If you're interested in learning more about investing then why not become a PensionCraft member? Pensioncraft.com members can enjoy lots of benefits, so to find out more about these and how to join our friendly community please click here www.pensioncraft.com/investor-education/membership/
Hi Liz, thanks for your support, I'm grateful for your feedback. The trouble is I limit my audience by making the videos UK-specific, but as you say we seldom get much airtime so it's worth doing. And investing in sterling does affect how you do your asset allocation e.g. the bond correlations in sterling are very different than the correlations in USD. Thanks, Ramin
@@Pensioncraft Hi Ramin, please can you explain (to an investing novice) why there is greater risk in investing in non-Stirling for UK investors? You mentioned the dollar/stirling risk a few times but I don't quite get why there is an increased risk there. Thanks.
Hi Lakedistrictrider, currency risk is best understood if you consider the price fluctuation of cash. If a UK investor has cash in the bank its volatility, or typical daily price fluctuation, is _zero_. Now imagine that the same UK investor holds US dollar cash in a US bank account. In sterling terms, the price of that cash fluctuates according to the typical daily price fluctuation of sterling versus the US dollar (GBPUSD). For major currencies, like USD and GBP, the annualised daily volatility is around 10%. Bonds are quite cash-like and lower risk (lower volatility) than shares and typically have a volatility of around 5% or less (depending on their duration). So if you hold a US Treasury bond its risk will be dominated by sterling's fluctuation versus the US dollar which is around 10%, twice as much as the price fluctuation of the bond itself. If that's not clear call me: ramin.as.me a ten-minute chat is free, and, I'll be honest, I like chatting to people about investment! Thanks, Ramin.
@@Pensioncraft Any particular reason you didn't use as examples the following two funds ? Vanguard FTSE Global All Cap Index Fund - Accumulation and Vanguard Global Bond Index Fund - Hedged Accumulation Global all cap covers large, mid and small caps and is denominated in £. Surely that's more diversification. Also with the Bond fund above it has a higher number of bonds in more countries (more diversification) and is hedged into sterling so less risk on the potential gains from bonds from currency fluctuations. Just curious as both funds were available on the vanguard platform at the time you made the video and in my opinion would have suited the two fund portfolio better. Regards the potential loss from hedging if the currency goes the other way Vanguard have an interesting article on their website which shows using historical data that more often there is more possible downside than upside over the long term if a bond fund was not hedged. Also what do you think of the above two as a portfolio in light of weak growth in the UK for the foreseeable short term future. So rather than being more uk-centric become more global-centric? Love the videos by the way I'm subscribed.
@@nomadml9716 I may be wrong but it looks like it actually was the vanguard global bond index fund, Stirling hedged that he was referring to. What about using UK government bond index fund instead, as it appears to have had higher total returns than the global bond index fund. I did see the vanguard article you are referring to, but were they using data from a US global bond index fund hedged to the dollar for their data
Marvelous content, surprising how you go into details without losing big picture. Also, how you don't skim through things that may feel self-evident to you, so that the audience doesn't lose track. By far and large, favorite channel on investing so far !
Hi Zakaria thank you! It's difficult to gauge the level of videos so that they appeal to a wide audience. And thank you for supporting us on TH-cam. Ramin.
Don't usually comment on these videos but your channel is an exception. Must say very good analyses in generally all of your videos, very digestible and very informative. Keep up the good work, no doubt your channel will grow like a well balanced stock/bond portfolio
Pretty much all 'global funds' involve 50% US equity with about 20% FTSE UK and tiny amount of Asia and Europe. Vanguards Bogle used to say that he only needed US equity due to most of those companies trading globally which is an interesting attitude.
I think the analysis here is amazing Ramin. However, I would never just have two funds personally however I think the idea is something that could work for others. Thanks for another great video!
Hi Jake, thanks. It is radical to have just two funds, but a PensionCrafter pointed out that my portfolio would have performed better if I had done this, and he was right!
Subscribed! This is a little over my head at the present time. But I can deduce that as a 32 year old looking to retire at 60 then equities are a good option at the moment. Then as I get closer to 60 start to balance my portfolio towards more bonds.
You can apply the rule that’s says “% of equities in your portfolio” = 100 - your age. It’s a very simple rule-of-thumb that also guide you on how to rebalance your portfolio every year.
Thank you very much for your time and effort in making this informational video. It's been a great help. Your channel is an absolute gem full of a wealth (no pun intended) of useful information.
Vanguard ftse global all cap index fund tracks a lot more stocks, I would guess other than that it depends on whether you want an etf or normal index fund. If you look at platforms like Hargreaves lansdown, a j bell for example you will see their platform charges are capped for holding etfs, individual stocks or investment trusts or any combination of those. So you could use VWRL for world equity exposure and I shares AGBP for global bond exposure. That could save a lot of money on platform charges, fund charges and trading costs. The evidence seems to point to just once a year rebalance over the long term works best, this will save you money, which should increase your returns and make it easy to manage your portfolio, less worrying it. Let the markets do the work. Or you could use vanguards own platform which has low platform costs, and use index funds which have no buy or sell costs with vanguard platform. Vanguard ftse global all cap index fund, combine with vanguard global bond fund hedged to the pound. This in theory should produce similar results with a once per annum rebalance. Or if you want to be more hands on you could use more funds, like vanguard uk ftse all share, vanguard ftse dev world ex uk, vanguard uk government bond index fund, vanguard inflation linked UK government bond index fund, vanguard uk investment grade bond fund, vanguard emerging markets index fund etc. But not sure if you will get better results, as it looks like nobody knows which regions, sectors or asset classes will do the best going forward. Maybe best just stick to 2 fund approach, buy and hold, just rebalance nothing else. I think it takes quite a lot of discipline and patience to stick with it no matter what happens in the markets, but it seems like the best course for the long term
A very educational video, thank-you. Should I go for a two fund portfolio and learn how to balance it or just pick a Vanguard LS fund that balances itself? Thanks.
Voice of Brian Cox brain of Warren buffet Even with an investment plan of 20 years is it still worth having say 20% bonds. Seems like it would be beneficial to overall returns to have the ability to rebalance during a market crash
Great video as usual *BUT* we were all left *wondering* what %/% split to choose between Bonds and Stocks? Should it 50/50 or what should it be??? Dalio All Weather = 30 / 40 / 15 / 7.5 / 7.5 see Ray Dalio all weather portfolio asset allocation video.
