The 10-year returns are in for the Vanguard LifeStrategy funds. Forget the birthday celebrations and keep your cake, I hear you cry. Just tell us did the passive fund-of-funds deliver?

• Did LifeStrategy investors earn respectable returns over the last decade?

• Did the passive fund family hold its own against active funds that promise to beat the market like a drum?

Well, without wanting to spoil the surprise… if you invested in any of the Vanguard LifeStrategy funds a decade ago then you can be quietly pleased with yourself today.

Vanguard LifeStrategy 10-year returns

Here’s the 10-year returns for the entire Vanguard LifeStrategy range:

Source: Trustnet. Nominal1 annualised returns to 19 July 2021

Ten years ago, a LifeStrategy 100% investor might have hoped for around 7.5% annualised over the next decade (assuming they added average long-term inflation of 2.5% to an average historical equity real return of 5%.)

But expected returns were typically more pessimistic back then. For instance, the Financial Conduct Authority had recently published a real2 expected return range of 2.6% to 3.8% for a 60:40 equity:bond portfolio.

Call that 5.1% to 6.3% in nominal annualised terms.

As it turned out though, Vanguard’s LifeStrategy 60% bagged 8.4% annualised returns over the last decade.

Maybe there’s time for a slice of that cake, after all?

Risk versus return

The table above also shows the price paid by cautious LifeStrategy investors during a decade of high equity returns.

Each 20% allocation to bonds rained on the returns parade as surely as a low pressure front hovering over your BBQ plans.

The 10-year cumulative returns show most clearly what you had to give up in exchange for lowering volatility:

Source: Trustnet. Nominal cumulative returns to 19 July 2021

Still, a wince now beats the pain of panicking and selling out during a market bloodbath to come.

I’m not going to dwell on the risk-reward trade-off. The fact is a 100% equity allocation is not to be taken lightly. It is definitely not for most people.

Most of us will do better to be happy we enjoyed one of the all-time bull runs and maybe draw a few conclusions about the future. Such as that our past good fortune does mute the market’s prospects for the next decade.

With that said though, it’s arguably the bond-packing funds in the Vanguard range that have covered themselves in glory, not LifeStrategy 100%.

Yes, the equity-only LifeStrategy fund has done a solid job. But it hardly shot the lights out for the extra risk, compared to say LifeStrategy 60%.

LifeStrategy 100% returns vs the Rest Of The World

Vanguard LifeStrategy 100% is comfortably mid-table versus other geographic bets you might have made a decade ago:

Nominal annualised returns to 16 July 2021.

The real comparison here is between the iShares MSCI World ETF and the LifeStrategy 100%. You could have plausibly chosen either option ten years ago to gain cheap exposure to globally diversified equities.

As for the other funds, they help illustrate which regions flourished and why that cost the Vanguard fund.

Home bias – that is, an extra dollop of UK equities compared to a true global tracker – bit LifeStrategy investors over the last decade.

The LifeStrategy 100% fund is 22% in UK equities. Not helpful in light of the London market’s laggy performance over recent years.

In contrast the MSCI World tracker held less than 10% UK equities in 2011. That allocation is below 5% now.

The MSCI World also excludes the emerging markets.

Instead, you got an extra shot of US equity espresso in your portfolio vs LifeStrategy.

So if you ignored all the advice last decade that US equities were overvalued – congratulations!

But if your next move is to double-down on the US then you’re a braver soul than I.

S&P 500 valuation levels have passed eve-of-the-Great-Depression base camp and are closing in on dotcom bubble peak.

Strategy versus tactics

On the upside, Vanguard LifeStrategy 100% still beat its investment category benchmark, according to financial data shop Morningstar.

Morningstar gave the fund its Silver award – which ranks it in the top third of its peer group, including active fund managers.

Yet the point of LifeStrategy funds is to be a portfolio in a box.

One buy gets you all the diversification you need, including defensive bonds.

So a better comparison pits LifeStrategy 60% against a classic 60:40 equity:bond portfolio.

LifeStrategy 60% returns vs the Rest Of The World

And the bad news is that LifeStrategy 60% lost out to a passive 60:40 portfolio.

I compared the Vanguard fund-of-funds to a simple two-fund portfolio using ETFs that were available in 2011.

