Shadowing a Tracker Fund?

Twointhebush

If I were to copy the percentages of investments in a tracker fund, would that save or cost me more money? Maybe tracker funds are constantly being modified and I wouldn't be able to keep up anyway?

AnotherJoe

it would be cripplingly expensive and ridiculous to even try.

MarkCarnage

Why on earth would you want to do that? It costs buttons to buy and hold one? The costs of continued replication not to mention time spent would be horrendous.

Linton

What is your pot size? The smallest member of the FTSE100, to take an example, is 1/500th the size of the index. So unless you have perhaps £1M to invest the faffing around with trivial holdings would not be worth the effort.


Although the constituents of the index dont change that much you have the time and cost of re-investing the dividends.

AnotherJoe

Not to mention the huge minimum investment and complete inability to reinvest dividends appropriately.
Imagine trying to replicate VLS80 and buying 3,500 equities world wide plus I don't know how many bonds across oerhaps 20 different stock markets. . And probably minimum size of a(edit) hundreds of millions
Even the FTSE 100 would likely have a minimum investment size of at guess £100k or so. Edit make that several million due to dividend reinvestment minimum sizes.
There would be no issue "keeping up" though once you've spent your several million because they aren't constantly being modified.

Thrugelmir

Linton wrote: »

Although the constituents of the index dont change that much you have the time and cost of re-investing the dividends.

Every quarter 3 are relegated and 3 promoted. That's 24 transactions a year.

Depending upon the weighting given to the new entrants in the index. That will require the portfolio to be rebalanced every so often.

AnotherJoe

So, if you prorated VLS to that, something getting towards one thousand transactions a year.
Before you did any rebalancing for the new entrants or for dividend reinvestment.
:rotfl:

jim1999

It's possible to do it with VLS if you buy the constituent ETFs / funds that make it up (I think around 8-10). It does shave a small amount off the fees, but for the vast majority would not be worthwhile for that reason alone.

MaxiRobriguez

Transactions costs money.

If you make thousands of them to replicate an index then you pay a thousand times transactions costs.

If you buy an index fund you pay once.

Index funds can shoulder the cost because they're splitting transaction fees over thousands and thousands of customers.

You stand zero chance of bettering an index funds on the cost front. Zero.

barnstar2077

jim1999 wrote: »

It's possible to do it with VLS if you buy the constituent ETFs / funds that make it up (I think around 8-10). It does shave a small amount off the fees, but for the vast majority would not be worthwhile for that reason alone.

I could see someone using a VLS fund, or any fund of funds, as a starting point. So, say you like the look of one of those funds but you want less exposure to the american market, you could replicate the funds but adjust the percentage allotted to the S&P 500. However, normally you could probably just find another fund that already does it.

I suppose in a way I am doing this by buying the VLS 100 and bond funds separately, instead of buying a VLS that already has bonds in it.

MarkCarnage

barnstar2077 wrote: »

I could see someone using a VLS fund, or any fund of funds, as a starting point. So, say you like the look of one of those funds but you want less exposure to the american market, you could replicate the funds but adjust the percentage allotted to the S&P 500. However, normally you could probably just find another fund that already does it.

I suppose in a way I am doing this by buying the VLS 100 and bond funds separately, instead of buying a VLS that already has bonds in it.

In which case you are creating a bespoke allocation using tracker funds, presumably actively managed to reflect your own views on asset allocation. Which is a different thing from the original question, which everyone agrees makes no sense.