Author Topic: Which Vanguard UK Funds For New Investor?  (Read 6400 times)

Ukwhat?

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Which Vanguard UK Funds For New Investor?
« on: January 24, 2016, 01:35:25 PM »
Hi.. I'm after help with deciding which Vanguard fund to invest in in the UK.

I have never invested in stock and shares before, nor has anyone in my family.

We plan on investing in two accounts, using a stocks and shares ISA from HL for us and a junior stocks and shares ISA from HL for our 3 months old money which he will get access to at 18.

My son does not have much money to invest (100s but not 1000s) (he is 3 months old so I don't know why he has any to be honest!) and we have no idea how much he will be given over time. We are sort of using his money to learn with, we see no point putting it into a normal savings account or ISA as the return will be minimal, and we have decided to guarantee the amount he has in his account + a 2% interest rate for the next 18 years with our own money, so even if his account loses money for some reason, he will not. Hopefully it will increase more than this!

We plan to learn how it all works from this, and adjust as necessary, eventually we plan to invest our money once we have paid down our mortgage as much as we can / want to.

I can't link to the vanguard funds at HL but they can be searched for here: http://www.hl.co.uk/funds

Currently I plan on investing in http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-us-equity-index-income which is a US equity index fund.

Everything I have read and can understand seems to suggest this is a good decision, although not necessarily the best.

Obviously the highest return possible would be ideal, but we also need some security and simplicity (being new at it), at this time I'm not too bothered if I can save fees elsewhere etc.

Is my decision wrong or flawed? Should I be doing something else? Is there anything I should know that it sounds like I haven't thought about? Any other help?

Thanks for your help!


frugledoc

  • Pencil Stache
  • ****
  • Posts: 591
Re: Which Vanguard UK Funds For New Investor?
« Reply #1 on: January 24, 2016, 02:09:50 PM »
Hargreaves Lansdowns is not a good platform for owning index FUNDS as they charge a 0.45% uncapped platform fee per year.  So if you own 1000 pounds of a Vanguard index fund with a 0.2% fee you will pay 2 pounds per year to vanguard but 4.50 per year extra to hargreaves just for holding the fund.

I only use Hargreaves Lansdowne for my investments because it is a truly excellent platform, but no good for funds.

You can get around this by buying ETFs instead, but there is a 15 charge per deal.  It does depend a bit on how much you are investing.

I'm not sure what the best way to invest for your son would be but for you I would recommend VWRL (vanguard all world ETF) for equities and VGOV for UK government bonds, blended to your risk appetite.

Vanguard all world is 50% US 10% emerging and the rest is europe, japan etc.

Please read all articles on www.monevator.com
« Last Edit: January 24, 2016, 02:11:32 PM by frugledoc »

Ukwhat?

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Which Vanguard UK Funds For New Investor?
« Reply #2 on: January 24, 2016, 02:17:57 PM »
Thanks for your help. I'll take a look at monevator and see what I can learn.

I see no mention on the HL website of a 0.45% charge, where should
I be looking for this? I just see the 0.1% fee on the us find for example?

Doubleh

  • Bristles
  • ***
  • Posts: 274
  • Location: London
Re: Which Vanguard UK Funds For New Investor?
« Reply #3 on: January 24, 2016, 03:28:42 PM »
I'd agree with the advice from frugledoc to consider a global fund, and to read as much as you can on monevator - pretty much everything I've ever read on there is golden. Another great source of UK specific information is the book Smarter Investing by Tim Hale.

