Newbie considering Vanguard All World VWRL ETF

[Deleted User]

Hello,

I've just bought a house so I'm in a position to invest some money and not worry about needing it for a deposit. I've never invested before so I'm not sure how best to start.

I was considering the Global VWRL fund however I don't know the best way to do this, would it be via a S&S ISA? How would I go about picking an S&S, or which platform to use? A S&S Lifetime ISA isn't something I want to commit to as it's not just savings for pension. Unsure even if a S&S ISA is the best route in to investing.

From what I understand of the fund it's 100% equities so I should probably say I'm 35 and wouldn't need the money soon. I have a pension and no debt except a mortgage.

I'm thinking Brexit / possible American recession might see a downturn in the market and so be a good time to put in a starter £1/2k, and potentially start drip feeding in say £100pm, does this seem reasonable / sensible?

Is this too simplistic an approach? From what I understand about the fund I was hoping it'd be something I could be fairly hands off with and just invest monthly and see how it plays out in the next 5 / 10 / 15 years, whilst also saving cash for emergencies.

Thanks!

David

Brian65

Personally I would rather pay off my mortgage than invest in the stock market when its close to a record high. But the future is notoriously difficult to predict so we don't know which will turn out best.
VWRL is very good, the downside being its 0.25% fee - you can get HMWO for 0.15% and S&P 500 ETFs for less than 0.1%
VWRL also pays dividends out in $, converting to £ incurs a fee, and re-investing incurs another. Cheaper to use an accumulator like SWDA.
You can compare platforms here on this website : https://www.moneysavingexpert.com/savings/cheap-online-sharedealing/?_ga=2.14774326.1017526747.1498207934-1345294851.1496851258
( have found x-o and iweb very good, but haven't tried any others.)

A_T

Brian65 wrote: »

Personally I would rather pay off my mortgage than invest in the stock market when its close to a record high. But the future is notoriously difficult to predict so we don't know which will turn out best.
VWRL is very good, the downside being its 0.25% fee - you can get HMWO for 0.15% and S&P 500 ETFs for less than 0.1%
VWRL also pays dividends out in $, converting to £ incurs a fee, and re-investing incurs another. Cheaper to use an accumulator like SWDA.
You can compare platforms here on this website : https://www.moneysavingexpert.com/savings/cheap-online-sharedealing/?_ga=2.14774326.1017526747.1498207934-1345294851.1496851258
( have found x-o and iweb very good, but haven't tried any others.)

There is an accumulating version VWRA - it's fairly new though and not sure how many platforms offer it as yet.

pip895

HMWO is good - slightly out performs VWRL - presumably because of the lower fees.

Betting on which way the pound will go is quite a gamble. I would say there has to be a better than 50% chance of a deal weather from Boris or a Labour led coalition in which case I would expect the pound to go up.

bowlhead99

pip895 wrote: »

HMWO is good - slightly out performs VWRL - presumably because of the lower fees.

HMWO tracks a different index, which excludes emerging markets.

In some periods it's true that the HSBC product would outperform (if emerging markets have a hard time), and in others it would underperform against a more comprehensive index such as FTSE All-World or FTSE Global All-Cap or MSCI ACWI.

As emerging market economies might be expected to offer higher long term growth rates than developed ones (huge populations while the companies there have lower price/earnings ratios then those listed on stock markets which which have already matured), it would be a strange choice to shun those countries in order to save a few basis points of fees.

Alexland

Brian65 wrote: »

Personally I would rather pay off my mortgage than invest in the stock market when its close to a record high. But the future is notoriously difficult to predict so we don't know which will turn out best.

The stock market spends a high proportion of it's time near record highs which is one of the characteristics of something that in the long term has gone in a generally upward direction.

If the OP isn't interested in pensions or Lifetime ISAs (shame) then that leaves S&S ISAs as the next best option. Personally I don't see the harm in locking away money towards retirement as I take a long term asset allocation and expect to get old which means the money will be needed later regardless.

For an initial modest regular contribution then Vanguard Investor has a low percentage charge (also consider the All Cap fund) but as the valuation grows then HSD/iWeb fixed charges might work out better. Always keep a cash emergency fund and only invest money you will not need for at least 5 years or probably longer if going 100% equities.

