Return expectations - Global Equity, next decade

ChilliBob

GazzaBloom said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

"as they see fit" using sorcery, magic formulas and pixie dust no doubt. Or would it be better to simply hold a low cost index tracker fund that follows a global weighted index, as no-one can predict market shifts and trends with any certainty, ever.

I seem to recall around year end 2020 you confidently predicting that the S&P500 would drop 10% in 2021. Instead it gained 28% when tracked with a tracker fund such as VUSA.

In my contrary opinion, the days of the investment managers and their long term lower than index performance after fees will never return to popularity with people who have become self-educated enough to understand the basic concepts, we've seen behind the Wizard's curtain now.

I think it's a bit different when it comes to multi asset to be honest. First off all you have active or passive - so say MyMap or VLS vs say some Royal London or Liontrust funds.

Then you have allocations, I think choosing the right level of allocations to non equity is tricky personally. If I wanted to have lots of non equity exposure I'd probably use a multi asset fund of some description.

Straight up 100% equity passive vs active is a different argument to multi asset in my view. 

It sort of feels odd to call VLS and the like 'passive' anyway as the manager has taken specific allocation choices and (in VLS case) overweights. 

So, if you didn't want 100% equities, what would your suggestion be, or, what do you do? - Genuinely interested  

GazzaBloom

ChilliBob said:

GazzaBloom said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

"as they see fit" using sorcery, magic formulas and pixie dust no doubt. Or would it be better to simply hold a low cost index tracker fund that follows a global weighted index, as no-one can predict market shifts and trends with any certainty, ever.

I seem to recall around year end 2020 you confidently predicting that the S&P500 would drop 10% in 2021. Instead it gained 28% when tracked with a tracker fund such as VUSA.

In my contrary opinion, the days of the investment managers and their long term lower than index performance after fees will never return to popularity with people who have become self-educated enough to understand the basic concepts, we've seen behind the Wizard's curtain now.

I think it's a bit different when it comes to multi asset to be honest. First off all you have active or passive - so say MyMap or VLS vs say some Royal London or Liontrust funds.

Then you have allocations, I think choosing the right level of allocations to non equity is tricky personally. If I wanted to have lots of non equity exposure I'd probably use a multi asset fund of some description.

Straight up 100% equity passive vs active is a different argument to multi asset in my view. 

It sort of feels odd to call VLS and the like 'passive' anyway as the manager has taken specific allocation choices and (in VLS case) overweights. 

So, if you didn't want 100% equities, what would your suggestion be, or, what do you do? - Genuinely interested  

Currently I'm 100% equities low cost index and cash, no bonds. 

If I were to go multi asset (well as multi asset as stocks/bonds is) I would probably add a low cost UK gilts index to a 80/20 or 70/30 mix and rebalance annually. I don't have any real interest in investing in any other asset classes outside equities/bonds/cash.

Thrugelmir

GazzaBloom said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

"as they see fit" using sorcery, magic formulas and pixie dust no doubt. Or would it be better to simply hold a low cost index tracker fund that follows a global weighted index, as no-one can predict market shifts and trends with any certainty, ever.

You do realise that the global weighted indexes you refer to aren't pure trackers. They are risk adjusted, free float adjusted,  etc etc.  Likewise the indexes themselves regularly change. They are not set in stone. A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level. People rarely delve into the fundamental differences between benchmark indexes. Vanguard (for example) will use the services of the index creators to determine their own allocations. No one relies on Pixie dust.  Though retail investors are well known for wearing blinkers and failing to perform their own research. 

Thrugelmir

GeoffTF said:

Thrugelmir said:

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. 

Out of curiosity I pulled up the SP500 for 1992.  In descending order the largest companies in the index were

Exxon
General Electric
Wal Mart
AT&T
Philip Morris
Coca Cola
Merck
Royal Dutch Shell
Procter & Gamble
Bristol Myers Squibb

Not an era for high growth companies. More monopolies. That eventually all had their day at the top of the tree, . 