Cumulative returns for the last 10 years were:

• 125% Vanguard LifeStrategy 60%
• 158% iShares Core MSCI World / iShares Core UK Gilts

(60:40 portfolio data from justETF)

Home bias is my prime suspect again, but I admit I haven’t dug into the differences in bond holdings, fees, or rebalancing. (I’d shoot myself in shame – if I wasn’t so passive.)

Life is the name of the game

Now for the good news!

LifeStrategy investors can stop beating themselves up because every fund bar LS100% is the holder of a Morningstar Gold award and five-star rating.

• A gold badge means the fund ranks in the top 15% of its peer group for returns after fees.

• Five stars means the fund delivered top 10% risk-adjusted returns in its category over the last 10 years.

Note: This is all according to Morningstar’s methodology and category definitions.

LifeStrategy 60% ranked as high as the 4th percentile in its peer group in 2016:

Morningstar. Vanguard LifeStrategy 60% – percentile rank in category (2014 – 2021).

It’s also important to emphasise that the LifeStrategy funds have trumped the majority of their actively managed peers.

Granted, we can all easily find a handful of active funds that smashed the last decade.

But the trick is to find them in advance. Wisdom after the fact is self-satisfaction dressed like a hipster.

Chart attack

LifeStrategy 60% investors can also enjoy this Morningstar chart of their fund trouncing various benchmarks:

And here’s the Vanguard fund pounding its multi-asset rival – BlackRock Consensus 60:

Note: The comparison begins from the inception date of the BlackRock Consensus 60.

I score this as a triumph in the age-old morality tale of simplicity versus complexity.

The BlackRock Consensus funds’ USP is they hold index trackers with an active management tactical twist.

It turns out we don’t need it, going on the results so far.

Getting on with life

What do 10-year returns tell us? Nothing about the next ten, sadly.

Still, I think the LifeStrategy returns are power to our passive investing elbows.

We’re told to invest for the long-term. But it’s hard to stay true for decades. Especially when we’re battered by outlier success stories all the livelong day. Sometimes it can feel like we’re extras in someone else’s virtual reality bliss machine.

So I think it’s worth celebrating that ordinary investors can get a fair shake just by choosing a simple, well-designed fund that saves you a ton of time and worry.

Take it steady,

The Accumulator

1. Nominal returns include inflation. [↩]
2. Real returns are net of inflation. [↩]

This article on meal boxes is by The Mr & Mrs from Team Monevator. Check back every Monday for more fresh perspectives from the Team.

For years, money slipped through the fingers of The Mr and me. Our outgoings kept pace with – and often outstripped – our earnings.

Even once we’d noticed this insidious ‘lifestyle creep,’ our immediate options seemed limited. 

We had little scope to increase earnings, invest savings, or slash housing or travel costs.

But we could cut other spending. Significantly.

Our fight back began with food.

Ending the bloat

For the past decade, we’ve experimented with ways to feed a family of four (plus dogs) on a tight budget. Our efforts have ranged from discount stores to tending an allotment.

Yet holding down our food costs was a slog.

The Mr has always loathed shopping, particularly supermarket shopping. And I resented the time and energy I spent planning, prepping, and cooking nutritious food for an unenthusiastic family.

However, swapping household roles would be worse!

Every so often, tiredness, boredom, or disorganisation would get the better of us. We’d rebel against our self-discipline and seek a quick fix.

Comfort snacks. Unscheduled takeaways. Blowout restaurant meals. All bad for the budget and bad for our waistlines.

Each lapse would prompt tough measures to get us back on track.

This yo-yo scenario was how matters seemed set to continue, until…

Opportunity knocks

Five years ago, on a day when The Mr was home alone, a vivacious sales rep called by. The rep was signing up customers for a new subscription food service.

The Mr: I don’t remember using the word ‘vivacious’ but maybe my description conveyed it.

When I returned home, The Mr excitedly brandished glossy leaflets at me and explained we no longer had to eat crappy food. In fact, the rep would be back later to collect our payment details.

The Mr: For the record, this is literally the only time I have ever bought anything sold door-to-door. But – just sometimes – good things can happen this way!

I flicked through the blurb. So, there were companies that specialised in delivering meal kits to your door?

Wow – didn’t we already have online shopping?

When the rep returned, I was ready with a stern expression and my arms crossed. No way was I spending extra money and more time in the kitchen, whatever fantasies The Mr might be entertaining.

I said to the rep: “Sell meal boxes to me.”

