How to move money from cash ISA into the stock market

bowlhead99

potatobrains said:

Is the FTSE Developed World ex-U.K. one better for a UK resident than the S&P500 then? I'd be holding it alongside the LS funds already mentioned.

The S&P500 tracker puts your money into the biggest companies that happen to be listed on the US stock markets. 

The Developed World Ex-UK tracker puts your money into the biggest companies that are listed on the stock markets of 20+ countries, including the US.

If you know that the US stock market will perform better than all the other countries, then sure, use the US tracker rather than the developed world tracker.

I would suggest that you don't know that, so why gamble on it?

tel_

grumiofoundation said:

The 2 aren't tracking exactly the same indexes. 

FTSE Developed World ex-U.K. Equity Index Fund -  large and mid-sized company shares in developed markets, 

FTSE Global All Cap Index Fund - large, mid-sized and small company shares in developed and emerging markets

Thanks all for the advice mentioned so far.

FTSE Developed World ex UK Equity Index Fund or FTSE Global All Cap Index Fund.

Both sound quite appealing to me so might have to invest in both, given the attributes mentioned by MSE forum members so far. I will look at them in more detail of course before deciding anythnig.

FinancialIdiot

Thanks for all further contributions, I think I'm slowly getting a better idea of what I could or should be doing.

I'm interested only in creating a portfolio of globally diversified stock market index funds. That said, there is clearly variability of emphasis within such funds, maybe most obviously with regard to geographies. Hence I can get a globally diversified index fund with UK bias (eg. the VLS funds) or without UK bias (eg. HSBC Global Strategy Portfolios??). Presumably I could get a (globally diversified index) fund with N America bias or Asian bias, etc??

So for the sake of further diversification, might there be merit in splitting my money between 3 funds - one with UK bias (eg. VLS60), one with no geographical bias (eg. HSBC Global Strategy Balanced Portfolio C Acc ??) and one with N. American bias?

It looks as if such funds provide variability of emphasis in other ways which might also be relevant, such as (judging from previous posts) emphasising different company sizes (large, medium or small). I don't want to complicate things too much but I'm starting to shy away from putting all of the money into just VLS60 or HSBC Global Strategy Balanced Portfolio C Acc. Does this sound reasonable - i.e. having 3, 4, 5 or 6 similar funds all with differing emphases (for the sake of further diversification)?

masonic

FinancialIdiot said:

It looks as if such funds provide variability of emphasis in other ways which might also be relevant, such as (judging from previous posts) emphasising different company sizes (large, medium or small). I don't want to complicate things too much but I'm starting to shy away from putting all of the money into just VLS60 or HSBC Global Strategy Balanced Portfolio C Acc. Does this sound reasonable - i.e. having 3, 4, 5 or 6 similar funds all with differing emphases (for the sake of further diversification)?

There's little diversification to be achieved by splitting the money between funds with such a large overlap. The various multi-asset funds do have slightly different approaches, some are passive fixed allocation, some are passive dynamic allocation, while others an element of active management. Generally people pick the one that suits their needs best. I can't really see a justification for '3-6' funds. If your needs are that specific you could just pick a range of single sector funds in exactly the proportions you want.

FinancialIdiot

masonic said:

There's little diversification to be achieved by splitting the money between funds with such a large overlap. The various multi-asset funds do have slightly different approaches, some are passive fixed allocation, some are passive dynamic allocation, while others an element of active management. Generally people pick the one that suits their needs best. I can't really see a justification for '3-6' funds. If your needs are that specific you could just pick a range of single sector funds in exactly the proportions you want.

OK, fair enough. Though I do see much comment on this forum about merits or otherwise of particular funds, especially the VLS funds in relation to their UK weighting (including one person on this thread disparaging them).

So I may as well choose just one ready-made index tracker portfolio and as long as it's low-cost, globally diversified (etc) it shouldn't matter which one I choose - VLS60 is as good as HSBC Global Strategy Balanced Portfolio is as good as any other similar.

masonic

FinancialIdiot said:

masonic said:

There's little diversification to be achieved by splitting the money between funds with such a large overlap. The various multi-asset funds do have slightly different approaches, some are passive fixed allocation, some are passive dynamic allocation, while others an element of active management. Generally people pick the one that suits their needs best. I can't really see a justification for '3-6' funds. If your needs are that specific you could just pick a range of single sector funds in exactly the proportions you want.

OK, fair enough. Though I do see much comment on this forum about merits or otherwise of particular funds, especially the VLS funds in relation to their UK weighting (including one person on this thread disparaging them).

So I may as well choose just one ready-made index tracker portfolio and as long as it's low-cost, globally diversified (etc) it shouldn't matter which one I choose - VLS60 is as good as HSBC Global Strategy Balanced Portfolio is as good as any other similar.