Hi Ramin. Why not just have one fund and make life even easier. One of the Vanguard Life Strategy Funds offers global diversification of both stocks and bonds in the one fund. As you are aware you choose the ratio of stocks and bonds based on your level of risk, the funds on offer are as follows 40/60 60/40 80/20 and 100% stocks. I know this because I watched one of your videos. I am keen to know what your view is. Thank you and keep up the good work.
Hi Mike, thanks for your comment, you are absolutely right. The choices in order from simplest to most complex are: i) target retirement fund (all you need to know is when you need your money) th-cam.com/video/Sr-IFxRGT88/w-d-xo.html ii) LifeStrategy Fund (need to know your risk capacity/appetite and how to map it onto one of the five portfolios th-cam.com/video/p-O3d6mel28/w-d-xo.html iii) A Two Fund portfolio where you have some flexibility over the particular equity & bond fund you choose For the vast majority of people something like (i) and (ii) is probably most appropriate. For (iii) you have to rebalance occasionally to keep the weights in line with your risk appetite/capacity. If you want me to keep up the good work the Patreon link's at the end of the video 8-) Thanks, Ramin.
Excellent video. I have chosen to put my savings in a vanguard life strategy 60 and this will offer some protection in case of market crash or correction.
I would have gone more global focused. lifestrategy are a little bit too heavily weighted towards the uk. UK is showing poor growth for the next few years at least. Just my two cents worth . Normally lifestrategy 60 would be a great choice. Just in the light of uk growth data it might be better to be more global and have a smaller uk weighting.
@@nomadml9716 As of where we’re at now, if you had £150,000 to invest, which two accounts would you opt for? I’m 46. I was considering the Vanguard LifeStrategy 60% Fund but hesitating for the exact reason you outlined here. Be interested to know your thoughts? Might it be wise to spread the capital across across more than two funds right now..?
@@VoiceOfThe I'd have to do a little research before I said anything more detailed but hopefully you do your own research too if you really are investing that much. But yes right now I would split up the world into the cheapest ETF's/Funds I can buy to give the same coverage as say a global all cap and a global bonds fund. This gives flexibility to give more weighting accordingly depending on the projections for each region. One of the drawbacks of a global all cap fund is the weightings are all fixed with generally the S&P 500 most highly weighted. Breaking down into regions does add more complexity into a portfolio but adds flexibility. I think sometimes also there are fee savings to be had too by doing it this way.
@@nomadml9716 Cheers for the reply. Yeah, my head’s getting a bit frazzled with it all, to be honest. New to investing as well, which is why I was leaning towards Vanguard 60% to keep it simple (as Ramin recommends). I’m probably needing some FA but, I’m wary about who to trust. I’m also considering travelling in the next 12-24 months, not sure for how long. Long term my aim is to retire abroad, not stay in the U.K, which again makes things more complex. I’m speaking with someone this week who’s been recommended, will see what they have to say. Back to your reply... one part of it didn’t make sense (typo?) if you read it back. Which account(s) exactly did you mean again? I’ll take a look.
Just a thought...wouldn’t splitting your investment 50/50 into the lifestrategy 80 and VWRL, give you the best of all worlds? You’d have some of vanguards lifestrategy work, some bonds and 50% would be in the world tracker VWRL...am I missing something?
@Jack Durham Best of both worlds as in VWRL has a much less significant UK weightage, so yes, I’m increasing my equity balance to make it 90:10, but also decreasing my UK exposure.
Hi Apolo Don, I'm a big fan of low fees and the reason why I like Vanguard is that they provide some of the lowest. The reason why I show my portfolio was because people asked how I invested my own money. This was not so people could copy my trades, it was to show how to build a diversified portfolio and to think about risk first. Thanks, Ramin.
The first fund I invested into was HSBC global strategy dynamic portfolio as my appetite for risk is quite high. What are your views on this? I know you prefer vanguard but so far I have had a nice return on it and it has been far better than any savings account would provide. I must admit, investing can become addictive as I have started investing into UBS emerging markets to become more diversified
The bit I don't understand is why Vanguard skews so heavily towards the UK in terms of equity allocations in its "global" funds (around 20% in LS 100). Surely a more balanced allocation would include less UK exposure. Or is this just a nod to "home country bias"?
Hi McCready 747, well mine of course! It's called a Financial Bestiary amzn.to/2zWeKJx and the latest review puts it nicely: "I am not a financial professional. However I found the book very instructive on many levels. The book contains more than the average person needs to know about finance as I believe it was targeted primarily to financial professionals. However for those non-professionals who want to have a good idea about what is going inside financial institutions, how things work and the concepts that are employed this is an excellent account. This is a difficult but rewarding read."
where to you source the data you utilize to develop your graphs? You make graphs representing risk to return etc, but how do you efficiently develop these on a quarterly basis? I've tried doing the same using the institutional data on vanguard, but a lot of the data is lacking...
Hi Mark, I've got a fund buyer's checklist pensioncraft.com/fundbuyers-checklist/ which lists the factors that I consider important. I hope that helps. I'm not aware of any good books on selecting funds. I use ShareScope to get price data for stocks, bonds and currencies. My affiliate link is www.sharescope.co.uk/pensioncraft but for people starting out free resources are very good too such as uk.finance.yahoo.com/ Thanks, Ramin.
If the two-fund suggestion is equity-bonds, wouldn't it be the same as just buying one Vanguard Lifestrategy fund, depending on how many % of equity/bonds you prefer?
Hi Tze Donn Ng the returns won't be the same. Importantly the fee can be lower depending on which funds you choose. My "Portfolio Inspiration" video th-cam.com/video/Fuidd0i1keU/w-d-xo.html discusses how to match LifeStrategy returns using combinations of cheaper Vanguard and iShares funds. Of course, the drawback is that you have to rebalance the portfolio once a year or so which is a task people may prefer to avoid by paying extra to buy a LifeStrategy fund. Thanks, Ramin.
