LifeStrategy 80% Equity Fund - set and forget SIPP?

[cillitbang]

Hi all,

I have recently ended my long-standing relationship with my IFA and moved my SIPP over to interactive investor to take advantage of the lower platform fees. My portfolio currently stands at £350,000 so the fees were all adding up (combined 2% with advisor fees, their platform fees and the funds fees they had me in!)

I liquidated my funds into cash for the transfer as I didn't want to carry on with ones like Fundsmith Equity Fund Class I (Acc) weren't delivering the goods with the fund charge of 0.94%

I am considering trying to time the market as best I can (haha) and reinvest the majority of this cash into:

LifeStrategy 80% Equity Fund (Acc)

My reasoning for this is that I should be able to 'set and forget' with a fund like this. Yes the fees aren't the lowest they could be at 0.22% but I think on the whole it might suit me well.

I am 45 years old and in a very fortunate position to be able to pay £60,000 per year into my SIPP each year. My aim is to build this up to over 1 million in the next 10 years (ideally sooner!). I have no pressing need to retire.

I would welcome your thoughts on this as more experienced investors. I am new to the DIY space, but I am learning quickly.

I want to have low platform fees and low fund fees and basically be passive tracking the index.

Should I be considering LifeStrategy 100 instead? Might the bonds just slow my returns down? Why does interactive investor have a less positive impression of the 100% fund? Again MorningStar seem more in favour of 80%.

Does anyone think I would be better off investing in the following index funds instead?

- HSBC FTSE All-World Index Fund Accumulation C
- iShares MSCI ACWI UCITS ETF (Acc)
- Vanguard FTSE All-World UCITS ETF (VWRP) Acc

If I did go with LifeStrategy, would it be wise to run it alongside an S&P index tracker in order to water down the UK overweighting found in LifeStrategy funds?

Thanks in advance for your advice.

[Urbandreamer]

Should I be considering LifeStrategy 100 instead? Might the bonds just slow my returns down? Why does interactive investor have a less positive impression of the 100% fund? Again MorningStar seem more in favour of 80%.

Only you can formulate opinions about your own objectives and comfort level. However, here is some information that may help.

Traditionally, a mixed or balanced portfolio is considered preferable. There was a significant amount of research into "modern portfolio theory" which is intended to maximise returns for a given risk tolerance. Choosing 100% equities goes against that, though you could achieve the same as the lifestrategy 80 by mixing the 100 lifestrategy with Vanguard bond funds. After all that is what vanguard does for you.

Both funds are actually technically active funds, though as you noted charging really low fees. This is because they are funds of ... funds. The 80 mixes a choice of equity funds with bond funds.

Another thing to be aware of is that there is a UK slant to their investment. Sure, they do invest globally, but they are "overweight" towards the UK relative to a global index.

None of the above make them a bad choice. They wouldn't be my choice, but then I invest for a mix of entertainment and returns. Probably not your goals.

[DrFfybes]

As siad - only you can choose your risk tolerance.

You're 45, so they're hopefully going to be invested for a long time, so 100% equities hs historically been better longer term. However, when do you want to retire, will it be driven by wealth, health, or tax avoidance?

You've seen the pitfalls of the UK bias, although some believe that will be an advantage short term if the UK catches up with the rest of the world (then again Japan didn't), and over the 40+ years you should have left there's a lot can change.

Personally if you want simplicity under one roof then rather than Lifestrategy I'd go VEVE/VHYL or their fund equivalents, and add a bond fund to whatever level makes you comfortable. You can rebalance with your anual subscriptions as time passes.

Paul

[GeoffF100]

LifeStrategy 80% Equity Fund (Acc)

My reasoning for this is that I should be able to 'set and forget' with a fund like this. Yes the fees aren't the lowest they could be at 0.22% but I think on the whole it might suit me well.

If your IFA recommended 80% equity after going through his questionnaire, that is probably reasonable. Fire and forget is better than buying high and selling low, which is what most private investors do.

I am 45 years old and in a very fortunate position to be able to pay £60,000 per year into my SIPP each year. My aim is to build this up to over 1 million in the next 10 years (ideally sooner!). I have no pressing need to retire.Should I be considering LifeStrategy 100 instead? Might the bonds just slow my returns down? Why does interactive investor have a less positive impression of the 100% fund? Again MorningStar seem more in favour of 80%.

