Vanguard LifeStrategy available in Europe! A Retriever Portfolio in One ETF

Imagine, that your Dad or cousin didn’t invest in that pharma stock a while ago that initially surged, then stagnated and in the end underperformed the market. 

Because most of them do.

Now, he doesn’t even want to sell it anymore because of the emotional attachment. Imagine he didn’t have to think about when selling or buying. Or even rebalancing.

He/she almost certainly isn’t following Banker on Wheels to realize that, as of December 2020, there is a new kid in town. Vanguard LifeStrategy is now available to European Investors!

Your financial advisor may not like that, given the fees he’s charging, but who cares – the Golden Retriever Portfolio (with a little nuance) is now available in one UCITS ETF!

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What is Vanguard LifeStrategy?

It may not necessary be your cup of tea – I get it. Some investors like flexibility. 

But learn more about these funds to make that comment during a (post Covid-19) family reunion when someone asks about the best investment. Whether it’s a bull or a bear market, it could save them lots of money. 

And stress. If they ask about Bonds, tell them the Babushka doll includes that as well. The advantage of this investment is that it’s easy to explain, even a Golden Retriever gets it.

For dog lovers

Until now, it was fairly easy to buy a Equity World ETF. But you would usually want a World Bond ETF that goes with it. 

Vanguard LifeStrategy ETFs are Funds of Funds, that offer a cheap way of getting a global, diversified portfolio that has a fixed level of equities which is determined by the share component of the portfolio. 

Who are Vanguard LifeStrategy Funds for?

Vanguard LifeStrategy funds are the perfect  solution for you if:

  • You are investing for the long term and want an established and reliable ETF provider
  • You are looking for simplicity and a cheap Fund
  • You want to have hands-off portfolio without the need to rebalance ETFs
  • You want to lower transactions costs and taxes (this may depend on jurisdiction)

When would Vanguard LifeStrategy Funds NOT be suitable?

Vanguard LifeStrategy funds may not be a solution for you if:

  • You like to build your own portfolio and adjust to your personal needs, tax situation or want full flexibility (e.g. Banker or Cyclist portfolios).
  • You want to reduce costs to the absolute minimum (LifeStrategy, while cheap at 0.25%, is slightly more expensive than its components – Equity at 0.22% and Bonds at 0.10%) because Vanguard charges for rebalancing the ETFs.
  • You want another asset allocation than the proposed ones (80/20, 60/40, 40/60, 20/80), an allocation that changes over time or don’t want Bonds at all
While the Vanguard LifeStrategy ETFs may not fulfill all your needs they can still serve as the backbone of your portfolio.
 You can then add other investments around this core Fund or even tweak the Equity/Bond allocation by adding a World ETF.

Vanguard LifeStrategy Fund Types

What are the common characteristics of Vanguard LifeStrategy ETFs?

The underlying ETFs are the same for each LifeStrategy Fund:

All LifeStrategy Funds are rebalanced regularly (e.g. monthly basis) so that the asset allocation remains fixed over time – Equity/Bonds are bought as they trade lower (understand how rebalancing works)

There is a little quirk in the way these ETFs are assembled (see technical details section) but essentially that’s all you need to know.

What is the difference between Vanguard LifeStrategy ETFs?

The LifeStrategy Funds differ by the asset allocation or the proportion of Equity and Bond ETFs

Vanguard recommends 60% and 80% Equity ETFs for investors with higher risk profile and 5+ years investment horizon.  

The 100% Equity Fund is not explicitly available in Europe, but it is equivalent to Vanguard FTSE All-World

Are Vanguard LifeStrategy Funds the same as Golden Retriever Portfolio?

The only difference with a Golden Retriever portfolio is that it does not include Inflation Linked Bonds/Gold. This could be helpful in rare scenarios when both Equities and Bonds underperform at the same time (look here for the 1970s). Not that I see this happening anytime soon, but I like being forecast-free.

Do Vanguard LifeStrategy ETFs have a track record?

Vanguard LifeStrategy Funds have traded on the US Stock Exchanges since 1994. Vanguard has also launched LifeStrategy in the UK in 2011 and more recently Canada in 2018. While European Funds are brand new and size is an important criterion in selecting an ETF Vanguard’s experience and Retail demand makes this a likely success.

However, since the EUR funds started trading in December 2020 there is little performance data, yet. 

But I combined the EUR-denominated benchmarks, for which data is available since 1999 and the underlying Funds since their launched, then substracted the 0.25% fee to see how they would have performed.

How to choose a Lifestrategy fund

What losses can you stomach?

The #1 criterion when choosing a LifeStrategy Fund is how much risk you can tolerate. 

You don’t want to end up like this guy.

