Vanguard Index Fund (UK)

mezzo6

Hi everyone, longtime reader and dipper-inner here. I should have asked this here a long time ago, but at least I'm doing it now

I don't earn a lot of money and I've been a terrible saver so far, but I listen to and read articles by a lot of American folks who keep saying the Vanguard Index Fund is the best place to put your money if you want fairly modest but highly safe long-term returns without having to learn how to 'play the market', etc.

My question is, as a resident of the UK, how do I do that? Can I invest in the US fund, which is presumably what everyone is recommending, or do I have to go elsewhere?

I've never invested in anything before, to the point where I have a bank ISA that has (to my knowledge) never had anything in it.

I'm completely green. Like I said, I've been very bad with my money up to now, but I'd like to change that curve and finding out about the Vanguard Index Fund seems pretty important to that

Thanks in advance for your time,
Darren

System

mezzo6 wrote: »

Hi everyone, longtime reader and dipper-inner here. I should have asked this here a long time ago, but at least I'm doing it now

I don't earn a lot of money and I've been a terrible saver so far, but I listen to and read articles by a lot of American folks who keep saying the Vanguard Index Fund is the best place to put your money if you want fairly modest but highly safe long-term returns without having to learn how to 'play the market', etc.

My question is, as a resident of the UK, how do I do that? Can I invest in the US fund, which is presumably what everyone is recommending, or do I have to go elsewhere?

I've never invested in anything before, to the point where I have a bank ISA that has (to my knowledge) never had anything in it.

I'm completely green. Like I said, I've been very bad with my money up to now, but I'd like to change that curve and finding out about the Vanguard Index Fund seems pretty important to that

Thanks in advance for your time,
Darren

Investing in equities is not 'highly safe'!
Vanguard funds are available in the UK:
https://www.vanguardinvestor.co.uk/
Which index do you intend to track? There are 3.73 million to choose from (although not all available from Vanguard):
https://forums.moneysavingexpert.com/discussion/5924204/market-indices

eskbanker

Best walk before you run, and do some more research!

For a start, investing in equity-based products entails the risk of partial (or even complete, in extreme cases) loss of capital - if you think that investing in Vanguard is "highly safe" then be assured that it isn't, and never can be.

Among the golden rules of investing are that you should only do so with money that you have no short to medium term (<10 years) need for, and only once you've established a rainy day fund of readily-accessible cash savings (in fully capital-protected deposit accounts), typically 3-6 months worth of expenditure.

If/when you're ready to embark on an investment journey then one of the other golden rules is to diversify, across asset classes, sectors, geographies, etc, i.e. putting your eggs in many baskets in order to manage your risk. Investing solely in a single country, whether that's the UK or the USA, isn't a good idea, so, for those who don't have the time, skill, money and experience to build up bespoke portfolios, there are low-cost global multi-asset funds suited to this, one of which is indeed Vanguard with their LifeStrategy range of funds, but there are a number of others from HSBC, BlackRock, L&G, etc.

Anyway, in your shoes I'd really concentrate on building up some savings first and park thoughts of investing for a while yet....

MaxiRobriguez

STOP.

Start reading before you put your money anywhere.

You need to understand the difference in asset classes, difference between mutual funds and index funds, difference between value and growth, difference between capitalisations and geographies etc. There's a plethora of online self-help on all this stuff.

Once you understand that then you need to work out what it is you're investing for, if there's a timeline, your tolerance to risk etc.

Only then should you start dipping your toe in. It's not that just going ahead means you'll lose all your money - that probably won't happen, but it might be sub-optimal for what you actually want.

Please research first rather than diving straight in.

mezzo6

Hi folks,

Thank you for the quick replies.

I know there's no such thing as a guaranteed investment, but it seems like a lot of people think that over a (very) long term, the Index is a good place to keep your money.

I agree that building up some savings first is a smarter idea to begin with, but I'm still quite interested in finding out about the Index. Like you guys said, more reading is definitely in order. It just confuses me how so much of the information available is geared towards US residents. I'm never quite sure which Index is being recommended or even if I'll be able to invest in it, haha.

Thanks again,
Darren

eskbanker

I wouldn't get fixated on something called 'The Index', but if you want to start educating yourself on investment principles and practices, without being steered towards a very US-centric outlook, you could do worse than reading up on the subject at the likes of:

https://www.moneysavingexpert.com/investments/
http://www.monevator.com
http://diyinvestoruk.blogspot.com/
https://www.moneyadviceservice.org.uk/en

and of course all the threads on here about investment strategies!

MaxiRobriguez

mezzo6 wrote: »

Hi folks,

Thank you for the quick replies.

I know there's no such thing as a guaranteed investment, but it seems like a lot of people think that over a (very) long term, the Index is a good place to keep your money.

I agree that building up some savings first is a smarter idea to begin with, but I'm still quite interested in finding out about the Index. Like you guys said, more reading is definitely in order. It just confuses me how so much of the information available is geared towards US residents. I'm never quite sure which Index is being recommended or even if I'll be able to invest in it, haha.

Thanks again,
Darren

We're in a global market place now, the information geared towards US investors can be applied to UK investors too.

Index investing is popular because it spreads risk, is a cheap way into investing and requires only a small amount of knowledge to get going. Over the long term equities (and therefore indexes that track equities) have done well, but that doesn't mean they always will. We are at a point where most investments are expensive and expected returns over the short term will not be as good as they have been recently.

Can't say it enough, research research research before you dip in. Once you know enough you might realise you don't actually want to invest in equity index funds and instead would prefer to hold a different asset class entirely. But you won't know until you understand what you're getting yourself into.

londoninvestor

MaxiRobriguez wrote: »

We're in a global market place now, the information geared towards US investors can be applied to UK investors too.

In many ways, yes. Some things that don't quite translate across are:

1. US investing discussion generally seems to be very cautious about global diversification (i.e. outside the US): factor that into what you read
2. Any specific funds mentioned for US investors won't work in the UK. US mutual funds can't be bought outside the US, and (the great majority of) US ETFs haven't done the necessary regulatory paperwork to continue being sold in Europe after Jan 2018
3. Stuff about "tax loss harvesting" - this is largely a product of the complicated US capital gains tax treatment of funds. In the UK, when you have a portfolio in a non-ISA non-pension account, it can be worth thinking about how to best use your annual CGT allowance, but it's not as complex as in the US.
4. Specific US tax-advantaged structures like IRAs and 401(k)s. There is some similarity with UK vehicles like ISAs and pensions, but just read directly about the UK structures rather than trying to make inferences from US specifics.

Audaxer

mezzo6 wrote: »

I know there's no such thing as a guaranteed investment, but it seems like a lot of people think that over a (very) long term, the Index is a good place to keep your money.

If looking at Vanguard, it is best to consider their range of multi asset funds which are called Vanguard LifeStrategy funds - they are globally diversified as they hold a number of different indexes. They are based here in the UK and come in 5 different options from 20% equities (low risk) to 100% equities (high risk). The higher risk funds like VLS80 and VLS100 will be more volatile but are likely to give better returns if you are investing for the long term. They are available on all major DIY investment platforms here in the UK, including Vanguard's own platform. But as others have said it's best to start with some research on this forum and sites like Monevator.