VLS 100 is more risky. Your aim is to build a million in 10 years. How will you react if you lose the majority of your money? It may not happen, but you will not know how you will react until it does until it does. The longer you hold equities the less likely it is that you will lose money, but the greater the likely loss if you do. The cost of insuring against loss increases with the length of time that equities are held. Equities and bonds are equally desirable. If equities were more desirable, their price would rise and the price of bonds would fall, and vice versa. The average investor holds about 40% equities.

Does anyone think I would be better off investing in the following index funds instead?

- HSBC FTSE All-World Index Fund Accumulation C
- iShares MSCI ACWI UCITS ETF (Acc)
- Vanguard FTSE All-World UCITS ETF (VWRP) Acc

That would be pointless. The HSBC and Vanguard funds track the same index. The iShares fund tracks and inferior version of the same index which holds fewer stocks.

If I did go with LifeStrategy, would it be wise to run it alongside an S&P index tracker in order to water down the UK overweighting found in LifeStrategy funds?

LifeStrategy deliberately over-weights the UK, which waters down the very heavy weight of the US and the tech giants in particular, which are relatively expensive. UK stocks are currently relatively cheap, and you do not pay withholding tax on UK dividends.

[cillitbang]

Thanks for all the insightful replies. These are really helpful!

Only you can formulate opinions about your own objectives and comfort level. However, here is some information that may help.

Traditionally, a mixed or balanced portfolio is considered preferable. There was a significant amount of research into "modern portfolio theory" which is intended to maximise returns for a given risk tolerance. Choosing 100% equities goes against that, though you could achieve the same as the lifestrategy 80 by mixing the 100 lifestrategy with Vanguard bond funds. After all that is what vanguard does for you.

I am really struggling to know what my comfort level is. In the past when going through the process with IFAs, I have always invested in adventurous funds. I've had time on my side (a little bit less now I am in my 40s) and a healthy income so a massive loss would be less devastating to me. (not to say it would make me happy of course!!)

I suppose my idea of investing into lifestrategy 80 rather than 100, is because in theory it is slightly less risky. Though of course bonds haven't been so great lately, I felt it might be a good idea to have some in my portfolio rather than going 100% equities. I am still on the fence!

As siad - only you can choose your risk tolerance.

You're 45, so they're hopefully going to be invested for a long time, so 100% equities hs historically been better longer term. However, when do you want to retire, will it be driven by wealth, health, or tax avoidance?

You've seen the pitfalls of the UK bias, although some believe that will be an advantage short term if the UK catches up with the rest of the world (then again Japan didn't), and over the 40+ years you should have left there's a lot can change.

Personally if you want simplicity under one roof then rather than Lifestrategy I'd go VEVE/VHYL or their fund equivalents, and add a bond fund to whatever level makes you comfortable. You can rebalance with your anual subscriptions as time passes.

I suppose the idea of even putting £60k a year into a SIPP is down to managing tax burdens as a company director. I have other investments, so I may not need to draw on the SIPP until well into my retirement. Of course I know money in the bank is being eroded through inflation, so I would like to see a decent return.

I do dabble with ETFs already in an InvestEngine ISA. I have some VEVE and I like that ETF as it only have 4.9% UK holdings, rather than LifeStrategy's over-weighting.

VHYL I hadn't used because it's fund fee is high at 0.29% and I prefer Accumulating funds.

Yes, perhaps something like Vanguard FTSE Developed World ex-U.K. Equity Index Fund will work well for me. The OCF of 0.14% is appealing.

If your IFA recommended 80% equity after going through his questionnaire, that is probably reasonable. Fire and forget is better than buying high and selling low, which is what most private investors do.

VLS 100 is more risky. Your aim is to build a million in 10 years. How will you react if you lose the majority of your money? It may not happen, but you will not know how you will react until it does until it does. The longer you hold equities the less likely it is that you will lose money, but the greater the likely loss if you do. The cost of insuring against loss increases with the length of time that equities are held. Equities and bonds are equally desirable. If equities were more desirable, their price would rise and the price of bonds would fall, and vice versa. The average investor holds about 40% equities.

LifeStrategy deliberately over-weights the UK, which waters down the very heavy weight of the US and the tech giants in particular, which are relatively expensive. UK stocks are currently relatively cheap, and you do not pay withholding tax on UK dividends.