Data from 1999 includes choppy market conditions. The period starts just before the Dot Com crash and followed by the GFC Crisis in 2008

It’s great decade to stress test the Funds – you can show the animation below to your relatives and ask how much (unrealized) losses they would be able to stomach during a crisis on a 1,000 EUR value as at the last market peak. Agreed, it’s theory. Nothing replaces real life crisis reaction. But it’s a good start.

As you can see a 100% Equity portfolio lost almost 55% of value during both stress periods. A 60% Equity portfolio dropped 25-30%. 

Yes, Covid-19 was just a blip

Animated drawdowns for €1,000 from prior market peak

Why history may be misleading

Returns expectations are where things get more challenging.

While the 1999-2021 period, where EUR benchmark data does exist, is very useful for stress testing, it is tricky from a return perspective due to (i) the first lost decade for Equities but also (ii) higher returns from Bonds than currently available

Below is the performance of a 1,000 EUR portfolio from 1999 until 2021 with 0% (or entirely Bonds) to 100% Equity allocation.

Expected historical performance of Vanguard LifeStrategy Funds
Historical Risk and Return for Vanguard LifeStrategy Benchmarks
  • Over the past two decades:
  • 100% Equity World ETF returned 5% annually
  • Adding bonds was a great idea. If you look at the 100% Bond portfolio the return was 3.9% – not very dissimilar to Equities

Over the last, exceptional decade:

  • 100% Equity World ETF returned 10.4% annually
  • Adding bonds reduced risk but also added a drag with 3% return
 

What can you expect?

Reasonable expectations for next decade(s):
 
  • Equities are unpredictable. But a reasonable long term average (over few decades) is a return of 7% annually – doubling your investment after 10 years. Below is the data for World Equities (in USD) since 1988
  • Given negative Bond yields in Europe, the Bond portion should not be expected to make any meaningful contribution to returns in the next years (which will be different to the 3% experienced over the past decade)
Long term return of World Equities

How to invest in a Lifestrategy fund

I/Vanguard are not exactly selling dreams when you take into account that Bonds won’t contribute much to the returns in a 60/40 portfolio.

What are the options? For your relatives, keep it simple.

For yourself, think about the right mix of assets – holding it longer or treating as the core part of your portfolio.

Holding it for longer

Given  negative Bond yields holding higher proportion of Equities could be a solution (if you can stomach losses). 

Since 1988 (based on USD data), chances of losses were reduced below 5% if holding World Equities above 5 years. 

But if you have a short to medium term investment horizon and need to fund a project, the 20 to 40% Equity portfolios are probably still the most sensible choices.

Holding period needed to avoid losses in 100% Equity Portfolio

Adding satellites

Having a e.g. 90% Vanguard LifeStrategy core and 10% satellite portfolio could work as well. 

Adding other asset classes could be a solution for a slightly more complex portfolio – like the Cyclist or the Banker.

Have a look at risk and return profiles of different asset classes over the past two decades.

But remember, setting the right expectations is probably the most reasonable first step.

What else do i need to know about Vanguard Lifestrategy

There are numerous factors you need consider before buying an ETF. 

Some apply to Vanguard LifeStrategy ETFs – I have listed them below.

Key considerations

What's under the hood?

Note that if you check the underlying ETFs you may be surprised to see more ETFs (German and Italian brochures are available)

 

Don’t worry if some ETFs are added to the two I mentioned above. This is just how Vanguard is implementing it because of UCITS law limiting any single component to maximum of 20%. Vanguard goes around that restriction using other funds but the result is the same as if you had exposure to these two ETFs.

Vanguard states in its factsheet that no active bet is made. 

Show me the Funds

As long as you have access to on the below exchanges (most brokers would allow you to access Xetra and Borsa Italiana) you can use the ISINs below to buy it – both have the same funds but this will be amended as funds/exchanges are added

What’s the difference between accumulating and distributing? Here is the answer.

  • XETRA
  • BORSA ITALIANA
FUNDINCOMEISIN
Vanguard LifeStrategy 20% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5K07
Vanguard LifeStrategy 20% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5L14
Vanguard LifeStrategy 40% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5M21
Vanguard LifeStrategy 40% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5N38
Vanguard LifeStrategy 60% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5P51
Vanguard LifeStrategy 60% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5Q68
Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5R75
Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5S82
FUNDINCOMEISIN
Vanguard LifeStrategy 20% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5K07
Vanguard LifeStrategy 20% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5L14
Vanguard LifeStrategy 40% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5M21
Vanguard LifeStrategy 40% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5N38
Vanguard LifeStrategy 60% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5P51
Vanguard LifeStrategy 60% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5Q68
Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) - AccAccumulatingIE00BMVB5R75
Vanguard LifeStrategy 80% Equity UCITS ETF (EUR) - DistDistributingIE00BMVB5S82

Good Luck and keep’em* rolling !