The high UK weighting of VLS is a reason not to use VLS if you don't want a high UK weighting. To that extent, VLS60 is not as good as HSBC Global Strategy Balanced Portfolio. On the other hand, if you do want a significant home bias in your portfolio, VLS would more closely meet your needs.

FinancialIdiot

masonic said:

The high UK weighting of VLS is a reason not to use VLS if you don't want a high UK weighting. To that extent, VLS60 is not as good as HSBC Global Strategy Balanced Portfolio. On the other hand, if you do want a significant home bias in your portfolio, VLS would more closely meet your needs.

Yes, but what difference would it make to the performance of the portfolio?? I thought the point you were making was that it wouldn't make any significant difference (because of the large amount of overlap between the portfolios).

bowlhead99

FinancialIdiot said:

masonic said:

The high UK weighting of VLS is a reason not to use VLS if you don't want a high UK weighting. To that extent, VLS60 is not as good as HSBC Global Strategy Balanced Portfolio. On the other hand, if you do want a significant home bias in your portfolio, VLS would more closely meet your needs.

Yes, but what difference would it make to the performance of the portfolio?? I thought the point you were making was that it wouldn't make any significant difference (because of the large amount of overlap between the portfolios).

There is no point buying a whole set of portfolio funds (which are each designed so that they are an all-in-one portfolio right off the shelf) if those funds are broadly similar to each other in terms of how much equities and bonds they have, because there is loads of overlap. Just pick one and be done with it.  

Nobody really knows for sure what a relatively 'high' vs 'low' UK FTSE index weighting will do to your portfolio performance, because it depends how the various markets perform over your timescale. If you wanted relatively more more in the UK, Vanguard gives you that. If you wanted relatively less in the UK, HSBC gives you that. What difference will it make? Well, that depends whether the UK index performs better or worse than the average of all the other markets. The general point is that there is no point buying 6 different funds to make up your own allocation out of a bunch of different funds which are all perfectly reasonable things to hold in their own right.

There are 3000+ different funds out there. So why stop at 3, 4, 5, 6 all with different emphasis? Why not 30 or 60 or 300? 

The answer is that if someone has got a bunch of professionals in a room and said this is how we can spread our customers money around to achieve their objective, and someone at another company got their guys in a room and did the same, and came up with a different solution, there is no need to say 'I will have a bit of both'.  Just pick one which sounds like it's fine.  You don't need to say, "hmm, I can't decide if I want high UK or low UK or middling UK, so I will buy all three. Oh and then more US. Oh and then more Asia. Hold on, what about more emerging markets? Damn, almost forgot Europe. Now I'm up to seven. I am lost.".  Keep it simple.

If you go to the barbers and get a haircut you don't ask for them to give you a cocktail of 6 different haircuts, each of which could be adequate on its own. You pick what you think you prefer. If you are not sure what you prefer you just close your eyes and let them get on with it, but it is best if you make the decision yourself, as you're the one that has to live with it.

masonic

FinancialIdiot said:

masonic said:

The high UK weighting of VLS is a reason not to use VLS if you don't want a high UK weighting. To that extent, VLS60 is not as good as HSBC Global Strategy Balanced Portfolio. On the other hand, if you do want a significant home bias in your portfolio, VLS would more closely meet your needs.

Yes, but what difference would it make to the performance of the portfolio?? I thought the point you were making was that it wouldn't make any significant difference (because of the large amount of overlap between the portfolios).

The point I previously made was that holding multiple multi-asset funds did not constitute diversification owing to them having such a high degree of overlap. Diversifying involves adding assets that are not highly correlated with what you already hold.

Nobody knows how holding an overweight to UK equities will impact performance. But one can put forward arguments concerning the wisdom of holding such an overweight, and take a view as to whether it is something one would want. If you don't agree with any of those arguments and don't really care about the subtleties of the asset allocations, then it won't matter which you pick. This is pretty much the opposite stance to picking multiple funds to precisely control your asset allocation (and diverge it from the allocation picked by the fund manager).

FinancialIdiot

masonic said:

Nobody knows how holding an overweight to UK equities will impact performance. But one can put forward arguments concerning the wisdom of holding such an overweight, and take a view as to whether it is something one would want. If you don't agree with any of those arguments and don't really care about the subtleties of the asset allocations, then it won't matter which you pick. This is pretty much the opposite stance to picking multiple funds to precisely control your asset allocation (and diverge it from the allocation picked by the fund manager).

This must be a very subtle argument and I'm not sure I understand it.

In my simple-minded way my concern is just which portfolio to get - home-weighted or non-home-weighted? If there's no significant difference in performance then I'm probably not bothered which to get. If there IS significant difference but I don't know which will do better, then (assuming no cost to having both) if I do have both will the combined result be better than having chosen only the worse performing portfolio? That's it - those are the questions I want an answer to.

Of course, if there is a cost or downside to having both portfolios in the same ISA then that's a different matter but at present I'm not aware of one.