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Put It all in a lifestrategy fund?

Stocks and Shares ISA , Choosing funds for ISA's, risk factors for funds etc
Investment strategy discussions not dealt with elsewhere.
BitterLemon
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Put It all in a lifestrategy fund?

#324861

Postby BitterLemon » July 9th, 2020, 3:13 pm

Hi

So I have recently completed a performance review of my investments over the last 9 or so years. These have been held on multiple platforms and in SIPPs, ISAs and wrapper free investment accounts.

Since the start of 2012 I have made a 10.3% annualised money-weighted return after all fees. I have been partially active over this period, probably carrying out ~15-20 trades a year on average and choosing funds to invest in myself. On a couple of occassions I have been mostly in cash to mitigate risk and so have been on the emotional roller coaster with market movements.

I am aware that some people advise putting everything into a low cost fund such as one of vanguards' lifestrategy funds as a concession, since reliably beating the market is hard, so settling for average market performance with low fees.

I've calculated that vanguards' lifestrategy 100% equity would have returned about 9% annualised time-weighted return over this same period (before fees).

I think it's probably not too inaccurate to compare the time-weighted and money weighted percentages directly.

TLDR: So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.

dealtn
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Re: Put It all in a lifestrategy fund?

#324868

Postby dealtn » July 9th, 2020, 3:33 pm

BitterLemon wrote:So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this.


2% for 10 years is 22% difference, over 20 years its nearly 50% difference.

That's a lot of "aggro" to offset.

kiloran
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Re: Put It all in a lifestrategy fund?

#324873

Postby kiloran » July 9th, 2020, 4:12 pm

BitterLemon wrote:So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds.

Remember that previous performance is not necessarily a guide to the future. Are you really confident that your stock-picking skills are better than the market? Your 1-2% advantage in the past might be negative in the future :o

--kiloran

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Re: Put It all in a lifestrategy fund?

#324875

Postby Shaker » July 9th, 2020, 4:15 pm

The reason for your outperformance is likely due to asset allocation differences rather than "beating the market" which is unlikely to be consistent over time.

midgesgalore
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Re: Put It all in a lifestrategy fund?

#324891

Postby midgesgalore » July 9th, 2020, 5:13 pm

BitterLemon wrote:TLDR: So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.


Hi BitterLemon
I think much depends on the actual reason for resorting to using the lifestrategy funds. Diversification is one thing but if you are nearing the point where you are no longer investing but, instead, planning to draw on your savings fairly soon then maybe the requirement you need is reasonable investment growth with less volatility; especially if you have as much (or close to as much) as you think you will need now and you would not be able to withstand another deep lunge in your investment portfolio value.

You don't say where you are in your investment journey so hard to tell.

In any case my personal view of the Lifestrategy 100% equity fund, FWIW, is its a giant wrapper around a bundle of trackers and ETFs of all the big indexes so you could save yourself the potential platform fees and fund costs by just buying a world ETF. Vanguard VWRL is popular with some folks around here whilst others reduce costs further by combining some ETFs

Example viewtopic.php?p=197152#p197152 where GeoffF100 points out a very simple compromise

Good luck

midgesgalore

Itsallaguess
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Re: Put It all in a lifestrategy fund?

#324915

Postby Itsallaguess » July 9th, 2020, 6:20 pm

BitterLemon wrote:
So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds.

Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.


I'm not a big fan of quick 100% shifts in strategies - why not make a partial shift and just see how you feel about everything over a longer period?

I've been drip-feeding some capital into the Vanguard 80/20 LifeStrategy fund for a while now, and I'm happy to use it as part of my asset allocation, but I don't think I'd like to shift my full approach in such short timescales..

Cheers,

Itsallaguess

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Re: Put It all in a lifestrategy fund?

#324946

Postby Eboli » July 9th, 2020, 7:25 pm

Itsallaguess said

why not make a partial shift and just see how you feel about everything over a longer period?


I think those are very wise words indeed. I can only speak from my own experience but I wish I had employed that nugget a lot earlier in my investment life.

Eb.

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Re: Put It all in a lifestrategy fund?

