Monday, 4 July 2016

Vanguard LifeStrategy - 5 Year Performance

I had the Vanguard LifeStrategy Fund on my watch list as a possible option for my portfolio as far back as 2013 but as I was primarily investing for income - mainly via individual shares and investment trusts and looking for natural yield, I did not quite appreciate its full potential until early in 2015 when I was researching material for my book 'DIY Simple Investing'.

Investing is all about the long term for the best probability of a good result. Investors therefore need a sound strategy which will provide them with every chance of lasting the course or ‘staying in the game’.

It is just over one year since I purchased VLS 60 for the first time. This represented a shift in strategy on several fronts -

A move to funds rather than shares and/or investment trusts,

A move towards passive index rather than actively managed, and

A move to selling units to provide ‘income’ rather than taking the natural yield

The LifeStrategy range of funds were launched on 23rd June 2011 and therefore now have a 5 year performance which can be compared to other funds.

Last week, I had a brief look at Trustnet’s Multi manager & Mixed Asset tables to compare the performance over the past 5 years since launch.

I was pleasantly surprised to see that the Lifestrategy range all performed well compared to other funds in the same sector. In fact the LS20 was the #1 fund out of 146 funds listed in the 0 - 35% equity section and all funds were in the top 10%.

Here is a brief table listing the 5 yr performance of each fund and I have included a couple of other Vanguard funds and also a selection of my investment trusts by way of comparison. (The figures for the LS returns are taken from the Vanguard site). I must say I was a little surprised to note how well the UK government bonds have done in recent years.

(click to enlarge)

Of course, five years is not such a long time over which to draw firm conclusions but at the same time, I think it is probably long enough to give me confidence to suggest my change of strategy last year is looking like a sensible move.

For me, and I am sure many other small investors, the appeal of the VLS strategy is its simplicity combined with low volatility compared to pure equities. At the same time it offers a good total returns for the level of risk involved compared to other strategies.

I intend to reallocate further investments between the VLS60 and possibly VLS40 over the coming year.


  1. Thank you for posting these articles. I have just discovered the Vanguard LS and Target Retirement funds, and found your articles when doing my research.

    I am interested in some advice. I understand the nature of Vanguard's business, so have no worries that "over-investing" will cause issues with insolvency. But the reason I am investing is that I am moving my pension into an offshore pension (having left the UK 8 years ago). I have received a large transfer value from my old pension, and want to use Vanguard for my pension. I also have a separate portfolio of my own equities which I actively manage myself so like the "fire and forget" nature of the Vanguard funds for my pension, which is roughly twice the size of my personal portfolio.

    So, all of that said (purely to give you an idea of my situation), I find myself wondering with all the diversification already offered by the VLS60 (my preferred weapon of choice), is there really any need to invest elsewhere? I mean something in the back of my mind says don't put everything all in one fund, but that fund is really just a wrapper for about 19 other funds isn't it? Am I missing something here? Or is it actually realistic to invest such a large pot in a single Vanguard fund (bearing in mind the structure of Vanguard means that even company insolvency would not affect the fund)? These funds are really just wrappers aren't they?

    It also strikes me that investing everything in one place makes the drawdown phase after retirement much easier to manage, as you just sell units in one fund (for one fee) amounting to your salary for the year, rather than trying to sell equal proportions of numerous funds.

    Just some random ramblings that I would love to hear your opinions on.

    And thanks again for an excellent resource!

    1. GD,

      Unfortunately I am not permitted to offer advice to individuals so I cannot really comment on your specific situation.

      Personally, I have a large percentage of my portfolio invested in the VLS60 fund which offers plenty of global diversity as well as the diversity between equities/bonds but I also feel more comfortable holding other strings to the bow such as my basket of investment trusts.

      Sorry not to more helpful and I hope you manage to resolve the questions you have posed.

    2. Thanks for the reply. Maybe "advice" was the wrong word to use! I was just interested in your (and your other readers) opinions on something like this. But to be honest, I feel that one fund for my entire pension pot (which is sizeable) would be rash. I may split it equally between VLS60, VLS80, Target Retirement 2025 and a FTSE (undecided on exactly which index) tracker until the pound recovers (which I genuinely believe it will in time), when I may switch the latter into the Vanguard US All-Shares (planning to retire to a dollar-based economy). All Vanguards, but the structure of the company gives me peace of mind and the costs are so low.

  2. Is average annualised return the same thing as yield?

    1. No Matt, the yield is the annual distribution of income which for the LS funds is quite low ~1.3% or so. The annualised return is capital appreciation combined with income and then averaged out according to the number of years - in this case 5 yrs.