L&G International vs HSBC Ftse all world fund, vs any low cost vanguard tracker fund suggestion

mears1

NedS, you are right. I just need to get on with it. The vast choice is overwhelming. Scared of making the wrong decision - as it could be costly. 

tebbins

mears1 said:

NedS, you are right. I just need to get on with it. The vast choice is overwhelming. Scared of making the wrong decision - as it could be costly. 

You're literally deciding between apples and almost identical apples.

Thrugelmir

tebbins said:

mears1 said:

NedS, you are right. I just need to get on with it. The vast choice is overwhelming. Scared of making the wrong decision - as it could be costly. 

You're literally deciding between apples and almost identical apples.

That's because the number of tasty apples in the basket has progressively reduced. A small concentration of apples common to all is now making the best cider. The remainder aren't contributing much to the mix.  Eventually the trade will end and new one commence. 

george4064

Have a read here: https://monevator.com/finding-an-index-tracker/

It helps break down the different aspects you should consider when choosing an index tracker for your portfolio.

Like others have said, from the funds/ETFs mentioned you really are comparing very minor points such that it’s like comparing pink lady apples vs gala apples, they are all apples and there isn’t a perfect apple that suits everyone.

FWIW, I hold FTSE Global All Cap Accumulation in my S&S LISA. Does what it says on the tin.

GeoffTF

mears1 said:

Please could some kind member advise me on a passive global index fund to hold for about 10 years in my stocks and share isa.
It needs to be
 1. low cost with a good return,
  2.low or no maintenance - I do not want to be reinvesting dividends. The Accumulation version.  
  3. A fund that I can just leave, as I do not have the know how to assess whether it is doing well.

Important factors here are the size of your up front investment, the amount of money that you expect to add or remove from your investment each year. You tax status is also important. Vanguard is the most popular passive fund manager for retail investors. You may be able to save a lot of money by using Exchange Traded Funds (which do not usually attract platform fees) rather than OEICs. Accumulating versions are available, but they have wider market spreads. VWRL and VWRP and popular all-world Vanguard ETFs.

Freetrade is cheap for small investors, and iWeb is popular for large investors, and does not charge platform fees at all. I suggest you look here for the most suitable platform:

https://monevator.com/compare-uk-cheapest-online-brokers/

[Deleted User]

eskbanker said:

Deleted_User said:
In fact since I have some cash in both of these funds and this comment worried me, I have checked for myself, and over the past 5 years the returns of each fund was as follows (as of today):

• Vanguard FTSE Global All Cap Index Investor Acc GBP - 80.34% 5 year return
• HSBC FTSE All World Index C Acc - 81.61% 5 year return
  

So in fact the comment from the other public forum is WRONG and the HSBC fund as you would expect has given better returns. As with all such things be careful before relying on what the internet tells you!!

PS figures taken from the Hargreaves Lansdown site here (https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-ftse-global-all-cap-index-accumulation/charts &) NB I don't use HL for actual investing as they're super expensive but their research tools are good!

Those funds track different indices - the Vanguard one tracks the FTSE Global All Cap index, which includes small caps, whereas the HSBC one tracks FTSE All World, which is only large and mid cap.  Both are likely to deliver broadly similar performance, but those small variances between the two funds can be attributed to various factors but not specifically tracking error as it's not a like-for-like comparison....

I hadn't spotted that difference! Although I did say be careful on relying on internet randoms (which includes me)

To definitively answer this, I've compared how closely each fund tracked its slightly different underlying benchmark (using figures taken from the KIDs for each fund). This includes fund fees but not exit/entry costs or platform fees (e.g. the £5 iwebtrading fee or the 0.15% Vanguard annual platform fee since they are unknown and vary depending on your investment route): 

HSBC:
2015 - HSBC returned 2.9% vs 4.0% for the benchmark (-1.1% tracking error)
2016 - HSBC returned 29.2% vs 29.6% benchmark (-0.4% tracking error)
2017 - HSBC returned 13.0% vs 13.8% benchmark (-0.8% tracking error)
2018 - HSBC -4.8%  vs 3.4% benchmark (-1.4% tracking error)
2019: HSBC 22.7% vs  22.3% benchmark (+0.5% tracking error)
2020: HSBC 12.6% vs 13.0% benchmark (-0.4% tracking error)

Historically, HSBC underpperformed the tracked benchmark by an average 0.68% each year.

Vanguard:
2017: Vanguard returned 13.0% vs 13.3% for the benchmark (-0.3% tracking error)
2018: Vanguard -4.5% vs -4.2% benchmark (-0.3% tracking error)
2019: Vanguard 21.5% vs 21.9% (-0.4% tracking error)
2020: Vanguard 12.5% vs 12.9% (-0.4% tracking error)

Historically, Vanguard underperformed the tracked benchmark by an average 0.35% each year.

So HSBC was in fact a bit more "expensive" although you would still have done better overall by holding HSBC since its underlying benchmark has slightly outperformed Vanguard's underlying benchark. And the diffrences are pretty small: you'd have done far, far better with either than holding cash, also this is just what happened in the past, future years may be totally different (for instance notice that during the big gain in 2019 HSBC randonly outperformed its benchmark whereas Vanguard underperformed!)

