Having a wobble about investing

[TheGander]

I set up a Vanguard life strategy 60% fund about 3 years ago. I invest £300pm and in the last 2 years it’s done nothing but go down in value . It sometimes feels like I’m chucking money down a black hole. I know investments are for the longer term but it’s starting to feel painful. I’m not a high earner by any means (band 7 NHS if that means anything), have 2 kids at home who want to go to university in the next 1-3 years. We are also hoping to move home when junior leaves and will need money, I’m thinking of stopping the Lifestrategy and re routing the £300 pm into a higher rate savings account. I know no one can give definite answers but would welcome other investors’ views on this.

Not sure if this helps not my LS 80% is way outperforming the LS 60%…. Maybe direct future investments in something other than what you’re already doing? (disclaimer - I am not an IFA!)

Leave the LS60 stuff to improve for the younger children- you have more time… then save in cash for the elder…

Same here but like pp I have reoriented to the 80/20 fund and to a global tracker which has recouped some of my losses. With 40% of your fund in bonds last year's events are going to make a big dent. You could also stick some in a fixed rate bond? Some of those have 5-6% (assuming you aren't a higher rate taxpayer which would lose a fair bit )

I opened a Vanguard account a couple of years ago and had initially going up but then down down down. As soon as had money back and fixed interest rates rose above 4% I withdrew it and shifted to bonds, now you can get up to 6% in fixed interest bonds. Personally I would move to that.

Worth checking out money-saving expert for regular savings high interest as well, I have one linked to my current paying 6 point something, cap at 150 a month.

I get it - but investing is a long-term strategy, over more than 5 years. If you are likely to need the money sooner, leave that money in there and start saving somewhere with high interest rates. You're doing really well to save £300/month!

I think you will have to hold your nerve as it should be looked at in the longer term, but I know it is disheartening.

What I've done is split the amount across the different LS funds. So rather than putting the whole £300 in the 60%, I put £75 into 40%, £75 into 60%, £75 into 80% and £75 into 100%. For me that splits the risk and the 100% is currently helping to off-set the losses the 40% is suffering.

Again, I'm only a very amateur investor, but this suits me as it spreads the risk.

Are bonds different to savings accounts? I need to google..

This is what we have done as well. Vanguard have an excellent spread of companies etc in these funds and low costs, so worth sticking with what you've invested already. If you have a short term goal, then diverting some/all to a high interest savings account is a good plan I think 🤔

If you are thinking short-term then you’d be better off with savings accounts now than a supposedly-low-risk low-reward fund like LS60.

If you are thinking long-term then you need to be LS100.

It’s obvious I don’t fully understand the life strategies. I thought 60% would be medium risk but it seems from PPs that 80 and 100% are doing better. Good idea to have a look at Moneysavingsexpert. I am very tempted to put some in a high interest account, maybe do a 50:50 split and put £150 in each.

Forgot to say, thanks for everyone’s input and suggestions!

@TheGander

Unless your about to retire i thought 100% equities are better?

Ive got 100 percent in sipp which ie doing well.
I've got 80 percent ib isa which is doing OK.

Im going to change it to 100 per xent.

However.. I have been paying into isa for 3 years and I've paid enough into this dip.

I'm going to put that into my pb for a bit then change again to savings...

@Chocolatelabradorsarethebest

Have you looked at what any life stragety fund is invested in.
ANY one of them is very spread... Already!

I’m 56 and was hoping to retire in 2 years. When I started with lifestrategy, bonds were seen as safe, I think no one saw it coming : inflation , the rise in interest rates and bonds weakening. I would have considered Lifestrategy 100 too edgy. Now it’s outperforming the more conservative products. Realistically I should now think of retiring at 60 when my NHS pension kicks in.

What you are doing here is really over complicating something that doesn't need to be. If you really want a fund that is a mix of bonds and stocks then pick the one with the split you are comfortable with.

What was your objective and timeline for investing when you first started? Why did you select that fund choice? Has anything changed?

