When would you choose a fund with 80-100% equities over an all-world index?

HamOnBeans

I’m currently invested into the HSBC Global Strategy Dynamic fund but I’ve been considering changing to the HSBC FTSE all-world index instead.

My thinking is that a fund with 80% equities is already very much impacted by dips in the stock market which is why it's recommended to invest over the long-term. If I’m going to be investing for at least 10 years then wouldn’t I be better off in an all-world index tracker instead? I’m fairly new to this but I’m not really seeing what the bonds and higher fees in the managed fund are doing for me right now.

I’m sure that both of these are solid choices and I probably can’t go wrong with either. There’s also the HSBC Global Strategy Adventurous fund which is a middle ground that I’ve been looking at as well. I know it probably comes down to personal choice but I’m suffering from analysis paralysis. Any advice that could sway me in one direction would be appreciated.

masonic

If you can tolerate the risk, then going 100% equities should deliver higher returns over the long term. Dropping to 80% equities will reduce returns and volatility. The longer your investment horizon and length of time you'll be adding to your investments, the more sense starting at 100% equities would be. Many would find this approach too high risk, and what you absolutely want to avoid is sustaining losses that would cause you to throw in the towel and give up on investing.

oz0707

I went with vls100 for lisa and the hsbc all world index for isa. Not sure of the technicals behind it. It will be interesting to see if they perform different as will be holding long term. 

Thrugelmir

Decide upon your own appetite for risk. Diversification is the only free lunch for investors. Investing is akin to riding a roller coaster. Managed funds aren't simply there to maximise returns but reduce the downside. Nothing magical about global equities.  Sooner or later there'll be a new investment fad. Every trade once it becomes mainstream becomes obsolete. 

eskbanker

oz0707 said:

I went with vls100 for lisa and the hsbc all world index for isa. Not sure of the technicals behind it. It will be interesting to see if they perform different as will be holding long term. 

They will perform differently, given different costs and geographical allocations, but should be broadly aligned - at the risk of stating the obvious, it makes more sense to do your research before buying, rather than waiting until holding these to ascertain differences....

GeoffTF

HamOnBeans said:

My thinking is that a fund with 80% equities is already very much impacted by dips in the stock market which is why it's recommended to invest over the long-term. If I’m going to be investing for at least 10 years then wouldn’t I be better off in an all-world index tracker instead? I’m fairly new to this but I’m not really seeing what the bonds and higher fees in the managed fund are doing for me right now.

20% bonds will soften the falls, particularly large ones. It took a lot more than 10 years to recover from the 1929 crash. You can cut fees buy using a global equity tracker and a cash/bond investment:

https://www.kroijer.com/

Prism

Just remember that you will be losing the 8% property allocation.

JohnWinder

One would expect the returns on your two choices to be different after 10+ years in favour of all equities, but the difference would be small compared to the difference between the two if you chose the wrong one and were to capitulate under fire in a bear market. Have a look at the duration of bear markets, by different measures here: https://earlyretirementnow.com/2019/10/30/who-is-afraid-of-a-bear-market/

aroominyork

oz0707 said:

I went with vls100 for lisa and the hsbc all world index for isa. Not sure of the technicals behind it. It will be interesting to see if they perform different as will be holding long term. 

I might pay Vanguard's 0.22% for a mixed asset VLS (20, 40, 60 or 80% equities) if I wanted bond rebalancing - especially if I wanted the bonds to be overweight to the UK - but for 100% equities it is silly to pay that much. Just buy a global tracker with about 80% of your money at 0.13% and a UK tracker with the other 20% at 0.06%.

GeoffTF

JohnWinder said:

One would expect the returns on your two choices to be different after 10+ years in favour of all equities, but the difference would be small compared to the difference between the two if you chose the wrong one and were to capitulate under fire in a bear market. Have a look at the duration of bear markets, by different measures here: https://earlyretirementnow.com/2019/10/30/who-is-afraid-of-a-bear-market/

That is for the US market, which is the most favourable market of all, and for the most favourable period in history.

Audaxer

HamOnBeans said:

If I’m going to be investing for at least 10 years then wouldn’t I be better off in an all-world index tracker instead? 

Over a period of 10 years, I don't think 100% equities is guaranteed to beat 80% equities. More likely over a longer term.