Vanguard LifeStrategy 60 using ETFs

Index tracking funds and ETFs
TimR
Posts: 12
Joined: December 15th, 2016, 5:14 pm

Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 20th, 2016, 10:01 pm

Hi All,

I am fairly new to passive investing an am looking for some help.

I am progressively selling a ragbag of OEIC funds within a SIPP & ISA an would like to recreate new portfolios similar to Vanguard Life Strategy 60 using ETFs. (Unfortunately my platform is expensive to hold funds but cheap for shares.)

After Studying this site I am happy I can create the Global Equity Part by either using VWRL or 10 / 11 ETFs covering each Regional world market.

What really stumps me is how to create the Bond Part. Would something as simple as VGov do or would I need to add other types of Bond ETFs for diversification of the Bond part of the portfolio?

Thanks in advance,

TimR

mc2fool
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Re: Vanguard LifeStrategy 60 using ETFs

Postby mc2fool » December 20th, 2016, 10:07 pm

TimR wrote:I am progressively selling a ragbag of OEIC funds within a SIPP & ISA an would like to recreate new portfolios similar to Vanguard Life Strategy 60 using ETFs. (Unfortunately my platform is expensive to hold funds but cheap for shares.)

So why not just use a platform that isn't, rather than faffing around to recreate something that already exists?

TimR
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Joined: December 15th, 2016, 5:14 pm

Re: Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 20th, 2016, 10:21 pm

'So why not just use a platform that isn't, rather than faffing around to recreate something that already exists'

The total of the transfer charges for each fund was a lot and I did not want to be out of the market using a cash transfer. Anyway I have almost completed the Equity conversion of funds to ETFs now so it is just recreating the Bond part using ETFs am not sure about.

mc2fool
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Re: Vanguard LifeStrategy 60 using ETFs

Postby mc2fool » December 20th, 2016, 10:43 pm

Hint: if you use the "Reply with quote" feature*, as I did in my previous reply, then the person you are replying to and quoting will get a Someone quotes you in a post notification**, as per their settings***, whereas if you just quote them by copy'n'pasting they don't.

* the button with quotation marks, top right of each post, next to the exclamation mark button
** as long as you leave in the [quote="username"] tag
*** ucp.php?i=ucp_notifications&mode=notification_options

Rooky102
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Re: Vanguard LifeStrategy 60 using ETFs

Postby Rooky102 » December 21st, 2016, 11:35 am

ishares SLXX, (or ISXF to exclude financials) gives wide £ bond cover.

BarrenWuffett
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Joined: November 4th, 2016, 10:31 am

Re: Vanguard LifeStrategy 60 using ETFs

Postby BarrenWuffett » December 21st, 2016, 12:04 pm

TimR wrote:
I am progressively selling a ragbag of OEIC funds within a SIPP & ISA an would like to recreate new portfolios similar to Vanguard Life Strategy 60 using ETFs. (Unfortunately my platform is expensive to hold funds but cheap for shares.)


I think you will find it impossible to recreate an ETF equivalent as the VLS funds are constantly rebalanced. Keep it simple and if necessary, move to another platform.

TimR
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Joined: December 15th, 2016, 5:14 pm

Re: Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 21st, 2016, 1:14 pm

BarrenWuffett wrote:
TimR wrote:
I am progressively selling a ragbag of OEIC funds within a SIPP & ISA an would like to recreate new portfolios similar to Vanguard Life Strategy 60 using ETFs. (Unfortunately my platform is expensive to hold funds but cheap for shares.)


I think you will find it impossible to recreate an ETF equivalent as the VLS funds are constantly rebalanced. Keep it simple and if necessary, move to another platform.


I have gone past the point of moving to a new platform and already have the equity part of the ETF portfolio in place. I'm not too bothered about matching the Bond part of Life Strategy 60 accurately so I think a 10% in each of the following Bond ETFs may do for the 40% part of the portfolio :-

10% VGov,
10% SLXX
10% IS15
10% INXG

gadgetmind
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Joined: November 25th, 2016, 10:30 am

Re: Vanguard LifeStrategy 60 using ETFs

Postby gadgetmind » December 21st, 2016, 1:18 pm

I have done what you describe across four portfolios.

I use VGIV and SLXX for bonds and IUKP and INPP for property and infrastructure. I also use VWRL but am considering switching to VUSA, VJPN, VEUR, VAPX, and VFEM instead as the charges are lower but it adds trading costs.

