Difficulty selecting funds to invest in

Michael121

Hi
My names Michael im looking to invest in a stocks and shares isa but im having difficulty selecting one between a few funds I have my eyes on.
From what research I have done it would seem I want to put my savings in global index, but from what ive been reading about it would seem there is a better way to do it and bring costs down. All so ive been told I need some value small cap but the funds on vanguard have growth stock as well which im told isn't worth bothering with. With that being said the options I think look good are as follows.

HSBC Global Strategy Adventurous Portfolio AC 0.48 OCF
So this is fairly simple for me as I already have a bank account with hsbc and there would be no need to use other platforms which is nice however the charges seem a little high.
Vanguard LifeStrategy 100% Equity Fund 0.2 OCF
Cost is nice on this one however im not sure if I like the idea of having 20% in the uk, every other fund is more like 5% so im not sure if this is good, bad or don't really make a difference.

The next 3 I could use from vanguard are my attempt at trying to do something similar to what these funds are doing but lowering costs further, i would have to balance these myself which wouldn't be a problem assuming 85% Global (ex uk) 5% UK and 10% Emerging Markets is good.
FTSE Developed World ex-U.K. Equity Index Fund - Accumulation 0.14 OCF ( 85% of my savings here )
FTSE U.K. All Share Index Unit Trust - Accumulation 0.06 OCF ( 5% of my savings here )
Emerging Markets Stock Index Fund - Accumulation 0.23 OCF ( 10% of my savings here ) 

Finally I could just put it all in global all cap index. Not sure why I would choose it over vanguard life strategy with the higher costs however I could be convinced this would be a better option.
FTSE Global All Cap Index Fund - Accumulation 0.23 OCF
Thanks for your time.. Mike

eskbanker

Michael121 said:

HSBC Global Strategy Adventurous Portfolio AC 0.48 OCF
So this is fairly simple for me as I already have a bank account with hsbc and there would be no need to use other platforms which is nice however the charges seem a little high.

This is also 0.2% OCF, where did 0.48 come from?

Michael121

From the hsbc website, where did you see 0.2? 

bowlhead99

Michael121 said:

From the hsbc website, where did you see 0.2? 

The HSBC website figure will include the cost of the 'platform fee' to hold it via HSBC's service. The ongoing charges figure is lower. You'll incur platform/account fees and charges no matter what investment you choose to hold, and you don't have to hold HSBC's fund on HSBC's platform.

If you're trying to compare apples with apples, you can't compare in your left hand the costs of the HSBC global strategy fund including ongoing charges figure and platform fee, with in your right hand the costs of the Vanguard funds including ongoing charges figure but excluding any platform fee.

Michael121

bowlhead99 said:

Michael121 said:

From the hsbc website, where did you see 0.2? 

The HSBC website figure will include the cost of the 'platform fee' to hold it via HSBC's service. The ongoing charges figure is lower. You'll incur platform/account fees and charges no matter what investment you choose to hold, and you don't have to hold HSBC's fund on HSBC's platform.

If you're trying to compare apples with apples, you can't compare in your left hand the costs of the HSBC global strategy fund including ongoing charges figure and platform fee, with in your right hand the costs of the Vanguard funds including ongoing charges figure but excluding any platform fee.

Oh right I thought the hsbc charge was ongoing, So I can eliminate vanguards 100% lifestrategy and now its a decision between the rest thanks for clearing that up.

SonOf

HSBC Global Strategy Adventurous Portfolio AC 0.48 OCF
So this is fairly simple for me as I already have a bank account with hsbc and there would be no need to use other platforms which is nice however the charges seem a little high.
The charge is higher as the share class they are using is designed for distribution via the bank.   In effect, it includes the in-house platform in the fund charge.
The whole of market platforms would use class C which has an OCF of 0.20%.

Vanguard LifeStrategy 100% Equity Fund 0.2 OCF
Cost is nice on this one however im not sure if I like the idea of having 20% in the uk, every other fund is more like 5% so im not sure if this is good, bad or don't really make a difference.
There is very little cost difference once you factor the platform charge in.
The UK is around 4% if the global economy.  Vanguard have made management decisions to hold a greater amount.

The next 3 I could use from vanguard are my attempt at trying to do something similar to what these funds are doing but lowering costs further, i would have to balance these myself which wouldn't be a problem assuming 85% Global (ex uk) 5% UK and 10% Emerging Markets is good.
FTSE Developed World ex-U.K. Equity Index Fund - Accumulation 0.14 OCF ( 85% of my savings here )
FTSE U.K. All Share Index Unit Trust - Accumulation 0.06 OCF ( 5% of my savings here )
Emerging Markets Stock Index Fund - Accumulation 0.23 OCF ( 10% of my savings here ) 

Whilst running a bespoke portfolio of single sector funds does lower the charges, it means you have more work to do.  You have to select the weightings and rebalance the portfolio.  All management decisions.   Limiting yourself to Vanguard may not be a good idea as they are not the best option in every area.

