Page 36 - DIY Investor Magazine - Issue 27

Have you ever invested in that pharma stock that initially surged, then stagnated and underperformed the market – because most of them do – then been unable to sell it because of your emotional attachment? writes Banker on Wheels.
If you don’t want to think about selling or buying, or even rebalancing, you may be pleased to know that the Golden Retriever Portfolio (with a little nuance) is now available in one UCITS fund – Vanguard LifeStrategy.
WHAT IS VANGUARD LIFESTRATEGY?
It may not be your cup of tea – some investors like flexibility; but if asked about the ‘best investment’ for a bear or a bull market at a (post Covid-19) family reunion, LifeStrategy may be the answer to save them money and stress.
If they ask about bonds, tell them this Babushka doll includes them as well; LifeStrategy is so easy to explain, even a Golden Retriever gets it.
Until now, it was fairly easy to buy a Equity World ETF. But
you would usually want a World Bond ETF that goes with
it; LifeStrategy are Funds of Funds offering a cheap global, diversified portfolio with a fixed level of equities determined by the share component of the portfolio.
WHO ARE VANGUARD LIFESTRATEGY FUNDS FOR?
LifeStrategy funds are the perfect solution for you if:
• You are investing for the long term and want an established and reliable provider
• You are looking for simplicity and a cheap fund
• You want to have hands-off portfolio without the
need to rebalance
• You want to lower transactions costs and taxes
Vanguard LifeStrategy Funds may not be suitable if:
• You like to build a portfolio to your personal needs or want full flexibility (e.g. Banker or Cyclist portfolios).
• You want to reduce costs to the absolute
• You want an asset allocation other than 80/20, 60/40,
40/60, 20/80, one that changes over time or don’t want bonds
Vanguard LifeStrategy may not fulfill all your needs, but can serve as the backbone of your portfolio if you add other investments around a core fund or tweak the allocation by adding a World ETF.
LIFESTRATEGY FUND TYPES
The underlying ETFs are the same for each LifeStrategy Fund, which are in turn composed of a wide range of ETFs:
Bonds – Vanguard Global Aggregate Bond UCITS ETF Equity – Vanguard FTSE All-World UCITS ETF
Each fund is rebalanced regularly so that its asset allocation remains fixed over time – understand how rebalancing works.
The funds differ by the asset allocation or the proportion of Equity and Bond ETFs; Vanguard recommends 60% and 80% Equity ETFs for investors with a higher risk profile and 5+ years investment horizon.
The only difference with a Golden Retriever portfolio is that it does not include Inflation Linked Bonds/Gold which could be helpful in rare scenarios when both Equities and Bonds underperform at the same time (look here for the 1970s).
Vanguard LifeStrategy Funds have traded on the US Stock Exchanges since 1994, and launched in the UK in 2011;
it started trading LifeStrategy ETFs on Germany’s Xetra exchange and Borsa Italiana in December 2020.
CHOOSING A LIFESTRATEGY FUND
The primary criterion when choosing a fund is how much risk you can tolerate; you don’t want to end up like this guy.
DIY Investor Magazine | Mar 2021 36