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Vanguard VWRL v VHYL YTD

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scotview
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Vanguard VWRL v VHYL YTD

#502686

Postby scotview » May 25th, 2022, 10:56 am

I see that Vanguard VWRL is down 10% YTD and VHYL (high yield) is up 3% YTD.

Does this tell us anything and do you think the differential is likely to increase between these two funds, will growth take a further hit ?

Thanks, scotview.

Hariseldon58
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Re: Vanguard VWRL v VHYL YTD

#502811

Postby Hariseldon58 » May 25th, 2022, 7:20 pm

Well growth has taken a hit certainly, the economic outlook looks uncertain to say the least… recession is possible and high inflation may persist. Ukraine war may drag on or there may be a settlement but either way the trend of globalisation is likely to slow if not reverse.

VHYL is high yield and is a proxy for value, you might wish to look at World Value ETFs like IWVL (or WVAL) which hold a subset of the index with a value twist or perhaps the RAFI World 3000 index which holds the whole All World Index but rather than weight to Market Cap it uses four factors to achieve a value bias.

The RAFI Index looks pretty good on most timeframes compared to VHYL, the Value Index looks ok on 3 years but not as good the last few months.

The best argument for these alternative approaches is probably in conjunction with a market cap index, the charges are a little higher but may provide a balance to the growth bias of the market cap index. The value factor has been out of favour for many years now and maybe now is the time for it to catch up, no one knows but if you go for this hybrid approach you need to be very patient.

OhNoNotimAgain
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Re: Vanguard VWRL v VHYL YTD

#502874

Postby OhNoNotimAgain » May 26th, 2022, 7:59 am

Hariseldon58 wrote:Well growth has taken a hit certainly, the economic outlook looks uncertain to say the least… recession is possible and high inflation may persist. Ukraine war may drag on or there may be a settlement but either way the trend of globalisation is likely to slow if not reverse.

VHYL is high yield and is a proxy for value, you might wish to look at World Value ETFs like IWVL (or WVAL) which hold a subset of the index with a value twist or perhaps the RAFI World 3000 index which holds the whole All World Index but rather than weight to Market Cap it uses four factors to achieve a value bias.

The RAFI Index looks pretty good on most timeframes compared to VHYL, the Value Index looks ok on 3 years but not as good the last few months.

The best argument for these alternative approaches is probably in conjunction with a market cap index, the charges are a little higher but may provide a balance to the growth bias of the market cap index. The value factor has been out of favour for many years now and maybe now is the time for it to catch up, no one knows but if you go for this hybrid approach you need to be very patient.


Value has been out of favour, bar a year or two, since 2007 when the GFC triggered massive government and CB intervention to prop up the banks and voters. That has massively distorted the market, made worse by the thoughtless allocation of capital by price through mkt cap trackers.

Value has returned to favour since inflation picked up last autumn and the chimera of profitless growth has been exposed for the ludicrous target it is.
Momentum and Value are the only two factors that EMH identifies as having any merit. Value at least can be quantified.

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Re: Vanguard VWRL v VHYL YTD

#502886

Postby Itsallaguess » May 26th, 2022, 9:20 am

scotview wrote:
I see that Vanguard VWRL is down 10% YTD and VHYL (high yield) is up 3% YTD.


I'd noticed something similar when recently comparing 1 and 3 year performance of VWRL to Merchants UK Income IT (MRCH) -

Image

Things don't look too bright for any Scottish Mortgage (SMT) owners who didn't take profits over recent years either -

Image

Images source - https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/fundsmith-equity-class-i-accumulation/charts

Cheers,

Itsallaguess

scotview
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Re: Vanguard VWRL v VHYL YTD

#532165

Postby scotview » September 24th, 2022, 7:20 pm

Just noticed that VHYL is offering a yield of 4.06% .

The fund value has shown a significant drop recently.

Do you think there is more downside yet to come and will the USA earnings season be a disappointment ?

Hariseldon58
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Re: Vanguard VWRL v VHYL YTD

#532312

Postby Hariseldon58 » September 25th, 2022, 10:57 pm

scotview wrote:Just noticed that VHYL is offering a yield of 4.06% .

The fund value has shown a significant drop recently.

Do you think there is more downside yet to come and will the USA earnings season be a disappointment ?

It’s about 5% below its high for the year and well off it’s low points , the fall in sterling is flattering performance for us viewing its price in sterling.

What next… no one knows, us earnings ? How will this behave against the regular market cap world index is an interesting question. It has outperformed this year but will that persist ?

I think value in its many forms may do well over the next couple of years and have moved some funds from market cap trackers to value/quality/ RAFI indexes just in case.

No one really knows what will happen but you can invest in both options, there is not much downside and you won’t be wrong or right !!!

scotview
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Re: Vanguard VWRL v VHYL YTD

#532426

Postby scotview » September 26th, 2022, 12:52 pm

Hariseldon58 wrote:What next… no one knows, us earnings ?


Thanks for the reply.

Looking at recent Bloomberg commentators, the consensus seems to be that US rate rises will continue to end of 2022 then inflation will roll over. Then US will be investable again ( a lot healthier than UK). VHYL is mainly US (financials) so early 2023 might be the time for this fund but as you say, who knows ?


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