Does anyone remember when the UK had an economy worth investing in?

bowlhead99

CreditCardChris said:

• Get rid of oil & gas, mining, insurance and banks from the FTSE100 and move them into their own sh*tty index nobody wants to buy.

Maybe then I'd be able to take pride in our country again, but I know this will never happen.

This seems like a strange demand. You probably don't understand how financial markets work. I certainly fail to see how having banks and insurers or mining and extractive industries in a separate market index would enhance your ability to 'take pride in our country'. 

Still, many people I see talking about taking pride in their country and suggesting we should 'ban foreigners' from things, are crackpots and bigots. Perhaps you are not those things, just immature.

When we create companies, take them public as soon as it's safe to do so and do everything in their power to push them globally and never sell, ever.

Once they are 'public' they stop belonging to the 'we' who created them and will instead belong to whichever of the global investors chooses to buy shares in them at whatever price the market will dictate, so 'never sell, ever' is something that cannot be enforced and makes it particularly easy for predatory investors to start to build sufficient stake in the business to mount a successful takeover bid.

CreditCardChris

bowlhead99 said:

CreditCardChris said:

• Get rid of oil & gas, mining, insurance and banks from the FTSE100 and move them into their own sh*tty index nobody wants to buy.

Maybe then I'd be able to take pride in our country again, but I know this will never happen.

This seems like a strange demand. You probably don't understand how financial markets work. I certainly fail to see how having banks and insurers or mining and extractive industries in a separate market index would enhance your ability to 'take pride in our country'. 

Still, many people I see talking about taking pride in their country and suggesting we should 'ban foreigners' from things, are crackpots and bigots. Perhaps you are not those things, just immature.

When we create companies, take them public as soon as it's safe to do so and do everything in their power to push them globally and never sell, ever.

Once they are 'public' they stop belonging to the 'we' who created them and will instead belong to whichever of the global investors chooses to buy shares in them at whatever price the market will dictate, so 'never sell, ever' is something that cannot be enforced and makes it particularly easy for predatory investors to start to build sufficient stake in the business to mount a successful takeover bid.

OK let me say it this way, when people buy index funds, they have no say where the money is allocated, the money is allocated according to the weight of the companies that make up the index. Take the S&P for example, for every $1 invested in the index, 27.7 cents goes into the top 10 companies because they make up 27.7% of the index. 

These companies are Apple, Amazon, Microsoft, Facebook, Alphabet, Visa etc. Absolute monster companies that are overall incredible companies, regardless of your view of data privacy etc, they make so much money and have awesome growth prospects.

Then you have the FTSE100 where 5 of the top 10 companies (HSBC, British Tobacco, BP, RDSA and Rio Tinto) make up 19.8% of the index. This means for every £1 invested, 19.9 pence goes into these dinosaur companies which have absolutely no growth prospects and so are forced to go the dividend route, which is great for boomers living off the dividend payments.
But for young investors looking for growth, well the FTSE100 isn't capable of growth because these companies are bogging down the entire index. Tell me, in what universe do these 4 companies deserve to receive 20% of all funds invested? 

A solution could be to move them to a "high dividend index" or something,  

grumiofoundation

bowlhead99 said:

CreditCardChris said:

• Get rid of oil & gas, mining, insurance and banks from the FTSE100 and move them into their own sh*tty index nobody wants to buy.

Maybe then I'd be able to take pride in our country again, but I know this will never happen.

This seems like a strange demand. You probably don't understand how financial markets work. I certainly fail to see how having banks and insurers or mining and extractive industries in a separate market index would enhance your ability to 'take pride in our country'. 

Still, many people I see talking about taking pride in their country and suggesting we should 'ban foreigners' from things, are crackpots and bigots. Perhaps you are not those things, just immature.

You'd think someone who had started multiple threads on how the future of the UK, US and world economies will perform over the coming decades would have a basic understanding of how the FTSE100 works?

Take all sorts I suppose. 

thegentleway

Why is it “your” country? You didn’t chose to be born here...

eskbanker

CreditCardChris said:

Then you have the FTSE100 where 5 of the top 10 companies (HSBC, British Tobacco, BP, RDSA and Rio Tinto) make up 19.8% of the index. This means for every £1 invested, 19.9 pence goes into these dinosaur companies which have absolutely no growth prospects and so are forced to go the dividend route, which is great for boomers living off the dividend payments.
But for young investors looking for growth, well the FTSE100 isn't capable of growth because these companies are bogging down the entire index. Tell me, in what universe do these 4 companies deserve to receive 20% of all funds invested? 

