I thought I would share some number crunching that I have done on this fund.
From the Vanguard website I’ve scheduled the month end price for the accumulation version for every month since inception in June 2011 and here are the results:
So, to illustrate, looking at the 3 year column there have been 124 3-year periods since June 2011 using month ends. The average 3 year return per annum for those 124 periods has been 8.7% with corresponding standard deviation of 3 year return of 2.8% per annum.
The worst 3 year period was 1.1% per annum (3 years ended 31/03/20 - Covid dip) and the best was 14.6% per annum (3 years ended 30/09/18)
I like the fact that the volatility of returns measured by standard deviation drops markedly over time, as this is what you would intuitively expect.
If you are into statistics and probabilities a way you could use these figures if you assume that stock market returns are perfectly normally distributed is to consider that probabilistically 99.7% of 3 year returns per annum would be within 3 standard deviations of the mean. So between 0.2% per annum and 17.2% per annum per the table. And so it has proven to be with all 124 3 year returns per annum data points in that range.
In fact all returns are within 3 standard deviations of the mean for each timeframe. So this could give a guide as to what you might expect.
Maybe helpful, however I think you need to keep in mind the following:
- the period since June 2011 has seen a strong bull run for equities;
- you need to account for platform charges
- the proposition that equity returns are perfectly normally distributed is up for discussion, big topic !!
What I found interesting is then to compare the figures to those for LifeStrategy 60% equity which launched at the same time:
It surprised me that the standard deviation of returns over 10 years was 1% per annum for both the 60% and the 80% versions.
Again all returns are within 3 standard deviations of the mean for each timeframe for LS60%
Maybe my workings are awry but there is a big difference in the outcomes per annum for identical volatility. Average 10 year returns per annum 8.8% v 7.0%. Counter-intuitive?
The worst year for LS60% (-11.2%) was worse than the worst year for LS80% (-8.8%). Also counter-intuitive? In both cases this was the year ended 31/12/22.
And the point of all of this is? Well, a feeling that I should be thinking about increasing my equity %. I keep a 50% allocation to equities with rebalancing at 60% either way. I will ponder on that awhile.
Anyway, hope the info is of interest here.