We should all know that investments can go up as well as down. the ups and downs can last years. Personally I wouldn't consider investing for any period of less than 10 years.

My husband and I invested in the LS80 in April 22. We are still down. I constantly want to pull mine when I think of what I could make on it currently. It should come back in the longer term though. It’s hard seeing a minus when you could make 6% now but I’d hold out if you can

I agree about splitting across accounts.

One thing about bonds - when interests rates are low so are returns from bonds. So if interest rates are 1%, a bond with a £1 payout would be worth £100. Then when interest rates rise, the price of existing bonds fall to give them the same return. So if interest rates rise to 2%, the bond still pays £1, and so the price of the bond falls to reflect this. This is why your existing bonds have done badly.

But going forward, now that interest rates are near the peak, bonds will be doing better as new bonds will return a steady 5% or £5 per £100 bond. And if interest rates fall again, this will work in reverse and bond prices will increase.

Which is a long way to say that the 60% fund will probably do better in the next few years than it has done in the last few years, but in any case it it good to diversify.

Ls60 means 60% equity and 40% bonds. Traditionally equity is volatile and bonds are steady. But at the moment - Truss and Kwarteng- bonds have fallen massively. I'm no expert but I'm finding it hard to trust yhe experts that advised us bonds as safety ! I'm very unsure what comes next.

It is time in the market that matters - short term gains / losses are generally attributed to fluctuations in the market.

When interest rates are rising and expected to rise bonds will perform badly, but if you’re holding them to maturity they will return to par when they get close to redemption date.

Right now cash (in the form of medium term savings accounts) are good value. However, in the longer run, 3-5 years, a good spread of funds covering trackers, equities, bonds, and a good diversity of UK and overseas markets is still the way to go. By saving regularly, spread across all of the above, there should be no need to panic.

The life strategy funds do have a flaw depending on your point of view.
They have a huge U.K overweight, around 25% Vs 4/5% the UK should be weighted at if they were true global funds based on market capitalisation.
Obviously if the UK out performs then you are sitting pretty but that hasn't happened over the last decade which hasn't helped.
Also last year was the worst year for bonds since the 70s which make up 40% of life strategy 60.
This was because of global central banks raising interest rates which have the effect of reducing the price of existing bonds in circulation as they are no longer attractive compared to the new bonds being issued that have higher rates of interest(yield).
If you have continued to buy as the price has fallen then you have done well as you buying at lower prices so should benefit when the upswing comes.
I would not sell out at this stage, you could look at using a global equity fund with a global bond fund in the percentage you feel comfortable with rebalancing once a year.
I use the Vanguard Global All Cap fund as it has no bias and Vanguard Short term money market fund, which I intend to swap for the the Global Bond Fund when interest rate increases look to have peaked.

I saw a video where the advice was to view a crash or downtown as a 20/30/40% off sale. Everything is going cheap. And it's the perfect time to buy more.

I swapped out of the 60 and went 80 / 100 . Better returns as I have longer to invest

Just to clarify in case some people are not aware, 'bonds' can mean 2 different things eg a name for a fixed interest cash savings account OR an investment type thingy that you get in funds etc. Look on moneysavingexpert for guidance on the former.

@TheGander I’d like to second the other comment on this thread that saving £300pm is no easy feat and is an excellent foundation for your children. I’m a Dad of 2 kids (10 & 6 yo) and I’ve chosen to passively invest in index trackers - typically Vanguard US All Equity (Acc) & S&P 500 (acc). The returns on the US equity tracker are av. 13% annualised over the last 10yrs - https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=f000003yd7

The Vanguard Life Strategy 60% fund has had a poor couple of years return wise (for reasons already outlined above) but has recovered recently, and has performed reasonably well over the last decade or so (7-8% yoy). If you have recovered your original investment, it might be worth considering moving into index tracking funds rather than a split equity / bond fund. Personally I find investing in bonds has a drag on the performance you get over time compared to US economy focused index funds. Sadly the UK economy does not grow anywhere near the same rate as the US hence focusing there for my returns.