A solution could be to move them to a "high dividend index" or something,  

If you want a portfolio that covers multiple equities within a particular market but not all of the largest by market cap, while omitting those in specific sectors, and steering clear of dividend income generators, then it sounds like an index tracker isn't for you anyway - why not go down the active route?

CreditCardChris

eskbanker said:

CreditCardChris said:

Then you have the FTSE100 where 5 of the top 10 companies (HSBC, British Tobacco, BP, RDSA and Rio Tinto) make up 19.8% of the index. This means for every £1 invested, 19.9 pence goes into these dinosaur companies which have absolutely no growth prospects and so are forced to go the dividend route, which is great for boomers living off the dividend payments.
But for young investors looking for growth, well the FTSE100 isn't capable of growth because these companies are bogging down the entire index. Tell me, in what universe do these 4 companies deserve to receive 20% of all funds invested? 

A solution could be to move them to a "high dividend index" or something,  

If you want a portfolio that covers multiple equities within a particular market but not all of the largest by market cap, while omitting those in specific sectors, and steering clear of dividend income generators, then it sounds like an index tracker isn't for you anyway - why not go down the active route?

I'm currently investing in the vanguard global all cap, 60% of the weight is US and only 4% of the weight is UK thankfully. It's been doing me well so far. 

The reason I don't actively invest is because I'd basically be picking random companies with the hope they out perform the global all cap index. I'm not really the type of person to try and get lucky by picking individual stocks, and prefer the safer more casual gains of index investing.

Michael121

thegentleway said:

Why is it “your” country? You didn’t chose to be born here...

What difference does it make. 

eskbanker

CreditCardChris said:

eskbanker said:

CreditCardChris said:

Then you have the FTSE100 where 5 of the top 10 companies (HSBC, British Tobacco, BP, RDSA and Rio Tinto) make up 19.8% of the index. This means for every £1 invested, 19.9 pence goes into these dinosaur companies which have absolutely no growth prospects and so are forced to go the dividend route, which is great for boomers living off the dividend payments.
But for young investors looking for growth, well the FTSE100 isn't capable of growth because these companies are bogging down the entire index. Tell me, in what universe do these 4 companies deserve to receive 20% of all funds invested? 

A solution could be to move them to a "high dividend index" or something,  

If you want a portfolio that covers multiple equities within a particular market but not all of the largest by market cap, while omitting those in specific sectors, and steering clear of dividend income generators, then it sounds like an index tracker isn't for you anyway - why not go down the active route?

I'm currently investing in the vanguard global all cap, 60% of the weight is US and only 4% of the weight is UK thankfully. It's been doing me well so far. 

The reason I don't actively invest is because I'd basically be picking random companies with the hope they out perform the global all cap index. I'm not really the type of person to try and get lucky by picking individual stocks, and prefer the safer more casual gains of index investing.

If you've found an index that fits what you're looking for and don't want to invest actively then there's no problem, but your argument about the FTSE100 seemed to be that you felt it wasn't a particularly good index - you're not alone in that, but if you don't like it then go elsewhere, rather than coming up with a rather odd suggested 'solution' of tinkering with it to remove the bits you don't like, to create an different type of more specialised index rather than an essentially self-maintaining one based on market capitalisation!

bowlhead99

CreditCardChris saidTake the S&P for example, for every $1 invested in the index, 27.7 cents goes into the top 10 companies because they make up 27.7% of the index. 

These companies are Apple, Amazon, Microsoft, Facebook, Alphabet, Visa etc. Absolute monster companies that are overall incredible companies, regardless of your view of data privacy etc, they make so much money and have awesome growth prospects.

Yes, it is quite a concentrated index, and your figures are slightly out of date in that the weighting in a typical S&P tracker fund as of yesterday  (using the iShares $220bn S&P 500 ETF as an example) had ~30.5% in the top 10 of the 500 names (Apple, Microsoft, Amazon, Alphabet, Facebook, Berkshire, J&J, Visa, P&G, Nvidia).