Seems like you've fallen into the same (very common) trap that vandyk and I discussed on this other thread, of reading advice to invest in a U.S. market only fund that is sub optimal but very understandable for a US based investor, but makes less sense here in the UK. Read this thread for some info on home bias:

http://forum.mrmoneymustache.com/investor-alley/uk-investing/msg949364/#msg949364

HL are a long way from being the cheapest place to hold funds but it's not easy to find the charges on their site. I found the info hidden inside a collapsed bullet further down this page:

http://www.hl.co.uk/investment-services/fund-and-share-account

How much does it cost to hold investments in the Vantage Fund & Share Account?
Its free to hold shares, bonds or gilts and ETFs. Fund charges are tiered within bands starting at 0.45% per annum on the first 250,000 of funds, 0.25% per annum on the value between 250,000 and 1m, 0.1% per annum on the value of funds between 1m and 2m, and no charge on the value of funds over 2m

I mentioned on the other thread that I use Interactive investor, but they only make sense for a fund of over about 30k so are not good when you're starting out. As ever Monevator comes to the rescue with this guide:

http://monevator.com/compare-uk-cheapest-online-brokers/comment-page-20/#comment-734602

For smaller portfolios with mainly funds they suggest Charles Stanley or Cavendish Online, which would charge you 0.25 or 0.3% as a holding fee, and importantly not charge for trading funds so allowing you to build your portfolio.

Lastly you are talking about investing for your son which is fantastic. But do you know that if you open an account in his name for example a junior isa then he is entitled to the full amount as soon as he turns 18, which may not be what you want. If you aren't already maxing your own isa allowances (15k per year each) an alternative would be just to save in your isa and earmark the funds for him when you feel he is ready.

daverobev

  • Magnum Stache
  • ******
  • Posts: 3233
  • Location: UK
Re: Which Vanguard UK Funds For New Investor?
« Reply #4 on: January 24, 2016, 06:12:47 PM »
Most Vanguard ETFs are good in their class. See if you can go the ETF route - need to find a broker that will deal cheaply though. iWeb Sharedealing used to have a 'regular investment' option, some other companies may still.

I like, for example, VEUR.L, HMCX.L, VUKE.L etc. You may want to find a single 'global' ETF.. VEVE.L is developed world, for example.

Ukwhat?

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Which Vanguard UK Funds For New Investor?
« Reply #5 on: January 24, 2016, 11:36:40 PM »
Thanks for all the brilliant replies. I will take a look around at all of the options again and try and read everything you all suggested.

I looked at monevator a few weeks back but found it overly descriptive rather than getting to the point, I'll revisit and try again.

If I was to go with a different investor, do you think Vanguard funds are the way to go? I will read up on why a global fund will be better, but simply I assume it spreads the risk more?

Do you recommend reading the books before or after the monevator site?

Thanks again!

daverobev

  • Magnum Stache
  • ******
  • Posts: 3233
  • Location: UK
Re: Which Vanguard UK Funds For New Investor?
« Reply #6 on: January 25, 2016, 10:48:57 AM »
Thanks for all the brilliant replies. I will take a look around at all of the options again and try and read everything you all suggested.

I looked at monevator a few weeks back but found it overly descriptive rather than getting to the point, I'll revisit and try again.

If I was to go with a different investor, do you think Vanguard funds are the way to go? I will read up on why a global fund will be better, but simply I assume it spreads the risk more?

Do you recommend reading the books before or after the monevator site?

Thanks again!

Different *broker*? Yeah, Vanguard's whole 'thing' is doing the best they can for their clients - they are US-account-holder owned. They force other providers to lower their fees. IMHO it is good to support a more.. altruistic? Client-focussed? organisation.

Broker and fund are entirely independent. I prefer ETFs because they are clearer - no deferred or up-front fees etc, just the MER (and whatever trading cost and account fee the broker has - which is where the Monevator list comes in).

