Portfolio Advice

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  • Hooloovoo
    Hooloovoo Posts: 1,281 Forumite
    owains wrote: »
    Looks good to me. The only thing observations I would make are that you're over-exposed (relative to MSCI world index anyway) to Asia and UK at the expense of US (~50%). However, I'm sure this is a deliberate choice.

    Yes, many of the funds I looked at were weighted more towards the US. Even on Monevator he went 20% HSBC FTSE All Share Index and 27.5% HSBC American Index. That produces a region weighting of 27% to USA and 17% to UK.

    I have opted to go with approximately equal weights for US and UK, and pushed Japan and Australia up a bit to compensate. The US could go all wrong for the next few years after the election, and Australia is a pretty strong independent economy.

    Maybe I'm wrong. Who knows. Maybe I will change the weights again before finally pulling the trigger.

    I've got a few days yet while Cavendish sort out my account, so I wont be buying in just yet.
    In case it influences your decision to start buying immediately, I contacted Interactive Investor about availability of the FTSE UK All Share Vanguard fund and received this reply...

    I have asked them to find out whether the whole Vanguard tracker range will be available, though I think it's unlikely. Or, if they do strike a deal with Vanguard, I suspect there'll no longer be the 0% commission trades.

    Thanks. Do keep us updated on what you find out. :beer:
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    Hooloovoo wrote: »
    The US could go all wrong for the next few years after the election, and Australia is a pretty strong independent economy.

    OTOH, the US has many creative industries whereas Australia is dominated by diggers.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Hooloovoo
    Hooloovoo Posts: 1,281 Forumite
    gadgetmind wrote: »
    OTOH, the US has many creative industries whereas Australia is dominated by diggers.

    True, but Australia is still very much in it's infancy economically speaking. The country has seen spectacular growth in the last 20 years alone.

    And I'm still weighting the UK and US at almost 50% of the total portfolio.

    Hmm. Maybe I'll tweak the US back up a bit.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    First Anniversary First Post Combo Breaker
    Hooloovoo wrote: »
    Maybe I'll tweak the US back up a bit.

    I would, but as I say (often) there really are no right answers.

    I was really just trying to flag that Australia isn't what you might think (and thus by induction neither is an equal weight Pacific) and that the US is maybe more varied.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Hooloovoo
    Hooloovoo Posts: 1,281 Forumite
    gadgetmind wrote: »
    I would, but as I say (often) there really are no right answers.

    I was really just trying to flag that Australia isn't what you might think (and thus by induction neither is an equal weight Pacific) and that the US is maybe more varied.

    What about home bias? I was tempted to bias towards the UK to try and mitigate some currency risks, but pretty much every example portfolio has a majority weight to the US.
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
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    Hooloovoo wrote: »
    pretty much every example portfolio has a majority weight to the US.

    The US is (from memory!) about 65% of the global market so any portfolio with US at this figure is equal-weighting the US, anything more is over-weighting.

    Look at the make up of any global tracker to see how to equal weight. You can then decide whether to add/subtract in any of these areas. You might decide to boost the UK, which many do to reduce currency risk and to give them a portfolio that behaves more like the local market that they see day to day. You might decide that emerging markets are the area to invest more, or the US, or smaller companies.

    My current position is to slightly over-weight smaller companies, Pacfic and EM globally and the FTSE 250 and "value shares" locally, but I've done this with tweaks rather than "farm bets".
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Hooloovoo
    Hooloovoo Posts: 1,281 Forumite
    edited 26 April 2012 at 9:31AM
    gadgetmind wrote: »
    The US is (from memory!) about 65% of the global market so any portfolio with US at this figure is equal-weighting the US, anything more is over-weighting.

    Look at the make up of any global tracker to see how to equal weight.

    That's what I was doing last night. I was looking at the HSBC World Index funds. They have cautious (60/20), balanced (55/30), and dynamic (73/15). Those figures don't add up to 100%. The remainder is "short term" and "other" investment types.

    The "dynamic" portfolio has 73% equities. That is made up from:

    21.25% United States
    17.87% United Kingdom
    14.52% Eurozone
    11.52% Asia - Developed
    7.18% Asia - Emerging
    6.88% Japan
    6.41% Europe - ex Euro
    4.94% Australasia
    3.97% Latin America
    1.87% Europe - Emerging
    1.60% Africa
    0.11% Other

    So only 21.25% of the equities in the fund are in the United States.