#325010

Postby BitterLemon » July 9th, 2020, 11:59 pm

dealtn wrote:2% for 10 years is 22% difference, over 20 years its nearly 50% difference.

That's a lot of "aggro" to offset.


Yes, it is though I suppose I was thinking it may not be a statistically significant difference given that as kiloran rightly points out, my future stock picking may fare worse (or better) than the it did over this term.

Re Shakers point, asset allocation may be the difference Vs the market. I've probably been invested in the riskier side of equities. I wasn't really thinking that my portfolio had outperformed to be honest. I assume some (Warren buffet types perhaps) are able to average 20%+ per year. I met up with an advisor once from an investment management firm and his (cherry picked) fund had returned 22%PA he claimed over a couple of years.

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Re: Put It all in a lifestrategy fund?

#325014

Postby BitterLemon » July 10th, 2020, 12:22 am

midgesgalore wrote:
BitterLemon wrote:TLDR: So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.


Hi BitterLemon
I think much depends on the actual reason for resorting to using the lifestrategy funds. Diversification is one thing but if you are nearing the point where you are no longer investing but, instead, planning to draw on your savings fairly soon then maybe the requirement you need is reasonable investment growth with less volatility; especially if you have as much (or close to as much) as you think you will need now and you would not be able to withstand another deep lunge in your investment portfolio value.

You don't say where you are in your investment journey so hard to tell.

In any case my personal view of the Lifestrategy 100% equity fund, FWIW, is its a giant wrapper around a bundle of trackers and ETFs of all the big indexes so you could save yourself the potential platform fees and fund costs by just buying a world ETF. Vanguard VWRL is popular with some folks around here whilst others reduce costs further by combining some ETFs

Example viewtopic.php?p=197152#p197152 where GeoffF100 points out a very simple compromise

Good luck

midgesgalore

Hi midgesgalore

Thanks for your view. I would say I'm about 60% of the way through the accumulation stage of investing. Ie probably won't be drawing on my investments in s significant manner for at least 10 years.

The reason I am considering a passive approach is that over what I consider a long time window my semi active approach has barely justified the effort or I suppose the burden of worry that comes with actively choosing one fund over another and deciding when to buy, sell and get in or out of the market.

Thanks for the link. I hadn't realised that there were was such a premium to pay for vanguard aggregating the funds for you but I suppose it is still inexpensive compared to most active management and allows a buy and forget mindset without having to rebalance.


itsallaguess /eboli regarding buy into these passive funds gradually I have held increasing amounts of them recently though never really more than about 10-15% of my portfolio value. I don't tend to allocate more that that proportion to any one fund as I consider it having too many eggs in one basket. So I like your suggestion and think I need to revise my mindset to make an exclusion for these tracker funds.


On a practical point would anyone recommended the vanguard platform for SIPPs?

neversay
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Re: Put It all in a lifestrategy fund?

#325222

Postby neversay » July 10th, 2020, 4:07 pm

I feel a bit of a Pariah here on TLF but all my SIPP is in the Lifestrategy 80:20 (officially) 20 years to go to retirement. I did sell out a chunk prior to the recent correction and bought back in at the low point. I shouldn't really tinker but couldn't resist it.

The choice of LS80 was a split between the LS100 that I'm certain will get the best return versus the LS60 that in theory should be the 40% bond allocation based on age (in the case I am wrong).

The Lifestrategy route aligns to Warren Buffett's suggestion of 'owning the market'. I tried all sorts of investment strategies, including HYP, but liked the passive investing approach as in Tim Hale's 'Smarter Investing' for its simplicity, low cost and avoidance of regret.

My SIPP Is still with Interactive Investor that has the lowest fees and best service for my SIPP size. I waited patiently for Vanguard's direct offering but IIRC their fees were higher and it has restrictions on other holdings.

AleisterCrowley
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Re: Put It all in a lifestrategy fund?

#325228

Postby AleisterCrowley » July 10th, 2020, 4:26 pm

midgesgalore wrote:[...

