.png)
Vanguard’s LifeStrategy 100% Equity Fund (“LS100”) is a globally diversified, all-equity portfolio. It launched in June 2011 and has delivered solid long-term gains, but its returns have lagged certain benchmarks.
For example, over the 10-year period from mid-2011 to mid-2021, LS100 produced a total return of about 179%, slightly ahead of the average global equity fund but well behind the ~225% return of the MSCI World Index.
In other words, while LS100 benefited from the broad global bull market, it “hardly shot the lights out for the extra risk” compared to less aggressive allocations. Recent shorter-term results mirror this pattern: LS100’s 21.4% gain in one year (to mid-2021) trailed the 23.3% sector average and was on par with global indices.
This performance context sets the stage for examining why LS100 may not be the top choice for investors seeking maximum growth.
Supporting Data: Vanguard LS100 has beaten many peer funds over a decade (earning a Morningstar Silver rating), but a passive global index tracker or U.S.-focused strategy would have delivered higher returns in hindsight.
These outcomes stem from LS100’s asset allocation decisions and structural choices, which can act as growth limitations as detailed below.
Key Limitations for Growth-Seeking Investors
Despite its simplicity and low cost, LS100 has several characteristics that may limit its growth relative to other strategies.
Below are 10 reasons (and more) why this fund might not be optimal for investors targeting higher returns, focusing on its asset mix, sector exposures, fees, and risk-adjusted performance:
Heavy UK Home Bias – Lower Growth Potential: LS100 allocates roughly 25% of its equity portfolio to UK stocks, far above the UK’s ~4% weight in a neutral global index. This home bias has dragged on performance in the past decade.
The UK market has been a “laggy” performer compared to the U.S. and global averages. For instance, London’s FTSE indices (dominated by banks, oil, and miners) significantly underperformed U.S. markets in the 2010s. LS100’s extra “dollop” of UK equities meant it missed some of the stronger growth abroad. In short, overweighting a slow-growing home market has reduced the fund’s overall growth rate. An investor in a true global tracker with minimal UK exposure would have seen higher returns over the same period.
Underweight to High-Growth U.S. Stocks: Because of the UK tilt and inclusion of other regions, LS100 holds a smaller share in U.S. equities than the world market would dictate. The U.S. stock market – especially large-cap tech companies – was the engine of global equity growth over the last decade.
A global-developed index (MSCI World), which has ~60–70% in U.S. stocks, delivered much higher returns partly thanks to U.S. outperformance. LS100, by contrast, had roughly 35–40% in U.S. funds (19% U.S. index fund + ~18% S&P 500 ETF) in its portfolio. This underweight in the U.S. meant LS100 missed some of the “extra shot of US equity espresso” that boosted un-biased global funds. In periods when the U.S. market (with its many high-growth firms) leads the world, LS100’s relative underexposure there can hold back its total returns.
Exposure to Emerging Markets Lagged in Recent Years: LS100 includes an allocation to emerging markets (~7–8% via the Vanguard Emerging Markets Stock Index). Diversification into emerging economies can boost long-term growth potential, but over the last decade many emerging markets underperformed developed markets (especially the U.S.).
Notably, MSCI World (developed markets only) excludes emerging markets and benefited from a larger U.S. weighting, which helped it outperform LS100. LS100’s inclusion of emerging markets stocks – which had relatively weaker returns amid issues in China, Brazil, etc. – diluted its performance versus a developed-only or U.S.-focused strategy. In hindsight, the emerging market exposure did not pay off in growth terms during the 2011–2021 period, contributing to LS100’s gap behind a pure world index.
Broad Diversification into Low-Growth Sectors: By design, LS100 is extremely well diversified across all sectors and regions – it’s a “portfolio in a box” covering thousands of stocks. This provides safety through breadth, but it also means the fund inevitably holds many slow-growing companies and sectors that act as a drag on high-growth performance.
