Newbie considering Vanguard All World VWRL ETF

Brian65

bowlhead99 wrote: »

The vanguardinvestor platform fee of 0.15% is low

Iweb and X-O is 0.00% for an S&S ISA
X-O charge £60 to close an ISA, but I read somewhere the FCA may outlaw Account closure fees after the HL/Woodford debacle?

Brian65

Alexland wrote: »

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.
Alex

Yes I agree and still have about 88% of my portfolio in the stock market. But I don't owe anyone money (mortgage). I personally wouldn't feel comfortable borrowing to invest in the risky stock market, even though the odds still look quite good.

Alexland

Brian65 wrote: »

Iweb and X-O is 0.00% for an S&S ISA

Yes but they make their money from trade fees (and setup or exit fees) so for someone starting out with a zero account balance it's likely to be preferable to pay a small percentage charge and no trade fees for the first few years.

Brian65 wrote: »

X-O charge £60 to close an ISA, but I read somewhere the FCA may outlaw Account closure fees after the HL/Woodford debacle?

FCA views on closure fees were in their Platform Study which predates the Woodford implosion

Brian65 wrote: »

I personally wouldn't feel comfortable borrowing to invest in the risky stock market

Long standing Investment Trusts use leverage despite paying higher interest rates than a domestic mortgage. Most first time buyers take on extreme leverage to buy a property which has a volatile market valuation. Our mortgage is around 10% of our total net worth and we have life, critical illness and personal injury insurance so it doesn't seem an extreme risk.

Alex

System

A_T wrote: »

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

VWRP is the version traded in GBP (unhedged) and is available on Interactive Investor, but not yet HL.

[Deleted User]

Thanks @bowlhead99 for the really detailed post, it's been really helpful.

Brian65 wrote: »

VWRL also pays dividends out in $, converting to £ incurs a fee, and re-investing incurs another.

bowlhead99 wrote: »

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.

That's that decided on then. Out of curiosity how would you reinvest dividends if I didn't have an accumulating ETF?

bowlhead99 wrote: »

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.

Okay, that's starting to make more sense now.

A_T wrote: »

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

As I understand it VWRL is a very popular option, is it possible to say if VWRP would be similar? To me it looks like VWRP invests in exactly the same sectors / regions etc and the only difference is VWRP invests the dividends and trades in GBP? But otherwise it's the same as VWRL?

Or might it be the case that since VWRP is so new that it'd be picking an unknown and so riskier? Is there any concern about it not being as popular / or the fund size?

Many thanks

bowlhead99

Deleted_User wrote: »

That's that decided on then. Out of curiosity how would you reinvest dividends if I didn't have an accumulating ETF?

You would have money in the cash part of the account, and you would use them to buy more shares in the ETF (or in some other fund) just like when you first bought the shares in the ETF.

As I understand it VWRL is a very popular option, is it possible to say if VWRP would be similar i.e. is it the same fund but just accumulating instead of distributing? invested in similar stocks / countries etc or would picking VWRP be picking an unknown and so riskier?

Though it's technically a different fund with a different factsheet under the same product umbrella, it's basically the same fund, with the same asset exposure but the administrative difference that it doesn't pay out, and will instead just tell you what income it made each year so you can do your income taxes if not investing through ISA or pension.

As VWRP is new is there any concern about it not being as popular / or the fund size?

Not really a concern at the moment. There is a decent market for GBP priced global ETFs, and for accumulating ETFs; and while the original VWRL may remain more popular due to people not being bothered to change, it's more convenient for UK retail investors to not receive dollar dividends so it should get to a decent size (it's already half a biillion).

[Deleted User]

Thanks bowlhead99.

So I think I'm set then. For what it's worth I think I'll wait until after Brexit / October 31st, see what happens, then open an account, invest a starting £1k in VWRP and then drip feed £100pm and see how I get on. Start small and invest more as I get a bit more confident. I'll also save some cash for emergency funds and potentially overpay mortgage a little.

