An entire portfolio in a single multi-asset fund. The case of Vanguard’s LifeStrategy

Investors are always looking for the perfect portfolio formula. A product that avoids traditional intermediaries, removes complex allocation decisions, and minimizes ongoing management fees. A "smart" investment that takes care of everything, leaving the investor solely to collect the returns.

In recent years, Vanguard has attempted to address this very need, creating a range of multi-asset index funds that promise simplicity, efficiency, and diversification in a single instrument. But is it really that easy? In finance, shortcuts rarely exist. And understanding how a product like this works is the first step to using it wisely.

The LifeStrategy Philosophy

Vanguard’s LifeStrategy series is born from a simple yet powerful concept: building a balanced, global, and automatically rebalanced portfolio that can adapt to different risk profiles.

In practice, instead of choosing individual ETFs on stocks and bonds, investors can purchase a single fund that already contains a diversified mix of both.
The range includes four main versions: 20, 40, 60, and 80, numbers that represent the percentage of equity-to-bond allocation. Added to these is the LifeStrategy 100, which is entirely equity-focused.

A conservative investor might prefer the 20 or 40 versions, while a more dynamic investor might opt for the 60 or 80 versions. Each combination corresponds to a different balance between risk and expected return, thus offering a wide range of choices within a unique structure.

But the real strength isn’t just the variety: it’s the internal structure. These ETFs are "multi-asset" funds, i.e., ETF of ETFs. They contain a selection of Vanguard equity and bond ETFs, globally diversified. This means exposure to the main developed markets, but also a small portion to emerging economies, to ensure global coverage.

How it really works

The mechanics of LifeStrategy are its core.

Once purchased, the fund automatically manages its asset allocation: if stock markets rise too much and unbalance the portfolio, Vanguard rebalances by selling part of its equity holdings and buying bonds, restoring everything to the pre-established balance.

This process, called automatic rebalancing, occurs without the investor having to intervene. And this is one of the product’s main advantages.

Those who manage their own portfolio know how difficult it is to maintain discipline during periods of volatility. LifeStrategy eliminates emotion and acts mechanically, maintaining consistency with the chosen risk profile.

Costs are also a strong point. With an ongoing charges figure (OCF) of around 0.25%, LifeStrategy is competitive compared to many traditional asset management or balanced funds, which are often much more expensive.

Investors can also choose between distribution or accumulation versions, depending on whether they wish to receive periodic distributions or reinvest the proceeds, and consider the currency-hedged share class to reduce exchange rate risk.

Simplicity and Accessibility

Another distinctive aspect of these funds is their accessibility.

The LifeStrategy is a standard ETF, even with modest capital, through a brokerage platform or a regular savings plan.

In a single instrument, you get global diversification, automatic rebalancing, and management consistent with your profile. It is a all-in-one solution, which has made investing accessible even to those who do not want or cannot dedicate much time to portfolio management.

Yet, this very simplicity hides a structural limitation: lack of flexibility.

The Problem of Correlation and Lack of Flexibility

For decades, the success of balanced portfolios depended on a principle as elegant as it was effective: the negative correlation between equities and bonds.

When stock markets crashed, bonds tended to rise in price, acting as a counterweight. It was the classic "60/40" formula: two uncorrelated assets that offset each other.

In recent years, however, this balance has been compromised.

With rising inflation and central banks tightening their monetary policy, stocks and bonds began to move in the same direction, often both downwards. The increased correlation between the two asset classes weakened bonds’ stabilizing role, challenging portfolios constructed according to rigid and static models.

And here lies the limitation of the LifeStrategy: it lacks the ability to adapt. It cannot raise cash allocations during periods of high market risk, nor choose short-dated bonds to protect against rising interest rates. It doesn’t distinguish between defensive and cyclical equity sectors, nor does it take macroeconomic conditions into account. It’s an automatic, efficient system, but it lacks strategic flexibility.

Investors in a LifeStrategy essentially accept passive management that doesn’t move with the economic cycle.

Customization: the real weakness

Lack of customization is the other side of the coin.

A LifeStrategy doesn’t take into account personal variables such as age, financial goals, loss tolerance, or liquidity needs.

A young investor and a pre-retirement investor should hardly have the same asset allocation, but a LifeStrategy makes no distinction: it offers a medium balance, designed for a theoretical profile.

Furthermore, choosing a static fund like this implies forgoing any tactical intervention: weightings cannot be adjusted based on market conditions or current opportunities. It’s an approach that only works if the investor truly accepts maintaining a long-term buy-and-hold approach and letting the market take its course.

So? Simplicity, yes, but with awareness

The LifeStrategy represents one of the simplest solutions on the market. It offers global diversification, low costs, and automatic rebalancing that eliminates the burden of decision-making. But simplicity, as always, comes at a price.

You relinquish control over asset allocation and exploit specific market conditions.

In finance, there are no magic shortcuts, only solutions that may or may not suit each investor’s needs.

The secret isn’t finding the perfect ETF, but understanding whether its philosophy reflects your own. Because even the best portfolio in the world is of little use if it isn’t aligned with your life goals and risk tolerance.

Original article published on Money.it Italy 2025-10-09 06:35:00. Original title: 1 portafoglio intero con 1 solo ETF. Il caso del LifeStrategy di Vanguard