Trying to find the correct fund?

First_Time_Saver

Hello,

I'm looking to regularly invest in a fund that tracks the whole of the US equity market.

'Vanguard Total Stock Market Index Fund' seems perfect, but I don't seem to be able to find it available in any of the UK platforms I've looked at. (https://personal.vanguard.com/us/funds/snapshot?FundId=0085&FundIntExt=INT)

In Halifax and HL, they offer one called 'Vanguard US Equity Index Acc'. (http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000003YD7)

Is this the same thing, but under a different name and fund?

Linton

They follow different indexes but both do much the same job of tracking the overall New York Stock Exchange & NASDAQ. The use of different indexes leads to slightly different % allocations to the various sectors but that would only be of interest to an investment nerd. So yes the UK based fund "Vanguard US Equity Index Acc" is the appropriate one for your needs.

First_Time_Saver

Linton wrote: »

They follow different indexes but both do much the same job of tracking the overall New York Stock Exchange & NASDAQ. The use of different indexes leads to slightly different % allocations to the various sectors but that would only be of interest to an investment nerd. So yes the UK based fund "Vanguard US Equity Index Acc" is the appropriate one for your needs.

Thank you very much.

Can you tell me what the different indexes for the two are? I'm interested to know what the different % allocations are just for additional information.

I'm not too sure on how to find this particular information on the sites I'm looking at so if you can point me to the right information I should be looking at, that would be much appreciated.

Linton

Read the details in the links you posted. Look under the "portfolio" option for the allocations and the management option (US Fund) or the "investment objective" on the overview page (UK Fund) for the index.

The % allocation differences may or may not be real, they could just be due to the two funds or the two information providers having different criteria for allocating companies to sectors.

First_Time_Saver

Linton wrote: »

Read the details in the links you posted. Look under the "portfolio" option for the allocations and the management option (US Fund) or the "investment objective" on the overview page (UK Fund) for the index.

The % allocation differences may or may not be real, they could just be due to the two funds or the two information providers having different criteria for allocating companies to sectors.

Thank you very much again for your help.

I can see that the UK Fund is a market-capitalisation weighted index.

But I cannot see what type of index the US Fund is.

Do you know what type of index the US fund is?

Linton

The US fund is based on the CRSP Index (of which I had never heard until today) . For far more information that you probably wanted see here. It will be a cap weighted index, whether its modified in any way I dont know.

The US fund doesnt matter because I dont believe you could easily invest in it anyway. And probably wouldnt want to as it almost certainly cant be held in an ISA and US Tax arrangements for funds are very different to the UKs.

bowlhead99

Vanguard report their UK fund against the S&P Total Market index.

Both that and CRSP's Total Market index have 3800-4000 stocks in them, cap weighted.

The biggest, Apple has a market cap of over $6000 million and the smallest has a market cap of more like $6 million (so would have to go up 1000% to produce the same effect on your index as the daily 1% fluctuation in Apple).

If you invest in either of the indexes most of your money is concentrated in the biggest few hundred companies. Just like how the total money in the market is concentrated. So if you want to track that market it seems a reasonable fund to do it in and it's pretty cheap.

Some people would instead prefer to have an investment tracking the biggest companies and an investment in the smaller companies and an investment in the middle companies, in which case you would need 3 funds and you would get quite different results to this 'whole of market blended average return' which is basically pushing most of your money into the big boys (e.g. Apple is 3% of the value of a total market index but is only 0.025% of the number of companies in the index).

Of course, if you want to regularly invest relatively small amounts on an ongoing basis, it's way easier to just go with the flow rather than to seek out 3 or more funds to cover that market and hope that they give you a more balanced result.

First_Time_Saver

Thank you Linton and Bowlhead for that information, it is really helpful.

I wanted to see what/if any differences between the two funds were, but now knowing that it was only going to be possible to invest in the UK fund anyway, especially ISA-wrapped, I now know I didn't need to concern myself over it.

grey_gym_sock

when you're comparing 2 total market indexes, the differences will be really insignificant, because both indexes will include all the biggest companies (apple, etc), and the differences will be in exactly how many of the very smallest companies (the $6m companies) they include. and they are only putting minute fractions of your money in each of the latter.

with other kinds of index, it can make a lot more difference. e.g. a "small companies" index might mean companies worth under $1bn, or under $100m, or whatever.

a total market index has the advantage, compared to separate big/medium/small indexes, that it doesn't have to keep buying and selling shares when the company becomes to big or too small for its index. because it's holding (just about) everything regardless of size. this keeps down internal trading costs within the fund.

as bowlhead says, total market is mostly big cap. so you might want to combine total market with another fund for small (or even medium) cap (though this is not essential). but IMHO, total market a good thing to start with, and then perhaps add other things.

bigfreddiel

You may be better off looking at etf's, and also you should consider the buy/sell spread and tracking error

fj

hoc

My thread from a few days ago may be relevant: https://forums.moneysavingexpert.com/discussion/5369743

I am looking to avoid funds as there are enough ETFs about for most types of devices, so although SPTMI would have been slightly preferred I will go with VUSA or similar from another provider.