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Vanguard LifeStrategy Portfolios, Let’s Put Investing In A Box

Vanguard-lifestrategy-funds

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This is the article displaying the Vanguard LifeStrategy portfolios. Here you will find a description, performance, and resources for the portfolios as well as detailed information on how to implement them yourself.

Vanguard LifeStrategy Portfolios, Happiness In A Box

Vanguard is the fund management company founded by the supreme good guy of investing John C. Bogle. Vanguard has a unique governance structure that makes it so that Vanguard’s only mission is to look out for those who own shares of the mutual funds. John Bogle has structured Vanguard in such a way that the owners of shares are also the owners of Vanguard. The investors (owners) are all those people who own a Vanguard mutual fund or ETF. John Bogle calls it the only mutual mutual fund company.

John Bogle talks about it in one of his best books Common Sense on Mutual Funds.

john-bogle-common-sense-on-mutual-funds

I recently completed a history of the Vanguard, which was very good. It is called The Man in the Arena: Vanguard Founder John C. Bogle and His Lifelong Battle to Serve Investors First

man-in-the-arena-john-bogle-and-his-lifelong-battle-to-serve-investors

“The book is part tribute to Mr. Bogle, part history, and part investment wisdom. The breadth of the tributes extends beyond the finance world of managers and writers, to heavyweight economists, such as Paul Volcker, and all the way to a former resident of the White House, Bill Clinton. The history spans the time period from the founding of Vanguard and its unique mutual ownership to the launching of the first no-load mutual funds and index funds. I personally loved the poster that declared, “Index funds are un-American.”

index funds are unamerican

Description of the Vanguard LifeStrategy portfolios,

The Vanguard LifeStrategy funds are one-fund portfolio funds. They are funds of funds. This means that each fund contains a collection of other funds. This is the same method that target-date funds are constructed. It is an easy and inexpensive way to build one-fund portfolio funds. The alternative would be that each fund would need to buy individual shares and bonds to reach their allocated target levels.

One-fund portfolio funds are sometimes called target-risk funds.

A one-portfolio fund promises a particular asset allocation within the fund, such as 50% stocks and 50% bonds. It handles all the rebalancing for you. The only thing you need to do is buy the one fund. Other one-portfolio funds are target-date funds that also have a particular allocation but one that changes as you age.

There are many other providers of funds and ETF who offer one-fund portfolios solutions. Ishares have a few ETFs. Charles Schwab also provides one-fund portfolios as does Fidelity.

There are 4 Vanguards LifeStrategy funds. An income fund and three growth funds. They are:

  • LifeStrategy Income Fund
  • LifeStrategy Conservative Growth Fund
  • LifeStrategy Moderate Growth Fund
  • LifeStrategy Growth Fund
vanguard-lifestrategy-funds
The LifeStrategy portfolio allocation, along with recommended investment time horizons. Source: Vanguard

Each fund consists of 4 funds. See below for their asset allocation

Let’s see how the portfolios perform.

Performance of Vanguard LifeStrategy portfolios,

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Vanguard LifeStrategy Income Fund (20/80)41.33%12.195.22%6.710.05%
Vanguard LifeStrategy Conservative Growth (40/60)4-1.39%15.936.54%7.3310.05%
Vanguard LifeStrategy Moderate Growth (60/40)4-4.11%19.677.81%7.8420.05%
Vanguard LifeStrategy Growth Fund (80/20)4-6.79%23.379.01%8.2130.05%

Building the portfolio(s)

Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.

Asset Allocation for the Vanguard LifeStrategy portfolios

Vanguard LifeStrategy Income Fund (20/80)

  • 12.00%  US Total Stock Market   (VTI)
  • 8.00%    International All-World ex-US     (VEU)
  • 56.00%  Total US Bond Market    (BND)
  • 24.00%  Non-US Bonds   (BNDX)

Vanguard LifeStrategy Conservative Growth (40/60)

  • 24.00%  US Total Stock Market   (VTI)
  • 16.10%  International All-World ex-US     (VEU)
  • 42.00%  Total US Bond Market    (BND)
  • 17.90%  Non-US Bonds   (BNDX)

Vanguard LifeStrategy Moderate Growth (60/40)

  • 36.10%  US Total Stock Market   (VTI)
  • 24.10%  International All-World ex-US     (VEU)
  • 27.90%  Total US Bond Market    (BND)
  • 11.90%  Non-US Bonds   (BNDX)

Vanguard LifeStrategy Growth Fund (80/20)

  • 48.10%  US Total Stock Market   (VTI)
  • 31.90%  International All-World ex-US     (VEU)
  • 14.00%  Total US Bond Market    (BND)
  • 6.00%    Non-US Bonds   (BNDX)

If you are missing a 100% bond portfolio, there are of course the total bond market fund or ETF (BND)

If your a missing a 100% stock portfolio, there are the total stock market ETF and fund (VTI)

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

Resources for the Vanguard LifeStrategy portfolios,

It is always a pleasure to read any of John Bogle’s books, so any book by him is recommended. These two are good starting points.

Vanguard’s youtube channel.

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

If you need a primer on target-date portfolios, you should go read the article Target Date Fund Portfolios.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

Conclusion

Vanguard LifeStrategy portfolios offer excellent performance while keeping complexity in check.

Would you instead buy a one-fund solution or build the portfolio yourself?

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