Tracker fund investment for retirement

OldMusicGuy

jaybeetoo wrote: »

I’m sure there is a large overlap between these funds so I’m not sure what is gained from investing in 3 of them.

To increase diversification (the funds all have different global exposures) and to balance risk levels. My goal is to minimize volatility and it seems to be ok so far.

Alexland

jaybeetoo wrote: »

I’m sure there is a large overlap between these funds so I’m not sure what is gained from investing in 3 of them.

Depends how many investment accounts you hold. I have a different fund manager on each platform to improve my FSCS protection and optimise costs so hold discounted Blackrock Consensus in the HL LISA, HSBC GS in the Halifax SIPP, etc.

Alex

masonic

Tom99 wrote: »

[FONT=Verdana, sans-serif]I am happy to learn. How would you justify investing 6x as much in the US as in that UK? Would not a ratio of 1:1 be a more diverse spread than 6:1?[/FONT]

Which is more equal, buying 6 125g bars of "value" chocolate (@ 20p) to each 125g bar of "premium" chocolate (@ £1.20) or buying 1 bar of each?

eskbanker

This thread is becoming a bit like a Groundhog Day rerun of this one!

https://forums.moneysavingexpert.com/discussion/comment/74656358#Comment_74656358

Linton

Tom99 wrote: »

[FONT=Verdana, sans-serif]I am happy to learn. How would you justify investing 6x as much in the US as in that UK? Would not a ratio of 1:1 be a more diverse spread than 6:1?[/FONT]

I dont see the issue being n:1. Rather the requirement is that there is sufficient diversification so that problems in one geography or sector or currency do not have a disproportionate effect on the portfolio as a whole.


So 6:1 or 1:6 US:UK isnt the question but rather whether the ratios lead to one geography being over dominant in the portfolio. I would agree that global trackers with 50-60% US are to be avoided. Equally 50-60% UK would be bad.


Actually 50-60% UK would be much worse. The problem is that the UK stock market is very skewed in its sectors. There are no major IT or electronics companies, no FANGs or even any hopefuls, no significant world class manufacturers, rather a lot of oil, services, banks etc. The largest UK companies which would normally form the majority of your holding are generally global businesses that just happen to be listed on the London Stock Exchange and do not necessarily have a major UK presence (if I remember correctly one has none). They could well be listed on foreign exchangess, and several are. Their price follows the $ not the £ - hence the rise in valuations when the £ fell after the BREXIT vote. So there is no particular benefit from choosing say a UK oil company over a French or US one.


This is where the US has particular advantage. Most industries are well represented, You could probably have a reasonable sector balanced portfolio based on the US alone. There is just the concern that you dont want too much US, and it would be good to diversify away from the $.


One area where the UK is good, perhaps over the long term the best in the world, is Small Companies. So I would certainly advocate having a sigmificant investment there. But SC are volatile anyway and to compound that by restricting the geographic allocation in that sector seems foolish. One certainly doesnt want a major part of ones portfolio in UK small companies.

AnotherJoe

Tom99 wrote: »

[FONT=Verdana, sans-serif]Yes exactly my point. Why would I want 6 US eggs in my basket but only 1 UK egg. Are US eggs 6x safer, stronger, tastier?[/FONT]

Because the UK egg is like those Welsh lambs that were brought up in France, shipped across the channel, spent a week on land in Wales, and were then sold as "Welsh lamb" (to bring up a scandal from a few years back.) So really you've bought 7 global eggs because the US companies do a lot of their business across the world as well as in the US. Where do you think Apple, Facebook, Amazon and soon Tesla do a huge % of their business?



Also, of your FTSE100 investment, probably 80% of it is overseas income. And i would guess and say its 50% of the FTSE250 also. So you are arent really investing in UK egg producers, you are investing in overseas ones, and probably 60% of that is US. Thats one issue.

The second issue is that by investing in the FTSE100 and to a lesser extent the 250, you are omitting huge swathes of industries that are most likely where future growth will come from because the FTSE100 especially is bereft / disproportionately low on many world industries especially new ones. Social media, high tech, EV cars, software, chips and so on (yes theres exceptions but thats what they are, exceptions and mostly small ones)
The third issue which you can get around but few bother to do, is that some major constituents of the FTSE100 and 250 are investment trusts. And these hold shares in other companies which generally will be world wide. So again, not UK. And its double counting/obscuring what i hold. If I wanted to hold the 100 or 250 I'd pick an index that specifically excluded ITs.


So to summarise, you are the person in Tesco buying "Welsh" lamb that a week ago was on a farm in Languedoc and had been the last 6 months, and when you get home you tell your neighbour proudly you buy Welsh lamb because of all the benefits that gives to UK faremrs rather than French, when the major benefit was likely to the ferry company (which is probably French anyway).

AnotherJoe

Alexland wrote: »

Depends how many investment accounts you hold. I have a different fund manager on each platform to improve my FSCS protection and optimise costs so hold discounted Blackrock Consensus in the HL LISA, HSBC GS in the Halifax SIPP, etc.

Alex

The more you do that, the more you've created your own but more expensive tracker.

Tom99

eskbanker wrote: »

This thread is becoming a bit like a Groundhog Day rerun of this one!

https://forums.moneysavingexpert.com/discussion/comment/74656358#Comment_74656358

[FONT=Verdana, sans-serif]Ha ha, I though something sounded familiar. I did specifically open my post this time with the words:[/FONT]
[FONT=Verdana, sans-serif]'Bear in mind this is my view, I am not asking anyone to agree.' [/FONT]

Tom99

Linton wrote: »

So 6:1 or 1:6 US:UK isnt the question but rather whether the ratios lead to one geography being over dominant in the portfolio. I would agree that global trackers with 50-60% US are to be avoided. Equally 50-60% UK would be bad.

Yes spot on and that's why I split UK/ExUk so that I can decide the ratio.

System

How are those portfolios that are overweight in the UK doing this morning?
https://www.bloomberg.com/quote/GBPUSD:CUR