This blog is designed to record the investment journey of a UK based small investor. I hope to make a modest contribution to the collective wealth of investing knowledge made freely available to ordinary people. I am the author of four books [see sidebar and books tab]
It is now two years
since I added this to my portfolio and time for another update. The fund
represents the largest holding in my portfolio.
Following a review
of my investing strategy in 2015, I have come around to thinking that probably
all I really need is a very simple, no-frills low cost diy strategy which makes
sense, which can be tailored to fit in with my attitude to risk/market
volatility and has every chance of providing a decent outcome.
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’.
rejected the LifeStrategy option for at least the previous two years, I decided
to change tack and take the 'income' I needed from selling units in the
fund rather than the natural yield which I have done with my shares and
Vanguard LifeStrategy funds offer a balanced portfolio of globally diversified
equities combined with some gilts and corporate bonds.
by holding just a single LifeStrategy fund, my portfolio is widely diverse with ~18,000 stocks/bonds from all around the world. The bond element (assuming
you do not want the 100% equity) will comprise a combination of UK gilts,
global bonds, corporate bonds and inflation-linked gilts. The equities element
includes their UK all share tracker, global funds and some exposure to emerging
big advantage for me is the auto rebalance to ensure the fund always remains at
the risk level selected at the start - in my case with VLS60, 60% equities. The
fund is frequently rebalanced - probably daily as new money is injected via
annual charges for the Lifestrategy range have been reduced to 0.22% p.a. in
the past year. My platform costs with Halifax Share Dealing are £12.50 p.a.
which works out at 0.04% for £30,000. This fee would be £45 if held on
Vanguard's new platform however there would be no charges for buying and
how has the fund performed? I made my initial purchase in my new ISA with
Halifax in May 2015 and topped up later in the year as the markets retreated.
My average purchase price was £136.50.
current price two years on is £169.50 so a gain of 24.1%.
(click to enlarge)
comparison, the total return for the FTSE All Share over the same period is
~15.0% so the combination of 40% bonds and a wider exposure to global equities
in the VLS fund has worked very well. The LifeStrategy fund is priced in US
dollars and some of the rise in unit price has come from the fall in sterling
total return for each of the last 5 full years has been
2017 2.81% (4m to end April)
average annualised return since inception is 9.3%.
returns for the FTSE All Share Index2012
12.3%, 2013 20.8%, 2014 1.2%, 2015 1.0%, 2016
16.7% and 2017 year to date 6.8%.
natural yield on the fund is ~1.4% however I really need an income from my
investments of around 4%. I have purchased the accumulation version of the fund
with the intention of selling off some units each
year to provide the 'income' I require.
Due to the
unexpected boost in my Lifestrategy fund last June, I decided to sell 8% of my
holding which is the equivalent of 2 years 'income' so for the coming year I
already have my income requirement covered and can therefore leave the fund to
be seen above, selling off 4% would work in 4 out of 5 years. For periods when
returns are negative, I hold a cash buffer of 10% of the fund value in my
building society a/c however, so far it remains untouched and has increased
with the accumulated interest.
appeal of the VLS strategy is its simplicity - 18,000 assorted global equities
and bonds in one fund with low cost of ownership. It offers me the level of
equity/bond allocation to match my requirements and can deliver a reasonable
return compared to other strategies.
seems to me that putting together a DIY investment portfolio does not come much
simpler than this. You decide on your asset allocation, select your broker,
invest your lump sum and/or set up your automated monthly direct debit - job
done, get on with your life!
only minor reservation I have is the equity allocation of 25% to the UK is a
little high and I would prefer a lower figure of say 15%. Otherwise I am more
than happy with returns for my first two years and hope to top up my ISA
holding in the next few months as I have a build up of cash from various sales
and the redemption of my building society PIBS.
Leave a comment below if you
hold VLS or have any thoughts generally.