Hi Dan Kelly, i'm pleased you liked the video. You can find my on-line courses on my website pensioncraft.com/courses-we-offer/. I do have one specifically about asset allocation and included in the price is three hours video coaching with me. You can find it at pensioncraft.com/register/diy-asset-allocation-course/ If you have any question i'm happy to have a free chat with you about it before you buy anything and you can book that here ramin.as.me/schedule.php Thanks Ramin
Great video, definitely helped me consider a two fund portfolio. One thing I've read/heard though is "When stocks are up, bonds go down". If this is true, and over the long time stocks track upwards, why would anyone pick a bonds ETF? Over a 10-15 year period wouldn't it lose a lot of value if the stock ETF rises as predicted? I'm obviously not understanding completely but it seems strange to allocate 10-50% to a portfolio that would track downwards over the long time?
Jake Furze good points. My view stocks for growth and bonds for stability. So if you’re saving for retirement say in 20 years time you can weight your portfolio towards stocks for growth then as you get closer to retirement move over to bonds. But this is the traditional route to make a large cash purchase at retirement for an annuity. A fixed income for life that goes down with inflation or if you have one that rises each year the starting amount will be lower. What will be interesting in the coming years is drawdown pension. Where you would need to stay invested and take roughly 4% each year and when you die you leave money to pass on.
I think bonds like government bond funds tend to go up when stocks tank, for example in a big market correction or crash for equities. But over the long term bond funds give positive returns as well, all be it not usually as much as equities. But if you gave bond and equity funds you should ideally rebalance once a year. So if equities went up more than bonds in one year, you would sell some equities and buy some more bonds when you rebalance, or vice versa. So in theory this helps you avoid behavioural biases, mistakes & stick to your strategy when using passive funds. Also it helps you to sell high and buy low
Hi Andy as I say in the video this can be cheaper, depending on the funds you choose. LifeStrategy also has a very strong domestic bias e.g. the UK is more than triply overweight relative to MSCI Global so you can have a more "neutral" market cap weighting if you choose your own global funds. The drawback is having to rebalance. Thanks, Ramin.
Isn’t the equity ETF similar to Vanguard life strategy? I need to look more into bonds. I have the 80/20 which includes bonds but in these volatile times I could do with diversifying more.
You could change to vanguard lifestrategy 60 % Equity to reduce Volatility, job done, but I think since stock market investing is about the long term you have to stick with it even when markets tank. It all depends on what your time horizon is and what your investment goal is, ie a pension for retirement which could mean you have a longer time to ride out market Volatility
Ramin please could you tell me why the vanguard uk fund, ftse global all cap index fund tracks approx 6826 stocks and has ongoing fund charge 0.23%. But vanguard USA does a fund that tracks the same index, it's called total world stock index admiral shares fund, VTWAX. It has fund charge just 0.1%, and tracks 8776 stocks, it is just about 1 year old. So the UK version tracks roughly 2000 less stocks and costs just over double the cost. It's benchmark is the same, why?
I bought LS100 and LS20. The proportion of Equity/bond are the same as LS60. Could you tell me if it is the same? Please. Or I just should go for LS60 directly .
I'm confused why does the ishares msci GBP hedged fund look more volatile than the cheaper non hedged version of same ishares msci fund. I thought hedging to Stirling was supposed to reduce Volatility for UK investors
How do you evaluate a Vanguard lifestrategy or Vanguard target date retirement funds which are seen as blended. Is it a stock or a bond. I know the answer is neither, however when I wanted to rebalance I didn't know how to make it fit in my portfolio as my portfolio has equities and bonds in it also.
Can anyone tell me what his blue dot correlation graph means!!!??? What does the minus 1 to 1 mean on the right for instance,what do the different depth of blue mean,what does the size of dot mean? No key,nothing.
Hi Marios the cheaper the better. If there's a cheaper MSCI World Index tracker then it would make sense to use that instead. This is the fund you're referring to right www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000T32O with ISIN code IE00B4X9L533? In fact, there's an even cheaper one listed by Just ETF which is managed by Lyxor (Lyxor Core MSCI World ISIN LU1781541179) which charges just 0.12% www.justetf.com/uk/how-to/msci-world-etfs.html Thanks, Ramin.
You appear to be learning on the job with this outcome, which is no bad thing. Next you'll be asking, if I know an index contains a mix of good, bad and indifferent companies, why can't I filter out those bad ones for even better returns?
Hi pberesford, I'm always learning... I did a video on factor-based investing which discusses how you can buy cheap funds that filter stocks based on research on long-term stock outperformance, article & video here pensioncraft.com/review-vanguard-factor-funds/ Thanks, Ramin.
Hi @@kenzofinucane4057 do you mean a long-short portfolio i.e. a fund that goes short the "bad" stocks and long the "good" stocks while remaining market-neutral? If so, that's not possible if it's compliant with European laws (called UCITS) which limit the number of stocks that can be shorted in a fund. Thanks, Ramin.
Hi, I need a little help. My understanding is that SWDA is the GBP version of the global fund. However, you stated that IWDG is the sterling hedged version of the fund and that with SWDA there is currency risk. So, my question is, in what way is SWDA the GB version of the fund? I’m a little confused.
Hi Roy, SWDA is not currency hedged and is denominated in US dollars IWDG is currency hedged into sterling and contains the same shares as SWDA No currency hedge (SWDA) means you take the USDGBP currency risk With the GBP currency-hedged version of the fund (IWDG) you're not taking the USDGBP currency risk because it's hedged with a currency derivative Their descriptions are on the iShares website - SWDA www.ishares.com/uk/individual/en/products/251882/ishares-msci-world-ucits-etf-acc-fund - IWDG www.ishares.com/uk/individual/en/products/287737/ishares-core-msci-world-ucits-etf-fund If that's still unclear Roy just give me a quick call. You can arrange it here ramin.as.me Thanks, Ramin
@@Pensioncraft Hi, From your answer it seems that it matters that SWDA is denominated in US dollars. However your USD currency risk's reason is that SWDA contains more then 50% US shares not the denomination currency.
Hi Tahir VAGP is the "Global Aggregate Bond UCITS ETF" whereas VIGBBD is what SharePad calls the "Global Bond Index Fund" and this comes as a Hedged Accumulation and Hedged Income versions. All of them track the "Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index in GBP" index. Their fees are a bit different too - Fund version www.vanguardinvestor.co.uk/investments/vanguard-global-bond-index-fund-gbp-hedged-dist - ETF version www.vanguardinvestor.co.uk/investments/vanguard-global-aggregate-bond-ucits-etf-gbp-hedged-distributing?intcmpgn=fixedincomeglobal_globalaggregatebonducitsetf_fund_link Thanks, Ramin
Just after some input. i have an auto enrol pension with L&G. I am 30 years (at least from retirement). My pension is in the default fund. I am willing to accept more risk to grow my fund. Which of the L&G funds would be a good option to do this?