For example, the fund holds substantial weight in sectors like financial services, industrials, and energy (as part of its UK and global holdings). It also holds large-cap “value” stocks with higher dividends. Data on the fund’s holdings show a value tilt: LS100’s portfolio had a lower average P/E (~15.8) and much lower historical earnings growth (5% annually) than the global equity category average (~11% growth). In other words, LS100’s diversification included a lot of mature, slow-growth firms (e.g. oil majors, banks, consumer staples), which kept its earnings growth and capital appreciation lower than a more growth-oriented portfolio. Investors seeking higher growth might prefer to focus on sectors or companies with faster earnings growth, whereas LS100’s all-inclusive approach “captures the good with the bad,” limiting the overall growth rate.
Limited Allocation to Technology and Innovation: Related to the above, LS100 holds the tech sector at roughly market weight (~21% of the fund). While this reflects the global market capitalisation, it meant that during the 2010s tech boom, only about one-fifth of LS100 was in high-flying technology stocks.
By comparison, the S&P 500 (U.S. index) had ~27% in tech, and pure tech indexes (NASDAQ-100, etc.) had much higher exposure. The fund did own the big tech names (Apple, Microsoft, etc. via its index funds), but not in an overweight manner. The consequence: in periods when tech greatly outperforms (as seen in 2015–2021), LS100’s lack of emphasis on “high-growth technology stocks” contributed to its underperformance versus tech-heavy benchmarks. An investor concentrating more in booming sectors like technology, biotech, or e-commerce would have realised higher returns than the broad-market approach of LS100. In short, the fund’s sector mix is too balanced to capitalise on any single high-growth theme.
Primarily Large-Cap Focus – Missing Small-Cap Premium: The LifeStrategy 100 fund invests via Vanguard index funds that track large and mid-cap stocks in each region (e.g. FTSE All-Share for UK, FTSE Developed World ex-UK, S&P 500). It has minimal small-cap exposure, apart from a tiny slice in the FTSE 250 (UK mid/small-cap). Historically, smaller companies can offer higher growth rates (the “small-cap premium”), albeit with higher volatility. Because LS100 is categorized as a “Global Large-Cap Blend” fund, it forgoes a dedicated allocation to global small-cap stocks.
This could be a limitation for growth seekers – for example, many innovative up-and-coming companies start in small-cap indices before growing large. A self-directed investor could add a small-cap index fund or tilt towards mid/small companies to potentially enhance returns, whereas LS100’s fixed allocation does not specifically capture that segment. Essentially, LS100’s broad market approach skews toward established large-cap firms and may miss out on the higher growth often found among smaller-cap equities.
Static Asset Allocation (No Tactical Adjustments): One of LS100’s defining features is its fixed allocation – roughly 100% equities with set regional weights (including ~25% UK). The fund is passive and rules-based, rebalancing periodically to maintain target weights. While this discipline enforces buy-low, sell-high rebalancing, it also means no tactical shifts to capitalise on changing market conditions.
By design, the fund “does not adjust asset weightings depending on prevailing market conditions”. In contrast, an active investor or adaptable strategy could overweight markets or sectors expected to outperform and underweight those expected to lag. For example, when one region (like the U.S.) is clearly leading, LS100 will still trim it to add to others (like UK or emerging) to stick to the preset mix – potentially cutting winners too early. Similarly, the fund cannot raise cash or rotate into defensive assets in advance of a downturn; it rides the market fully down and up. This lack of flexibility can hamper growth in two ways: (a) the fund may continue plowing money into underperforming areas due to rebalancing (e.g. buying more of a slumping UK market) rather than shifting to faster-growing opportunities; and (b) it cannot sidestep market crashes (which, if one could even partially do, would improve long-run compounded returns). In summary, LS100’s one-size-fits-all static allocation might not be optimal if you have insight or desire to tilt toward where the growth is – it won’t tactically “chase” higher growth areas, even when doing so might be advantageous.
Risk-Adjusted Returns Not Superior: Investors seeking high growth should also consider risk-adjusted performance – are you getting enough extra return for the extra volatility? LS100 carries 100% equity risk (significant volatility and drawdowns), but its reward for that risk has not been dramatically higher than some less risky mixes. Over the past decade, a LifeStrategy 60%. LS100 did deliver higher absolute returns, but not by a wide margin relative to the jump in volatility.
