S&P 500 - sensible or silly?

FloraandFauna

Thanks again to all for your comments - really helpful getting me to understand what it is I want to do, and why.

It's confirmed my only reasons for fiddling were a vague sense that I should be doing something about some risks. Which is not a terribly well-informed place to start, and as all my 'risks' boil down to the political and how that may affect a country's economy (and the type of sectors it encourages), I can't possibly call that in advance. I'll just stick with the fund portfolio recommended.

It's difficult, this sitting on your hands business, isn't it.

Albermarle

t's difficult, this sitting on your hands business, isn't it.

Although for most investors , once you have decided on a course of action , sitting on your hands is probably the best thing to do.

That does not exclude the occasional review though. 

Sailtheworld

FloraandFauna said:

Uh-oh. Currency volatility? Is that a problem? I mean an immediate problem? 

No, not really. You're going to be exposed to currency movements whatever you do. Being 100% in Sterling offers zero protection because you'd be concentrating risk in a single currency. Sterling falls by 20% then you may well have the same number of pound notes in your pocket but they're all worth 20% less.

Investing globally gives you some currency diversification. Overall that's probably more of a positive than a negative.

FloraandFauna

Well, I started making monthly contributions over a year ago, so I guess I've done fairly well not to interfere so far <sigh>.

I think if I'm going to be this itchy to mess about, I probably need a safety valve to manage my own behaviour. Actual, serious, retirement investment goes ahead as planned - don't interfere unless very obvious trouble (management trouble that is, not external market volatility).

But I'll start putting a few quid aside each month and when I have a smallish sum, I can fanny around with that to my hearts content, picking random funds I like the look of. This can be true doesn't-matter-if-you-lose-it money.

Sailtheworld

FloraandFauna said:

But I'll start putting a few quid aside each month and when I have a smallish sum, I can fanny around with that to my hearts content, picking random funds I like the look of. This can be true doesn't-matter-if-you-lose-it money.

I've not quite mastered it but you'd get a better outcome if you focused on sticking to your strategy and not bothering with the fannying about. Unless you've got skill / luck you're going to lag the market by buying random funds you like the look of. Where's the fun in throwing money away?

Plenty of strategies to avoid tinkering. i.e. avoid the news / focus on things you can control i.e. savings rates and earnings etc.

bowlhead99

FloraandFauna said:

I think if I'm going to be this itchy to mess about, I probably need a safety valve to manage my own behaviour. Actual, serious, retirement investment goes ahead as planned - don't interfere unless very obvious trouble (management trouble that is, not external market volatility).

But I'll start putting a few quid aside each month and when I have a smallish sum, I can fanny around with that to my hearts content, picking random funds I like the look of. This can be true doesn't-matter-if-you-lose-it money.

I think that's how a lot of people do it.
1) Do some core investing to take care of their actual needs (e.g., x amount to a pension via payroll or standing order every month, y amount by direct debit into an ISA investment fund)
2) then some separate 'money i can afford to lose' or 'money I would rather not lose but won't mess up my plans if it doesn't perform very well' invested on an ad hoc basis when they 'fancy a flutter' or 'want to invest with close scrutiny in micromanaging the allocations as a bit of a hobby'.

Whether that separate pot is literally a separate account, or just a notional chunk of money within your overall pension or ISA account that you know is 'playing around money', isn't too important.  The key is to get the basics right and then if you get the 'optional extras' right, that's just the cherry on top.

FloraandFauna

Sailtheworld said:

FloraandFauna said:

But I'll start putting a few quid aside each month and when I have a smallish sum, I can fanny around with that to my hearts content, picking random funds I like the look of. This can be true doesn't-matter-if-you-lose-it money.

I've not quite mastered it but you'd get a better outcome if you focused on sticking to your strategy and not bothering with the fannying about. Unless you've got skill / luck you're going to lag the market by buying random funds you like the look of. Where's the fun in throwing money away?

Plenty of strategies to avoid tinkering. i.e. avoid the news / focus on things you can control i.e. savings rates and earnings etc.

No, no, you misunderstand - I AM going to stick to the strategy.

But as the issue appears to be personality-based, I'm ALSO going to start collecting a few quid for - entirely unnconnected - hobby investing. Much as people don't see their cash back from riding, going to the cinema, etc, I will be spending a small amount to amuse myself, with the added bonuses (bonii?) of maybe learning something along the way, and not !!!!!! about with my actual investment plans.

Filo25

FTSE 100 investing doesn't even necessarily hedge the currency impact significantly as most of the companies are large mulitnationals with significant non Sterling earnings outside the UK.

FloraandFauna

Filo25 said:

FTSE 100 investing doesn't even necessarily hedge the currency impact significantly as most of the companies are large mulitnationals with significant non Sterling earnings outside the UK.

Yeah, I think I'm just going to write off the issue of currency fluctuations as a) way over my comprehension horizon, and b) way over my ability-to-do-anything-about-it horizon. 

The general consensus for ignoramuses like me, is to stick to a global index tracker, and then go away and do something else for 10 years.

Having said that, I do have another question (sorry...) - a FTSE 100 is the top 100 companies listed with the "highest capitalisation". So presumably there's some churn around the bottom as companies move in and out. So in theory a "top 100/top 500" fund will focus on the 'better' companies, and failing sectors will gradually drop off the list anyway. Except... does "higher capitalisation" directly translate to better performance? Or is it a technical term just meaning they have the largest total on their balance sheets? Can you be in the FTSE 100 for years because you're a massive company, even if you're only returning, e.g. 1% a year return on investment?

NottinghamKnight

There's no direct correlation between size and performance, indeed the consensus view has been (excepting recent months over covid) that smaller companies will perform better because they have more room to grow.