Hi wondrboy89, I suggest you take a look at my Fundbuyer's Checklist which goes through the attributes of a fund to ensure it's suitable for you, your investment horizon and your long-term goals. There's a downloadable PDF document too! pensioncraft.com/fundbuyers-checklist/ Thanks, Ramin.
It looks like you made a mistake with the info on vanguard global bond index fund as it is actually GBP hedged for 0.15% fund charge. Would the vanguard uk government bond index fund do the same, as it appears to have produced better total returns
@@nomadml9716 how so. Wouldn't either of those bond funds achieve very similar results over the long term. And the UK government bond fund has a lower fund charge, plus lower transaction fees
Hi Ramin! 😀 So what if my work pension has stuck me in with FIDELITY that doesn’t offer any of these funds?! 🤣 And is your recommendation here that I only choose ONE stocks and ONE bond option in the portfolio ? I was always thinking it was best to invest in different countries and have stocks that cover Pacific, Japan, Europe, N America etc...?
VWRL or vanguard ftse global all cap index fund or similar funds from other providers like fidelity, HSBC, Legal & General cover most of the regions if not all in one low cost fund
@@fredatlas4396 I’m invested in the FTSE Global All Cap for equities. Happy with this. It’s a bond fund I’m yet to make a decision on. Any recommendations for which ones I should be considering?
What are your thoughts on a three or 4 fund that also has some Emerging market funds and Gold/Silver/Miners funds especially since Ray Dalio and others are suggesting ther's a major shift into gold for hedging and emerging markets for long term growth potential. In comparison to slowing developed markets and low or negative yield bonds? @pensioncraft
I am also enjoying and benefiting from this video series. Last month I diversified 10% of my portfolio into Gold. As US and Global markets slow 2020+ then it is not expected that Emerging markets will prosper. Elsewhere in another asset allocation video re. Ray Dalio it is suggested: 55% bonds, 30% equity funds, 7.5% Gold, 7.5% Commodities. "Ray Dalio All Weather Portfolio: Asset Allocation etc. " (I live in the UK). I love this channel.
@@chooselife3000 Are you saying that after 2020 you will be investing in emerging markets but not now?? Do you think EM might take a dump when US market corrects
I would look at holding a peer to peer platform and crypto to add more diversification as well as ETFs and bonds that way you can hold most things on planet earth as ETFs and bonds will be around 6 percent in next 10 years.ifisas are outperforming around 7 percent crypto around 20 percent at this moment..cash is poor around 1.75
If you invest in bonds only (100%) or mostly (e.g. 80%/20% for bonds and equity) over a short time period (max 5 years), what percentage of returns are you likely to get?
Hi, Quick question: I’m looking to start investing in the near future. I’m Irish but resident in Spain. I’m looking to invest for the next 30 years and have been finding it hard to get info from non US channels (until I found yours). So, I was thinking of investing (on a monthly basis) into VWRL and VUSA for all-world coverage. How does that sound? Also, what are the best platforms for investing as a European? Again, all the info I find online is from a US point of view.
Easy for Buffet to live off of his 10% in STB's because that 10% is probably 100's of millions if not a few billion. Myself, I'm gonna need to live off of all of my money. I can't afford to put 90% into risky funds at my age.
Hi TheOtherMike I'm also in a low risk allocation (I'm 50) of about 40% equity and 60% bonds but I'm also quite cautious by nature. Some of the people in PensionCraft are in their 70s but have high allocation to equity but that's because they have other savings and pensions to live off. Your risk allocation depends on many things and age is just one of them. Thanks, Ramin.
Hi Tim, if you look at my LifeStrategy review here th-cam.com/video/p-O3d6mel28/w-d-xo.html you'll see that the long-term real return of the S&P 500 is 6.9% over the period from 1871-2017. Also, if you look at Vanguard's 10-year outlook the central case is about 4% return for global ex-UK equity, global equity and UK equity (all unhedged) in this document at the bottom of page 24 www.vanguard.co.uk/documents/adv/literature/VEMO-research-paper-2018.pdf So I'd say 6% is fairly uncontroversial in terms of expectations for long-term equity return. What would you consider to be a more realistic return? Thanks, Ramin.
If you're interested in learning more about investing then why not become a PensionCraft member? Pensioncraft.com members can enjoy lots of benefits, so to find out more about these and how to join our friendly community please click here www.pensioncraft.com/investor-education/membership/
Best video ever seen about portfolio allocation, if youmwant to keep it simple, especially if you are living in euro-zone or uk, thanks for that!
Why would I want a global bond fund which includes Jap bonds with a negative yield?
Thank you for making this video UK specific. We Brits often get left out of the you tube investment world. Your work is appreciated ☺
Hi Liz, thanks for your support, I'm grateful for your feedback. The trouble is I limit my audience by making the videos UK-specific, but as you say we seldom get much airtime so it's worth doing. And investing in sterling does affect how you do your asset allocation e.g. the bond correlations in sterling are very different than the correlations in USD. Thanks, Ramin
@@Pensioncraft Hi Ramin, please can you explain (to an investing novice) why there is greater risk in investing in non-Stirling for UK investors? You mentioned the dollar/stirling risk a few times but I don't quite get why there is an increased risk there. Thanks.
Hi Lakedistrictrider, currency risk is best understood if you consider the price fluctuation of cash. If a UK investor has cash in the bank its volatility, or typical daily price fluctuation, is _zero_. Now imagine that the same UK investor holds US dollar cash in a US bank account. In sterling terms, the price of that cash fluctuates according to the typical daily price fluctuation of sterling versus the US dollar (GBPUSD). For major currencies, like USD and GBP, the annualised daily volatility is around 10%. Bonds are quite cash-like and lower risk (lower volatility) than shares and typically have a volatility of around 5% or less (depending on their duration). So if you hold a US Treasury bond its risk will be dominated by sterling's fluctuation versus the US dollar which is around 10%, twice as much as the price fluctuation of the bond itself. If that's not clear call me: ramin.as.me a ten-minute chat is free, and, I'll be honest, I like chatting to people about investment! Thanks, Ramin.
Your level of analysis is unbelievably detailed. Thanks as always
Hi Money Unshackled, thank you! I put a lot of work into the videos so I'm glad you find them useful. Thanks, Ramin.