Cheers all!

bowlhead99

If you're going to be putting in £100pm for the foreseeable future there doesn't seem to be much reason to defer putting in the initial thousand until after Oct 31. It's a coin toss whether now or November will, with hindsight, be a better time to invest - but as the next several tens of thousands over the course of your lifetime will on average be invested *after* Oct 31 2019 there is relatively little damage to be done by simply getting on with it this week

Of course investing above your comfort level is one way to get turned off investing for life, so feel free to ignore me

[Deleted User]

bowlhead99 wrote: »

If you're going to be putting in £100pm for the foreseeable future there doesn't seem to be much reason to defer putting in the initial thousand until after Oct 31. It's a coin toss whether now or November will, with hindsight, be a better time to invest - but as the next several tens of thousands over the course of your lifetime will on average be invested *after* Oct 31 2019 there is relatively little damage to be done by simply getting on with it this week

Of course investing above your comfort level is one way to get turned off investing for life, so feel free to ignore me

That's a fair point.

Am I missing anything do you feel from this as a plan for a first step into investing? My intention would be to open, setup, and leave for 5/10/15 years etc and see how it gets on. Potentially increase monthly amounts to £200/300 as funds allow.

One final question, I closed a HTB ISA this year with approx £10,900, would this affect in any way my ability to open a S&S ISA?

Cheers

bowlhead99

Deleted_User wrote: »

Am I missing anything do you feel from this as a plan for a first step into investing?

To be honest, most people's first step into investing is not to go straight into a fund that only invests in global equities, 94% of which are listed on stock exchanges outside their own country. There are thousands of investment fund options and most people would be more comfortable with a fund that used a blend of different types of assets (company shares, company and government bonds, commercial property etc) to create a risk / return profile that was not so volatile as the global equity market.

Most people buying professional advice (not that professional advice is affordable when you are only investing a couple of grand) would be talked through the various options while discussing their objectives and circumstances, and would likely not end up with the highest risk / highest potential reward. Likewise, many people's first exposure to 'investing' these days is in their workplace pension (which for some people can't be touched for decades decades); the default option in one of those would generally not be 100% global equity, and would only end up with that allocation if the person was really keen on doing it.

So, a first investment ISA invested into a global stocks ETF is a higher risk way of doing it. It is not as risky as picking just one region (eg UK or USA) or one industry sector (e.g. technology, renewable energy, healthcare) but it is going to give you a more volatile daily or monthly value than something with a blend of bonds and other asset classes beyond just international shares.

For context, in the last 12 years the biggest peak-to-trough drawdown for the FTSE All-World index measured in USD was 57.9%, between autumn 2007 and March 2009, even including dividends reinvested. Measured in GBP the loss was not so great, but next time it could be our turn to have our currency rate change dramatically against other countries' currencies at the same time as the world has a global market crash. Losses can be large when over 90% of the investments are overseas and the markets are dicey.

If you invest £1000 in the ETF in the next few weeks and then over the course of 18 months it drops to £500 (even with dividends reinvested) will you be OK with that? Hopefully yes because your monthly £100s or £200s (which will also be worth less than you put in) will at least be buying more shares at cheaper prices so when it eventually recovers you would be happy with it. However if the crash didn't happen for about 4 years from now when you had increased contributions to £300pm - it may be more distressing and if it takes several years after that to slowly recover the £10k you had put in. So it would not be looking good when you evaluate your success in 5 years from now.

Some people in that situation would sell out, thinking they had made a mistake, and then miss the market rebound, permanently damaging their wealth. So when you say you'll "open, setup, and leave for 5/10/15 years etc and see how it gets on", you have to be prepared for disappointment if you are going to go with a volatile fund and assess it after only 5 years. If you mean the full 15 years, or you are a gambler at heart, it's probably more suitable than I am making out.

One final question, I closed a HTB ISA this year with approx £10,900, would this affect in any way my ability to open a S&S ISA?

The annual subscription limit for ISAs is £20,000 in any one tax year. With the HTB ISA at £200 per month, you have probably not used more than £1000 or so, leaving £19,000 of subscription allowance left to use by next April and then you'll get another £20,000 allowance on top. So, absolutely no problem putting a few thousand into an S&S ISA over the coming months.


Bottom line, yes your plan is fine, and you are probably not 'missing something', so long as you are comfortable investing in something that could drop 50% in price and take several years to come back up. If you prefer more moderate gains and losses, you might prefer different 'mixed asset' investment options.