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Do you think we are sufficiently diversified with Vanguard?

21 April 2021

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Question by Roy

I and my Wife are in our 60's and investing for 10 years initially. We have a 6 figure sum in Vanguard Lifestrategy 40/60 and 60/40 funds split 50% in each representing 40% of our cash assets all in ISAs. In addition I have a Wealthify S&S ISA and our remaining cash is in fixed rate savings and cash ISA's. Our pensions are adequate for most of our needs. As interest rates are poor we have decided to invest further. As a novice investor I understand low cost and diversification are important and have considered Fidelity multi asset allocator fund which using Morningstar seems to hold some different investments such as property. I have also looked at other robo fund providers but they seem to hold similar investments to Vanguard. Do you think we are sufficiently diversified with Vanguard? Thanks for your thoughts.


Answered by Clinton Askew

The question you ask is I am diversified enough with Vanguard, but the real question is diversified in what sense? Diversification could be considered at a number of levels for example diversification at an asset level, stock level, country level, industry level or perhaps at a provider or contract level. To answer your first question, it may be worth answering a slightly different question, which is what’s my goal or objective in investing. If the answer to that question is to capture the capital market return from a diverse range of assets that balance growth and defensive assets then Vanguard may not be the right answer, because as you point out it only provides access to equities and bonds. So, it is really worth understanding what you need in terms of investment return when considering the types of asset classes you are investing in. That provides a lead to the range of asset classes that might be appropriate and the likely mix of growth and defensive assets.

Incidentally, Roy, you say you invest in both the Vanguard Lifestrategy 40/60 and 60/40 funds split 50% in each. My sense is that you are are duplicating the underlying stock holdings without a clear sense of whether you prefer or require growth assets or defensive assets. Resolve that conundrum and your choice of investments will be considerably simpler.

Answered by

Clinton Askew

CEO and Financial Planner

I’ve always wanted to do things differently. When I set up Citywide Financial Partners way back in 2004, it was to bring my own brand of financial planning to the market. One that was fresh, innovative and much more interested in people than money. And that still holds true today.