(* Wheels & Dividends)

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About Raph Antoine 77 Articles
Raph Antoine is a Portfolio Manager and Institutional Advisor that witnessed first-hand the 2008 Global Financial Crisis and the 2011 European Debt Crisis working for some of the most prestigious names in the financial industry. Raph has experience across multiple asset classes including Fixed Income and Equity products as well as bespoke Investment vehicles in multiple jurisdictions. Raph holds an MSc in Financial Engineering and is a CFA (Chartered Financial Analyst) Charterholder. He usually rides one of his two bikes. Rarely, a Canyon Ultimate CF SLX 8.0 (that is currently in family's attic) and most of the time a Gravel Pinnacle Arkose (his favorite) that he used to Cycle the World.
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XtremePWN
XtremePWN
10 months ago

The new lifestrategy are very cool and hope they will be added soon on trading212 and revolut (when they add etf’s)!

James
James
10 months ago

Amazing analysis – very helpful

BFink
BFink
10 months ago

Great insights as usual 🙂
One question though: does the mentioned 0,25% OCF goes on top of the OCFs of the underlying funds? That would make it a tad pricey.

Daniel
Daniel
10 months ago

Hi Raph, Although I never comment on articles that I read on the Internet, I just wanted to share my appreciation regarding your website (N.B. only last week I stumbled upon your website and after reading 5 articles I instantly subscribed) and the articles that you prepare and post – very well structured, researched and presented, as well the examples/recommendations that you make regarding various e.g. ETFs are very informative for investors considering that generally not many similar content provides such examples with the relevant pros’ and cons. I wanted to ask for your opinion regarding 2 investment strategies (EUR… Read more »

Daniel
Daniel
10 months ago
Reply to  Raph Antoine

Hi Raph,

Thank you for the quick response. The suggested articles provide indeed certain guidance in respect of my questions.

Can’t wait to read your next article.

All the best,
Daniel

XtremePWN
XtremePWN
10 months ago
Reply to  Daniel

What broker are you going to use for ISHARES CORE MSCI WORLD?

Daniel
Daniel
10 months ago
Reply to  XtremePWN

Probably XTB; I’m guessing that you are also from Romania – what broker do you currently use/contemplating on using?

XtremePWN
XtremePWN
6 months ago
Reply to  Daniel

interactive brokers

Tânia Oliveira
Tânia Oliveira
10 months ago

Hello Raph,

I love your content! Very helpfull.

I have a question:
If we start investing in a accumulating vanguard world etf (example: vanguard FTSE all world acc) , for the growth phase, is it possible, to change the same etf for the distributing regime later on, so I can live from the dividends?
Or do I have to sell the acc ETF and buy the distributing ETF?

Thank you so much for sharing so much value, especially for european investores, my case. I have learn a lot from you!

Tânia Oliveira
Tânia Oliveira
9 months ago
Reply to  Raph Antoine

Thank you Raph!

Richard
Richard
10 months ago

Hi Raph,
are these LS Funds EFT’s or OEICs (which is, my understanding is how LS Funds are offered in the UK)?

Richard
Richard
10 months ago
Reply to  Richard

apologies, should have typed – “are these LS Funds ETF’s or OEICs?”

Fabio
Fabio
10 months ago

Another great post. Started to follow you few months ago and I am enjoying it a lot. A good mix of deep but light reading
I love life stratefy funds. I have them in uk ..in pound but wouldn’t mind to have them in euro either..
Not available on DEGIRO yet. Hopefully soon
Keep up the good posts..and stay safe on the road

fabio
fabio
10 months ago
Reply to  Raph Antoine

u welcome. well i started studying personal finance few years ago and last year i bought a touring bike myself…so it was destiny i guess . what an amazing combo!!!…now i just need to start cycling more and let lifestrategy do its work for me!!!!

Maciej
Maciej
10 months ago

Hi Raph,

Few articles more and I will ask if there is possibility to donate your great site 🙂 Looks that winter allows you write more stuff! Thanks 🙂

One question. How tracking difference is imppacting Fund of Funds? The same way like classic ETF so we can expect real costs of 0% vs. stated TER? Currently Vanguard FTSE has tracking diff. of 0%;

Hedging to EUR for Bonds is not a pros for non EU-Zone countries :/

Regards, Maciej

Last edited 10 months ago by Maciej
BasLedeni
BasLedeni
10 months ago

Hi Raph, Your blog is a gold mine of cool information. Thank you so much for doing this. I have a question on calculating returns and risk in section Historical Risk and Return for Vanguard LifeStrategy Benchmarks. How can we calculate this information? Return of portfolio is simple, sum of (return_of_asset class * % of the asset class in portfolio) But risk calculation is not clear to me. Can you give me a few pointers on how to calculate this? Some of this information can be read in KIID but where do you get your data for research? Be safe,… Read more »