As one analysis noted, the all-equity fund “has done a solid job, but it hardly shot the lights out for the extra risk” when compared to something like LifeStrategy 60. Its Sharpe ratio (a measure of return per unit of risk) was likely not much better than a balanced portfolio, especially since bond yields were decent and smoothed volatility in that period. In practical terms, during market downturns LS100 can drop over 30-40% (as global stocks did in 2008 and March 2020), erasing years of growth temporarily. Unless an investor stays the course, that volatility can hurt long-term results (selling low locks in losses). Other strategies – e.g. slightly tempered equity exposure or factor-tilted portfolios – might deliver comparable long-term growth with a smoother ride. /
Thus, for the incremental risk taken, LS100’s risk-adjusted return profile hasn’t been extraordinary. Those seeking efficient high growth might improve the risk/reward balance by diversifying or timing allocations more wisely than the fund’s rigid approach.
Costs and Fees – Slight Drag on Total Returns: Vanguard is known for low fees, and indeed LS100’s ongoing charge (OCF) of ~0.22% is inexpensive in absolute terms. However, investors could achieve a similar all-equity global exposure at an even lower cost on their own. The LifeStrategy fund is a fund-of-funds, meaning it holds other Vanguard index funds. There is a small extra layer of cost for this convenience – “a small OCF premium for the convenience of buying in bulk”.
In fact, holding the underlying index funds or ETFs separately could trim the fees slightly (for example, a U.S. S&P 500 ETF charges as low as 0.05–0.07%, and global ETFs can be ~0.15% – a blend that might come in under 0.20%). As one comparison noted, LS100 at 0.22% vs a simple S&P 500 ETF at 0.07% highlights the higher fee for the diversified approach. Over long periods, every fraction of a percent in fees compounds and can shave off total returns. While the cost difference isn’t huge, fees do eat into growth, and extremely cost-conscious, growth-focused investors may prefer to use the cheapest possible index trackers or commission-free platforms. Additionally, because LS100 is a single fund, if it’s held on a platform that charges percentage-based account fees, there’s no way to avoid that by using ETFs (some brokers have flat fees or no custody fee for ETFs). In summary, LS100’s fee is low but not the lowest possible, and any avoidable cost can be viewed as a slight performance headwind for those trying to maximize returns.
No Chance of Outperforming the Market (By Design): Perhaps the most fundamental limitation is that LS100 is not trying to beat the market – it is the market, in many ways. The fund’s goal is to “achieve a global average weighted return” cheaply and reliably. That’s great for a hands-off approach, but for an investor aiming to outpace the market (higher growth than average), LS100 will never be the vehicle to do that. It does not employ any active stock selection or specialised strategy that could generate alpha beyond market returns.
In fact, Vanguard explicitly avoids such bets; even the home bias tilt is based on investor preference, not a forecast for better returns. As a result, LS100 will underperform any segment of the market that outperforms the average. If technology stocks or a particular country skyrockets, LS100 captures only a proportionate slice of that gain. It will also, by construction, hold parts of the market that might stagnate. In hindsight you can “always find an investment that would have been amazing” – whether Bitcoin, Nasdaq, or Tesla– but LS100 will never be that concentrated winner. It’s the classic trade-off: broad diversification vs. concentrated growth. Thus, investors with the goal of maximizing growth may find LS100 too constrained; to beat the market, one must deviate from the market portfolio. LS100’s mandate is to match market performance (with a slight UK twist), so it inherently forfeits the possibility of excess returns (aside from small variations) in exchange for simplicity and consistency.
In summary, the LS100 fund provides global equity exposure with low effort, but its built-in asset allocation and approach lead to a “middle-of-the-pack” growth profile. The above factors – from a large home bias to lack of tactical flexibility – help explain why it hasn’t been the top performer for growth, especially when compared to more focused or dynamic strategies.