Alex

IanManc

pip895 wrote: »

HMWO is good - slightly out performs VWRL - presumably because of the lower fees.

Betting on which way the pound will go is quite a gamble. I would say there has to be a better than 50% chance of a deal weather from Boris or a Labour led coalition in which case I would expect the pound to go up.

HMWO tracks the MSCI World Index which is made up of investments in developed world countries, whereas VWRL tracks the FTSE All-World index, so has investments in emerging markets.

Consequently HMWO is made up of 63.49% US investments, whereas VWRL is has 55.2% in the US. And HMWO invests in 1279 companies, while VWRL invests in 3267, so HMWO is also more concentrated in larger cap companies. For example HMWO has 2.48% in Microsoft while VWRL has 2.24%, HMWO 2.42% in Apple and VWRL has 2.07%, and so on.

Their performance differs because they are tracking different indices and invest in different companies, invest in the same companies in differing proportions, and invest in different countries.

Never presume.

Damn - Bowl beat me too it! :rotfl:

bostonerimus

Deleted_User wrote: »

.
I'm thinking Brexit / possible American recession might see a downturn in the market and so be a good time to put in a starter £1/2k, and potentially start drip feeding in say £100pm, does this seem reasonable / sensible?

Don't think too much. Your instinct is good so start investing into a low cost global equity fund. Keep doing that for 10 or 20 years. Again don't think about it, particularly when markets drop by 20 or 30%, just keep buying that fund.

[Deleted User]

Cheers all, so basically VWRL in a S&S ISA is a decent enough first step it sounds like.

Brian65 wrote: »

VWRL also pays dividends out in $, converting to £ incurs a fee, and re-investing incurs another. Cheaper to use an accumulator like SWDA.

A_T wrote: »

There is an accumulating version VWRA - it's fairly new though and not sure how many platforms offer it as yet.

Is this something I should be favouring over VWRL do people feel?

Alternatively I've just read:

The one downside of the fund is that its base currency is US dollars, so investors are exposed to any fluctuation in the exchange rate between the US dollar and sterling. To solve this, the fund’s owners Vanguard have also put out a GBP version, where assets are hedged back to sterling. Apart from the fact that it trades in a different currency, the sterling fund is virtually the same.

Is the GBP version a better option then?

Alexland wrote: »

For an initial modest regular contribution then Vanguard Investor has a low percentage charge (also consider the All Cap fund)

If I understand correctly then this is likely the best way in: https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

How does VWRL compare to:

'LifeStrategy® 100% Equity Fund - Accumulation'

bowlhead99

Deleted_User wrote: »

[accumulating version]

Is this something I should be favouring over VWRL do people feel?

If you're investing in an ISA, it is more convenient to not need to deal with dividend reinvestment if you are in it for the long term - so if it is going to be your only holding (i.e. you are not going to want to take money from it from time to time to rebalance into other funds within a portfolio) it is easier to go for an accumulating one. So the newer VWRA or VWRP may be more convenient for you.

SWDA (like HMWO mentioned in an earlier post) tracks only a developed world index rather than a global / all world one, so not as comprehensive as a one-stop solution, but if you are only investing small amounts there won't be a huge difference.

Alternatively I've just read:

The one downside of the fund is that its base currency is US dollars, so investors are exposed to any fluctuation in the exchange rate between the US dollar and sterling. To solve this, the fund’s owners Vanguard have also put out a GBP version, where assets are hedged back to sterling. Apart from the fact that it trades in a different currency, the sterling fund is virtually the same.

Is the GBP version a better option then?

I wasn't aware they had a GBP-hedged version so this 'assets are hedged back to sterling' might be a misunderstanding on the part of the author from which you are quoting. I thought they only offered 'hedged' versions on their bond investment funds, not the equity ones.

Hedging means that if the fund owns Apple and goes up in value by 10% in dollar terms, you as a sterling investor should also see something close to a 10% return, even if exchange rates move a considerable amount over the time period.

