As a Vanguard investor, you can see your Vanguard ISA as your straight road to financial bliss. It is not going to make you a private plane wealthy fast, but over the long run, it will help you build a hefty pile of cash. And you don’t have to be a financial maverick to get there.
What is the snag?
If you don’t choose to invest in one of Vanguard’s ready-made portfolios, you must select the index funds for your investments. Many of us, especially beginners, find this daunting.
In this post, I will unveil the benefits of being a spectacularly boring investor for your portfolio and state of mind by exploring a time-tested investment approach that is as thrilling as watching paint dry – the Merriman and Buck approach to selecting index funds.
Paul Merriman and Chris Buck have shown that investing doesn’t have to be complicated or anxiety-inducing. Their philosophy centres on simple principles: diversification, low costs, a long-term perspective, and regular rebalancing.
By the time you finish reading, you’ll understand why the power of patience, discipline, and a steadfast commitment to a dull but effective strategy can lead to remarkable results in your Vanguard ISA.
So, if you’re ready to trade the investing roller coaster for the steady climb, let’s explore the world of spectacularly boring investing.
The ‘Two Funds for Life’ Investing Approach and Your Vanguard ISA
“The Two Funds for Life” investing approach is a strategy developed by Paul Merriman and Chris Buck that involves investing in two funds for a lifetime. This approach aims to provide investors with a simple yet effective way to manage their investments by allocating their portfolio to two popular funds that balance risk and return.
Merriman and Buck developed this approach specifically for retirement. It is, however, applicable to your Vanguard ISA.
In a nutshell, this approach tells us to invest regularly, over a long time, in two funds – one ready-made fund and one small-cap value stock fund.
This is what genius looks like, friends.
The rest is up to you. Invest regularly and split your investments in an 80-20% ratio between the ready-made and small-cap funds.
You can learn more about this strategy by reading ‘We’re Talking Millions! 12 Ways to Supercharge Your Retirement’.
Key Messages to Supercharge Your Stocks and Shares ISA
In summary, here are the key messages in this book:
- Start investing as early as possible.
- Invest in stocks, not bonds.
- Account for inflation so that it doesn’t mess up your plans.
- All you need is to invest in a ready-made Vanguard fund (like LifeStrategy funds) and a small-cap value stock fund.
- Don’t over-complicate your investing. Just invest regularly and with persistence.
What Index Funds I Have in My Vanguard Stocks and Shares ISA
I have a confession to make – my Vanguard ISA portfolio is not precisely tailored according to the Merriman & Buck ‘two funds for life’ strategy.
It is still very simple.
- LifeStrategy 80% Equity Fund (34% of my portfolio)
- S&P 500 UCITS ETF (VUSA) (28%)
- US Equity Index Fund (36%)
And while the volatility of the markets is ever-present, my Stocks and Shares ISA is, so far, more up than down.
What is even better is that the funds are low-cost, diversification takes care of itself, and rebalancing takes an hour annually.
Is investing in my Vanguard ISA exciting?
Heck, no. It is as boring as investing gets.
My monthly contribution goes to the cash part of the portfolio automatically, I move money to the funds twice a month (dollar cost averaging is a powerful strategy) and repeat.
Does it build wealth? You bet it does.
Even better, anyone can use this approach.