In any case my personal view of the Lifestrategy 100% equity fund, FWIW, is its a giant wrapper around a bundle of trackers and ETFs of all the big indexes so you could save yourself the potential platform fees and fund costs by just buying a world ETF. Vanguard VWRL is popular with some folks around here whilst others reduce costs further by combining some ETFs
....
midgesgalore


Bit of a tangent, but how similar is LifeStrategy100 to VWRL?
From memory there are (big?) differences in allocations, but I haven't had a chance to check recently.

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Re: Put It all in a lifestrategy fund?

#325763

Postby Joe45 » July 13th, 2020, 9:57 am

BitterLemon wrote:Hi

So I have recently completed a performance review of my investments over the last 9 or so years. These have been held on multiple platforms and in SIPPs, ISAs and wrapper free investment accounts.

Since the start of 2012 I have made a 10.3% annualised money-weighted return after all fees. I have been partially active over this period, probably carrying out ~15-20 trades a year on average and choosing funds to invest in myself. On a couple of occassions I have been mostly in cash to mitigate risk and so have been on the emotional roller coaster with market movements.

I am aware that some people advise putting everything into a low cost fund such as one of vanguards' lifestrategy funds as a concession, since reliably beating the market is hard, so settling for average market performance with low fees.

I've calculated that vanguards' lifestrategy 100% equity would have returned about 9% annualised time-weighted return over this same period (before fees).

I think it's probably not too inaccurate to compare the time-weighted and money weighted percentages directly.

TLDR: So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.

You've done well. Studies show that less than 3% of investment professionals manage to beat the market average over 10 years. There is also a strong correlation between over-performance one year and under-performance the next. Tim Hale's book is worth a read. Go passive, reap the rewards and enjoy your life.

todthedog
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Re: Put It all in a lifestrategy fund?

#325929

Postby todthedog » July 14th, 2020, 6:19 am

VWRL is a all world tracker percentages representing the country's relative economic size

LS100 is a world tracker heavily biased towards the UK.

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Re: Put It all in a lifestrategy fund?

#326092

Postby BitterLemon » July 14th, 2020, 3:52 pm

neversay wrote:I feel a bit of a Pariah here on TLF but all my SIPP is in the Lifestrategy 80:20 (officially) 20 years to go to retirement. I did sell out a chunk prior to the recent correction and bought back in at the low point. I shouldn't really tinker but couldn't resist it.

The choice of LS80 was a split between the LS100 that I'm certain will get the best return versus the LS60 that in theory should be the 40% bond allocation based on age (in the case I am wrong).

The Lifestrategy route aligns to Warren Buffett's suggestion of 'owning the market'. I tried all sorts of investment strategies, including HYP, but liked the passive investing approach as in Tim Hale's 'Smarter Investing' for its simplicity, low cost and avoidance of regret.

My SIPP Is still with Interactive Investor that has the lowest fees and best service for my SIPP size. I waited patiently for Vanguard's direct offering but IIRC their fees were higher and it has restrictions on other holdings.


Thanks. It's good to hear from someone who has been-there, done-that with investments that passive is a conscious decision.

"Avoidance of regret" - this sums up what i was trying to say much more succiently!

I'm slightly suprised to hear you say II is cheapest as AFAIK their montly fees total £19.99 and they have a £8/trade. Iweb is £180/year and £5/trade. Both beat vanguard once your pot grows a bit beyond six figures.

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Re: Put It all in a lifestrategy fund?

#326244

Postby Chrysalis » July 15th, 2020, 8:44 am

With II you get trading credits, so you can potentially manage it so that the monthly fee is all you pay (and I think it is only £9.99 for an ISA or dealing account, and £19.99 for a SIPP).
But both are very cheap for large infrequently traded accounts.

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Re: Put It all in a lifestrategy fund?

#326257

Postby Stonge » July 15th, 2020, 9:37 am

iWeb don't charge an annual fee for an ISA or share dealing account.

neversay
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Re: Put It all in a lifestrategy fund?

#326289

Postby neversay » July 15th, 2020, 11:19 am

BitterLemon wrote:I'm slightly suprised to hear you say II is cheapest as AFAIK their montly fees total £19.99 and they have a £8/trade. Iweb is £180/year and £5/trade. Both beat vanguard once your pot grows a bit beyond six figures.