Maciej
Maciej
7 months ago
Reply to  Raph Antoine

Hi Raph, Two questions: Have reviewed Vanguard materials and I cannot find a clear statement that equity part is following FTSE All World index (only „no active bets” but manager has mandante do whatever he wants?). How we can be sure that FTSE All World will be followed? In your calculation how did you approched rebalancing within equity or bond part? Have you assumed fixed weights based on todays ETFs share from factsheet? Or they were changing to follow market weighting? Or it was not an issue as you have used only 2 indexes i.e. one for equity and one… Read more »

MaxDOL
MaxDOL
10 months ago

Wish Vanguard would provide the USD version of these Life Strategy ETFs. As an investor outside of Euro zone and also live in country that economic is more relate to USD i prefer to invest in USD. The currency of the equity portion should not be concern but bond hedged to EUR is gonna hurt and will have lower yield/return. I prefer to invest in single asset allocation fund in order to save on trading cost. I currently invested in “AOA” US domiciled ishares core aggressive allocation ETF(EQ80-BOND20). By US law US domiciled ETF have to paid regular dividend. It… Read more »

Wiljum
Wiljum
10 months ago

Hi Ralph, great post and very informative website! Do you have an idea why for example the 60/40 fund does not invest 60% in a global equity etf and 40% in a global bond etf but small percentages in different equity and bond etfs (that also seem to overlap)?

David S
David S
9 months ago

Hi Raph,

Thank you for creating such a cool content! Keep up the good work!

I have a question: How will Permanent portfolio https://www.investopedia.com/terms/p/permanent-portfolio.asp or Dragon’s portfolio tinyurl.com/3ypzcxja will compare to these long term target date portfolios?

Main idea of these strategies is to survive in all market conditions by allocating different asset classes.

What is your take on that?

Kind regards and stay safe,
David S

regis
regis
8 months ago

Hi, Ralph,
very good blog, a lot of valuable info, thanks.
Just wondering, where can I find exact information about LF fund exact TIER – if it holds another ETFs, I think it’s obvious that performance of LF fund should be lower by ETFs, that are included in it TIERs? What do You think?

regis
regis
8 months ago
Reply to  Raph Antoine

Thanks for clarification.

MiCv
MiCv
7 months ago

Great text ! Thank you Banker on Wheels.

kbk
kbk
7 months ago

You said “Given negative Bond yields in Europe, the Bond portion should not be expected to make any meaningful contribution to returns in the next years”. Then why in the world would anyone buy now even a small portion of bonds? Accumulate equities now and when the trend changes start buying bonds. Isn’t that a universal solution? Given that the risk of temporary extreme changes in value is understood and accepted.

Pires
Pires
7 months ago

Great website Raph, probably the best I have seen in the last few years since I started investing. Well done! Just bought Vanguard LS 80 ETF now also available via Amsterdam stock exchange (cheaper via Euronext in my brokers). Crossing fingers fund grows quickly over 100-200 M (hoping Vanguard do not close it out). Cheers from Portugal

Morika
Morika
6 months ago

Hi, are these LS ETFs available in USD on LSE or any EU stock exchange? As an expat, it makes no sense for me to buy these in Euro so I continue to buy VWRA+IGLA. Would be so good if they had an USD listing on LSE.

Andy
Andy
4 months ago

Awesome tool.

Thank you for the post, useful as always, Raph.

I already invest in the Vanguard All Word ETF mentioned above since some time. I was now looking for a related Bond ETF and I the starts guided me to this blog post.

Now, would it make sense stop putting money in the single ETF and start putting money in the Lifestrategy? (80/20 would be my choice).

My horizon is very long 10+ years and I’m a Labrador.

Andy
Andy
4 months ago
Reply to  Raph Antoine

Got it, thanks Raph!

Luke Perry
Luke Perry
3 months ago

Hi Ralph, Great article, thank you! Question for you though – I have British and Australian citizenship, I live in the UAE (earning in Dirhum) and don’t know where we’ll retire (maybe UK, Aus or somewhere in Europe). I’m in my 30s though and don’t know much about investing but I’m learning.  I was recommended to buy LifeStrategy 80 using Swissquote which I have just set up. My Swissquote account has access to V80 on the following exchanges: Euronext, Frankfurt, Stuttgart, Xetra, Munchen and Düsseldorf. Does it matter which one I choose to buy the ETF on? Would this have… Read more »

quikko
quikko
15 days ago

Great article, like always.

I (European investor) own already the “All-word” ETF from Vanguard and I was looking for a Bond ETF. I’m in for the long run (I’m 32).

Would it make sense to sell it and then buy Life Strategy 80-20 instead?