How Self-Directed Investing Can Offer Higher Growth
For investors willing to take a hands-on approach, self-directed investing can provide opportunities to outperform a one-size-fits-all fund like LS100. By constructing your own portfolio (or selecting specialised funds), you can address many of the limitations outlined above:
Custom Asset Allocation: A self-directed investor can remove the UK home bias and allocate globally according to market weights or personal market outlook. For example, one could invest in a global all-cap index fund with only ~5% UK exposure, instead of 25%. This would have boosted past returns and may continue to do so if the UK remains an under-performer. You also have the freedom to overweight regions you expect to grow faster. If you believe the U.S. or emerging Asia will lead, you can tilt more heavily there (unlike LS100, which is locked into fixed proportions).
Sector and Thematic Tilts: Self-directed portfolios allow overweighting high-growth sectors that LS100 only holds at market weight. For instance, an investor could allocate extra funds to technology or healthcare ETFs, or buy a NASDAQ-100 index fund, capturing more of the growth from innovative companies.
Indeed, a simple tilt toward the S&P 500 (U.S.) over the last 5+ years delivered higher returns than LS100, largely due to the tech-heavy nature of the S&P 500. The investor can also add funds focusing on specific themes (like clean energy, biotech, or emerging tech), which, if successful, could drive portfolio returns above the broad market average.
Include Small Caps and Growth Stocks: To aim for higher long-term growth, one might add a global small-cap index fund or a quality growth fund to the mix. Historically, smaller companies and certain “growth” factor stocks can outperform large-cap averages over extended periods. Since LS100 is light on small-caps, a DIY approach can intentionally capture that small-cap premium by investing in, say, a Vanguard Global Small-Cap index fund or similar. Likewise, one could choose funds that emphasize companies with high earnings growth or other favourable metrics. These tilts come with more volatility but potentially better returns to reward the risk – something a growth-seeking investor may accept.
Dynamic/Tactical Allocation: Unlike LS100’s static policy, a self-directed investor can practice tactical asset allocation (if they have the skill or conviction). This might mean reducing exposure to overheated markets or sectors and increasing exposure to undervalued or fast-rising ones. For example, an investor could have recognised the strength of the U.S. market and shifted more into U.S. equities in the mid-2010s, thereby beating the balanced global approach. Conversely, they could trim positions when valuations seem extreme. While timing the market is challenging, having the flexibility to adjust can protect and enhance growth – active managers did exactly this by underweighting expensive long-duration bonds, which helped them when bonds fell. Similarly, a nimble equity investor might avoid regions with poor outlook (e.g. trimming UK during Brexit uncertainties) in favor of those with stronger momentum.
Lower Costs with ETFs and Brokers: As noted, you can replicate LS100’s exposure with separate low-cost index funds or ETFs, often at a slightly lower total expense ratio. Many core ETFs (U.S., global developed, emerging markets, etc.) have OCFs in the 0.05%–0.20% range, which combined can come out below 0.22%. Additionally, some investment platforms offer free trading or zero commission on ETFs, meaning you won’t incur high transaction costs to rebalance periodically. Vanguard’s own platform, for instance, has a low account fee cap and does not charge for fund switches. By self-investing, you ensure that every basis point saved in fees can contribute to your returns – an edge that compounds over time. Essentially, you can get the same diversification without paying for the “fund-of-funds” wrapper, improving net performance slightly.
Potential for Stock Selection Alpha: Truly growth-driven investors might go beyond index funds and pick individual stocks or concentrated positions that they believe will outperform. LS100 holds thousands of stocks, most of which will never double or triple in value quickly. A self-directed approach could focus on a few dozen high-conviction stocks (for example, leading tech innovators or emerging market champions). If even a few of those picks turn into big winners, the portfolio’s growth could surpass an index fund. Of course, stock picking carries higher risk and requires research, but it’s a path to potentially beat the market – something LS100 doesn’t attempt. Even a barbell strategy of a core index fund plus a satellite of growth stocks can tilt the return higher. As Vanguard’s own product manager admitted, “some of the best fund managers can’t consistently” predict the next big out-performer, so this route is only for those confident in their analysis. However, the option is there to try for alpha.
