated it in detail because my portfolio is old and established (and with a fair few 'moving parts'), but I would certainly consider it more closely if I were starting over. For better or worse, it lacks the UK bias of the LifeStrategy fund range.

Thanks Ted, really appreciate your (and everyone else who's contributed) advice.
Hey Ted,

Please may you explain the differences between these two?

Vanguard U.K. Government Bond Index
vs
VGOV (ETF)

What I'm confused about is that the VGOV is "float adjusted" and invests in "UK Gilts, debt guaranteed by national government and its agencies".

The former doesn't mention "float adjusted", gilts or debt.

Cheers

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Tue Feb 13, 2018 9:41 am

spope2 wrote:
Tue Feb 13, 2018 9:07 am
The <Vanguard U.K. Government Bond Index Fund> doesn't mention "float adjusted", gilts or debt.
The fund's overview says:
The Fund employs a passive management or indexing strategy designed to track the performance of the index, which is a subset of the Bloomberg Barclays Global Aggregate Float Adjusted Bond Index.
If you compare the fund's Portfolio Data with the VGOV's Portfolio Data you should also see that they mostly overlap. As for what 'float adjusted' means... Vanguard provides this seemingly rather oblique explanation:
'Float adjusted’ refers to an index that has been adjusted to reflect the fact that not all the bonds that fall within the index selection criteria are traded on the open market. For example, several types of government bonds have been purchased by the government and effectively taken out of circulation. Although they technically still exist, they can’t be bought by investors. Adjusting bond indices this way gives fund managers the ability to use an index that reflects the actual investable market, rather than a theoretical one.

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Tue Feb 13, 2018 10:53 am

Thanks Ted, so is there not much advantage of one over the other?

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Tue Feb 13, 2018 12:42 pm

spope2 wrote:
Tue Feb 13, 2018 10:53 am
Thanks Ted, so is there not much advantage of one over the other?
No clear winner that I can see.

For an ISA or SIPP, the fund (OEIC) offers 'accumulation' units that might require less fiddly engagement overall; no need to reinvest dividends, for example. Outside an ISA though, 'accumulation' units quickly become a tax nightmare, so best stick to fund 'distribution' units if you cannot shelter the holding from tax. Conversely, the ETF always pays dividends regularly -- there is no 'accumulation' variant -- so a need to attend to things now and again, and some reinvestment costs, both inside and outside of tax shelters.

With this in mind, if you are using a platform that charges for funds (OEICs, etc) but not for ETFs then avoiding the platform's fund charge is likely to save you much more money annually than avoiding dividend reinvestment costs would. Also, if you want or need to move things around 'in specie' (that is, without selling, transferring as cash, then re-buying) in future, it is often much easier to find an acceptable new home for an ETF holding than for a fund or OEIC one.

spope2
Posts: 16
Joined: Wed Oct 25, 2017 6:08 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by spope2 » Tue Feb 13, 2018 3:54 pm

TedSwippet wrote:
Tue Feb 13, 2018 12:42 pm
spope2 wrote:
Tue Feb 13, 2018 10:53 am
Thanks Ted, so is there not much advantage of one over the other?
No clear winner that I can see.

For an ISA or SIPP, the fund (OEIC) offers 'accumulation' units that might require less fiddly engagement overall; no need to reinvest dividends, for example. Outside an ISA though, 'accumulation' units quickly become a tax nightmare, so best stick to fund 'distribution' units if you cannot shelter the holding from tax. Conversely, the ETF always pays dividends regularly -- there is no 'accumulation' variant -- so a need to attend to things now and again, and some reinvestment costs, both inside and outside of tax shelters.

With this in mind, if you are using a platform that charges for funds (OEICs, etc) but not for ETFs then avoiding the platform's fund charge is likely to save you much more money annually than avoiding dividend reinvestment costs would. Also, if you want or need to move things around 'in specie' (that is, without selling, transferring as cash, then re-buying) in future, it is often much easier to find an acceptable new home for an ETF holding than for a fund or OEIC one.
That's really helpful, thank you so much Ted

kosmicmisfit
Posts: 11
Joined: Sun Apr 29, 2018 9:53 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by kosmicmisfit » Fri May 04, 2018 10:01 am

minimalistmarc wrote:
Sun Jan 07, 2018 4:31 am
Use ETFs. You only need 2.

VWRL (vanguard all world)
VGOV (bonds)

Forget individual shares, and don’t bother tilting to the uk.

Check out these videos
http://kroijer.com
Hello
I am net to ETF investing and wanted to know what is the rationale behind all world ETF rather than individual regions.
Thanks!

