As I enter another fiscal year, my investment strategy remains simple.
My ISA consists of two funds. VanguardESGGlobalAll Cap ETF (V3AA) and Vanguard Global Aggregate Bond Ucits Etf (Missing).
The past few years have been turbulent in the world of investment. After the challenges brought about by hiking inflation and interest rates in 2022, Morningstar Global Market Index They have gathered for over 2023 and 2024.
Over the past two years, the Morning Star Global Market Index has increased by +33.07%, Morning Star US Large Cap Index In particular, +56.59% rose sharply, thanks to the AI rally.
However, in 2022, the Morningstar Global Market Index fell by nearly 18%. Morningstar Global Corporate Bond Index It retreated at 17.3%, highlighting the unpredictable nature of financial markets. Despite the turbulence, I ignored the fluctuations in the market and kept the course.
Looking forward to 2025 and 2026, unpredictability is an important theme. However, my strategy has not changed. Maintain a diverse, low-cost portfolio and avoid attempts to predict the next market move.
Start with the equity component and dig deeper into your portfolio options.
Vanguard ESG Global All Cap UCits Etf
Vanguard ESG Global All Cap Ucits Etf V3AA It’s my choice for the equity component of my portfolio. I generally avoid a narrow ESG portfolio to maintain diversification and this fund is consistent with my preferences. This follows a comprehensive exclusion-based ESG process and maintains many of the benefits of diversifying unscreened global all-cap indexes.
The fund tracks the FTSE Global All Cap Choice Index, which excludes non-renewable energy, by-products, weapons, and companies that earn revenue from oil, coal and gas. With 6,000 shares spanning development and emerging markets at a continuing fee of just 0.24%, it is one of the most cost-effective options for global large-cap exposure in Europe.
Vanguard Global Aggregate Bond UCits ETF
For the bond portion of my portfolio, I rely on the Vanguard Global Gregregate Bond UCits ETF Missing. The fund provides global government and corporate bond exposure and could serve as the sole bond component of its retail portfolio. With a continuous charging of 0.10%, it maintains a greater cost advantage over its peers.
ETF is attempting to replicate the performance of the global investment grade bond market by tracking the Bloomberg Global AGG Index. This is weighted by market capitalization. It offers diversification across geography, sector, maturity and credit quality, with approximately 10,000 holdings and invests in investment grade bonds only.
The fund has been difficult to hold over the past few years. In 2020, it landed in the second quartile compared to its active and passive morning star category peers, but fell to the third quartile in 2021 and to the bottom of the fourth quartile in 2022. China’s underweight also helped. I’m happy that we didn’t sell this position in 2021 and 2022. Because the losses have been crystallized. It was particularly difficult to hold in 2022 when the bond portion of my portfolio did not provide the expected ballast.
Passive funds covering the full maturation spectrum are usually more vulnerable to periods of rising rates, as they do not take all the downsides and cannot shorten the duration. This has been a key drug of return over the past few years compared to a flexible approach to the global bond market.
Vanguard Lifestrategy
Although it is no longer part of my ISA, which sold my position a few years ago, the Vanguard Lifestrategy series mentions its diversification, cost-effectiveness and strategic asset allocation.
The series’ equity exposure begins 20% in the most conservative portfolioincreases with an increase of 20% points 40%, 60% and 80%until the most offensive portfolio is allocated 100% on stocks 0% from bonds.
Vanguard’s Strategic Asset Allocation Committee reviews each portfolio allocation annually and utilizes research developed by the Investment Strategy Group.
The company’s research suggests that market-listed approaches provide broad exposure and effectively diversify their portfolios. Management avoids tactical inclinations, actively manages the underlying funds and niche asset classes, and instead sticks to cheap index-based exposure. A simple and efficient approach to providing the range of fairness and fixed income exposures for the series should continue to benefit investors. These funds are priced very competitively at 0.22%.
Although Ireland-controlled UCITS ETF maintains a global focus, there is a domestic bias in the UK-based funds available on the UK platform. The UK-based fund allocates approximately 25% of its equity portion and 35% of its bond portion to domestic investments. Despite its strengths, my desire for a geographically unbiased portfolio has pushed me forward and strengthened my commitment to global diversification.
Monica Kalay is the director of Morningstar’s Manager Research
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