Well I am not using an IFA any more. My previous experience was just paying them 1% to put me in expensive funds like Fundsmith Equity and baillie gifford, which are amazing in a bull market, but devastating outside of that.

I have experienced big losses in 2022, which of course would be gutting to repeat with LS100. But we all know what we're getting into with investing, I am going into it with my eyes open. I guess I am just questioning if LS80 might be more my speed or if with my circumstances if I am being too cautious or not. I have never had bonds in my portfolio in the past.

Dilemmas dilemmas!

[GeoffF100]

I have experienced big losses in 2022, which of course would be gutting to repeat with LS100. But we all know what we're getting into with investing, I am going into it with my eyes open. I guess I am just questioning if LS80 might be more my speed or if with my circumstances if I am being too cautious or not. I have never had bonds in my portfolio in the past.

2022 was little blip. Equity crashes of about 80% come along quite often. 1939 US. 1970s UK. 1980s Japan. Japan still has not recovered in real terms after more than 30 years. With 20% bonds you are likely to have two to three times as much money after a big crash as if you had no bonds at all. That is not a big price to pay for accepting a lower return on 20% of your money. What is the more scary? Being a little less rich than you might have been? Or being poor?

[Dod101]

In 2022 my 95% equity portfolio dropped by 9.8% and I had income of 4.8% so it was definitely not a good year, driven by substantial losses in growth shares. If you lost more than that that was not a very good out turn but I am relatively unphased by that sort of loss. Growth shares will return in due course. At your age with no particular plans to retire any time soon, you should be able to take that sort of loss without thinking about it too much.

I cannot help you with index funds as I do not use them.

I have never used an IFA except for general advice on asset allocation, never for actual investment advice. You need to keep costs down as you now know.

Dod

[Urbandreamer]

As I said, it all depends upon your objectives, comfort levels and time to put the effort in.

I confess that the 40% drop in my portfolio in 2020 felt bad, as I was approaching retirement. I continued to invest and my portfolio recovered.
However, VLS-80 is only one option. If you are happy picking your own investments, then you can mix and match. I started buying Ruffer shortly after my portfolio recovered.

They are one of a small number of funds or IT's who seek to avoid losses.


Ignoring index trackers, Ruffer are my second-largest holding.

[Dod101]

As I said, it all depends upon your objectives, comfort levels and time to put the effort in.

I confess that the 40% drop in my portfolio in 2020 felt bad, as I was approaching retirement. I continued to invest and my portfolio recovered.
However, VLS-80 is only one option. If you are happy picking your own investments, then you can mix and match. I started buying Ruffer shortly after my portfolio recovered.

They are one of a small number of funds or IT's who seek to avoid losses.


Ignoring index trackers, Ruffer are my second-largest holding.

But of course most people do not invest to avoid losses. You can avoid losses, at least nominally, by sticking the cash in the bank.

Dod

[Urbandreamer]

But of course most people do not invest to avoid losses. You can avoid losses, at least nominally, by sticking the cash in the bank.

Dod

I was simplifying. As your use of the word "nominally" identifies, cash in the bank does not avoid losses in real terms. Indeed, I suspect that government bonds are often bought with the intention of avoiding losses. Which is of course why recent bond losses are upsetting so many.

As I said, everyones objectives are different. The OP seems keen to "set and forget", hence the interest in LifeStratergy funds. I was simply suggesting that casting the net wider might be worth considering.

[Dod101]

But of course most people do not invest to avoid losses. You can avoid losses, at least nominally, by sticking the cash in the bank.

Dod

I was simplifying. As your use of the word "nominally" identifies, cash in the bank does not avoid losses in real terms. Indeed, I suspect that government bonds are often bought with the intention of avoiding losses. Which is of course why recent bond losses are upsetting so many.

As I said, everyones objectives are different. The OP seems keen to "set and forget", hence the interest in LifeStratergy funds. I was simply suggesting that casting the net wider might be worth considering.

And in principle I agree with you but did not want to muddy the waters as the OP seems quite set on index or quasi index linked funds. Re bond losses it is surprising how many seem(ed) to think that holding bonds was a one way risk free strategy.

Dod

[Wuffle]

Take a glance at Adamski's portfolio in the 'portfolio management and review' section.
At its core it is LS60 and a global tracker, which puts it back towards LS80 with less UK bias.
It is then leavened with CGT, an investment trust with a big holding of index linked bonds and a mandate to preserve wealth, which you could take or leave at your age and with a solid income but is worth bearing in mind.
Every time I see it I am aware that my arrangements are over complicated.

