Browsing here and there among the websites of the major fund management companies, I came across a series of interesting products put on the market by Vanguard: the LifeStrategy.
As the name suggests, these are products designed for a financial strategy of one’s life, aimed at satisfying every type of simple saver.
Disclaimer:
The information provided does not constitute a solicitation for the placement of personal savings. The use of the data and information contained as support for personal investment operations is at the complete risk of the reader.
The percentage in the name of each fund indicates the amount of stocks, while the remaining percentage not shown indicates the amount of bonds. For example, the fund “LifeStrategy 60%” is composed of 60% stocks and the remaining 40% bonds.
All the stocks that make up the funds are weighted based on the market capitalization of their respective companies. All the bonds, both government and corporate, that make up the funds are weighted based on their reliability rating and never lower than the Investment Grade rating (BBB by S&P).
#2. Advantages of funds
The following mutual funds offer some advantages, including professional management and risk diversification. They can be an effective solution for investors looking for simplicity and access to the markets.
Tax-effective: active management will take care of adjusting the weight of the various components. This is a huge tax advantage for the investor who, not having to rebalance the portfolio, will avoid having to face the taxation of any capital gains of the components, which would then reduce the potential future earnings.
Low management costs: 0.25% of annual expenses (TER, Total Expense Ratio), automatically taken by the manager from the fund itself. Management costs are kept low because the various components of each fund are in turn passive funds that collect various stocks and bonds. It therefore becomes easier and less expensive for a manager to act on a smaller number of components.
Suitable for every need: there are 8 funds with 4 different levels of risk: from the lowest for the best performing short-term investments to the highest for the best performing long-term investments. Furthermore, the possibility of choosing between accumulation or distribution funds increases the customization of the investment according to your needs.
Listed on the Italian Stock Exchange: all funds are listed on the Italian Stock Exchange, which makes them accessible to all Italian securities depositories at generally more advantageous trading commissions.
#3. Disadvantages of Funds
These mutual funds have some disadvantages, such as less liquidity than other financial instruments and the inability to invest directly in commodities. This can limit their flexibility and ability to diversify.
Raw materials are missing: all the funds leave out the participation of raw materials, especially precious metals, which are essential to stabilize the portfolio and protect it from critical events. It is possible to overcome this problem by buying precious metal separately, possibly physical gold and silver, or ETFs/ETCs that make up a broader basket of raw materials. I have already spoken about this extensively on the site.
Not excellent liquidity: only the first three accumulation funds of the 80%, 60% and 40% type have a capitalization that I would say is just sufficient. All the others struggle a bit in terms of liquidity, complicating the meeting between supply and demand. Let’s say that to sell and buy as close as possible to the market price they are not ideal, especially when the capital to invest exceeds tens of thousands of euros.
#4. Final considerations
I give a positive rating to these funds because they allow you to choose the level of risk you want to expose yourself to with extreme simplicity and face the investment with serenity without the need to constantly adjust it. The low management costs are also a good incentive for the average investor who can save a lot of money compared to the funds proposed by bank promoters.
However, for those who have a little more familiarity and a significant investable amount, I would recommend managing the investment independently, weighing the main components according to your needs. This will make your capital flow into more liquid funds and with lower management costs, which can be more than halved.
However, consider the tax disadvantage you may face during the autonomous rebalancing: any capital gains on a component will be taxed, thus weakening the future earnings that can be achieved.
Here is the list of the main components of the funds covered in this content:
Leave a Reply