Where to invest now the coronavirus has hit the markets

Thrugelmir

Sailtheworld said:

Thrugelmir said:

masonic said:

2_4 said:

tropic_of_Username019 said:

2_4 said:

Are there any funds designed specifically to try and cash in on any recovery?

I normally invest in very broad funds such as the Vanguard 100 but don’t want to expose myself to companies with a fair probability of not surviving, which I feel such a wide-ranging fund is likely to do.

Why wouldn't you want to expose yourself to companies which may not survive? Their prices have been marked down (further than the market as a whole) to reflect the risk that they won't survive. Some won't survive, and will lose shareholder's money; but others will, and their prices will bounce back more strongly when it turns out they're pulling through after all.

Wanting to avoid such companies is contradictory to wanting to cash in on any recovery. Because it's the worst hit companies that have the potential to let you cash in on a recovery, if things get better sooner or faster than the market is currently allowing for. They also have the potential to do worse than the market, if things turn out worse than current market prices imply.

In short, I see no reason to move away from very wide-ranging funds (such as VLS 100) in the current situation. Such funds include exposure to a broad range of both companies which are worse affected by the current crisis (but with greater recovery potential) and companies which are less affected (but with less recovery potential).

I'm happy to expose myself to companies that MIGHT fail but if I say buy an all-share tracker I'll automatically be buying some companies that are likely to fail. A managed fund should have a better chance of avoiding these... that's my thinking.

But I suppose maybe that's always the case though, in theory, but in reality even if a recovery fund thinks Share A is safe, Share B is a loser and Share C is very risk with a huge upside, they could get it wrong. Hmm, ok, so I suppose it's no different now to normal...is that what you and others are saying?

As per previous comments, in a cap-weighted index, companies known to be likely to fail will make up very little of the index. Companies unknown to be likely to fail can't reliably be avoided.

You'll still be buying the companies concerned and therefore be directly supporting the share price. While others sell out. 

The point of an index fund is to give market exposure whilst reducing individual stock risk. People who can't pick winners (or losers) in a bull market are no more likely to be able to do so in a bear market. You have to stop thinking everyone has your gift.

No gift. Having read many bibles. I don't believe in any particular one in deference to others. Would be foolish to do so. One fund alone doesn't create a diversified portfolio.  There'll be another bible to follow after the the current events are finally over and have been fully digested. 

Sailtheworld

Thrugelmir said:

Sailtheworld said:

Thrugelmir said:

masonic said:

2_4 said:

tropic_of_Username019 said:

2_4 said:

Are there any funds designed specifically to try and cash in on any recovery?

I normally invest in very broad funds such as the Vanguard 100 but don’t want to expose myself to companies with a fair probability of not surviving, which I feel such a wide-ranging fund is likely to do.

Why wouldn't you want to expose yourself to companies which may not survive? Their prices have been marked down (further than the market as a whole) to reflect the risk that they won't survive. Some won't survive, and will lose shareholder's money; but others will, and their prices will bounce back more strongly when it turns out they're pulling through after all.

Wanting to avoid such companies is contradictory to wanting to cash in on any recovery. Because it's the worst hit companies that have the potential to let you cash in on a recovery, if things get better sooner or faster than the market is currently allowing for. They also have the potential to do worse than the market, if things turn out worse than current market prices imply.

In short, I see no reason to move away from very wide-ranging funds (such as VLS 100) in the current situation. Such funds include exposure to a broad range of both companies which are worse affected by the current crisis (but with greater recovery potential) and companies which are less affected (but with less recovery potential).

I'm happy to expose myself to companies that MIGHT fail but if I say buy an all-share tracker I'll automatically be buying some companies that are likely to fail. A managed fund should have a better chance of avoiding these... that's my thinking.

But I suppose maybe that's always the case though, in theory, but in reality even if a recovery fund thinks Share A is safe, Share B is a loser and Share C is very risk with a huge upside, they could get it wrong. Hmm, ok, so I suppose it's no different now to normal...is that what you and others are saying?

As per previous comments, in a cap-weighted index, companies known to be likely to fail will make up very little of the index. Companies unknown to be likely to fail can't reliably be avoided.

You'll still be buying the companies concerned and therefore be directly supporting the share price. While others sell out. 

The point of an index fund is to give market exposure whilst reducing individual stock risk. People who can't pick winners (or losers) in a bull market are no more likely to be able to do so in a bear market. You have to stop thinking everyone has your gift.

No gift. Having read many bibles. I don't believe in any particular one in deference to others. Would be foolish to do so. One fund alone doesn't create a diversified portfolio.  There'll be another bible to follow after the the current events are finally over and have been fully digested. 

