Which Vanguard fund

RomfordNavy

A_T wrote: »

Dunno about the other half but I'd just put it all into their FTSE Global All-Cap Index fund.

I looked at that but has only been trading for just over a year. Compare that to the Global Small-Cap Index fund which has a good record over the past five years. Also the Small-Cap returned 14% over it's previous year as opposed to 11.71% for the FTSE Global All-Cap Index.

redpete

RomfordNavy wrote: »

I looked at that but has only been trading for just over a year.

Yeah but it's an index fund so you don't need to give it time to prove the skill of the fund manager, it'll follow the economic cycle of the underlying make up of the companies it uses.

Compare that to the Global Small-Cap Index fund which has a good record over the past five years. Also the Small-Cap returned 14% over it's previous year as opposed to 11.71% for the FTSE Global All-Cap Index.

But is the world economy going to be more or less favourable to small cap companies over the next year, or five years, or... Will it be a good time to exploit the potential for growth associated with small cap, or a time when the relative vulnerability to market pressure dominates?

Personally I wouldn't be comfortable with a gamble on one sector (or one geography, or one industry) but I want to spread the risk across a balanced selection (and not all equities). But then if I'd already sorted a risk-balanced portfolio in line with my objectives I might take a punt with spare money that I could afford to lose.

bowlhead99

RomfordNavy wrote: »

I looked at that but has only been trading for just over a year.

How long Vanguard's tracker fund has been 'trading' is largely irrelevant. The tracker fund has proved in its year of existence that it is capable of closely following the index, which is not surprising given that Vanguard's other index tracker funds also track their respective indices quite succesfully.

The data for the FTSE Global All Cap index itself, which the fund tracks, is available on FTSE's own site. Here's a link to the factsheet from about a year ago which will give you the key data for the 5-10 years leading up to last September:

https://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssueByDate?IssueName=GEISLMS%20&IssueDate=20170929&IsManual=%20False

Compare that to the Global Small-Cap Index fund which has a good record over the past five years. Also the Small-Cap returned 14% over it's previous year as opposed to 11.71% for the FTSE Global All-Cap Index.

By looking at FTSE's Fact Sheet for Global Small Cap from last year:


(https://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssueByDate?IssueName=GEISSC%20&IssueDate=20170929&IsManual=%20False), which has some useful data for the decade ending September 2017, you can see that the largest peak-to-trough drawdown of the index was 62% in US dollar terms (total return basis including dividends), which would have been the 'credit crunch' period from 2007 to 2009.

Obviously as an investor, you can't invest directly in 'the index' of thousands of companies, so if you wanted those returns you would be using an index fund such as Vanguard's - which incurs operating costs such as management and platform fees on top of those losses. So the max loss from buying in at the top and selling out at the bottom would have been closer to 63% in dollars, and that's assuming Vanguard were able to achieve a tracking error of only a fraction of a percent rather than making some bigger mistakes when trying to track FTSE's underlying index.

As you can see from the stats on the factsheet, by contrast, the Global All-Cap whose factsheet is on the first link 'only' lost 58.4% max drawdown peak to trough on a US dollars total return basis.

So, based on the stats from the last one year you can see that the Global Small Cap beat the Global All Cap by three to four percent - but you shouldn't compare long term investments by short term results; if you look at the credit crunch losses from FTSEs factsheet you can see there was a period in the last 11 years where the Global Small Cap was worse than the All Cap by three to four percent. And that would presumably not have been very welcome given the All Cap was itself losing almost 60% in under two years.

bostonerimus

RomfordNavy wrote: »

I looked at that but has only been trading for just over a year. Compare that to the Global Small-Cap Index fund which has a good record over the past five years. Also the Small-Cap returned 14% over it's previous year as opposed to 11.71% for the FTSE Global All-Cap Index.

These comments strongly suggest that you should not try to build your own portfolio just yet. Comparing the return of a global all cap index to a global small cap index without any other context is almost meaningless. Let Vanguard work for you and buy one of their Vanguard Life Strategy funds.

Iain_For

Can't help but feel that a portfolio comprised of an ill-liquid factor fund and a global small cap fund would carry extraordinary downside risk. The suggestion of looking at Vanguard's LifeStrategy range or a simple two fund portfolio of say VWRL and VGOV would seem eminently more balanced.

dunstonh

This thread is a good example of why people are told to stick to multi-asset funds until they know what they are doing.

It is good that the OP is asking questions. It's a shame though that the OP is not replying to many of the questions we are asking. They are making key newbie errors and there is little understanding of how investments work.

Any other new investors reading this thread should take notice in the errors the OP is making and learn from it.

RomfordNavy

Iain_For wrote: »

The Vanguard site itself has some pretty good advice on assessing your investing personality and tolerance for risk. Depending on what other savings/investments you have 100% exposure to equities is not low risk, reviewing once a month is fine - just don't trade!

There is already quite a bit invested outside of equities for safety, Gold/Silver among a number of other physicals.

RomfordNavy

coyrls wrote: »

You have chosen a fairly obscure active Vanguard ETF for 50% of your portfolio, can I ask why you have made this choice? The Investment Strategy for the ETF:
So it actually invests in relatively illiquid equities. It seems odd to have 50% of your portfolio in relatively illiquid equities.

Only 50% of the Vanguard bit, not 50% of whole portfolio.

...These measures have been shown to be a component of long-run stock market returns.

The whole idea of favouring stocks with lower trading volumes was something I looked into a number of years ago, this is the first fund I have seen which attempts to implement this.

RomfordNavy

redpete wrote: »

...
But is the world economy going to be more or less favourable to small cap companies over the next year, or five years, or... Will it be a good time to exploit the potential for growth associated with small cap, or a time when the relative vulnerability to market pressure dominates?

Personally, over the coming years I can see more business volume moving away from the global Corporates in favour of smaller Companies.


Question is timing, it may be that this slowly starts happening soon, or maybe it doesn't happen until five years time. I know I have never been good at predicting timing, most things I guess are going to happen eventually do but often not until a number of years later.

bostonerimus

RomfordNavy wrote: »

There is already quite a bit invested outside of equities for safety, Gold/Silver among a number of other physicals.

For us to meaningly comment on your Vanguard funds we need to know the rest of your portfolio so we can see how they'd fit together. Gold/Silver are volatile and your Vanguard funds are volatile too, what is your goal and strategy for portfolio construction. For example, I want long term growth and some less volatile component that I can use to rebalance during market cycles and possible spend in down turns. I don't want to actively trade and don't know enough to choose sectors (or maybe I'm smart enough not even to try). So I go with a cap weighted global equity index component and a local bond index. It's very high level and simple.