Opinions on a single global/world ETF instead of more than one global/world ETF (110k+ invested)

EthicsGradient

Vanguard has very low ongoing charges for developed world products (see https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/fee-cuts-show-vanguard-commitment ), 0.12% or less, while their FTSE All-World ETF (VWRP or VWRL) is 0.22% - the same as their Emerging Markets ETF. So it would make sense to do future investments in 2 or 3 parts - Developed World via Vanguard, and emerging markets and/or small companies separately, either via Vanguard or other providers whose ETFs have competitive charges.

pip895

IanManc wrote: »

Seeing you are only going to trade every 3 to 6 months you might in time consider moving your ISA and dealing accounts from a percentage based platform like HL to something like IWEB, part of Halifax sharedealing, which charges £5 for each deal and has no percentage custody charges, so the dealing charges are all you pay. As the value of your investments grows over the years this could save you a lot of money.

As the OP is invested in ETFs he wont save much if anything moving from HL - their ISA charges are caped at £45 and there is no custody charge in a fund & share account. I'm not sure iWeb have any regular dealing reduction in charges so his monthly purchase costs could go up from £1.50 to £5. Moving to vanguard could be more expensive as well, their cap is £375 though he would at least save on dealing. HL is also one of the only platforms to have a LISA.

I shouldn't have used the word diversify when I mentioned SC & EM - its more that as these areas are supposed to outperform over the long term he might want to over weight them.

Ixel

All good points. Indeed, HL's annual charge of 0.45% is capped with ETF's at £45 for an ISA (each ISA I think, so £90 in total if so, of which I need at least £10,000 in each ISA to hit the cap - which I'm over ). Fund & Share as you've mentioned has no annual charge for ETF's so I make a nice saving there. The LISA is also an important factor for me. Overall it sounds like I should stay where I am, with HL, unless for some unexpected reason I plan to deal regularly (instantly that is, not via the regular monthly savings facility). I don't anticipate that I'll be needing to instantly deal on a regular basis.


Regarding the emerging markets and small cap, I see. That's interesting to know and will do a bit of studying in these areas. More than likely given I'm planning to be in it for the long term then it would make sense for me to put a little more weighting into both of these areas on the assumption that they are supposed to outperform in the long term.


Thanks for the suggestion!

IanManc

pip895 wrote: »

As the OP is invested in ETFs he wont save much if anything moving from HL - their ISA charges are caped at £45 and there is no custody charge in a fund & share account. I'm not sure iWeb have any regular dealing reduction in charges so his monthly purchase costs could go up from £1.50 to £5. Moving to vanguard could be more expensive as well, their cap is £375 though he would at least save on dealing. HL is also one of the only platforms to have a LISA.

I shouldn't have used the word diversify when I mentioned SC & EM - its more that as these areas are supposed to outperform over the long term he might want to over weight them.

He said in post #3 that he was going to invest every 3 to six months in a single fund.

Even if he did it every 3 months rather than six then the costs in his dealing fund would be £20 a year, and £20 a year in the ISA with IWEB.

If someone is choosing passive investments and then deciding to overweight in something it means that you are making active decisions which by choosing to invest in a global passive index you have already decided not to make.

You say that emerging markets and small cap "are supposed to outperform over the long term". Says who? You? Do you have any edge over all the combined investors in the whole of the global market who aren't investing in expectation of that? No you don't.

IanManc

Ixel wrote: »

Regarding the emerging markets and small cap, I see. That's interesting to know and will do a bit of studying in these areas. More than likely given I'm planning to be in it for the long term then it would make sense for me to put a little more weighting into both of these areas on the assumption that they are supposed to outperform in the long term.

Thanks for the suggestion!

You have no evidence that these areas will outperform. You just have one person's suggestion.

You made the decision to choose a global tracker which tracks an index based on market capitalisation. If you're going to depart from that then I would suggest that you should find a cogent and evidence based reason to do so before you do it. Otherwise it wouldn't "make sense" at all.

Oh, and never assume.

pip895

Another point - which you have probably considered but I will mention anyway is CGT. It is worth ensuring capital gains don't build up too far as you are building your investments outside of a tax wrapper. One possibility is when CG has built up to close to the allowance to swap the ETF in your F&S account for another similar one or perhaps for the cheaper VEVE or HSBCs HMWO you could then add in a bit of separate EM & SC at that point.

EM is well catered for by vanguards etf but I personally prefer an active fund for SC. I use JMI - if that is a step too far VMID is good, but mid cap rather than small company.