The pitch that got us into meal boxes

“Imagine that a large box – carefully packed with fresh ingredients – lands on your doorstep each week. You’ve chosen the delivery date, some delicious meals, and the number of servings you require.

“The menu contains more than 40 meal options. These change on a weekly basis. High-quality seasonal ingredients are bought in bulk and the savings passed on to you. There’s minimal packaging and minimal waste as you buy only what you need. Meals are planned by professional chefs and are healthy, nutritious, and portion-controlled. Clear step-by-step instructions and timings are available online or on reusable recipe cards.

“It’s easy to suspend delivery if you’re away. Or to alter the number of meals required. There’s no need to trawl the supermarket aisles or to fret over balancing the family’s dietary needs.

We aim to deliver fine dining at home at a very competitive price.

Any questions?”

Reader, I signed up… on a discounted trial basis.

The Mr: Phew!

Meal boxes unpacked

It’s tricky to compare exact like-for-like options between the various subscription services. Some have tried though: BBC Good Food recently analysed meal kits from the main UK providers.

For the budget-conscious Monevator reader, the best value is usually a family box containing three or four meals for four or five adults (or two adults and three kids).

Introductory discounts for new customers can reduce costs for a few weeks while you try out a service.

Fixed-price family boxes are offered by HelloFresh (a German company that began UK operations in late 2012) and Gousto (appeared on Dragon’s Den in 2013).

During the pandemic, Morrisons entered the field with a meal-kit box containing five family meals. But while the cost is much lower, Morrisons doesn’t offer a choice.

• HelloFresh family box costs £54.99, or £3.25 per portion
• Gousto family box costs £47.75, or £2.98 per portion
• Morrisons family box (five meals) costs £30.00, or £1.50 per portion

Not falling into the budget meal bracket, but potentially useful for post-FI readers, is UK company The Mindful Chef. It’s aimed at the health-conscious and caters for (some) dietary needs ( for example gluten-free).

The Mindful Chef also offers meal boxes for one person.

For comparison purposes, The Mindful Chef’s family box (three meals) varies in price according to the recipes chosen. A test selection costs £64, or £6 per portion.

Note: prices quoted were noted on 31 July 2021 and do not include any promotional discounts.

But is it good value?

When we started using meal-kits, I obsessively price-checked each recipe against buying the same ingredients from the supermarket.

On the whole it was roughly equal, though some proved more expensive.

However I was not including delivery charges or petrol costs. Nor the re-planning on finding key ingredients were out-of-stock. Nor had I put any monetary value on the time that The Mr and I were saving.

The Mr: These are not to be ignored. And we find some ingredients (like Henderson’s Relish) aren’t even stocked by the local supermarkets.   

However for the geeks out there, we price-checked a recent Gousto recipe.

Gousto: chunky veg stew with goat’s cheese

• Stew incorporates 13 ingredients including fresh red peppers, courgettes, red onions, cherry tomatoes, rocket, and an excellent goat’s cheese. Cost from Gousto is £2.98 per portion.

Matching the exact quantities – regardless of actual packaging amounts – for this meal against our three nearest supermarkets:

• Tesco – £2.89 per portion
• Sainsbury’s – £3.46 per portion
• Asda – £2.47 per portion

But wait! Unless you’re buying at a market, it’s tricky to buy exact quantities. Most food is sold pre-packaged, or bottled in set amounts. While you may end up with a larger quantity that lasts longer, it will cost more at the outset.

Assuming that you had none of the ingredients – except olive oil, which Gousto also requires as extra – we recalculated the costs of this recipe using the closest packaging match and loose veggies (where these are available or work out cheaper).

We’ve also given a portion-cost for consistency, although you will have surplus ingredients like pumpkin seeds for other meals:

• Tesco – £4.18 per portion (£16.71 total)
• Sainsbury’s – £4.78 per portion (£19.10 total)
• Asda – £3.42 per portion (£13.69 total)

Again Gousto’s £2.98 per portion charge holds up fairly well by comparison.

I hope you can see that meal boxes are not the luxury purchase you might have thought they were.

Not to taste

Meal boxes will not suit everyone. Here are some who might pass.

Rarely in – If no one’s around to take delivery or there’s nowhere sensible to leave a package, then meal boxes don’t make sense.

Those on a tight budget – Simpler low-budget meal plans can be quite a bit cheaper per head. If you’re time-rich and cash-poor, meal kits may raise your costs.

