All World Trackers - High Risk? - I Don't Think So

Thrugelmir

Adyinvestment said:

Playing on the stock market is no longer a game played by Wall Street that when I was young you only heard about in films and news, in these digital times it is readily available to the masses, I can easily purchase shares in 10,000's of worldwide companies in seconds!

Playing is a game. Investing isn't.  You'd be wise to heed the four most expensive words in the investing vocabulary. "This Time is Different".  How much do you know about these thousands of companies you can purchase shares in? One suspects very little. 

Thrugelmir

ZeroSum said:

maxsteam said:

Personally I expect a fund manager to beat the indices rather than just match them. Tracker funds have a place in the investment world (lots of derivatives rely on them) but any idiot can track an index.

Like neil woodford?

Was extremely successful in the Dot Com era. Despite taking stick for serial underperformance for some years. Strategy ultimately came good and investors that stuck with Perpetual were rewarded with a large payday. Being contrarian requires making brave choices not investing with the herd.  

Prism

ZeroSum said:

maxsteam said:

Personally I expect a fund manager to beat the indices rather than just match them. Tracker funds have a place in the investment world (lots of derivatives rely on them) but any idiot can track an index.

Like neil woodford?

Are you implying that Neil Woodford didn't beat his benchmark index?

ZeroSum

Prism said:

ZeroSum said:

maxsteam said:

Personally I expect a fund manager to beat the indices rather than just match them. Tracker funds have a place in the investment world (lots of derivatives rely on them) but any idiot can track an index.

Like neil woodford?

Are you implying that Neil Woodford didn't beat his benchmark index?

Some do go wrong in the end.

Prism

ZeroSum said:

Prism said:

ZeroSum said:

maxsteam said:

Personally I expect a fund manager to beat the indices rather than just match them. Tracker funds have a place in the investment world (lots of derivatives rely on them) but any idiot can track an index.

Like neil woodford?

Are you implying that Neil Woodford didn't beat his benchmark index?

Some do go wrong in the end.

Yes it did go a bit wrong with the fund being locked but performance wasn't really the main issue as someone invested over the long term with Neil Woodford would likely have done very well. 

Voyager2002

Adyinvestment said:

I just think that investing is completely different to what it used to be, it is completely acceptable for the young to be pumping more and more money into shares.

"This time it's different."

The four most terrifying words in the world of finance.

The thoughts that you express are very similar to what one often heard in the period between the tech-stocks crash and the global financial crisis.

Adyinvestment

Thrugelmir said:

Playing is a game. Investing isn't.  You'd be wise to heed the four most expensive words in the investing vocabulary. "This Time is Different".  How much do you know about these thousands of companies you can purchase shares in? One suspects very little. 

Yes, individual shares are highly volatile, this is why I don't consider a "World" tracker high risk.

It does not matter if the FTSE100 or any other smaller index is under or over performing, as long as the "World" stock market is growing as a whole the tracker also will grow.

My thinking is that as more and more money is poured into the "World" stock market, the "World" stock market can only grow over time (with lots of dips and highs), and if this is the case why classify it as high risk?

The below chart shows that since the 2nd World War there have only been 3 instances of making a very small loss over a 5 year period...is that high risk?

Ray_Singh-Blue

I have read that between 1929 and 1933 US stocks lost 89% of their value.

If it happened once, it could happen again. In fact, stuff can happen that has never happened before. When you invest in shares, what happens next depends on the fears, expectations and sentiments of millions of strangers. We have literally no idea, we can just guess what might happen.

This is why shares, as an asset class, are considered high risk- when compared to more predictable stuff like cash or bonds.

pip895

My concern with world trackers is that they are more than 50% invested in a single country - any one else consider this an issue?

Thrugelmir

pip895 said:

My concern with world trackers is that they are more than 50% invested in a single country - any one else consider this an issue?

Yes, when just 5 companies have accounted for 22% of the growth in shareholder wealth in the past 3 years in the USA.