Michael121

SonOf said:

HSBC Global Strategy Adventurous Portfolio AC 0.48 OCF
So this is fairly simple for me as I already have a bank account with hsbc and there would be no need to use other platforms which is nice however the charges seem a little high.
The charge is higher as the share class they are using is designed for distribution via the bank.   In effect, it includes the in-house platform in the fund charge.
The whole of market platforms would use class C which has an OCF of 0.20%.

Vanguard LifeStrategy 100% Equity Fund 0.2 OCF
Cost is nice on this one however im not sure if I like the idea of having 20% in the uk, every other fund is more like 5% so im not sure if this is good, bad or don't really make a difference.
There is very little cost difference once you factor the platform charge in.
The UK is around 4% if the global economy.  Vanguard have made management decisions to hold a greater amount.

The next 3 I could use from vanguard are my attempt at trying to do something similar to what these funds are doing but lowering costs further, i would have to balance these myself which wouldn't be a problem assuming 85% Global (ex uk) 5% UK and 10% Emerging Markets is good.
FTSE Developed World ex-U.K. Equity Index Fund - Accumulation 0.14 OCF ( 85% of my savings here )
FTSE U.K. All Share Index Unit Trust - Accumulation 0.06 OCF ( 5% of my savings here )
Emerging Markets Stock Index Fund - Accumulation 0.23 OCF ( 10% of my savings here ) 

Whilst running a bespoke portfolio of single sector funds does lower the charges, it means you have more work to do.  You have to select the weightings and rebalance the portfolio.  All management decisions.   Limiting yourself to Vanguard may not be a good idea as they are not the best option in every area.

Cheers bud for finding the time to comment on my post. I think im going to choose either hsbc or vanguard life strategy for the time being. 

bd10

Hi Mike,
have a look at Morningstar. You can query these funds for their past performance, holdings, etc.. You can also see potential overlaps across various funds.
Fees is one element in the whole equation. The lower the better, obviously, but personally I am more interested in their performance first. If I had the choice between a fund that barely beats the benchmark but is dead cheap or a more expensive fund that has been outperforming consistently for a decade after fees, I'd favour the latter. For that I need to see consistency, both in years when the general market moves up as well as sideways and down. That's why I look at 10+ years or performance history.

Mr.Saver

bd10 said:

If I had the choice between a fund that barely beats the benchmark but is dead cheap or a more expensive fund that has been outperforming consistently for a decade after fees, I'd favour the latter.

I would also check the tracking error. If the fund has a higher tracking error and that resulted in better performance, I would not buy it. Also, 10 years is too short to say "outperforming consistently". Flip a fair coin 10 times, and you'd have roughly 0.1% chance to have 10 heads in a row. Does that mean the next result will likely to be a head too? I don't think so. RTTM is a much bigger concern. If a more expensive index fund "consistently outperforming" other cheaper index funds tracking the same index after fees. I wouldn't touch that fund at all.

bd10

Very true regarding tracking error, but not in the absolute sense: a fund designed to track an index or stated benchmark then this t/e is important, otherwise not really meaningful in my opinion.
The 10 years that's the minimum I look at. I filter through Morningstar and anything with less than 10 years I simply disregard. Whether 10 years is way too short, not so sure. Ideally I want a bull and bear market in the sample but using monthly returns the sample size of 120 observations is sufficient for me (I usually test weekly and monthly returns, annual is too vague for me).

Mr.Saver

bd10 said:

Very true regarding tracking error, but not in the absolute sense: a fund designed to track an index or stated benchmark then this t/e is important, otherwise not really meaningful in my opinion.

As you can see, all funds mentioned in this thread are index funds, therefore I'd assume we are talking about index funds here. Active managed funds are totally different, and I don't want to talk about how to pick a star fund / star manager. Because that's a loser's game.

bd10 said:

The 10 years that's the minimum I look at. I filter through Morningstar and anything with less than 10 years I simply disregard. Whether 10 years is way too short, not so sure. Ideally I want a bull and bear market in the sample but using monthly returns the sample size of 120 observations is sufficient for me (I usually test weekly and monthly returns, annual is too vague for me).

For an index fund, if the index is a well established and investable, and the fund is run by a well-established and reputable fund management company, why would you need so many years of history for the fund itself? If the index is new, the history of the index can be derived by applying the indexing method to the stock data before the index was created, and the index maintaining company (MSCI, FTSE, etc.) often publish those data. Well-established and reputable fund management companies surely know how to best run their index funds - they have been doing that for decades. So I don't see any problem buying a new index fund with short (a couple of years) history.