Inclusion of Alternative Growth Assets: While LS100 sticks strictly to equities, a self-directed investor could diversify into other growth-oriented asset classes that might boost returns. Examples include real estate investment trusts (REITs), commodities or gold (which can shine in certain cycles), or even crypto and private equity for the very risk-tolerant. These are unconventional and come with their own risks, but they’ve been stellar performers in certain periods (e.g. Bitcoin in the 2010s, or property in various markets). LS100 doesn’t touch these areas. Adding a small allocation to alternative assets when conditions favor them could improve the growth trajectory of a portfolio beyond what a 100% public equity fund delivers. (Naturally, caution and due diligence are critical with such assets.)
In essence, self-directed investing offers greater control and customisation. You can correct the aspects of LS100 that you view as drawbacks – whether it’s eliminating the UK bias, emphasising specific sectors, or adjusting allocations as the world changes.
By doing so, you increase the chance (though not the guarantee) of achieving higher growth than the off-the-shelf LifeStrategy fund. Indeed, looking back, a simple self-built portfolio of 90% global equities (with no home bias) + 10% emerging tech stocks would have handsomely outpaced LS100.
The trade-off, of course, is the effort and risk of making these choices yourself. But for those targeting maximum growth, that effort can be worthwhile.
Conclusion
The Vanguard LifeStrategy 100% Equity Fund has proven to be a robust, low-cost vehicle for broad equity market exposure, but its very design – broad diversification with a home bias and static allocation – means it delivers middle-of-the-road growth. It achieves the market’s average return (after a small fee), which by definition cannot lead the pack when certain segments soar. We identified at least ten reasons why LS100 may not be ideal for aggressive growth seekers: from its 25% UK allocation dampening returns, to its underweight in the U.S./tech boom, inclusion of slower-growth sectors, lack of small-cap tilt, and inability to adapt tactically. Its risk-adjusted performance has been decent but not remarkable, given 100% equity volatility. In contrast, a self-directed strategy can exploit these shortcomings – by reallocating to high-growth regions and sectors, lowering fees, and even attempting to pick winners, an investor might achieve better performance than the all-in-one fund.
Ultimately, whether LS100 is the “best” choice depends on one’s goals. For many investors, its simplicity and diversification at low cost are a winning formula (avoiding big mistakes is as important as chasing big returns). However, for those solely focused on higher growth and willing to take extra risk or effort, more tailored approaches appear capable of outperforming LS100 over the long run. The historical data bears this out: a globally diversified but home-bias-free portfolio would have topped LifeStrategy 100’s returns by a sizable margin, and a U.S.-heavy or tech-heavy portfolio even more so. Going forward, investors who desire maximum growth should consider taking the driver’s seat – using LS100 as a benchmark of global equity performance, but not necessarily the vehicle of choice. With informed asset allocation decisions, sector emphasis, and cost discipline, self-directed investors can position their portfolios for better growth than the all-in-one, average approach embodied by LifeStrategy 100% Equity.
RISK WARNING: All investing is risky. Returns at not guaranteed. Past performance and case studies are no guarantee of future results.
Disclaimer: The content provided on this blog is for informational purposes only and does not constitute financial advice. The opinions expressed here are the author's own and do not reflect the views of any associated companies. Investing in financial markets involves risk, including the potential loss of your invested capital. Past performance is not indicative of future results.
You should not invest money that you cannot afford to lose. Mentions of specific securities, investment strategies, or financial products do not constitute an endorsement or recommendation. The author may hold positions in the securities discussed, but these should not be viewed as personalised investment advice.
Readers are encouraged to conduct their own research and seek professional advice before acting on any information provided in this blog. The author is not responsible for any investment decisions made based on the content of this blog.
Alpesh Patel OBE
Visit www.alpeshpatel.com/shares for more and see www.alpeshpatel.com/links
ความคิดเห็น