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Fri May 04, 2018 10:59 am

kosmicmisfit wrote:
Fri May 04, 2018 10:01 am
I am new to ETF investing and wanted to know what is the rationale behind all world ETF rather than individual regions.
Simplicity. If you are happy to hold regions weighted by their market cap, you never need to rebalance across them if they all live in one ETF or fund.

BritishInvestor
Posts: 9
Joined: Thu Jun 14, 2018 5:22 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by BritishInvestor » Thu Jun 14, 2018 6:16 am

Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.vanguardinvestor.co.uk/inve ... ion-shares

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
Last edited by BritishInvestor on Thu Jun 14, 2018 10:54 am, edited 1 time in total.

ying_yang
Posts: 29
Joined: Sun Nov 19, 2017 10:18 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by ying_yang » Thu Jun 14, 2018 10:02 am

Mors wrote:
Sun Jan 21, 2018 7:43 pm
I also second Lifestrategy 80. I find the UK tilt justified, for currency risk reduction and possible tax benefits. From a speculative side, we could argue that currently UK stocks are undervalued too.

However, here you will find the cheapest index funds and etfs.

https://www.google.gr/amp/www.telegraph ... -cost/amp/

Also check here for cheap Isa.

https://www.google.gr/amp/www.telegraph ... n-isa/amp/

And Sipp. Sipp is more tax efficient compared to ISA, but it locks your money. You may also have already a pension plan with your employer.

http://www.telegraph.co.uk/investing/si ... ting-5000/

Also check about Lifetime Isa.
Would you mind to elaborate on the tax benefits of Lifestrategy?

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Thu Jun 14, 2018 10:21 am

BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?

BritishInvestor
Posts: 9
Joined: Thu Jun 14, 2018 5:22 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by BritishInvestor » Thu Jun 14, 2018 10:57 am

Valuethinker wrote:
Thu Jun 14, 2018 10:21 am
BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Thu Jun 14, 2018 11:19 am

BritishInvestor wrote:
Thu Jun 14, 2018 10:57 am
Valuethinker wrote:
Thu Jun 14, 2018 10:21 am
BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.
I don't see that you have edited the bond reference?

Why not just give the link from the VG UK website?

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Thu Jun 14, 2018 11:20 am

BritishInvestor wrote:
Thu Jun 14, 2018 10:57 am
Valuethinker wrote:
Thu Jun 14, 2018 10:21 am
BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.
The Lifestrategy funds have some different allocation of assets-- it's not immediately clear why.

The global funds are a "purer" play.

Whether that means less or more volatility and/or expected return would require some number crunching with tools I don't have.

TedSwippet
Posts: 1878
Joined: Mon Jun 04, 2007 4:19 pm

Re: What do you think of my Asset Allocation? (UK Investor)

Post by TedSwippet » Thu Jun 14, 2018 11:37 am

ying_yang wrote:
Thu Jun 14, 2018 10:02 am
Mors wrote:
Sun Jan 21, 2018 7:43 pm
I also second Lifestrategy 80. I find the UK tilt justified, for currency risk reduction and possible tax benefits. ...
Would you mind to elaborate on the tax benefits of Lifestrategy?
Not the author of the post you quote, but one potential tax benefit I can see comes from the fact that having more UK stock than by market cap means having less than the market cap proportion of US stock. The US withholds tax on dividends paid out from US stocks to non-US individuals or non-US funds at 30%, or lower treaty rate (so likely 15% to a UK domiciled OEIC). In comparison, the UK does not withhold any tax on dividends paid out by UK stocks, no matter whether paid to a UK or non-UK individual or fund.

So raising the UK allocation while lowering the US one could reduce overall dividend tax drag, all other things being equal (which, of course, they are not!).

Mors
Posts: 192
Joined: Wed Aug 16, 2017 10:06 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Mors » Thu Jun 14, 2018 2:47 pm

TedSwippet wrote:
Thu Jun 14, 2018 11:37 am
ying_yang wrote:
Thu Jun 14, 2018 10:02 am
Mors wrote:
Sun Jan 21, 2018 7:43 pm
I also second Lifestrategy 80. I find the UK tilt justified, for currency risk reduction and possible tax benefits. ...
Would you mind to elaborate on the tax benefits of Lifestrategy?
Not the author of the post you quote, but one potential tax benefit I can see comes from the fact that having more UK stock than by market cap means having less than the market cap proportion of US stock. The US withholds tax on dividends paid out from US stocks to non-US individuals or non-US funds at 30%, or lower treaty rate (so likely 15% to a UK domiciled OEIC). In comparison, the UK does not withhold any tax on dividends paid out by UK stocks, no matter whether paid to a UK or non-UK individual or fund.

