Andrew Hallam
06.06.23

Why Vanguard LifeStrategy ETFs Are Still The Best Funds In Europe
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If you’ve been investing for the past several years, you might be pulling your hair out. Perhaps you bought a great stock based on a solid track record. You might have purchased a fund that posted great performance and had a genius at the helm. Then the investments crashed.

You might have even jumped from stock to stock or fund-to-fund, as currencies swung, war efforts changed and political rumblings made you sweat. You might have even sold out of the market, believing nothing but doom would hit us all soon.

If that’s the case, let me offer a solution. It won’t make you money every year. But based on peer-reviewed academic studies, following this course will ensure you beat most professional investors. It will maximize your wealth. Smart investing, after all, isn’t about picking a hot stock or a hot fund.

As the SPIVA Persistence Scorecard proves, hot hands this year often turn cold the next. Despite what our primitive instincts lead us to believe, smart investing isn’t about moving money around, either. It isn’t about jumping out of the market or changing your allocation if you think the US will default, the euro will crash or Leonardo DiCaprio will jump into bed with Putin.

Smart investing, instead, is about channeling Greed. I’m not talking about the Gordon Gecko kind. As the antagonist in the film, Wall Street, he crookedly repeated, “greed is good” as he fleeced everyone he could. Instead, I’m talking about calculated Greed, with a capital “G”. No, you won’t see this in the dictionary. But give it time. It might show up there soon.

Greed with a capital “G” is based on peer-reviewed, academic evidence. It’s akin to the probability that it’s better to own a casino than to play in the thing. Most people, when they invest, play in that casino. That’s greed, with a tiny “g.”

In contrast, Greed with a capital “G” plays the longer game. Yes, there’s always somebody winning a windfall in a casino. And some days, that casino loses money.

But long-term, the casino beats almost every player. And only the long term counts. It’s the only thing that counts.

That’s why if you want to build a retirement portfolio, buy an all-in-one portfolio ETF. That’s all you really need. Just one.

Then, while you’re working, keep adding money. Ignore how it performs this week or this year. Ignore how it performs…period. Don’t listen to investment news (any investment news) and add as much money as you can, whenever you have that money. That’s smart investing: Greed with a capital “G.”

All the research that has ever been done on funds reveals that on an equal risk-adjusted basis, an all-in-one portfolio of ETFs or index funds will beat most professional money managers over your lifetime. One reason is that you would own the world’s markets at the lowest possible cost. In other words, you own the casinos that others play in.

And there’s more.

Most amateur investors don’t come close to beating professional money managers. Amateurs, after all, invest with their emotions. They follow (or are convinced to follow) their short-term greed. That’s the one with the tiny “g.”

Below, I’ve listed four funds that I recommend for Europeans (or anyone living or retiring where the currency is euros). But please note. While these funds are listed in euros, they do not represent investments in euros. Instead, they represent exposure to the world’s stock markets and the world’s currencies. They include US stocks, emerging market stocks, Canadian stocks, European stocks, Australian stocks…the list goes on. They also include a variety of global and European bonds.

Vanguard LifeStrategy ETFs

Each of these funds maintains a consistent allocation. For example, Vanguard LifeStrategy 60% equity ETF (V60A) includes the following, approximate breakdown:

33% US Stocks
27% International stocks (including European and Emerging Markets)
23% US government and US corporate bonds (hedged to euros)
14% European government and corporate bonds
3% Other international bond exposure (hedged to euros).

^{Source: Vanguard}

Vanguard doesn’t juggle the holdings based on projections or forecasts. Instead, the fund company rebalances these funds internally to maintain a consistent allocation. This helps to reduce risk. It can boost returns, too.

As I referenced in my book, Millionaire Expat, the fund ratings company, Morningstar, found that all-in-one portfolios of index funds (or all-in-one ETFs, in this case) beat their equal risk-adjusted actively managed counterparts.

But there’s more.

Investors in such funds typically embrace the science of the capital “G” for Greed. As a result, they behave better.

That’s a really big deal.

Let me explain. Assume a fund earned an average annual return of 8 percent over the past 20 years, after fees. Morningstar found that the average investor in that fund, over the same time period, would have earned far less than 8 percent per year. Typically, they would have earned between 5.5 percent and 6 percent per year. On a long-term basis, they would have ended up with half of what they deserve.

That’s because of greed with a tiny “g.” Most investors buy funds after they have done well, and they trade out of those funds after they have done poorly. As a result, they typically buy high and sell low.

Those who invest in all-in-one index funds rarely make such mistakes. That’s because they know what they’re buying, and they typically ignore market news. They stay the course, long term, and make more money.

If you’ll be retiring in the UK, you can buy Vanguard LifeStrategy All-In-One funds through Swissquote Bank Europe. I explain those products here.

If you’re an expat who will eventually retire in Australia or Canada, you could buy these via Swissquote Bank Europe and transfer your holdings to an Australian or Canadian brokerage when you repatriate.

In each case above, that’s Greed with a capital “G.”

This is how to make money…and not just fool around.

Andrew Hallam is a Digital Nomad. He’s the bestselling author Balance: How to Invest and Spend for Happiness, Health and Wealth. He also wrote Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas

Swissquote Bank Europe S.A. accepts no responsibility for the content of this report and makes no warranty as to its accuracy of completeness. This report is not intended to be financial advice, or a recommendation for any investment or investment strategy. The information is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Opinions expressed are those of the author, not Swissquote Bank Europe and Swissquote Bank Europe accepts no liability for any loss caused by the use of this information. This report contains information produced by a third party that has been remunerated by Swissquote Bank Europe.

Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.