Why You Might Not Want a Vanguard Stocks and Shares ISA

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Vanguard is a popular topic of discussion when it comes to investing, with many people recommending it as a viable option. However, in this article, we will explore the reasons why you might not want to go with Vanguard for your investment needs. As an experienced investor, I want to provide you with an alternative perspective and shed some light on the potential downsides of choosing Vanguard.

Before we dive into the details, let me give you a brief overview of my investing journey. Currently, my portfolio stands at £107,944, and I want to emphasize that I’m not sharing this to show off, but rather to demonstrate that I have been investing for a while and have gained some knowledge in the process. I believe it’s essential to back up advice with real numbers and personal experiences, which is something I feel is lacking in some recommendations for Vanguard.

Now, let’s address the issue at hand. While many YouTubers in the finance space promote Vanguard and provide updates on their Vanguard portfolios, I question the motives behind their recommendations. It seems that some creators are leveraging the popularity of Vanguard as a keyword to attract views and generate more content. However, simply having numerous Vanguard funds in a small portfolio doesn’t necessarily benefit the investor.

When it comes to investing, there are three primary strategies you can consider: options A, B, and C. Option A involves playing it safe with Vanguard ETFs. These funds allow you to diversify your investments across various companies. For example, you can choose Vanguard ETFs for the FTSE 100 or FTSE 250, which spread your risk across the top 100 or 250 companies in the UK, respectively. This is often recommended for 95% of individuals, as it offers a low-risk option with consistent returns.

Warren Buffett, one of the most successful investors globally, suggests that most people should opt for an S&P 500 or FTSE 100 index fund. By doing so, you can achieve a decent return of around 7.75%, which is a safe and reliable choice for the majority of investors. However, it’s important not to go overboard with the number of funds in your portfolio, as some creators on YouTube tend to do. Spreading your investments too thin can dilute the potential rewards.

Option B, which I find incredibly frustrating, involves buying hyped-up individual shares. Many YouTubers advocate for purchasing shares of companies like Apple, Tesla, Facebook, or even GameStop, promising quick and significant profits. However, this approach often leads to poor financial outcomes. Without a solid foundation for investing in these companies, such as a comprehensive analysis of their fundamentals, buying based on hype or personal preferences is risky and can result in losses.

Option C combines the best of both worlds. It entails allocating 75% of your portfolio to a fund like Vanguard and using the remaining 25% to invest in individual shares. This approach allows you to benefit from the stability and diversification of funds while also providing the opportunity to research, purchase, and hold individual shares for long-term growth. This strategy has worked well for me personally, providing a balance between risk and reward.

To invest with Vanguard directly may seem like an attractive option, but I believe it limits your choices unnecessarily. Platforms like Hargreaves Lansdown and Free Trade offer a vast array of stocks and funds, including Vanguard, but also many other options from different investment firms. As a beginner, it’s crucial not to restrict yourself solely to Vanguard, as having the ability to buy and hold individual shares provides invaluable learning opportunities.

Furthermore, it’s important to note that while funds offer a safe and stable return, they may not provide the same level of growth as carefully chosen individual shares. If your goal is to outperform the stock market and achieve higher returns, it’s worth considering incorporating individual shares into your portfolio.

In my own experience, I have seen significant profit by holding individual shares such as Aviva, Taylor Wimpy, BP, and Disney. These investments outperformed the performance of Vanguard funds, demonstrating the potential higher rewards that come with selecting individual stocks.

In conclusion, while Vanguard is indeed a reputable investment firm, it may not always be the optimal choice for everyone. By considering alternative strategies and exploring the advantages of holding individual shares, you can potentially achieve higher returns and have more control over your investment decisions. Remember to conduct thorough research, diversify your portfolio, and invest wisely.