With the top three all up 70-85% in share price value year to date, the weighted average return for those 10 companies is 50% year to date, i.e. their value was a third lower on the first day of the year.  If you scale their current 30% weight of the S&P back to being a third lower they would only have been worth 20% of the index's current value back then.  So what you can say is that they have contributed ~10% of the index's value growth year to date, and over 9% of that 10% has come from the first five names. What's the total price growth of the index YTD?  9%. 

So although on the face of it it seems that the US economy is booming and the index of 500 leading stocks is breaking new highs and is clearly the best country in the world, actually all the year to date growth has come from those 5-10 companies and the other 490 companies as a whole were completely flat, with no average growth at all; and they have only been able to maintain the 'no growth at all' due to massive government handouts in the form of grants, tax cuts and loans provided by Uncle Sam (funded in part by US treasury issuing bonds to foreign investors).

I'm not sure it is wise to do as you do and shun all stock markets outside the US and all companies on the face of the earth that are not US-listed, on the basis that US markets are up while other markets are flat or down, when we can see that slightly more than every single dollar of the growth in the index this year has come from just five high profile companies - only one percent of the number of companies in the index, and a little over a tenth of a percent of the number of companies in the US total market index.  The dominance of a few at the expense of the many mirrors the fact that over a third of the country's wealth is held by 1% of the people in it. 

Still, if life is about getting rich on the back of other people's coat tails, then the US market would seem to be a great place to dive in and hold on with both hands. You can't lose, right?

CreditCardChris

bowlhead99 said:

CreditCardChris saidTake the S&P for example, for every $1 invested in the index, 27.7 cents goes into the top 10 companies because they make up 27.7% of the index. 

These companies are Apple, Amazon, Microsoft, Facebook, Alphabet, Visa etc. Absolute monster companies that are overall incredible companies, regardless of your view of data privacy etc, they make so much money and have awesome growth prospects.

Yes, it is quite a concentrated index, and your figures are slightly out of date in that the weighting in a typical S&P tracker fund as of yesterday  (using the iShares $220bn S&P 500 ETF as an example) had ~30.5% in the top 10 of the 500 names (Apple, Microsoft, Amazon, Alphabet, Facebook, Berkshire, J&J, Visa, P&G, Nvidia).

With the top three all up 70-85% in share price value year to date, the weighted average return for those 10 companies is 50% year to date, i.e. their value was a third lower on the first day of the year.  If you scale their current 30% weight of the S&P back to being a third lower they would only have been worth 20% of the index's current value back then.  So what you can say is that they have contributed ~10% of the index's value growth year to date, and over 9% of that 10% has come from the first five names. What's the total price growth of the index YTD?  9%. 

So although on the face of it it seems that the US economy is booming and the index of 500 leading stocks is breaking new highs and is clearly the best country in the world, actually all the year to date growth has come from those 5-10 companies and the other 490 companies as a whole were completely flat, with no average growth at all; and they have only been able to maintain the 'no growth at all' due to massive government handouts in the form of grants, tax cuts and loans provided by Uncle Sam (funded in part by US treasury issuing bonds to foreign investors).

I'm not sure it is wise to do as you do and shun all stock markets outside the US and all companies on the face of the earth that are not US-listed, on the basis that US markets are up while other markets are flat or down, when we can see that slightly more than every single dollar of the growth in the index this year has come from just five high profile companies - only one percent of the number of companies in the index, and a little over a tenth of a percent of the number of companies in the US total market index.  The dominance of a few at the expense of the many mirrors the fact that over a third of the country's wealth is held by 1% of the people in it. 

Still, if life is about getting rich on the back of other people's coat tails, then the US market would seem to be a great place to dive in and hold on with both hands. You can't lose, right?

And what about the other 29 years where US markets have been dominating? And please for the love of everything holy don't tell me it's a "market cycle" or that the US was a developing nation. The US was a developing country in the 1800's, not in the 1950's. 

But it's clear we're going around in circles. 
A lot of people think the UK is a booming economy because it's propped up on old grandpa companies which can't innovate and can't grow. A -50% drop in currency over a 50 year period and the weakest military in forever. While I think the UK is failing for these very reasons. Each to their own I guess.