The "do as I say not as I do" is basically age-as-bonds% (gilts, in the UK - you want whatever Vanguard's gilt ETF or fund is), then global diversification reasonably market weighted (ie, significant amounts of US because there are lots of multi-nationals there - US domiciled companies make up half of global market cap or something silly like that), mixing in more emerging if you feel like it, more small/mid cap if you feel like it - but honestly a simple global fund is probably just as good and needs no reading up, just go one gilt fund and one 'everything else' if you can find one.

webcat86

  • Stubble
  • **
  • Posts: 113
Re: Which Vanguard UK Funds For New Investor?
« Reply #7 on: January 25, 2016, 11:08:31 AM »
Hargreaves Lansdowns is not a good platform for owning index FUNDS as they charge a 0.45% uncapped platform fee per year.  So if you own 1000 pounds of a Vanguard index fund with a 0.2% fee you will pay 2 pounds per year to vanguard but 4.50 per year extra to hargreaves just for holding the fund.

I only use Hargreaves Lansdowne for my investments because it is a truly excellent platform, but no good for funds.

You can get around this by buying ETFs instead, but there is a 15 charge per deal.  It does depend a bit on how much you are investing.

I'm not sure what the best way to invest for your son would be but for you I would recommend VWRL (vanguard all world ETF) for equities and VGOV for UK government bonds, blended to your risk appetite.

Vanguard all world is 50% US 10% emerging and the rest is europe, japan etc.

Please read all articles on www.monevator.com

Would VWRL be a better option that LifeStrategy 100%? Seems to have better weightings

Doubleh

  • Bristles
  • ***
  • Posts: 274
  • Location: London
Re: Which Vanguard UK Funds For New Investor?
« Reply #8 on: January 25, 2016, 02:49:10 PM »
What daverobev said.

In my earlier post I was trying to suggest some further reading to help you understand more, rather than suggesting you need to read all that before you start - it's all to easy to end up in paralysis by analysis. I should know, I did it myself for years. Better to start investing in something even if it's not 100% perfect then adjust as you go.  US whole market tracker as you suggested originally would get you going, as would a uk whole market tracker. Neither is perfect but either would be better than nothing.

A global tracker is generally considered the best solution to your equity portion, that and a bond fund for whatever percentage you feel gives you peace of mind and your good to go. You can even cut that down further by just chosing the vanguard lifestrategy fund that gives the equity to bond ratio you want, it doesn't get much simpler than that

webcat86

  • Stubble
  • **
  • Posts: 113
Re: Which Vanguard UK Funds For New Investor?
« Reply #9 on: January 26, 2016, 01:34:27 AM »

What daverobev said.

In my earlier post I was trying to suggest some further reading to help you understand more, rather than suggesting you need to read all that before you start - it's all to easy to end up in paralysis by analysis. I should know, I did it myself for years. Better to start investing in something even if it's not 100% perfect then adjust as you go.  US whole market tracker as you suggested originally would get you going, as would a uk whole market tracker. Neither is perfect but either would be better than nothing.

A global tracker is generally considered the best solution to your equity portion, that and a bond fund for whatever percentage you feel gives you peace of mind and your good to go. You can even cut that down further by just chosing the vanguard lifestrategy fund that gives the equity to bond ratio you want, it doesn't get much simpler than that

How does the lifestrategy 100 compare to a simple global tracker though? No bonds to take into consideration, but LS seems to have very low weightings in developing regions

Doubleh

  • Bristles
  • ***
  • Posts: 274
  • Location: London
Re: Which Vanguard UK Funds For New Investor?
« Reply #10 on: January 26, 2016, 03:44:35 AM »
This write up on Monevator gives a good explanation of what the Lifestrategy 100 is and isn't, and compares it to a Vanguard all world tracker.

http://monevator.com/how-to-chooose-total-world-equity-trackers/

Short answer is that Lifestrategy isn't a true all world tracker, for example (the UK version) does have a fairly heavy uk bias. But overall it is a very diversified global fund, and if you're looking for a simple one stop solution then is a good place to go. Probably the real value of the Lifestrategy funds is that you can pick your stock / bond split and forget; if you want to go 100% equities, or buy your bond exposure separately, then you are probably as well going for the all world tracker. Either way you'll likely do better than 90% of investors over the long term so no need to overthink it too much.