@@Pensioncraft Any particular reason you didn't use as examples the following two funds ?
Vanguard FTSE Global All Cap Index Fund - Accumulation
and Vanguard Global Bond Index Fund - Hedged Accumulation
Global all cap covers large, mid and small caps and is denominated in £. Surely that's more diversification. Also with the Bond fund above it has a higher number of bonds in more countries (more diversification) and is hedged into sterling so less risk on the potential gains from bonds from currency fluctuations. Just curious as both funds were available on the vanguard platform at the time you made the video and in my opinion would have suited the two fund portfolio better. Regards the potential loss from hedging if the currency goes the other way Vanguard have an interesting article on their website which shows using historical data that more often there is more possible downside
than upside over the long term if a bond fund was not hedged. Also what do you think of the above two as a portfolio in light of weak growth in the UK for the foreseeable short term future. So rather than being more uk-centric become more global-centric?
Love the videos by the way I'm subscribed.
@@nomadml9716 I may be wrong but it looks like it actually was the vanguard global bond index fund, Stirling hedged that he was referring to. What about using UK government bond index fund instead, as it appears to have had higher total returns than the global bond index fund. I did see the vanguard article you are referring to, but were they using data from a US global bond index fund hedged to the dollar for their data
Marvelous content, surprising how you go into details without losing big picture. Also, how you don't skim through things that may feel self-evident to you, so that the audience doesn't lose track.
By far and large, favorite channel on investing so far !
Hi Zakaria thank you! It's difficult to gauge the level of videos so that they appeal to a wide audience. And thank you for supporting us on TH-cam. Ramin.
Don't usually comment on these videos but your channel is an exception. Must say very good analyses in generally all of your videos, very digestible and very informative. Keep up the good work, no doubt your channel will grow like a well balanced stock/bond portfolio
Thank you Macfhlannchadha Ronan I am glad that you are finding it helpful - Ramin
Only watching this now in 2022 but this is by far one of the best pensioncraft videos! Thank you!
Wow, thanks @Vinay
Really illustrating video with all those graphics. Thanks Ramin
My pleasure!
Pretty much all 'global funds' involve 50% US equity with about 20% FTSE UK and tiny amount of Asia and Europe. Vanguards Bogle used to say that he only needed US equity due to most of those companies trading globally which is an interesting attitude.
World Equity Index tracker,and a UK intermediate term Gilt Tracker, Done! It's worked for me.
I think the analysis here is amazing Ramin. However, I would never just have two funds personally however I think the idea is something that could work for others. Thanks for another great video!
Hi Jake, thanks. It is radical to have just two funds, but a PensionCrafter pointed out that my portfolio would have performed better if I had done this, and he was right!
PensionCraft can you maybe do a video showing this, as it would make a great example
Subscribed! This is a little over my head at the present time. But I can deduce that as a 32 year old looking to retire at 60 then equities are a good option at the moment. Then as I get closer to 60 start to balance my portfolio towards more bonds.
You can apply the rule that’s says “% of equities in your portfolio” = 100 - your age. It’s a very simple rule-of-thumb that also guide you on how to rebalance your portfolio every year.
Thank you very much for your time and effort in making this informational video. It's been a great help. Your channel is an absolute gem full of a wealth (no pun intended) of useful information.
Thanks CaptainButtonMasher! I'm glad you found it useful.
All your vids are good but this one is just awesome Ramin- cheers
Thank you Pedro Montano. I'm pleased you liked it. Ramin
I am happy you are helping the Brits
What are your thoughts on VWRL vs Global All Cap?
Vanguard ftse global all cap index fund tracks a lot more stocks, I would guess other than that it depends on whether you want an etf or normal index fund. If you look at platforms like Hargreaves lansdown, a j bell for example you will see their platform charges are capped for holding etfs, individual stocks or investment trusts or any combination of those. So you could use VWRL for world equity exposure and I shares AGBP for global bond exposure. That could save a lot of money on platform charges, fund charges and trading costs. The evidence seems to point to just once a year rebalance over the long term works best, this will save you money, which should increase your returns and make it easy to manage your portfolio, less worrying it. Let the markets do the work. Or you could use vanguards own platform which has low platform costs, and use index funds which have no buy or sell costs with vanguard platform. Vanguard ftse global all cap index fund, combine with vanguard global bond fund hedged to the pound. This in theory should produce similar results with a once per annum rebalance. Or if you want to be more hands on you could use more funds, like vanguard uk ftse all share, vanguard ftse dev world ex uk, vanguard uk government bond index fund, vanguard inflation linked UK government bond index fund, vanguard uk investment grade bond fund, vanguard emerging markets index fund etc. But not sure if you will get better results, as it looks like nobody knows which regions, sectors or asset classes will do the best going forward. Maybe best just stick to 2 fund approach, buy and hold, just rebalance nothing else. I think it takes quite a lot of discipline and patience to stick with it no matter what happens in the markets, but it seems like the best course for the long term
A very educational video, thank-you. Should I go for a two fund portfolio and learn how to balance it or just pick a Vanguard LS fund that balances itself? Thanks.
Love these videos..well done sir 👍
Glad you like them paul w
Voice of Brian Cox brain of Warren buffet
Even with an investment plan of 20 years is it still worth having say 20% bonds. Seems like it would be beneficial to overall returns to have the ability to rebalance during a market crash
Nice, this was really useful. I'm more on the heavy bond side, since I want to protect the capital as much as possible. And it's not all mine either.
Hi Mikki, I'm pleased you found it useful. Ramin
This guy and Tim Bennett 👍🏼
Great video as usual *BUT* we were all left *wondering* what %/% split to choose between Bonds and Stocks? Should it 50/50 or what should it be??? Dalio All Weather = 30 / 40 / 15 / 7.5 / 7.5 see Ray Dalio all weather portfolio asset allocation video.
Hi Ramin. Why not just have one fund and make life even easier.
One of the Vanguard Life Strategy Funds offers global diversification of both stocks and bonds in the one fund. As you are aware you choose the ratio of stocks and bonds based on your level of risk, the funds on offer are as follows 40/60 60/40 80/20 and 100% stocks. I know this because I watched one of your videos. I am keen to know what your view is. Thank you and keep up the good work.
