LifeStrategy 80% Equity Fund - set and forget SIPP?

[cillitbang]

I've been reconsidering LifeStrategy due to the UK overweighting. Are there any thoughts on this as my main 'set it and forget it' index fund?

FTSE Global All Cap Index Fund - 0.23% fund fee

I suppose the equity in small caps might be a concern here... or an advantage?

My other thought was to go with this one due to the lower fee and complete lack of UK!

FTSE Developed World ex-U.K. Equity Index Fund - 0.14% fee

Not to say that I don't want to invest in the UK, but I could add a small % into a FTSE 100 fund to run alongside this I guess.

The HSBC FTSE All-World Index Fund Accumulation C you mentioned earlier has a 0.13% OCF - any reason you wouldn't choose that over the more expensive 0.23% (from Vanguard, I presume)?

Yes, that’s a good point. The HSBC all world fund probably makes more sense compared to Vanguard’s global all cap.

[GeoffF100]

I've been reconsidering LifeStrategy due to the UK overweighting. Are there any thoughts on this as my main 'set it and forget it' index fund?

FTSE Global All Cap Index Fund - 0.23% fund fee

I suppose the equity in small caps might be a concern here... or an advantage?

My other thought was to go with this one due to the lower fee and complete lack of UK!

FTSE Developed World ex-U.K. Equity Index Fund - 0.14% fee

Not to say that I don't want to invest in the UK, but I could add a small % into a FTSE 100 fund to run alongside this I guess.

The HSBC FTSE All-World Index Fund Accumulation C you mentioned earlier has a 0.13% OCF - any reason you wouldn't choose that over the more expensive 0.23% (from Vanguard, I presume)?

HSBC increased the charges on some of their funds last year. You would not have known unless you kept downloading and reading the latest KIID. Vanguard has a long history of reducing charges.

With Vanguard, you can reduce the cost of a FTSE All-World tracker to about 0.14% by using VEVE and a market weight of VFEM (about 10%), but that involves more work.

Vanguard has its own platform with reasonable charges, and charges nothing for the US platform, so there is hope that they will reduce their charges over here. HSDL (particularly the iWeb brand) is cheaper, unless you have a SIPP in payment. Interactive Investor is cheaper in some cases, but its new owner is ramping up the charges. How long before HSDL does the same? All the other platforms charge swinging percentage fees for holding OEICs, except for Share Deal Active, but Jarvis is much smaller than Vanguard or Lloyds Banking Group.

If you are in a tax shelter, you can reinvest in other funds, but if you want fire and forget, Vanguard has a lot to be said for it.

[John123ab]

I don't see the point of bonds unless you are a company holding them especially after last year. Surely you can replace the bond element with blue chip FTSE100 companies and/or long standing quality investment trusts for as much safety but better returns?

[Hornblower]

I'm in a similar position (though with considerably less capital going into my SIPP every year!

I went with a simple 50/50 weighting in two Vanguard funds:

FTSE All-World UCITS ETF (VWRL) & FTSE All-World High Dividend Yield UCITS ETF (VHYL)

It's basically me saying: I have no idea which country, region, sector, technology is going to dominate in the decades to come. I'll own equity in whatever wins. Maybe some Chinese company will build revolutionary A.I technology & be valued higher than all the FAANG stocks combined? Maybe mining stocks will explode in value in the rush to build more renewables? I don't have to have an opinion. The high yield component is to act as a 'brake' so I'm not too overweight in the latest 'hot thing' that then crashes in value 40%. If you look at the companies that make up the VHYL, they are nice defensive stocks.

The dividends coming in 4 times a year are lovely to see, and they now exceed my annual contributions. I can already detect the benefits of compounding in action, with my dividends buying more units that then also pay dividends + the dividend per unit steadily increasing over the years.

As for the fees, these are a tiny fraction of what you would have been paying with an IFA/actively managed fund model.
Good luck with whatever you choose.


Hornblower

[AWOL]

I don't see the point of bonds unless you are a company holding them especially after last year. Surely you can replace the bond element with blue chip FTSE100 companies and/or long standing quality investment trusts for as much safety but better returns?

The point of bonds is that 80-90% of the time they are inversely correlated with equities during a correction. However occasionally they are not. This isn't a new discovery, it's the way it has always been although because they usually are inversely correlated journalists and others often simplify the situation to "are inversely correlated" or "zig when equities zag" misleading the man on the Clapham omnibus.

Why is that important? Well during accumulation reducing volatility to a level that the investor can stomach (their "risk tolerance") stops people trading as it's in their interest to leave their investments alone and ride out volatility as they will otherwise sell when it hurts most. However many people can and if they are truly strong willed (i.e. don't think they are but go weak at the knees when things fall more than 20%) should hold little or no bonds during accumulation until they are close to spending their investments.

For those in drawdown, sequence of returns risk means that volatility can be very harmful to ones financial health so a chunky exposure to bonds will increase the safe/sustainable withdrawal rate. The precise allocation will vary depending on life expectancy and bequest intentions. There is a big difference between what makes sense for someone who doesn't want to be the richest man in the cemetery and someone who wishes to provide for loved ones particularly when they have vulnerable loved ones like a disabled child.

Equities are not very good diversifiers for equities. Some diversification is needed within equity but diminishing returns kick in long before you get to holding MSCI All-World.

Personally I moved into cash before yields started rising and moved back into bonds when Liz Truss and Kwasi were getting high on power although this goes against my passive philosophy. Now I am prepared to weather the storm as nobody knows when crash protection will be needed.

[AWOL]

The global markets are now much more interconnected, and stock markets are highly correlated. The US economy was less dominant in 1939, but the 1939 crash still had global impact:

https://www.encyclopedia.com/education/ ... -1929-1939

There was no global index at the time, and investing globally would not have been easy. Another 1939 style crash in the US would reverberate round the world. The 1973-74 crash was global:

https://en.wikipedia.org/wiki/1973%E2%8 ... rket_crash

50% is about the extent of the worst global market corrections since the 60's;

https://en.wikipedia.org/wiki/MSCI_Worl ... -_2020.svg

That said, 50% falls are not all that rare - 73/4, Dotcom, GFC. Japan hardly figures though. It's hard to get data for a global index in 1929 -32 but it's clearly wrong to say 80% crashes come along quite often when talking globally.

BoE

The Great Financial Crisis 2007-2009 caused a 57.46% fall in the MSCI World.



If one looks at data before the 20th century then the length of historic bear markets is astonishing. In fact, I heartily recommend fantastic Rob Arnott article from 2011 (perhaps my favourite of all time) https://www.researchaffiliates.com/content/dam/ra/publications/pdf/F_2011_March_The_Biggest_Urban_Legend.pdf

[John123ab]

My thoughts are to live off the state pension plus dividends. I have half my pension fund in high div stocks and investment trusts and the other half in global trackers. I still have about 10 working years so as to ride out any massive stock market crashes (50% is a lot though). I just don't have a use for bonds which dilute returns. Still, equities are not doing much at the moment. The divs are just balancing out share price drops these days.....

[GeoffF100]

I still have about 10 working years so as to ride out any massive stock market crashes (50% is a lot though). I just don't have a use for bonds which dilute returns. Still, equities are not doing much at the moment.

Ten years may not be enough. Bonds do not always dilute returns. Nonetheless, I do not know what will happen, and neither does anyone else.