As to the question of why go global, this article also from Monevator has some great background

http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/


webcat86

  • Stubble
  • **
  • Posts: 113
Re: Which Vanguard UK Funds For New Investor?
« Reply #11 on: January 26, 2016, 10:56:02 AM »

This write up on Monevator gives a good explanation of what the Lifestrategy 100 is and isn't, and compares it to a Vanguard all world tracker.

http://monevator.com/how-to-chooose-total-world-equity-trackers/

Short answer is that Lifestrategy isn't a true all world tracker, for example (the UK version) does have a fairly heavy uk bias. But overall it is a very diversified global fund, and if you're looking for a simple one stop solution then is a good place to go. Probably the real value of the Lifestrategy funds is that you can pick your stock / bond split and forget; if you want to go 100% equities, or buy your bond exposure separately, then you are probably as well going for the all world tracker. Either way you'll likely do better than 90% of investors over the long term so no need to overthink it too much.

As to the question of why go global, this article also from Monevator has some great background

http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/

Great post, thanks.

I had been set on the LS 100, and put my first 500 into it last week. Now I'm thinking of just going into a global tracker instead of choosing other markets to make up for the shortfall in LS

Ukwhat?

  • 5 O'Clock Shadow
  • *
  • Posts: 24
Re: Which Vanguard UK Funds For New Investor?
« Reply #12 on: January 26, 2016, 01:20:30 PM »
This has all been so helpful and its all starting to make more sense. The only thing I'm struggling to find is the all world tracker on the HL website?

The two I see with anything to do with global are:

1. Vanguard SRI global stock income fund http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-sri-global-stock-income

2. Vanguard FTSE Developed World ex-UK Equity Index http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-developed-world-ex-uk-equity-index-income

Apart from this I think I'm ok for now. I may just start with the LS 60 or 80 and then as I learn a bit more look at the LS 100 or the all world tracker + bonds etc.

Any idea what the link is to the all world tracker?

financialfreedom

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Age: 36
  • Location: UK
Re: Which Vanguard UK Funds For New Investor?
« Reply #13 on: January 26, 2016, 02:31:06 PM »
There isn't as much from vanguard.co.uk. We looked at LS 100, but went for these funds instead.
 
60% - VVDWEU - Vanguard Dev Wld Ex UK
10% - VVUSEQ - Vanguard US Equity Ind
20% - VVUKEI - Vanguard UK Equity Income
10% - VVAAAM - Vanguard UK All Share

so a maybe have a look at some of these.

webcat86

  • Stubble
  • **
  • Posts: 113
Re: Which Vanguard UK Funds For New Investor?
« Reply #14 on: January 26, 2016, 04:13:06 PM »

There isn't as much from vanguard.co.uk. We looked at LS 100, but went for these funds instead.
 
60% - VVDWEU - Vanguard Dev Wld Ex UK
10% - VVUSEQ - Vanguard US Equity Ind
20% - VVUKEI - Vanguard UK Equity Income
10% - VVAAAM - Vanguard UK All Share

so a maybe have a look at some of these.

Do you not invest in Pacific or emerging?

financialfreedom

  • 5 O'Clock Shadow
  • *
  • Posts: 26
  • Age: 36
  • Location: UK
Re: Which Vanguard UK Funds For New Investor?
« Reply #15 on: January 27, 2016, 08:57:02 AM »
Vanguard Dev Wld Ex UK has some exposure to Australia, Hong Kong, Japan, Korea etc.

However, it's possible we are light on emerging, but this works for our goals. Good cheap funds from Vanguard UK.

You'll notice we have almost the same allocation as LS 100, but with the following differences:-
1. Lower price (max charge is 0.15% on these, VVAAAM is 0.08%)
2. No emerging markets
3. Greater exposure to US to slightly offset the UK home bias of the LS 100. We are still 30% UK

Still, we all make of our decisions. I posted this mainly as a lot of the advice is US-centric.