The Mr: The really budget-conscious people I know look for alternatives to supermarkets. For example, Suma deliver wholefoods very cheaply but only in bulk. You need somewhere to store it, or else to club together with other households.

Foodies – While meal-kits may inspire some of us, others will be reluctant to outsource all their fun. Some of my friends spend hours poring over recipe books and heading off to the shops with a long list. There’s no accounting for taste…

The Mr: I know some people who need to ‘eyeball their vegetables’. It won’t work for them either.

Tasting notes

Originally, I saw the costs of a regular meal box as being akin to having a fixed-rate mortgage.

There’s a certain relief in fixing your mortgage costs, provided you don’t then agonize over whether the variable rate is lower.

I thought meal boxes would similarly make things simpler, but also add to our monthly spend on food.

In fact, our spending has decreased, despite the national rise in food prices.

One reason is that having restaurant-standard meals at home means we don’t feel deprived and so we rarely eat out these days.

Plus nobody in our family now minds our own boring cheap meals that help to balance out costs for the remainder of the week.

We create far less food wastage. Yet we don’t overeat because something is about to go off and we can’t bear spoilage, either.

And – saving the best until last – armed with clear instructions and all the ingredients, our kids have turned into good and confident cooks.

In short, I spend less time in the kitchen. The Mr spends less time at the shops. The family eats well. And spending on food is kept in check.

It’s an approach that works for us.

See all The Mr & Mrs’ articles in their own archive.

What caught my eye this week.

Two diligent bloggers took a run at the subject of rebalancing portfolios this week.

First up – in a tour de force that could give our own @TA a run for his carefully husbanded money – Occam Investing dove deep into the fabled ‘rebalancing bonus’, where investors see extra returns from regularly rejigging their asset allocation.

The post concludes that while such a rebalancing windfall is obviously welcome, the bonus cannot be banked on in the real-world:

Am I personally likely to benefit from the rebalancing bonus over the long term?

Probably not.

I’m not confident it’s possible to forecast anything with a great level of accuracy in markets, let alone being able to predict correlations, returns, and volatility. I’m certainly not confident enough to start making my portfolio more complicated by splitting it up, and therefore increasing trading costs, time required for monitoring, and risk of tinkering.

I may be sacrificing a potential rebalancing bonus by investing in a global tracker because I can’t rebalance its constituent parts.

But in my view, the benefits of a global tracker are worth it.

Not so well endowed

Funnily enough, this very same week on a A Wealth of Common Sense, Ben Carlson spotted the rebalancing bonus roaming in the wild.

After showing how a simple portfolio of index-tracking ETFs would have beaten the returns of a bunch of sophisticated endowment funds over the past decade, Ben noticed that an investor with an 80/20 stock/bond split across three particular Vanguard tracker funds could have conjured up even higher returns by annually rebalancing:

If you were to simply multiply the weights for the 80/20 portfolio (48% U.S. stocks, 32% int’l stocks, 20% bonds) by [their] returns you would get an overall annual return of 8.9%.

But the actual 10 year annual return for the 80/20 portfolio shows 9.1%.

How could this be?

The difference here is the rebalancing bonus.

Both authors show their workings, and both are well worth a read.

Everything in moderation

While any investor would take bonus returns where they can get them, rebalancing is best thought of as a risk management tool rather than a source of alpha.

You may or may not see a rebalancing bonus in your years as an investor. That’s down to the luck of the historical draw.

But you might well expect to have a lower-risk portfolio if you keep your allocations broadly in-line with where you’ve determined they should be.

As a naughty active investor, my portfolio is to a passive 60/40 set-up what quantum mechanics is to Newtonian physics. Investments pop in and out of existence in my portfolio all the time. Any one of them could affect my returns (for good or ill) much more than the modest impact of annually rebalancing between asset classes.

Nevertheless, these days I too try to ensure nothing grows too far out of whack. This can mean trimming winning positions, which I do knowing full well this can be a behavioural bias and mathematical blunder that curbs long-term returns.

So why do it?

Because you never really see a catastrophic blow-up in investing that doesn’t involve over-exposure to a share, sector, geography, or asset class.

Stay vaguely diversified and the worst you will likely do is relatively poorly.

Of course we all hope to do better than that! But avoiding disaster is the number one rule.

As Warren Buffett’s sidekick Charlie Munger says: “All I want to know is where I’m going to die, so I’ll never go there.”

Amen to that!

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