Whereas with a normal 'unhedged' product which most people would choose to use, if Apple goes up in value in dollars by 10% and the exchange rate changes so that you have to pay more pounds to get a dollar, you will get more than a 10% return from the Apple investment when converted back to sterling because dollars are very valuable. And likewise if dollars became relatively worthless, your Apple holding would still be worth as many dollars but the dollars wouldn't buy you as many pounds when you cashed it in.

Generally if you are investing over the very long term there is probably not much point hedging currency movements, because it costs money (in fund operating costs) to do so - and at the end of the day you don't know whether pounds sterling will have more or less buying power, relatively speaking.

When you get to retirement you will still be buying goods and services from all over the world which have a foreign cost base (barrels of oil, movies, TV and cloud computing subscriptions, software, consumer electronics and white goods etc) and it is useful to have investment funds which have proper exposure to the movements of currencies like the dollar or euro or franc or yen or won or rmb etc. Having foreign currency assets to pay for foreign currency future costs in your life is a good thing - it is itself a hedge against risk. So, somewhat counter-intuitively, if you hedge away that exposure you are hedging away your natural hedge against future costs and global inflation ...

As mentioned, I didn't think Vanguard had created a hedged version of its London-listed global ETFs. What they have done is make some versions available with a price listed in pounds so that your broker doesn't need to convert your pounds to dollars to buy the shares of the ETF - they can just pay pounds to buy the ETF shares off someone else who wants to sell at a price in pounds. This does not mean that the underlying assets are 'hedged' - you still have the same raw exposure to US and Euro and Yen assets, and the fund does its accounting in dollars and pays dividends in dollars - it is simply an administrative convenience to be able to pay pounds to buy and sell the fund from other people on the stock market.

If you are buying the Vanguard FTSE all-world ETF on the london stock exchange you can choose whether you want to buy the one priced in dollars (VWRD for distributing, VWRA for accumulating) or the one priced in pounds (VWRL for distributing, VWRP for accumulating). But that just determines what currency it trades in, not what assets are held underneath. The differences between those 4 product classes do not relate to hedging at all.

If I understand correctly then this is likely the best way in: https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

Yes it is a decent way in. The vanguardinvestor platform fee of 0.15% is low, and there are no extra fees for booking trades to buy or sell the ETF on the stock exchange each month. If you had £100k invested it would be costing £150 a year for that service and it could be cheaper to shop around.

How does VWRL compare to:

'LifeStrategy® 100% Equity Fund - Accumulation'

That product is an open ended fund which must be subscribed to through a fund platform rather than being bought and sold through orders on the stock exchange. A number of providers which offer both would have a different price structure to buy and hold a share in an 'open ended investment company' (oeic) such as Lifestrategy rather than an 'exchange-traded fund' (etf) such as VWRL / VWRP, though the vanguardinvestor.co.uk platform has decided it will give the same pricing for both product types.

Aside from platform and product fee differences, more importantly the portfolio mix in LifeStrategy differs from VWRL/VWRP. That's because the latter is simply allocating money based on the free-float market capitalisation of the biggest companies in the world = thereby leaving 6% or less invested in the UK stock market and the rest international. Whereas LifeStrategy deliberately has 25% of its equities money allocated to the UK stock market indexes, because Vanguard believe UK-based investors might prefer that.

Alexland

Deleted_User wrote: »

How does VWRL compare to:

'LifeStrategy® 100% Equity Fund - Accumulation'

VLS60 and VLS80 are the sweet spot in the VLS series for those seeking balanced and adventurous allocations. The hedged bonds provide some currency and volatility stability and I guess you just accept the under performance caused by the circa 25% UK allocation within the 60% or 80% equities.

However if going 100% equities with VLS100 then you don't get any hedged bonds just the global equities with the unfortunate 25% UK allocation. Better options on Vanguard Investor include their All Cap fund or VRWL All World ETF which are invested in world developed and emerging markets but do not have the bias just the normal circa 5% UK allocation.

To see the negative drag from the UK bias compare the below total return graphs of VLS100 versus the HSBC All World and HSBC FTSE100 tracker funds (data goes back earlier than the Vanguard equivalents).

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=FACDV,FKLDQ,FG18U

Alex