Hi Mike, thanks for your comment, you are absolutely right. The choices in order from simplest to most complex are:
i) target retirement fund (all you need to know is when you need your money) th-cam.com/video/Sr-IFxRGT88/w-d-xo.html
ii) LifeStrategy Fund (need to know your risk capacity/appetite and how to map it onto one of the five portfolios th-cam.com/video/p-O3d6mel28/w-d-xo.html
iii) A Two Fund portfolio where you have some flexibility over the particular equity & bond fund you choose
For the vast majority of people something like (i) and (ii) is probably most appropriate. For (iii) you have to rebalance occasionally to keep the weights in line with your risk appetite/capacity.
If you want me to keep up the good work the Patreon link's at the end of the video 8-)
Thanks,
Ramin.
Great video
Glad you enjoyed it R
Excellent video - complex topic explained very well; question - why not choose one of the vanguard lifestrategy funds would that not achieve the same?
yes it would indeed, depends on what you like tbh since they are all different funds
Excellent video. I have chosen to put my savings in a vanguard life strategy 60 and this will offer some protection in case of market crash or correction.
Hi xx, I'm glad you found a cheaper solution which sounds very sensible, and I hope it works out for you. Thanks, Ramin.
I would have gone more global focused. lifestrategy are a little bit too heavily weighted towards the uk. UK is showing poor growth for the next few years at least. Just my two cents worth . Normally lifestrategy 60 would be a great choice. Just in the light of uk growth data it might be better to be more global and have a smaller uk weighting.
@@nomadml9716
As of where we’re at now, if you had £150,000 to invest, which two accounts would you opt for? I’m 46. I was considering the Vanguard LifeStrategy 60% Fund but hesitating for the exact reason you outlined here. Be interested to know your thoughts? Might it be wise to spread the capital across across more than two funds right now..?
@@VoiceOfThe I'd have to do a little research before I said anything more detailed but hopefully you do your own research too if you really are investing that much. But yes right now I would split up the world into the cheapest ETF's/Funds I can buy to give the same coverage as say a global all cap and a global bonds fund. This gives flexibility to give more weighting accordingly depending on the projections for each region. One of the drawbacks of a global all cap fund is the weightings are all fixed with generally the S&P 500 most highly weighted. Breaking down into regions does add more complexity into a portfolio but adds flexibility. I think sometimes also there are fee savings to be had too by doing it this way.
@@nomadml9716
Cheers for the reply. Yeah, my head’s getting a bit frazzled with it all, to be honest. New to investing as well, which is why I was leaning towards Vanguard 60% to keep it simple (as Ramin recommends). I’m probably needing some FA but, I’m wary about who to trust. I’m also considering travelling in the next 12-24 months, not sure for how long. Long term my aim is to retire abroad, not stay in the U.K, which again makes things more complex. I’m speaking with someone this week who’s been recommended, will see what they have to say.
Back to your reply... one part of it didn’t make sense (typo?) if you read it back. Which account(s) exactly did you mean again? I’ll take a look.
Just a thought...wouldn’t splitting your investment 50/50 into the lifestrategy 80 and VWRL, give you the best of all worlds? You’d have some of vanguards lifestrategy work, some bonds and 50% would be in the world tracker VWRL...am I missing something?
@Jack Durham Best of both worlds as in VWRL has a much less significant UK weightage, so yes, I’m increasing my equity balance to make it 90:10, but also decreasing my UK exposure.
Good analysis. Would be interesting to see how your portfolio has performed so far?
Seems like you're a big fan of vanguard
Hi Apolo Don, I'm a big fan of low fees and the reason why I like Vanguard is that they provide some of the lowest. The reason why I show my portfolio was because people asked how I invested my own money. This was not so people could copy my trades, it was to show how to build a diversified portfolio and to think about risk first. Thanks, Ramin.
The first fund I invested into was HSBC global strategy dynamic portfolio as my appetite for risk is quite high. What are your views on this? I know you prefer vanguard but so far I have had a nice return on it and it has been far better than any savings account would provide. I must admit, investing can become addictive as I have started investing into UBS emerging markets to become more diversified
It would be great to see a video on currency exposure, as most of my indexing is in the vanguard VRWL and global bond ETF VAGP ?
The bit I don't understand is why Vanguard skews so heavily towards the UK in terms of equity allocations in its "global" funds (around 20% in LS 100). Surely a more balanced allocation would include less UK exposure. Or is this just a nod to "home country bias"?
I love this channel. Are there any particularly good textbooks or resources on how pension funds actually work behind the scenes?
Hi McCready 747, well mine of course! It's called a Financial Bestiary amzn.to/2zWeKJx and the latest review puts it nicely: "I am not a financial professional. However I found the book very instructive on many levels. The book contains more than the average person needs to know about finance as I believe it was targeted primarily to financial professionals. However for those non-professionals who want to have a good idea about what is going inside financial institutions, how things work and the concepts that are employed this is an excellent account. This is a difficult but rewarding read."
@@Pensioncraft Super!
where to you source the data you utilize to develop your graphs? You make graphs representing risk to return etc, but how do you efficiently develop these on a quarterly basis? I've tried doing the same using the institutional data on vanguard, but a lot of the data is lacking...
Hi, love your videos. Where do you get your data? Any suggestions for basic books /resources for funds evaluation.
Hi Mark, I've got a fund buyer's checklist pensioncraft.com/fundbuyers-checklist/ which lists the factors that I consider important. I hope that helps. I'm not aware of any good books on selecting funds. I use ShareScope to get price data for stocks, bonds and currencies. My affiliate link is www.sharescope.co.uk/pensioncraft but for people starting out free resources are very good too such as uk.finance.yahoo.com/ Thanks, Ramin.
still think short term bond fund is the way to go.. maybe SHY? why short term? why not intermediate or long term?... IEF or TLT?
great video but how do you decide how much of your assets to allocate between the two funds? just watched through twice and not gleaned that aspect
If the two-fund suggestion is equity-bonds, wouldn't it be the same as just buying one Vanguard Lifestrategy fund, depending on how many % of equity/bonds you prefer?
Hi Tze Donn Ng the returns won't be the same. Importantly the fee can be lower depending on which funds you choose. My "Portfolio Inspiration" video th-cam.com/video/Fuidd0i1keU/w-d-xo.html discusses how to match LifeStrategy returns using combinations of cheaper Vanguard and iShares funds. Of course, the drawback is that you have to rebalance the portfolio once a year or so which is a task people may prefer to avoid by paying extra to buy a LifeStrategy fund. Thanks, Ramin.