So raising the UK allocation while lowering the US one could reduce overall dividend tax drag, all other things being equal (which, of course, they are not!).
This is one thing. The other may be the more favorable tax rules for UK investments compared to foreign ones. For that I am not certain, but I believe that a Vanguard paper about home bias mentioned some tax benefits.

Edit: Here it is. A small overweighting of UK Equities is justified because of more favorable dividends taxation. No big deal though as I see it.

https://www.google.gr/url?sa=t&source=w ... -BNKw4-4jB

I did not meant that the lifestrategy fund has tax advantages because of its structure though.

BritishInvestor
Posts: 9
Joined: Thu Jun 14, 2018 5:22 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by BritishInvestor » Fri Jun 15, 2018 8:45 am

Valuethinker wrote:
Thu Jun 14, 2018 11:19 am
BritishInvestor wrote:
Thu Jun 14, 2018 10:57 am
Valuethinker wrote:
Thu Jun 14, 2018 10:21 am
BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.
I don't see that you have edited the bond reference?

Why not just give the link from the VG UK website?
Hi, it's this one

https://www.vanguardinvestor.co.uk/inve ... ion-shares

Valuethinker
Posts: 36681
Joined: Fri May 11, 2007 11:07 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by Valuethinker » Fri Jun 15, 2018 9:32 am

BritishInvestor wrote:
Fri Jun 15, 2018 8:45 am
Valuethinker wrote:
Thu Jun 14, 2018 11:19 am
BritishInvestor wrote:
Thu Jun 14, 2018 10:57 am
Valuethinker wrote:
Thu Jun 14, 2018 10:21 am
BritishInvestor wrote:
Thu Jun 14, 2018 6:16 am
Late post to this, but has anyone compared holding a mix of

Global All Cap
https://www.vanguardinvestor.co.uk/inve ... ion-shares

and

Global Bond hedged to GBP

https://www.trustnet.com/factsheets/o/f ... ed-acc-gbp

with LifeStrategy?

The former will require (annual?) rebalancing, but I believe should give a better return per until of risk over the long term (when currency movement is less important) due to not having a skew to the UK. Should also be a tad cheaper too. Anyone got any thoughts?
The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.
I don't see that you have edited the bond reference?

Why not just give the link from the VG UK website?
Hi, it's this one

https://www.vanguardinvestor.co.uk/inve ... ion-shares
Hi

Those 2 funds should work fine.

The lifestrategy funds give you a wider range of investments, but the gains from diversification would be small.

The main thing is you have to take charge of the asset allocation - increasing bond weightings as you get older.

And drift is a real threat. The best institutional investors in the world have, historically, tended to let equity weightings drift upwards as stock markets outperform. And not be aggressive rebalancing towards equities in a bear market.

Are you likely to do any better? Beware your own behavioural biases.

BritishInvestor
Posts: 9
Joined: Thu Jun 14, 2018 5:22 am

Re: What do you think of my Asset Allocation? (UK Investor)

Post by BritishInvestor » Sat Jun 16, 2018 6:00 am

Valuethinker wrote:
Fri Jun 15, 2018 9:32 am
BritishInvestor wrote:
Fri Jun 15, 2018 8:45 am
Valuethinker wrote:
Thu Jun 14, 2018 11:19 am
BritishInvestor wrote:
Thu Jun 14, 2018 10:57 am
Valuethinker wrote:
Thu Jun 14, 2018 10:21 am


The Trustnet site simply tells me the fund does not subscribe to Trustnet.

There's no link so which LIfestrategy fund did you mean?
Apologies, have edited to show the Vanguard link for the Global Bond fund

These are the Lifestrategy funds I am referring to

https://www.vanguardinvestor.co.uk/what ... y-products

my point was that I believe you can have a 2 fund global portfolio for broadly the same level of risk as your chosen LifeStrategy fund while potentially achieving greater returns.
I don't see that you have edited the bond reference?

Why not just give the link from the VG UK website?
Hi, it's this one

https://www.vanguardinvestor.co.uk/inve ... ion-shares
Hi

Those 2 funds should work fine.

The lifestrategy funds give you a wider range of investments, but the gains from diversification would be small.

The main thing is you have to take charge of the asset allocation - increasing bond weightings as you get older.

And drift is a real threat. The best institutional investors in the world have, historically, tended to let equity weightings drift upwards as stock markets outperform. And not be aggressive rebalancing towards equities in a bear market.

Are you likely to do any better? Beware your own behavioural biases.
Hi ValueThinker,

I'm interested to understand where you feel the LS offers a wider range of investments, as far as I can make out it's still just equities and bonds

http://www.morningstar.co.uk/uk/funds/s ... MLUO&tab=3

Agreed on drift, would look to semi or annually rebalance, if necessary.

https://www.vanguard.com/pdf/ISGPORE.pdf

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