I only do this as we got a cracking "grandfathered" deal from BestInvest. Without this, I'd probably have gone for Vanguard LS somewhere else.

Note that I also have a naughty 5% in each portfolio for "themes" where I pick up IT in unloved sectors (thus big discounts) and wait for the wheel to turn. This has worked so well that I keep toying with moving it to 10% !

TimR
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Re: Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 21st, 2016, 11:20 pm

gadgetmind wrote:I have done what you describe across four portfolios.

I use VGIV and SLXX for bonds and IUKP and INPP for property and infrastructure. I also use VWRL but am considering switching to VUSA, VJPN, VEUR, VAPX, and VFEM instead as the charges are lower but it adds trading costs.

I only do this as we got a cracking "grandfathered" deal from BestInvest. Without this, I'd probably have gone for Vanguard LS somewhere else.

Note that I also have a naughty 5% in each portfolio for "themes" where I pick up IT in unloved sectors (thus big discounts) and wait for the wheel to turn. This has worked so well that I keep toying with moving it to 10% !


My position is similar. I have VUSA, VJPN, VUKE, VMID, VERX, VAPX, VFEM plus a USA and European small cap which covers the equity part. They are more work than VWRL but allows you to over / underweight the equity in region if you want to. If I had four portfolios I would think twice about increasing the work load. On the Fixed income part - Is INPP an infrastructure investment trust ? I was also thinking of allocating more to IS15 at the expense of SLXX in order to reduce the duration of the Bonds.

AJC5001
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Joined: November 4th, 2016, 4:55 pm

Re: Vanguard LifeStrategy 60 using ETFs

Postby AJC5001 » December 21st, 2016, 11:41 pm

gadgetmind wrote:Note that I also have a naughty 5% in each portfolio for "themes" where I pick up IT in unloved sectors (thus big discounts) and wait for the wheel to turn. This has worked so well that I keep toying with moving it to 10% !


If it works so well, won't it grow to 10% (and more) by its own momentum?


Adrian

gadgetmind
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Joined: November 25th, 2016, 10:30 am

Re: Vanguard LifeStrategy 60 using ETFs

Postby gadgetmind » December 22nd, 2016, 10:47 am

TimR wrote:[quote="gadgetmind"On the Fixed income part - Is INPP an infrastructure investment trust ?


Yes, and we do hold it (and HICL, BBGI and JLIF) but I actually meant to type INFR, which is an infrastructure tracker!

Our large holdings of these investments is because I wanted to limit our bond exposure. As it happens, our bonds have done very well, but our infrastructure has done even better. However, this doesn't mean it was the right thing to do and it's all on fat premiums now anyway.

mc2fool
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Re: Vanguard LifeStrategy 60 using ETFs

Postby mc2fool » December 22nd, 2016, 12:27 pm

TimR wrote:On the Fixed income part - Is INPP an infrastructure investment trust ?

No, it's an infrastructure investment company, it doesn't have UK investment trust status. And it's not really fixed income in the usual sense of the phrase, although does have some similar characteristics.

It's worth knowing, at least in outline, how such infrastructure investment companies are valued and the effects of changes in the factors involved. INPP's annual report, pages 19-24, explains that and lists the major factors, the two biggest being the discount rate (long-term government bond yields plus a risk premium) and inflation.

E.g. a reduction of 1%pa in the discount rate would increase NAV by 14.7p whereas an increase of 1%pa would decrease it by 12.4p. OTOH a reduction of 1%pa in inflation would decrease NAV by 9.5p, whereas an increase of 1%pa would increase it by 10.7p.

melonfool
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Re: Vanguard LifeStrategy 60 using ETFs

Postby melonfool » December 23rd, 2016, 9:23 am

TimR wrote:
gadgetmind wrote:I have done what you describe across four portfolios.

I use VGIV and SLXX for bonds and IUKP and INPP for property and infrastructure. I also use VWRL but am considering switching to VUSA, VJPN, VEUR, VAPX, and VFEM instead as the charges are lower but it adds trading costs.

I only do this as we got a cracking "grandfathered" deal from BestInvest. Without this, I'd probably have gone for Vanguard LS somewhere else.

Note that I also have a naughty 5% in each portfolio for "themes" where I pick up IT in unloved sectors (thus big discounts) and wait for the wheel to turn. This has worked so well that I keep toying with moving it to 10% !