@@Pensioncraft Ah I see, the video answers my question perfectly. Thanks for the videos btw, great work as always :)
This is awesome! Do you have a video or course how to do this? Or, do you have a video just like this for US investors?
Hi Dan Kelly, i'm pleased you liked the video. You can find my on-line courses on my website pensioncraft.com/courses-we-offer/.
I do have one specifically about asset allocation and included in the price is three hours video coaching with me. You can find it at pensioncraft.com/register/diy-asset-allocation-course/
If you have any question i'm happy to have a free chat with you about it before you buy anything and you can book that here ramin.as.me/schedule.php Thanks Ramin
Great video, definitely helped me consider a two fund portfolio.
One thing I've read/heard though is "When stocks are up, bonds go down". If this is true, and over the long time stocks track upwards, why would anyone pick a bonds ETF? Over a 10-15 year period wouldn't it lose a lot of value if the stock ETF rises as predicted?
I'm obviously not understanding completely but it seems strange to allocate 10-50% to a portfolio that would track downwards over the long time?
Jake Furze good points. My view stocks for growth and bonds for stability. So if you’re saving for retirement say in 20 years time you can weight your portfolio towards stocks for growth then as you get closer to retirement move over to bonds. But this is the traditional route to make a large cash purchase at retirement for an annuity. A fixed income for life that goes down with inflation or if you have one that rises each year the starting amount will be lower.
What will be interesting in the coming years is drawdown pension. Where you would need to stay invested and take roughly 4% each year and when you die you leave money to pass on.
Bonds tend to give a consistency and an income to investors, which is why older investors prefer them.
I think bonds like government bond funds tend to go up when stocks tank, for example in a big market correction or crash for equities. But over the long term bond funds give positive returns as well, all be it not usually as much as equities. But if you gave bond and equity funds you should ideally rebalance once a year. So if equities went up more than bonds in one year, you would sell some equities and buy some more bonds when you rebalance, or vice versa. So in theory this helps you avoid behavioural biases, mistakes & stick to your strategy when using passive funds. Also it helps you to sell high and buy low
Why use this method of investing over just Vanguard LifeStrategy and adjusting the Equity to Bond Ratio as you reach your retirement age?
Hi Andy as I say in the video this can be cheaper, depending on the funds you choose. LifeStrategy also has a very strong domestic bias e.g. the UK is more than triply overweight relative to MSCI Global so you can have a more "neutral" market cap weighting if you choose your own global funds. The drawback is having to rebalance. Thanks, Ramin.
@pensioncraft, get the "join" button on TH-cam so we can support you through youtube, and not necessarily patrion.
Isn’t the equity ETF similar to Vanguard life strategy? I need to look more into bonds. I have the 80/20 which includes bonds but in these volatile times I could do with diversifying more.
You could change to vanguard lifestrategy 60 % Equity to reduce Volatility, job done, but I think since stock market investing is about the long term you have to stick with it even when markets tank. It all depends on what your time horizon is and what your investment goal is, ie a pension for retirement which could mean you have a longer time to ride out market Volatility
I have a four way fund 2 global funds, one fund in one specific market or country and one bond fund
Hello, if I moved from lifestrategy to VWRL and VIGBBD would this be wise for a new investor?
Ramin please could you tell me why the vanguard uk fund, ftse global all cap index fund tracks approx 6826 stocks and has ongoing fund charge 0.23%. But vanguard USA does a fund that tracks the same index, it's called total world stock index admiral shares fund, VTWAX. It has fund charge just 0.1%, and tracks 8776 stocks, it is just about 1 year old. So the UK version tracks roughly 2000 less stocks and costs just over double the cost. It's benchmark is the same, why?
I bought LS100 and LS20. The proportion of Equity/bond are the same as LS60. Could you tell me if it is the same? Please. Or I just should go for LS60 directly .
I'm confused why does the ishares msci GBP hedged fund look more volatile than the cheaper non hedged version of same ishares msci fund. I thought hedging to Stirling was supposed to reduce Volatility for UK investors
Why 2 funds Ramin? Wouldn't the appropritely risked Lifestrategy or MyMap fund do the trick in one!
How do you evaluate a Vanguard lifestrategy or Vanguard target date retirement funds which are seen as blended. Is it a stock or a bond. I know the answer is neither, however when I wanted to rebalance I didn't know how to make it fit in my portfolio as my portfolio has equities and bonds in it also.
Can anyone tell me what his blue dot correlation graph means!!!???
What does the minus 1 to 1 mean on the right for instance,what do the different depth of blue mean,what does the size of dot mean?
No key,nothing.
I wish to ask why did you pick iShares msci world rtf and not the HMWO HSBC msci world that charges only 0.15%? Thank you.
Hi Marios the cheaper the better. If there's a cheaper MSCI World Index tracker then it would make sense to use that instead. This is the fund you're referring to right www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P0000T32O with ISIN code IE00B4X9L533? In fact, there's an even cheaper one listed by Just ETF which is managed by Lyxor (Lyxor Core MSCI World ISIN LU1781541179) which charges just 0.12% www.justetf.com/uk/how-to/msci-world-etfs.html Thanks, Ramin.
Is this what you do?
You appear to be learning on the job with this outcome, which is no bad thing.
Next you'll be asking, if I know an index contains a mix of good, bad and indifferent companies, why can't I filter out those bad ones for even better returns?
Hi pberesford, I'm always learning... I did a video on factor-based investing which discusses how you can buy cheap funds that filter stocks based on research on long-term stock outperformance, article & video here pensioncraft.com/review-vanguard-factor-funds/ Thanks, Ramin.
You could bet against the bad ones in your fund
Hi @@kenzofinucane4057 do you mean a long-short portfolio i.e. a fund that goes short the "bad" stocks and long the "good" stocks while remaining market-neutral? If so, that's not possible if it's compliant with European laws (called UCITS) which limit the number of stocks that can be shorted in a fund. Thanks, Ramin.
Wich websites/app do you use to make those simulations? Kind regards
Does VIGBBD pay dividend?
What software do you use ? is that Matlab?
Hi, I need a little help. My understanding is that SWDA is the GBP version of the global fund.
However, you stated that IWDG is the sterling hedged version of the fund and that with SWDA there is currency risk.
