Vanguard LifeStrategy funds are good benchmarks to my mind, marketed as they are as a one one stop shop. Here’s an example …..

James Shack - The One Fund You Will Ever Need?

I’ve already shared some workings on dedicated LifeStrategy 80% and 60% threads which were well received so here is the 40% version to complete the set.

My thought right now is that it is unlikely I would ever stray outside of 40% - 80% equities in our portfolio. I like to keep tabs on these three and benchmark our portfolio performance against them.

Here are the latest holdings in VLS 40% which I will update from time to time if there is interest:



Our portfolio, which has been running at nearer to 50% equity since 2022, has less volatility than VLS 40% measured by a rolling 36 months calculation of standard deviation. I’m guessing that this is because I have so much in shorter duration investments – MMFs, ERNS, gilts maturing < 5 years.

Interested in any insight or opinion from the forum as to why LifeStrategy products don’t appear to have any short duration bonds?

Here is the performance data for LifeStrategy 40% measured on month end prices of accumulation units since launch. To explain, since launch in June 2011 there have been 152 rolling 12 month periods with an average % return of 5.5% and so on:



I find these workings useful because if I were to hold something like this it would be on a buy and forget basis. So looking at the 10 year figures I might say to myself that it’s not unreasonable to expect 5% per annum long term and that the range of outcomes at the extremes might be 2% to 8% per annum allowing for 3 standard deviations. Depending on the timeframe held, you are more likely to end up nearer to 5%.

That is not attractive to me. The 80% version has an average return of 9% per annum with a range of 6% to 12% (in extremis) and this is more acceptable.

So I’m going to continue to push equities higher carefully over time as my concerns about sequence of returns risk
subside. Noting also that it’s our kids (currently of teenage age) who will likely inherit the pot and so their timeframes are more relevant.

Anyway, that’s how I interpret the number crunching for now. It helps me and if there is interest I will pop an update on these LifeStrategy threads from time to time.

Context
Aged 57, retired. Kids at secondary school and dependent for roughly 7 years so we need to manage a sequence of returns risk. Estimating that we need low single digit returns to not run out of money in retirement / old age. I model investment returns forward at 3% per annum, inflation 4% and this model shows us not running out of money. Win by not losing, passive approach.

Harry-understand your reasoning but…….
Can you remind me how you cope with market drops
Have you a large fund so drops don’t matter too much
Or have you a cash fund to call on during market downs
Or a bit of both?
xxd09

"Drops"? What are those? Wasn't aware stocks were allowed to go down these days ;)

We currently have around 5 years of expenses in cash which sits in term deposits outside of our investment accounts.

This cash gets us to within a couple of years of when the kids become financial independent and thus when my perceived sequence of returns risk is much reduced.

Thereafter I believe we will live off the passive income generated by our investments.

So we may well be in a position where we can take on more volatility (equities) as we age as long as we have enough buffer in the passive income to not be a forced seller.

I write about this on this forum because I think that it may be sub-obtimal for me not to challenge the oft-quoted mantras such as "your age in bonds" or "decide on your asset alllocation and stick to it through thick and thin".

This is all well and good if we can tough out the inevitable troughs and hold our nerve with a higher equity allocation.

Certainly I seem to be showing that the volatility of long term returns is the same for VLS 80% and VLS 40% based on their performance thus far. Noting of course that VLS funds have enjoyed bull run conditions since launch.

Understanding all of this should stiffen my resolve. I guess I'm really just sharing my plans for the forum sounding board as it all feels a bit counter intuitive !!

*Had, not has

10 years ago, you were buying bonds on terrible valuations. Today, stocks and bonds are priced about the same. So just on value, this is one of those periods when there might not be upside in taking more stock market risk.

2000 was an example – stocks had been driven up to 2% earning yields, while you could buy treasuries on 5-6%. For most the next decade, it made more sense to own bonds. But today's there's a big wild card in AI.