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The strength and weakness of Vanguard LifeStrategy

A belated happy tenth birthday to Vanguard’s LifeStrategy range. The five funds have become a common sight: they frequently crop up in IC Reader Portfolio submissions and have taken in huge swathes of money. The range’s most popular fund, Vanguard LifeStrategy 60% Equity (GB00B3TYHH97), recently had more than £12.5bn in assets.

For those unfamiliar with them, the five funds each have a set allocation to equities, with the balance in bonds. The 20% Equity fund, for example, has a fifth of its assets in equities, with the rest in fixed income. All of the investing is done via Vanguard trackers and each portfolio sticks to its set asset allocation.

The low cost and simplicity of this approach has been pretty alluring, and that’s part of the reason why I myself am a LifeStrategy customer. I use one of the portfolios purely because it captures traditional markets and allows me not to think too much about fund selection outside the day job. Investors have also been well rewarded, at least in the longer run. A recent AJ Bell analysis found that while the funds had a fairly weak showing versus rival funds in the year to 23 June, four of the LifeStrategy products had done extremely well against the most relevant Investment Association (IA) fund sectors over a decade. That’s testament to the resilience of government bonds, which have a decent presence in the LifeStrategy fixed income allocations. It also reminds us that passive has remained difficult to outmaneuver, especially in the past decade.

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