IanManc

EthicsGradient wrote: »

Vanguard has very low ongoing charges for developed world products (see https://www.vanguardinvestor.co.uk/articles/latest-thoughts/investing-success/fee-cuts-show-vanguard-commitment ), 0.12% or less, while their FTSE All-World ETF (VWRP or VWRL) is 0.22% - the same as their Emerging Markets ETF. So it would make sense to do future investments in 2 or 3 parts - Developed World via Vanguard, and emerging markets and/or small companies separately, either via Vanguard or other providers whose ETFs have competitive charges.

For the sake of less than 10 basis point in fees I don't think it makes sense to invest in "2 or 3 parts" by splitting your investments between different funds or ETFs.

A developed world fund or ETF will have roughly 65% of investments in the USA and will be in large and larger mid cap companies, whereas a global one will have about 55% in the USA and will contain emerging markets and perhaps some small cap depending on the fund or ETF you choose.

So to correct those biases you would buy ETFs or funds to bring the figures back to those that would be found in a global index fund or ETF. Then you would have to keep rebalancing to make sure the proportions remain correct.

The global index fund does this automatically. It think that "makes sense" compared with the work you would have to put in so that you might save up to 10 basis points on fees, while also incurring more dealing charges if you were on a platform which didn't charge custody fees.

pip895

IanManc wrote: »

He said in post #3 that he was going to invest every 3 to six months in a single fund.

Even if he did it every 3 months rather than six then the costs in his dealing fund would be £20 a year, and £20 a year in the ISA with IWEB.

He is saving into three separate accounts though ?? In any case I don't see a £25/annum saving as worth moving platform over - anyway iWeb don't do a LISA.

IanManc wrote: »

If someone is choosing passive investments and then deciding to overweight in something it means that you are making active decisions which by choosing to invest in a global passive index you have already decided not to make.

You say that emerging markets and small cap "are supposed to outperform over the long term". Says who? You? Do you have any edge over all the combined investors in the whole of the global market who aren't investing in expectation of that? No you don't.

Its may not be pure passive investing but its not that outlandish a suggestion - quite a few on here do essentially this including some much more experienced investors than me.:)

Ixel

IanManc wrote: »

You have no evidence that these areas will outperform. You just have one person's suggestion.

You made the decision to choose a global tracker which tracks an index based on market capitalisation. If you're going to depart from that then I would suggest that you should find a cogent and evidence based reason to do so before you do it. Otherwise it wouldn't "make sense" at all.

Oh, and never assume.

I would have done my own research as well, not just instantly go with an assumption or reply. The assumption was only made at the time I posted the reply, until I looked further into those options myself .

pip895 wrote: »

Another point - which you have probably considered but I will mention anyway is CGT. It is worth ensuring capital gains don't build up too far as you are building your investments outside of a tax wrapper. One possibility is when CG has built up to close to the allowance to swap the ETF in your F&S account for another similar one or perhaps for the cheaper VEVE or HSBCs HMWO you could then add in a bit of separate EM & SC at that point.


EM is well catered for by vanguards etf but I personally prefer an active fund for SC. I use JMI - if that is a step too far VMID is good, but mid cap rather than small company.

Indeed CGT had come into mind. That's something I will be keeping an eye on and will switch around the ETF accordingly. Good advice.


There's only one thing I'm not 100% sure on, which I'm making a guess for the moment. Regarding switching ETF due to CGT, I assume it applies for the current tax year, not for a longer term? For example, I could switch to another ETF I've never used in a tax year, and then when I'm near CGT threshold again in another tax year I have the option of switching back to the ETF I was using (assuming I wanted to do that). Does this sound right or am I missing some points regarding this?


https://www.investorschronicle.co.uk/funds-etfs/2019/11/21/go-to-the-right-class-to-avoid-unnecessary-fees/



I read this a little while ago, but it looks like it's talking about funds in that particular article, although I imagine similar applies to ETF's.


Thanks again for all the suggestions, advice and help given.

pip895 wrote: »

He is saving into three separate accounts though ?? In any case I don't see a £25/annum saving as worth moving platform over - anyway iWeb don't do a LISA.

Its may not be pure passive investing but its not that outlandish a suggestion - quite a few on here do essentially this including some much more experienced investors than me.:)

Yeah LISA is an important factor. Besides I could probably 'use' the regular monthly savings facility on HL to get the cheaper dealing charges (£1.50 each buy) if I'm prepared to wait a few weeks before that money is invested, at least I think I could, by opting to only have next month pay in a certain amount of money via this facility and then stop that again after it's done. At least that's an idea I had in mind.

pip895

You want to minimise switching with etfs - it is a bit easier with funds as its a cheaper process. VWRP has a spread of around 0.26% so switching does have a cost well above the fee. Much cheaper than ending up paying CGT though!