A World tracker with holdings allocated according to market capitalisation containing c4000 stocks from 50 countries is about as diversified as you can get. That's still too risky for some so balance that off with a minimal (because there's no such thing as zero) risk asset according to how much risk you want to take and that's it.

No religion required and bibles can thereafter be safely ignored. Of course, none of this applies to anyone with an investing edge or luck because they can keep on successfully picking winners as before - good for them.

bowlhead99

Sailtheworld said: A world tracker with holdings allocated according to market capitalisation containing c4000 stocks from 50 countries is about as diversified as you can get. That's still too risky for some so balance that off with a minimal (because there's no such thing as zero) risk asset according to how much risk you want to take and that's it.

No religion required and bibles can thereafter be safely ignored.

If you look at iShares's MSCI ACWI ETF, which aims to follow MSCI's all countries world index, on Friday it had over 9% of its money in just Microsoft, Apple, Amazon and Alphabet. 

The FTSE All-World tracker offered by Vanguard, holds over 3300 stocks to efficiently track the performance of the 3900 shares of the index which it's trying to track. It only publishes portfolio data on a monthly basis but at the end of Feb had something like 8.5% in those four companies mentioned above; since then, the allocation to them will have increased, as a consequence of Amazon and Google holding up a little better in the downturn than the average global stock. So would now be similar to the iShares MSCI ACWI product, at over 9% in those big 4.

If you are convinced that those world trackers are examples of being 'as diversified as you can get', fair play, there are some sound reasons to use market capitalisation as a basis for allocation (albeit for practical reasons, both FTSE's and MSCI's indexes necessarily underweight companies and regions that don't have as much capital in free float as actually exists).

However, your approach comes from only one of the available 'bibles'. You can throw away the other bibles if your bible tells you that >9% in 4 companies and <91% in the other 3000 companies (ignoring for convenience the other 20000 smaller companies that don't feature in those indexes) is "as diversified as you can get", and you're happy with that approach.

However, I suspect Thrugelmir doesn't subscribe to that school of thought, because he took a more rounded self-education process and read other bibles. As you say, "good for him"  and fair play for reminding us that there is usually more than one school of thought when it comes to investing.

Sailtheworld

I'm convinced that VWRL is as diversified as you can get using market capitalisation as a basis for allocation. I could say to myself that 9% in four companies isn't diversification but to make that call I would be stating that (a) there's something wrong with using market cap as a basis for allocation and (b) I thought the world's investors were wrong in allocating 9% of capital to these four companies.

I've made it very clear that I don't have the investment skills to make such big calls and I don't believe I can pick someone (ahead of time) who I can pay to make these calls correctly either. What sounds like the biggest call - saying the aggregate of the World's investors are wrong and doing something else or allocating capital in the same places as the aggregate?

Only the most risk tolerant investor would be 100% VWRL (I'm 30% in UK gilts to offset the market risk).

I actually think back in horror about how I followed the Motley Fool HYP strategy. 15 high yielding shares was considered diversified and I couldn't resist trading either. Fortunately I was lucky to be playing most of this game during a bull market and blessed with a healthy dose of luck. Most strategies require concentration of risk whether it's the dogs of the dow or choosing a star manager. If there was a way of reliably beating the market we'd all be doing it wouldn't we?

Thrugelmir doesn't subscribe to this school of thought because he thinks that his wide reading of information which is already in the public domain means he can better interpret current information for future gain. He'll be right or wrong. It doesn't really matter to me because my starting point is the assumption that I don't have these skills.

bargainhunter888

as i'm new and want a diverse fund im looking at SWDA - 0.2% vs the VWRL which looks to be an income ETF
the other option is HMWO - can i get opinions on these 3?
looking to keep this investment long term, no requirement for immediate funds

Thanks 

Alistair31

What about VWRP ?

bargainhunter888

Alistair31 said:

What about VWRP ?

sorry thats what meant, instead of VRWL

Alistair31

bargainhunter888 said:

Alistair31 said:

What about VWRP ?

sorry thats what meant, instead of VRWL

Then that will be ACC and not INC.

bargainhunter888

Alistair31 said:

bargainhunter888 said:

Alistair31 said:

What about VWRP ?

sorry thats what meant, instead of VRWL

Then that will be ACC and not INC.

i was looking for an acc fund...so SWDA would fit better than income anyway just that vanguard is more diverse

Alistair31

bargainhunter888 said:

Alistair31 said:

bargainhunter888 said:

Alistair31 said:

What about VWRP ?

sorry thats what meant, instead of VRWL

Then that will be ACC and not INC.

i was looking for an acc fund...so SWDA would fit better than income anyway just that vanguard is more diverse

Well then I think VWRP could be the solution ?