So, my question is, in what way is SWDA the GB version of the fund? I’m a little confused.
Hi Roy,
SWDA is not currency hedged and is denominated in US dollars
IWDG is currency hedged into sterling and contains the same shares as SWDA
No currency hedge (SWDA) means you take the USDGBP currency risk
With the GBP currency-hedged version of the fund (IWDG) you're not taking the USDGBP currency risk because it's hedged with a currency derivative
Their descriptions are on the iShares website
- SWDA www.ishares.com/uk/individual/en/products/251882/ishares-msci-world-ucits-etf-acc-fund
- IWDG www.ishares.com/uk/individual/en/products/287737/ishares-core-msci-world-ucits-etf-fund
If that's still unclear Roy just give me a quick call. You can arrange it here ramin.as.me
Thanks,
Ramin
@@Pensioncraft
Hi,
From your answer it seems that it matters that SWDA is denominated in US dollars.
However your USD currency risk's reason is that SWDA contains more then 50% US shares not the denomination currency.
Wow did this backfire by not having FTSE 100…..
Is VIGBBD the same as VAGP?
Hi Tahir VAGP is the "Global Aggregate Bond UCITS ETF" whereas VIGBBD is what SharePad calls the "Global Bond Index Fund" and this comes as a Hedged Accumulation and Hedged Income versions. All of them track the "Bloomberg Barclays Global Aggregate Float Adjusted and Scaled Index in GBP" index. Their fees are a bit different too
- Fund version www.vanguardinvestor.co.uk/investments/vanguard-global-bond-index-fund-gbp-hedged-dist
- ETF version www.vanguardinvestor.co.uk/investments/vanguard-global-aggregate-bond-ucits-etf-gbp-hedged-distributing?intcmpgn=fixedincomeglobal_globalaggregatebonducitsetf_fund_link
Thanks, Ramin
Just after some input. i have an auto enrol pension with L&G. I am 30 years (at least from retirement). My pension is in the default fund. I am willing to accept more risk to grow my fund. Which of the L&G funds would be a good option to do this?
Hi wondrboy89, I suggest you take a look at my Fundbuyer's Checklist which goes through the attributes of a fund to ensure it's suitable for you, your investment horizon and your long-term goals. There's a downloadable PDF document too! pensioncraft.com/fundbuyers-checklist/ Thanks, Ramin.
It looks like you made a mistake with the info on vanguard global bond index fund as it is actually GBP hedged for 0.15% fund charge. Would the vanguard uk government bond index fund do the same, as it appears to have produced better total returns
You're comparing apples with oranges
@@nomadml9716 how so. Wouldn't either of those bond funds achieve very similar results over the long term. And the UK government bond fund has a lower fund charge, plus lower transaction fees
Hi Ramin! 😀
So what if my work pension has stuck me in with FIDELITY that doesn’t offer any of these funds?! 🤣
And is your recommendation here that I only choose ONE stocks and ONE bond option in the portfolio ?
I was always thinking it was best to invest in different countries and have stocks that cover Pacific, Japan, Europe, N America etc...?
If you get a world fund then you dont really need to separately buy different geographical regions.
VWRL or vanguard ftse global all cap index fund or similar funds from other providers like fidelity, HSBC, Legal & General cover most of the regions if not all in one low cost fund
@@fredatlas4396
I’m invested in the FTSE Global All Cap for equities. Happy with this. It’s a bond fund I’m yet to make a decision on. Any recommendations for which ones I should be considering?
What are your thoughts on a three or 4 fund that also has some Emerging market funds and Gold/Silver/Miners funds especially since Ray Dalio and others are suggesting ther's a major shift into gold for hedging and emerging markets for long term growth potential. In comparison to slowing developed markets and low or negative yield bonds? @pensioncraft
I am also enjoying and benefiting from this video series. Last month I diversified 10% of my portfolio into Gold. As US and Global markets slow 2020+ then it is not expected that Emerging markets will prosper. Elsewhere in another asset allocation video re. Ray Dalio it is suggested: 55% bonds, 30% equity funds, 7.5% Gold, 7.5% Commodities. "Ray Dalio All Weather Portfolio: Asset Allocation etc. " (I live in the UK). I love this channel.
@@chooselife3000 Are you saying that after 2020 you will be investing in emerging markets but not now?? Do you think EM might take a dump when US market corrects
I would look at holding a peer to peer platform and crypto to add more diversification as well as ETFs and bonds that way you can hold most things on planet earth as ETFs and bonds will be around 6 percent in next 10 years.ifisas are outperforming around 7 percent crypto around 20 percent at this moment..cash is poor around 1.75
If you invest in bonds only (100%) or mostly (e.g. 80%/20% for bonds and equity) over a short time period (max 5 years), what percentage of returns are you likely to get?
Hi,
Quick question:
I’m looking to start investing in the near future.
I’m Irish but resident in Spain.
I’m looking to invest for the next 30 years and have been finding it hard to get info from non US channels (until I found yours).
So, I was thinking of investing (on a monthly basis) into VWRL and VUSA for all-world coverage.
How does that sound?
Also, what are the best platforms for investing as a European? Again, all the info I find online is from a US point of view.
Look here if you can buy a mish mash- you should.
Easy for Buffet to live off of his 10% in STB's because that 10% is probably 100's of millions if not a few billion. Myself, I'm gonna need to live off of all of my money. I can't afford to put 90% into risky funds at my age.
Hi TheOtherMike I'm also in a low risk allocation (I'm 50) of about 40% equity and 60% bonds but I'm also quite cautious by nature. Some of the people in PensionCraft are in their 70s but have high allocation to equity but that's because they have other savings and pensions to live off. Your risk allocation depends on many things and age is just one of them. Thanks, Ramin.
WOAH 6%?!? Where's that pessimism come from?
Hi Tim, if you look at my LifeStrategy review here th-cam.com/video/p-O3d6mel28/w-d-xo.html you'll see that the long-term real return of the S&P 500 is 6.9% over the period from 1871-2017. Also, if you look at Vanguard's 10-year outlook the central case is about 4% return for global ex-UK equity, global equity and UK equity (all unhedged) in this document at the bottom of page 24 www.vanguard.co.uk/documents/adv/literature/VEMO-research-paper-2018.pdf
So I'd say 6% is fairly uncontroversial in terms of expectations for long-term equity return.
What would you consider to be a more realistic return?
Thanks, Ramin.