I have a similar issue with cash in a SIPP (much, much less cash) and am mulling over similar - simple, cheap, ongoing - in proportions to suit my personal circumstances.

W.

[Wuffle]

Take a glance at Adamski's portfolio in the 'portfolio management and review' section.
At its core it is LS60 and a global tracker, which puts it back towards LS80 with less UK bias.
It is then leavened with CGT, an investment trust with a big holding of index linked bonds and a mandate to preserve wealth, which you could take or leave at your age and with a solid income but is worth bearing in mind.
Every time I see it I am aware that my arrangements are over complicated.

I have a similar issue with cash in a SIPP (much, much less cash) and am mulling over similar - simple, cheap, ongoing - in proportions to suit my personal circumstances.

W.

[kempiejon]

I do dabble with ETFs already in an InvestEngine ISA. I have some VEVE and I like that ETF as it only have 4.9% UK holdings, rather than LifeStrategy's over-weighting.

VHYL I hadn't used because it's fund fee is high at 0.29% and I prefer Accumulating funds.

Yes, perhaps something like Vanguard FTSE Developed World ex-U.K. Equity Index Fund will work well for me. The OCF of 0.14% is appealing.

Lifestrategy is not a product I have a view on but like others I do note it's UK bias. I like the idea of about global average return in my SIPP. Reading this thread I did think that VEVE might suit you, as it's mostly developed western though even more USA than the global VWRP. The global exUK is interesting too but I prefer ETFs to OEICs. I hold FTSE350 shares directly in ISAs but for my SIPP I built a global ex UK using Vanguard ETFs. By choosing georaphical ETFs I could make my own weightings and dodge the UK. I chose Developed Asia Pacific ex-Japan, Japan, Developed Europe ex-UK, S&P 500, Emerging Markets and UK gilts. I'm about 50% USA and 5% to 15% the others. New money sorts the balances if they get out of kilter, the charges are low on those products such that with my construction it was around 50% cheaper than the global VWRL/P OCF of .22%.

[Bubblesofearth]

2022 was little blip. Equity crashes of about 80% come along quite often. 1939 US. 1970s UK. 1980s Japan. Japan still has not recovered in real terms after more than 30 years.

These are crashes in local markets. AFAIA the Global market has never fallen to this extent and the trackers under discussion are Global.

That said all bets are off once we reach the limits to growth in 20-30 years time.

BoE

[tjh290633]

My portfolio currently stands at £350,000

At 45 I think you need to be a bit more adventurous that a Lifestrategy fund. Certainly it is too soon to be thinking of bonds, if you ever do.

You will avoid all the fund charges if you move into equities. If you go for some ITs, you will get their charges, but probably outpace the indices you are looking at. If it were me I would be looking at a mixture of global ITs, like FCIT, Alliance and Witan, plus a selection of dividend paying shares, such as would be choices for an HYP. Obviously you would need a diversified selection, spread over the mandatory 15 sectors at least. If you don't wish to plunge into equities, then some of the higher income ITs, like CTY and others, could replace them plus some sector specific ITs, like BRWM and others.

If you choose ITs, 12 or 15 would be enough, but for an HYP you need 20 to 30 shares.

Time to take matters fully into your own hands.

TJH

[GeoffF100]

2022 was little blip. Equity crashes of about 80% come along quite often. 1939 US. 1970s UK. 1980s Japan. Japan still has not recovered in real terms after more than 30 years.

These are crashes in local markets. AFAIA the Global market has never fallen to this extent and the trackers under discussion are Global.

That said all bets are off once we reach the limits to growth in 20-30 years time.

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

[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.

[EthicsGradient]

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)? The amount in small caps won't be huge - Morningstar puts it as 83% Large, 17% Mid, 0% Small ( https://www.morningstar.co.uk/uk/funds/ ... TXY8&tab=3 ), which is practically the same as an S&P 500 tracker at 84% Large, 16% Mid, 0% Small - https://www.morningstar.co.uk/uk/etf/sn ... entType=FE .

[Bubblesofearth]

These are crashes in local markets. AFAIA the Global market has never fallen to this extent and the trackers under discussion are Global.

That said all bets are off once we reach the limits to growth in 20-30 years time.

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