Lifestrategy 100% Equity v S&P 500

[princessa2727]

Hi guys,

I'm a relatively young investor (22) and I'm currently putting around £300-£400 into my stocks and shares ISA per month. I'm hoping to keep doing this for pretty much the rest of my working life.

I currently split this around 70/30 between Vanguards Lifestrategy 100% (70) and then the S&P 500 (30). Am I kicking myself in the foot by splitting it this way? Should I just have everything going into the lifestrategy fund? Any other advice with these funds would be great too! Thanks

 

[linehogs]

@princessa2727 LS100 has a bit of S&P 500 in it as well as the total S&P market. So I guess what you're doing is flattening the UK-bias of LS100 a bit. There is overlap but not massively so; it really depends what you want to achieve - are you deliberately trying to lessen the UK slant in favour of weighting towards the S&P? Or did you just pick a couple of funds and bang some money in? If the latter, I'd have a look at the composition of each fund to better educate yourself on where your money is invested (bearing in mind the LS are more like a "fund of funds").

Whilst not advice by any means, I'm just wondering why LS100 and not a global tracker (e.g. FTSE Global All Cap) - is the UK bias important to you? For what it's worth, my personal feeling is that the S&P500 is overvalued right now and that, sooner or later, that bubble will burst - but then, I have no crystal ball or time machine, and I'm certainly not an expert - so who knows!

 

[princessa2727]

@linehogs Well I guess in all honesty, I went with the LS100 as it was the one most marketed to me, being very new to this world (Targeted ads, YouTube videos etc) and the only thing I really don't like about it is how weighted it is towards the UK market. This is mainly the reason I split and starting putting some in to the S&P500. Maybe it'd be best for me to have a look at swapping from the LS100 to something like the FTSE Global all cap as you referred to there - reason being me wanting to not have so much invested in the UK.

 

[linehogs]

@princessa2727 Fair enough - for what it's worth, I also dislike the UK bias (some might believe the UK will magically transform into the land of milk and honey, a belief I don't share myself) but I mean, if your goal is diversification across geographic areas, to be honest you probably aren't totally far off. The US is a huge portion of the market, so even if you went all-in on FTSE Global All Cap, you'd still have ~ 50% exposure to North America.

Just to be clear, my personal opinion is that you're doing alright - there's nothing wrong with your approach at all and you've clearly picked the funds with a rationale backing it up. Personally, I might shove out of LS100 and pile into FTSE Global All Cap whilst leaving the amounts being fed in - if you want to be overweight in the S&P 500 you can then leave that alone too.

 

[princessa2727]

@linehogs Yeah I'm completely with you on the whole UK thing - guess I'm happy to be investing in UK business but at the same time, it doesn't seem like it's where the money is at (at least for now). Yeah what you've suggested seems like a good idea and one I'll definitely look into with a bit of personal research. Also considering putting a small amount per month away into the FTSE Emerging Markets ETF - I know this is a lot more volatile but a small amount PM can't hurt can it?Money in China can't be bad eh

 

[pzero39]

@princessa2727 Many ftse 100 cos are making most of their money outside uk. A big reason it hasn’t done so well in recent years is it is full of old commodities, FMCGs and oil cos, so it’s a sectoral composition thing as much as a uk geographic thing. Not saying that’s not a reason to avoid, but the reasoning may be different. IMO ftse100 is reasonably positioned for a high inflation environment given its composition.

Good luck with China, they do not respect property rights, you may wish to look up Evergrande.

 

[sashieng]

@princessa2727 Whilst what you have done seems perfectly reasonable and as per your other posts you have explained your rationale perfectly well. If the S&P500 is to compensate (to a degree) the overweight UK position, why not simply invest in the Vanguard Global All Cap fund so that you have appropriate weightings globally as the basis position, and then apply your additional weighting as you see fit, e.g. S&P500?

 

[princessa2727]

@sashieng I think this needs to be what I look into from now - like I said in one of the other comment threads, I'm very new to investing and the LS100 (or just the lifestrategy funds in general really) were the ones that were most marketed at me (YouTube videos, targeted ads etc) and so that was the one I felt I had the most knowledge about and with me wanting to get in and started ASAP, I just opened an account and deposited in. It was only really when I started to get a hang of it (very broad but I guess nobody ever really gets the hang of it lol) that I realised it was very UK weighted and I wanted to try and compensate for that somewhat (hence me starting to add funds into the S&P500)...yes I know I probably (definitely) should've have looked at where the fund was weighted before hand but in all honesty, without prior knowledge at the time, I wouldn't really have seen the fact it's UK heavy as a negative and it probably wouldn't have made much of a difference in me opening the account as a LS100. Maybe I should be looking into moving my funds from the LS100 over to the Global all cap?

 

[sashieng]

@princessa2727 Don't get too worried about it, performance is not hugely different:

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NKOBN,FACDV

Your investing journey is all about recognising mistakes or variations you want to make, and it will evolve over time.

 

[vclr2010]

@princessa2727 Perfectly fine.

All you're doing is weighting your portfolio towards the US Large Cap companies.

 

[sameolsameol]

@princessa2727 I’m also in LS100 purely as I was happy with the market splits when I initially opened it. In the event I like OP may shift to the Global All Cap would others suggest moving everything across from LS100 or just start depositing into GAC?

 

[timhparker]

@princessa2727 I must agree with many of the previous comments. If you are unhappy with the 50% Europe weighting of LS100 then best go with a Global Fund.

Vanguard LS funds (UK and US) have always have a home market bias as that is what investors and advisors favoured. Vanguard have been progressively changing this as both in the US and UK there is a movement towards more global diversification - so there has been a marketing based rather than analytical reason for the bias.

I personally am unhappy with the 65% US weighting of many global indices. I know that the weighting is self correcting - if the tech dominated S&P collapses then the US weighting of the global index will reduce - this just means that your tech dominated US holdings have collapsed - so you’ve lost money. Global Indices do not provide good global diversification so LS100 isn’t such a bad option as evidenced by its out-performance of Global Funds in recent times. There is a fundamental issue in thinking that a Global Fund provides diversification as it is cap weighted - it will be tech dominated - great over the last few years - not so great now. I’m not sure what the solution is - but an investment geographically biased and dominated by a few mega-companies with 8 out of the top 10 companies being in the tech sector cannot be the optimum investment strategy