I finally opened a stocks and shares isa.

JohnRo

CreditCardChris said:

Well when I'm being told that buying US stocks is "wrong" when they've outperformed the UK since 1940 of course I'm going to dispute that.

You're being told that only buying US stocks is "wrong". It may ultimately prove to be "right" in terms of outcome and you then win bragging rights but it's a far bigger gamble than the approach most would pursue.

What you ought to be trying to acheive is a balanced regional asset allocation where possible rather than betting big on a single country, single asset class even if that has been a (hindsight) winner.

CreditCardChris

[quote]The previous cycle had the US as the worst performer.  [/quote]

What is this mysterious cycle you speak of? Please tell me so I can research it for myself.

And I'm not only planning on investing in US equity. As I invest more and get used to it I will start diversifying a bit more. However I have to keep fees in mind... Trackers are low fee options. 

bowlhead99

CreditCardChris said:

[quote]The previous cycle had the US as the worst performer.  [/quote]

What is this mysterious cycle you speak of? Please tell me so I can research it for myself.

Surely you have been looking at the graphs of all the different sectors to determine that the US was the best as the basis for your first foray into the investment world, so you have seen all the comparative information and are not unaware that economies and markets move in cycles of boom and bust. 

We have had a long boom since the market bottomed out in 2009, fueled by low interest rates and quantitative easing. The US did well. Leading up to that it didn't, as you can see it was well behind some other sectors on the chart previously posted (UK smallcap as an example). 

And I'm not only planning on investing in US equity. As I invest more and get used to it I will start diversifying a bit more.

That seems like exactly the opposite route to what would ever be recommended as a sensible choice to a new investor. Starting with a specialist single country cap-weighted tracker holding 100% equities and whose companies have the most of their assets and earnings in a foreign currency. And then later once you have figured out how to handle the 60% swings of value, diversify to get a proper balanced portfolio.

The obvious thing to do is surely to start with a proper balanced portfolio and then once you have years of experience, take greater risks (if you really must) by concentrating your investment into single country or thematic funds.

However I have to keep fees in mind... Trackers are low fee options

They are indeed low fee options. But the key to a successful result is to make a sensible allocation among asset classes and regions/ industries, and then find the cheapest way to hold that exposure. Not find the cheapest thing to hold and then hope it happens to give you a balanced portfolio, which it won't. 

The disparity between the returns of one asset class and another can be 30% in a given year. Focusing on saving 0.2% in a given year on fees without caring what that does to your allocation among asset classes is bonkers.

CreditCardChris

bowlhead99 said:

CreditCardChris said:

[quote]The previous cycle had the US as the worst performer.  [/quote]

What is this mysterious cycle you speak of? Please tell me so I can research it for myself.

Surely you have been looking at the graphs of all the different sectors to determine that the US was the best as the basis for your first foray into the investment world, so you have seen all the comparative information and are not unaware that economies and markets move in cycles of boom and bust. 

We have had a long boom since the market bottomed out in 2009, fueled by low interest rates and quantitative easing. The US did well. Leading up to that it didn't, as you can see it was well behind some other sectors on the chart previously posted (UK smallcap as an example). 

And I'm not only planning on investing in US equity. As I invest more and get used to it I will start diversifying a bit more.

That seems like exactly the opposite route to what would ever be recommended as a sensible choice to a new investor. Starting with a specialist single country cap-weighted tracker holding 100% equities and whose companies have the most of their assets and earnings in a foreign currency. And then later once you have figured out how to handle the 60% swings of value, diversify to get a proper balanced portfolio.

The obvious thing to do is surely to start with a proper balanced portfolio and then once you have years of experience, take greater risks (if you really must) by concentrating your investment into single country or thematic funds.

However I have to keep fees in mind... Trackers are low fee options

They are indeed low fee options. But the key to a successful result is to make a sensible allocation among asset classes and regions/ industries, and then find the cheapest way to hold that exposure. Not find the cheapest thing to hold and then hope it happens to give you a balanced portfolio, which it won't. 

The disparity between the returns of one asset class and another can be 30% in a given year. Focusing on saving 0.2% in a given year on fees without caring what that does to your allocation among asset classes is bonkers.

I only invested £1000 though, it's not exactly a life changing amount of money for my first investment. I just went with an index  that historically has performed incredibly well (yes I know past performance isn't an indicator of future performance etc), had low fees and which I believe will continue to do well in the future. 

OK it might not perform the best out of every option available but I don't think it will perform badly either, 80 years of history suggests it won't perform badly.


Now I have my foot in the door I can invest about £500 each month and start expanding my portfolio into other sectors and countries. One thing I didn't want to do was be overwhelmed with choices right from the start by splitting my measly £1000 across a ton of different funds.

JohnRo

The amount involved doesn't negate the wise words you've been offered by other posters.

There are several single fund multi asset index tracking vehicles with low charges that offer exposure to global markets in different asset classes.

I know you probably won't appreciate the constructive criticism but it really does sound like you're focused entirely on trying to hit the jackpot winner rather than investing sensibly for the long term.

CreditCardChris

JohnRo said:

The amount involved doesn't negate the wise words you've been offered by other posters.

There are several single fund multi asset index tracking vehicles with low charges that offer exposure to global markets in different asset classes.

I know you probably won't appreciate the constructive criticism but it really does sound like you're focused entirely on trying to hit the jackpot winner rather than investing sensibly for the long term.

So which low fee passive fund do you recommend then? My broker is HL by the way.

Albermarle

Vanguard Lifestyle : Blackrock Consensus: L& G Multi Index : Fidelity Allocator etc
They all offer a range based on the risk/volatility that you are aiming for .

JohnRo

CreditCardChris said:

JohnRo said:

The amount involved doesn't negate the wise words you've been offered by other posters.

There are several single fund multi asset index tracking vehicles with low charges that offer exposure to global markets in different asset classes.

I know you probably won't appreciate the constructive criticism but it really does sound like you're focused entirely on trying to hit the jackpot winner rather than investing sensibly for the long term.

So which low fee passive fund do you recommend then? My broker is HL by the way.

I wouldn't recommend any one in particular. They're all good at what they do.

Apologies if this sounds patronising but assuming you haven't already, I personally think you'd do well to examine your appetite for paper losses first, which given the initial amount involved may well seem unimportant and your attitude far more gung-ho than will be the case with a larger pot.

However adding £500 a month will soon build into a decent amount and what's comfortable and care free at £1K will not be the same at £50K or more

The exposure to the underlying investment risk needs to be understood in terms of losses, as does your attitude to and appetite for the losses that might potentially be delivered, albeit temporarily.

Looking at historic US charts that have done little more than rise and rise and rise with the odd brief wobble now and again for the last 10 years or so is not giving you any insight whatsoever into the future.

You need to be serious and properly investigate your attitude to financial loss because gut wrenching paper losses in the next big crash may be deep and protracted, they will be uncomfortable and it's safe to assume that your resolve will be severely tested, especially where a larger pot has been built.

Worst case scenario is that it then causes doubts, regret and sleepless nights. Subsequent behaviour then makes them real losses, which isn't good for your wealth.. better to invest appropriately ahead of time.

Look at your situation as a whole and how this investment portolio is intended to fit within that, do you have emergency cash , cash savings, pensions, property, income, debt, other assets. Can you withstand a long drawn out stock market recovery after a major crash, will you need some or all the investment money back by a certain date, for a specific purpose?

What do you ultimately want this investment to achieve?

Big questions.

Which multi asset investment to choose is then a relatively minor and simple decision.