    It's made up predominantly by investing in the funds I am looking to purchase:

    15.24% - HSBC European Index Retail Inc
    15.14% - HSBC FTSE All Share Index R Inc
    14.79% - HSBC American Index Retail Inc
    13.46% - HSBC MSCI Emerging Markets ETF
    8.62% - HSBC Pacific Index Retail Inc
    5.16% - HSBC Japan Index Retail Inc

    The Vanguard Life Strategy 100% Equity fund has just 22% in America. With 35% UK, 18% Europe, and 13% Japan.

    The 80% equity version has just 17% in America, and almost half in the UK.

    So my current plan is weighting the US about the same as in the Vanguard 100% fund.

    Could you show me a global fund that weights the US at 65%? I'd like to look at that composition of the other elements of that.

    I'm not saying I'm right or wrong, just trying to get a bigger picture :)
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    First Anniversary First Post Combo Breaker
    Hooloovoo wrote: »
    Could you show me a global fund that weights the US at 65%? I'd like to look at that composition of the other elements of that.

    I was a bit off with my 65%.

    The Vanguard Global ex UK has US 57%, Europe 23%, etc.

    The MSCI All Countries World Index breakdown is here -
    http://us.ishares.com/product_info/fund/overview/ACWI.htm - it has US 45%, UK 8.27%, Japan 7.79% etc.

    Note that MSCI also have a World Index that doesn't include EM, and there are also equal weighted index as opposed to these market cap ones.

    Ultimately, there really isn't any one good answer. ISTR that Tim Hale said that over-weighting the UK was partly done to reduce currency risk but also so that investors didn't get edgy when their portfolio behaved very differently to the markets the read about in the paper!

    I also started with the Vanguard 100% equities and then started tweaking.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
  • Hooloovoo
    Hooloovoo Posts: 1,281 Forumite
    gadgetmind wrote: »
    The Vanguard Global ex UK has US 57%, Europe 23%, etc.

    Well of course if you exclude the UK then the US is going to get a much greater exposure.

    Stick 25% UK in there and the US component will be down to 30% or so. Admittedly that's still higher than other global funds I've looked at.
    The MSCI All Countries World Index breakdown is here -
    http://us.ishares.com/product_info/fund/overview/ACWI.htm - it has US 45%, UK 8.27%, Japan 7.79% etc.

    Note that MSCI also have a World Index that doesn't include EM, and there are also equal weighted index as opposed to these market cap ones.
    Thanks for that. I still seem to be having trouble finding fund details some times.

    The region total only gives 82.11% of the fund. I can't seem to see where the other 17.89% goes?
    Ultimately, there really isn't any one good answer. ISTR that Tim Hale said that over-weighting the UK was partly done to reduce currency risk but also so that investors didn't get edgy when their portfolio behaved very differently to the markets the read about in the paper!
    Yes, that's right. I'm not too worried about that so I'm not intending to bias the UK too much. Having said that, the 8.27% given to the UK in the MSCI fund above seems a bit low!

    I think I will tweak the numbers a little more again tonight and post another suggestion ...
  • gadgetmind
    gadgetmind Posts: 11,130 Forumite
    First Anniversary First Post Combo Breaker
    For what it's worth, here is where I ended up.

    UK Equity 19.20%
    UK Equity Income 6.40%
    FTSE 250 Index 6.40%
    Developed World ex UK 43.60%
    Pacific ex Japan 6.40%
    Emerging Markets 10.30%
    Global Small Cap 7.70%

    Note my boosts of UK, UK income, Pacific, EM and small cap. I do intend to slowly reduce my FTSE 250 and small cap weightings but I made a judgement last year that these would outperform larger caps for a few months, which has proven to be the case and I have already trimmed FTSE 250 once.

    Alongside these trackers, I hold 10% bonds, 17% property and infrastructure, 5% "themes" (more equities!) and about 6% cash.

    Of course, I'm not saying that my approach is right or wrong, but my TER is still well sub 0.5% and I have good global exposure.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
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