The VLS range of funds were used as the basis for my latest book “DIY Simple Investing”.
Vanguard have recently announced half-year results to 30th September 2015. The report covers all 5 index funds but I will pick out the relevant figures for the fund I hold which is the LifeStrategy 60 (acc) - which consists of a mix/blend of Vanguard’s stand-alone index funds - 60% equities and 40% bonds.
Over the 6 month period the fund returned a loss of -6.5% compared to the composite benchmark of -6.1%. Average annualised returns since inception of June 2011 has been 6.85% p.a.
The fund is widely diversified -
Bonds
Global Bond 19.4%,
UK Gilts 6.2%
UK Corporate Bonds 3.6%
UK Index Linked Bonds 3.1%
European Corporate Bonds 0.9%,
European Government Bond 1.9%,
Japan Government Bond 1.3%
US Corporate Bonds 1.9%
US Government Bond 1.9%
Equities
N. American Equities 26.4%
UK Equities 15.0%
European ex-UK Equities 7.8%
Japan Equities 4.2%
Asia ex-Japan Equities 2.4%
Emerging Markets Equities 4.0%
Total 100%
The above percentage figures are of the whole fund combining bonds and equities. As a percentage of the equity element, the UK accounts for 25% and US is 44% - therefore a significant home bias towards UK equities.
Ongoing charges are 0.24% p.a. - the 0.10% dilution levy on the fund was scrapped from July. In addition to the fund charges, I pay a platform fee to Halifax Share Dealing of £12.50 p.a. which adds a further ~0.08% to overall charges.
More on this following the full-year results next June.
Hi John, thanks for the reminder about these lifestyle funds. I have my son's JISA in a handful of index trackers for stocks and bonds (about 60/40 split) and have thought about switching to a single fund for a while. It's just a case of doing it as I'm sure the broker commission would work out cheaper saving into a single fund rather than having to make multiple purchases in several funds.
ReplyDeleteJohn
John,
DeleteGood to hear from you, thanks for dropping by.
I suppose it depends which broker you are with. For example, Charles Stanley Direct do not charge for fund purchases which would make it ideal for regular monthly contributions in as many funds as you need.
I have started an investment in the Vanguard LS80 for the grandchildren with AJ Bell - the starting sum is fairly modest so no problems with the 0.20% platform charges which work out at £2 p.a per £1,000 invested. When/if it gets to £15K I may move over to Halifax if their fee remains at £12.50.
The best aspect for me about the LS funds is the auto rebalancing.
Good luck with the JISA.
Hi DIY
ReplyDeleteMy largest fund holding is still my LS80. At some point, when I'm fed up with tinkering with my portfolios, I'll probably switch my other funds to LS80 or a bit later on, to LS60.
Good to see that your LS60 are holding their own in the Monkey Stocks challenge - very steady in the face of share volatility!
weenie,
ReplyDeleteThanks - I have been following the ups and downs of the Monkey league. Most entrants are randomly chosen mainly smaller companies so you would expect some dramatic leap frogging and volatility. I will be interested to see how it pans out over the coming 9 months or so and what lessons (if any) can be drawn from the experiment.
With 40% weight in bonds and the announced increase of interest rates by the fed and Bank of England , how the fund is going to be rebalanced ? Even with inflation protected bonds they will reduce in value as inflation correlates with interest rates .
ReplyDeleteCan you elaborate your strategy on this ? Thanks and I love your blog !
Presumably not THE Mr Buffett!
DeleteI agree that rising interest rates are not generally regarded as good for bonds but this arguement was being put forward 4 yrs ago, and each subsequent year but bonds have provided the better returns for me in 3 of the past 4 yrs.
There are many studies which show a classic 60/40 equities to bonds mix has provided a good outcome over lengthy periods so I am hoping that will continue.
Also worth adding that since March 2007 interest rates have been falling hence bonds were quite a good ride for everybody. A probably better strategy (although I am relatively young ) would be to buy an indexed annuity instead of bonds.
DeleteIndeed I am a diluted version of THE Mr Buffet ahaha!
ReplyDeleteThere was an interesting story I was reading in the past where there was a bond fund in US and when people started to panic they were selling their fund which resulted in a snowball effect where everybody then lost their bonds.
I guess history doesn't repeats itself but with some motifs, if you have individual bonds you are less likely to get caught in this sort of herding behaviour ( I will try to find that youtube video again).
My strategy is to buy some individual Guilts (in a ladder with 1 year step) after the bank of England does its honky ponky.
PS
I have bought your eBook!
Just read a good article on AWoCS showing returns on a 60/40 portfolio - very interesting
Deletehttp://awealthofcommonsense.com/portfolio-management/
Hope you enjoy the book - thanks!