I should have said 'when I joined it' but I also balance the quality and flexibility of the platform. I'm sure you know about the monevator comparisons:

https://monevator.com/compare-uk-cheape ... e-brokers/

I'm keenly following this thread to know if I can improve on the LS80 approach. In part the decision was due to wanting a 'set it and forget it' strategy due to being just too busy to do any active management. Over the years though it has performed consistently well... to date...

Edit: I have S&S ISAs in iWeb with which I tinker, but the retro iWeb website always freaks me out thinking it's a spoof. I know I shouldn't.

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Re: Put It all in a lifestrategy fund?

#326351

Postby hiriskpaul » July 15th, 2020, 2:47 pm

BitterLemon wrote:Hi

So I have recently completed a performance review of my investments over the last 9 or so years. These have been held on multiple platforms and in SIPPs, ISAs and wrapper free investment accounts.

Since the start of 2012 I have made a 10.3% annualised money-weighted return after all fees. I have been partially active over this period, probably carrying out ~15-20 trades a year on average and choosing funds to invest in myself. On a couple of occassions I have been mostly in cash to mitigate risk and so have been on the emotional roller coaster with market movements.

I am aware that some people advise putting everything into a low cost fund such as one of vanguards' lifestrategy funds as a concession, since reliably beating the market is hard, so settling for average market performance with low fees.

I've calculated that vanguards' lifestrategy 100% equity would have returned about 9% annualised time-weighted return over this same period (before fees).

I think it's probably not too inaccurate to compare the time-weighted and money weighted percentages directly.

TLDR: So I'm wondering if, for the sake 1 or 2 percent in annual growth, I should just save myself the agro of being fairly active and just put it all onto one of these vanguard funds. Would be interested to get peoples thoughts on this. I'm aware I might need to choose a couple of funds to get the diversification I'd want.

There can be significant differences between time and money weighted returns. If you are going to make the effort to compare, you need to do it on the same basis. Prices for the LS100 fund are available from Vanguard on a daily basis, so just create a time series of fictitious LS trades that match your buys but not your sells. "New money" goes into new buys, reinvested money (following a sell) just stays put. You can then compare both time and money weighted returns.

However, if you are swinging significant amounts of money in and out of a portfolio you need to be very careful with money weighted rate of return. In those circumstances there can be multiple rates of return solutions and so any number you get may be meaningless. Money weighted rate of return is only guaranteed to be unique if you make one initial purchase, followed by multiple withdrawals or multiple purchases, followed by a final single withdrawal (or final mark to market). Time weighted rate of return is more appropriate here. It guarantees you a unique rate of return and would properly assess your market timing and investment decisions against an accumulate all in LS100 approach, with no intermediate disposals.

hiriskpaul
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Re: Put It all in a lifestrategy fund?

#326360

Postby hiriskpaul » July 15th, 2020, 3:23 pm

ps, I agree with the comments on LS100 being overweight UK shares, which has dragged returns. VWRL may be more appropriate but would likely be a pain to work with as it pays dividends in dollars, so you would need GBP/USD prices for all those cashflows. iShares SWDA might be simpler for you to use as a benchmark as it is an accumulating world ETF, priced in pounds. You might be able to find the pound prices somewhere, otherwise you can download the daily NAV history from iShares. This again is in dollars unfortunately, so you would need to lookup GBP/USD rates at the time of your purchases.

Pipsmum
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Re: Put It all in a lifestrategy fund?

#326451

Postby Pipsmum » July 15th, 2020, 11:06 pm

BitterLemon wrote:So I have recently completed a performance review of my investments over the last 9 or so years. These have been held on multiple platforms and in SIPPs, ISAs and wrapper free investment accounts.


Can I just ask how you worked that out if that isn't too complicated a question?

I want to see if all my recent fiddlings about with these small caps is indeed a worthy pursuit as a divi replacer activity or just a fools game. I'm currently putting them all into a google chrome sheet to see what the true rate of return is. So I'm dividing the total profit by the total investment amount but I'm not sure if that % figure is an accurate one. I'm also dividing each transaction the same way to see if there is an average positive or negative return on regularly traded small stocks.


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