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Best Pension for low cost investing

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  • AlanP_2
    AlanP_2 Posts: 3,520 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    My wife uses a SL 50/50 pension fund, so 50% global and 50% UK equities. It is down about 12% since Feb 2020 dues to the high UK element.
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    1. Some home bias is justified.
    2. Any allocation will have periods of under- and over-performance.
    3. Changing allocation because a fund has recently underperformed is a bad strategy called “chasing performance “.  Leads to long term losses vs staying put. 

    Could you define "home bias" because if you simply mean buying shares in companies that happen to be nominally based in the UK , especially based on them being in the footsie 100 or similar, lets use BP or Unilever as classic examples, "home bias" is an illusion. These companies probably do a similar % of their business in the UK as say Nestle (Swiss) do.
  • 1. Some home bias is justified.
    2. Any allocation will have periods of under- and over-performance.
    3. Changing allocation because a fund has recently underperformed is a bad strategy called “chasing performance “.  Leads to long term losses vs staying put. 

    Could you define "home bias" because if you simply mean buying shares in companies that happen to be nominally based in the UK , especially based on them being in the footsie 100 or similar, lets use BP or Unilever as classic examples, "home bias" is an illusion. These companies probably do a similar % of their business in the UK as say Nestle (Swiss) do.
    Lots of discussion around the issue on this forum and I know you've seen it.  Yes, multinationals have international exposure. Also, FTSE 100 companies have more correlation to each other than to stocks trading on NYSE.  And are heavily concentrated in certain sectors while missing out on others. 
    Bottom line: 
    1. home bias = being overweight domestic equity.
    2. home bias leads to less diversification. 
    I have 20% of my equity in my home market. Thats overweight - its share of the world cap is 3%.  This home bias has hurt performance over the last decade. Doesnt bother me; its only a fifth. I have lots left for S&P500/FAANG.   If I was 50% home, it would have hurt the portfolio in a meaningful way. 


  • Vanguard Life Strategy 80% Acc and Blackrock Consensus 100% Acc. 

    Are you aware that both of these have a significant UK bias and therefore have underperformed recently compared to similar funds with no UK bias ? Might be better to change one of them at least to get more balance.


    Wouldn't that be selling low to buy high?
  • Vanguard Life Strategy 80% Acc and Blackrock Consensus 100% Acc. 

    Are you aware that both of these have a significant UK bias and therefore have underperformed recently compared to similar funds with no UK bias ? Might be better to change one of them at least to get more balance.


    Wouldn't that be selling low to buy high?
    Only if you believe the UK funds is currently low* (ie undervalued) and the global fund are high* (ie overvalued)

    *compared to where they ‘should’ be. 
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Vanguard Life Strategy 80% Acc and Blackrock Consensus 100% Acc. 

    Are you aware that both of these have a significant UK bias and therefore have underperformed recently compared to similar funds with no UK bias ? Might be better to change one of them at least to get more balance.


    Wouldn't that be selling low to buy high?
    Only if you believe the UK funds is currently low* (ie undervalued) and the global fund are high* (ie overvalued)

    *compared to where they ‘should’ be. 
    Many investors will select recent good performers, whether it be markets, funds, individual shares to avoid "missing out".  Why buy an underperformer?  Somebody will. More than likely will require patience to see a decent return though. Markets are no different to tides, at some point they will turn. 
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
    10,000 Posts Fifth Anniversary Name Dropper Photogenic
    Vanguard Life Strategy 80% Acc and Blackrock Consensus 100% Acc. 

    Are you aware that both of these have a significant UK bias and therefore have underperformed recently compared to similar funds with no UK bias ? Might be better to change one of them at least to get more balance.


    Wouldn't that be selling low to buy high?
    Only if you think that the U.K. shares will go up faster than the non U.K.  
    Let me give you a real example.
    three years ago I bought BYD. It halved about 5 minutes after I bought. Or seems like that anyway. 
    A year later I sold it at that half price  (selling low?) and bought Tesla which at that time was near its all time high that year around 250 (buying high., 50 in today's terms) . Last time I looked BYD had doubled since then. Tesla is up maybe 8x now.  

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