To the OP - I was in your position recently. I do frankly think we are in a massive bubble right now but the problem is if you don't invest in shares you're missing out on the growth that everyone else is getting, and inflation is gobbling away the real world value of your cash every day so standing still is making you relatively poorer (and real inflation is significantly higher than official inflation figures). Cash isn't necesarily safe either (if share prices were to permanently collapse on a long-term basis, banks probably would too). So I've jumped in, so far it has worked out but I'm fully aware that this could change anytime, but you have to take risks in life since everyone else is. And just make sure you diversify your assets as much as possible to avoid putting all your eggs in one basket.

[Deleted User]

mears1 said:

How about when you deduct costs from these 5 year returns?

You need to consider both platform charges and fund costs. Platform charges are what you pay someone to hold the investment for you. For example, if you buy the Vanguard fund through Iweb's platform, you pay £100 to open your iweb account and then a £5 trading fee each time you invest. If you buy the Vanguard fund through Vanguard's own investment platform, you pay 0.15% of your invested amount annually and there's no trading fee. Which is cheaper depends on how much you invest and how often you'll trade (Vanguard is better for small amounts under about £35k and shorter-term more frequently traded investments and iweb is cheaper for larger longer term investments). You have to do the maths here yourself. My previous post doing a comparison ENTIRELY IGNORED the platform costs. 

Then you need to consider fund charges (the money the fund takes out of your investment in exchange for running the fund including the "Total Expense Ratio" which is how much you'll pay each year to the fund manager for running the investment). The HSBC fund charges a lower total expense ratio than the Vanguard fund. And then on top of the Total Expense Ratio, the fund incurs numerous underlying trading costs and taxes etc. when it deals in shares on a day-to-day basis and those costs are also taken from your investment reducing its value. 

The comparison in my previous post included all these fund charges because the value of the fund reflects all these internal charges having been paid. 

Also consider the "ease of use" of the platform, iWeb is genuinely terrible, I am sticking with them because they're much cheaper for me than Vanguard's platform but I suffer each time I want to do something (you get logged out randomly, the account opening process is horrible, their customer service team is not helpful etc etc) and I've seen forum posts here of iweb "losing" ISA transfers for periods of months or even (!) years.

mears1 said:

 If you hold them via iweb isa, does the fund or iweb self invest the dividends?

Depends on the fund, some pay you the money and some keep it to grow the value of the fund. UNLESS you've invested in an ISA you do need to report your capital gains to HMRC so they can be taxed (once you get above a certain amount) and it's harder to keep track of this if profits don't get paid out in cash. But it's also administratively easier if the money just stays in the fund, and might avoid platform fees (e.g. iweb would charge you £5 for each reinvestment out of cash dividends but you might avoid this fee if the fund just keeps the money and reinvests it within the fund).

mears1 said:

And do both of these deal in sterling, so avoiding the need to need to factor currency charges?

Yes and do watch out for iweb's extortionate FX fee (something like 1.5%?) which is so incredibly expensive I will never use them for a foreign currency denominated investment. Also remember that investing in funds using foreign currency also exposes you to FX risk (potentially very unwise!).

Are there any other charges that need to be considered apart from i webs transaction cost of £5, and ongoing charge to consider?

See my answer above, you need to consider both platform and fund costs.

Also note that the fund pays a bunch of hidden costs e.g. trading fees and the spread each time they buy and sell shares, and taxes, but you can't avoid them and you don't know what they are. You just have to trust that both Vanguard and HSBC have sufficient clout and nous to reduce these as much as possible. The fund manager is not supposed to directly profit from such costs (otherwise I think they'd have to include the amounts in the Total Expense Ratio).

And also research capital gains tax - if you make more than £12,300 profit (including both dividends and from selling investments) each year that's taxable at 20% (or as little as 10% if you're a basic rate taxpayer). HMRC won't chase you for this...until they do, and if you "forgot" they can impose massive fines of 100% or more in addition to the tax and interest, so don't take this lightly!

Also note I'm not an expert so this is just my own understanding, I may well have made a large number of massive mistakes, double check everything I said

And don't forget to open a stocks and shares ISA, you can put £20k in each year and the profits are tax free!

Albermarle

mears1 said:

 If you hold them via iweb isa, does the fund or iweb self invest the dividends?

Depends on the fund, some pay you the money and some keep it to grow the value of the fund. You do need to report your capital gains to HMRC so they can be taxed (once you get above a certain  amount) and it's harder to keep track of this if profits don't get paid out in cash. But it's also administratively easier if the money just stays in the fund, and might avoid platform fees (e.g. iweb would charge you £5 for each reinvestment out of cash dividends but you might avoid this fee if the fund just keeps the money and reinvests it within the fund).

If the funds are in an ISA, there are no capital gains or dividend taxes payable.

GeoffTF

Vanguard charges a platform fee of 0.15% (capped at £375), not 0.35%. iWeb charges just £5 per trade after the first year and is owned by Lloyds Bank. Freetrade charges nothing for a GIA, and £3 per month for an ISA. If you are small investor starting out, you can use a GIA until your account is large enough to make an ISA worthwhile. VWRL is denominated in GBP, but pays dividends in USD. It is cheaper to use VEVE (or VHVG) and a market weight (about 10%) of VFEM (or VFEG).

[Deleted User]

GeoffTF said:

Vanguard charges a platform fee of 0.15% (capped at £375), not 0.35%. iWeb charges just £5 per trade after the first year

Thanks for the correction! My mistake re: vanguard and I've corrected the post. But iweb charges £5 per trade straight away from account opening (not after the first year).