My position is similar. I have VUSA, VJPN, VUKE, VMID, VERX, VAPX, VFEM plus a USA and European small cap which covers the equity part. They are more work than VWRL but allows you to over / underweight the equity in region if you want to. If I had four portfolios I would think twice about increasing the work load. On the Fixed income part - Is INPP an infrastructure investment trust ? I was also thinking of allocating more to IS15 at the expense of SLXX in order to reduce the duration of the Bonds.


I have the same problem (YouInvest?) and have £10k to invest then the £30k that is in the Vanguard LS 60% to move.

I'd prefer just to have four funds and one bond ETF - I suppose I could therefore just do the world one. I'd be happy to change it to 80%/20%, I am 48 so still have a while to go.

I think the biggest issue I face is balancing it all against the ISA holdings and other pension pots. or which there are still two invested in standard trackers. I hope to move two of them in a year or so.

Mel

Penguin
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Joined: December 23rd, 2016, 10:53 am

Re: Vanguard LifeStrategy 60 using ETFs

Postby Penguin » December 23rd, 2016, 10:58 am

A great deal of faith seems to be shown in this product, but I have never seen an explanation of the methodology behind the various index weightings. It seems to me that this product is not quite as passive as it is perceived to be

mc2fool
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Re: Vanguard LifeStrategy 60 using ETFs

Postby mc2fool » December 23rd, 2016, 1:12 pm

Penguin wrote:A great deal of faith seems to be shown in this product, but I have never seen an explanation of the methodology behind the various index weightings. It seems to me that this product is not quite as passive as it is perceived to be

https://www.vanguard.co.uk/documents/ad ... proach.pdf explains, and there's some discussion at http://boards.fool.co.uk/here-is-a-link ... 59529.aspx

Basically for the equities part it's market cap-weighted but with a UK "home bias", so more UK than a world tracker but otherwise market cap-weighted.

TimR
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Joined: December 15th, 2016, 5:14 pm

Re: Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 24th, 2016, 7:11 pm

melonfool wrote:
TimR wrote:
gadgetmind wrote:I have done what you describe across four portfolios.

I use VGIV and SLXX for bonds and IUKP and INPP for property and infrastructure. I also use VWRL but am considering switching to VUSA, VJPN, VEUR, VAPX, and VFEM instead as the charges are lower but it adds trading costs.

I only do this as we got a cracking "grandfathered" deal from BestInvest. Without this, I'd probably have gone for Vanguard LS somewhere else.

Note that I also have a naughty 5% in each portfolio for "themes" where I pick up IT in unloved sectors (thus big discounts) and wait for the wheel to turn. This has worked so well that I keep toying with moving it to 10% !


My position is similar. I have VUSA, VJPN, VUKE, VMID, VERX, VAPX, VFEM plus a USA and European small cap which covers the equity part. They are more work than VWRL but allows you to over / underweight the equity in region if you want to. If I had four portfolios I would think twice about increasing the work load. On the Fixed income part - Is INPP an infrastructure investment trust ? I was also thinking of allocating more to IS15 at the expense of SLXX in order to reduce the duration of the Bonds.


I have the same problem (YouInvest?) and have £10k to invest then the £30k that is in the Vanguard LS 60% to move.

I'd prefer just to have four funds and one bond ETF - I suppose I could therefore just do the world one. I'd be happy to change it to 80%/20%, I am 48 so still have a while to go.

I think the biggest issue I face is balancing it all against the ISA holdings and other pension pots. or which there are still two invested in standard trackers. I hope to move two of them in a year or so.

Mel


To keep it simple you could consider VWRL for the equity part and 10% VGov plus 10% SLXX for the bond part. If you break down VWRL into individual regional ETFs it gets more complicated but can bring down the cost below the VWRL cost (ocf 0.25).

TimR
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Joined: December 15th, 2016, 5:14 pm

Re: Vanguard LifeStrategy 60 using ETFs

Postby TimR » December 25th, 2016, 10:48 am

Mel I have just read your comment again - I have not been able to find a single ETF to cover the total Bond Market. That is why I use VGov, SLXX, IS15, INXG to provide some diversity. In the Equity part of my portfolio I am also increasing the UK home weighting to about 20% (VWRL is only 7%) as I believe the £ exchange rate will eventually improve from its current low level.


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