From Google: S&P 500 on 20 Dec 91 387.04 and 4417.44 on 11 Feb 22. That is a growth of more than 11 times. You would have either already own all the future growth stocks, or would have owned them as soon as they entered the index. A tiny percentage of active funds would have beaten that.

Currency movements make for a very different return for UK investors. In 2004, I was getting $2.12 of investments for ever £1 invested. 

ChilliBob

GazzaBloom said:

ChilliBob said:

GazzaBloom said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

"as they see fit" using sorcery, magic formulas and pixie dust no doubt. Or would it be better to simply hold a low cost index tracker fund that follows a global weighted index, as no-one can predict market shifts and trends with any certainty, ever.

I seem to recall around year end 2020 you confidently predicting that the S&P500 would drop 10% in 2021. Instead it gained 28% when tracked with a tracker fund such as VUSA.

In my contrary opinion, the days of the investment managers and their long term lower than index performance after fees will never return to popularity with people who have become self-educated enough to understand the basic concepts, we've seen behind the Wizard's curtain now.

I think it's a bit different when it comes to multi asset to be honest. First off all you have active or passive - so say MyMap or VLS vs say some Royal London or Liontrust funds.

Then you have allocations, I think choosing the right level of allocations to non equity is tricky personally. If I wanted to have lots of non equity exposure I'd probably use a multi asset fund of some description.

Straight up 100% equity passive vs active is a different argument to multi asset in my view. 

It sort of feels odd to call VLS and the like 'passive' anyway as the manager has taken specific allocation choices and (in VLS case) overweights. 

So, if you didn't want 100% equities, what would your suggestion be, or, what do you do? - Genuinely interested  

Currently I'm 100% equities low cost index and cash, no bonds. 

If I were to go multi asset (well as multi asset as stocks/bonds is) I would probably add a low cost UK gilts index to a 80/20 or 70/30 mix and rebalance annually. I don't have any real interest in investing in any other asset classes outside equities/bonds/cash.

Fair enough. I think if I was going to go beyond equities and cash I like the idea of more than bonds, especially at the moment, I guess property, metals, PE etc. 

eskbanker

Thrugelmir said:
A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level

By what specific measure would China be weighted on a roughly equal basis with the US, and do any such indices (with trackers) exist?

Thrugelmir

eskbanker said:

Thrugelmir said:
A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level

By what specific measure would China be weighted on a roughly equal basis with the US, and do any such indices (with trackers) exist?

Market capitalisation of publicly listed companies. None as far as I am aware.

Not all shareholders are equal. The Ford family (as an example) only own 2% of the company but control 40% of the vote. Many Chinese companies have the state amongst their largest shareholders. 

eskbanker

Thrugelmir said:

eskbanker said:

Thrugelmir said:
A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level

By what specific measure would China be weighted on a roughly equal basis with the US, and do any such indices (with trackers) exist?

Market capitalisation of publicly listed companies. None as far as I am aware.

Not all shareholders are equal. The Ford family (as an example) only own 2% of the company but control 40% of the vote. Many Chinese companies have the state amongst their largest shareholders. 

So do you feel that free-float indices are inferior, or are you just making the point that this is inherently an adjustment and therefore less 'true' in a purist sense?  Why do you think there aren't global indices that follow your preferred methodology?

Thrugelmir

eskbanker said:

Thrugelmir said:

eskbanker said:

Thrugelmir said:
A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level

By what specific measure would China be weighted on a roughly equal basis with the US, and do any such indices (with trackers) exist?

Market capitalisation of publicly listed companies. None as far as I am aware.

Not all shareholders are equal. The Ford family (as an example) only own 2% of the company but control 40% of the vote. Many Chinese companies have the state amongst their largest shareholders. 

So do you feel that free-float indices are inferior, or are you just making the point that this is inherently an adjustment and therefore less 'true' in a purist sense?  Why do you think there aren't global indices that follow your preferred methodology?

Think that you are misconstruing my observations. In summary benchmarks are in themselves are man made and not unadulterated. Which is the misconception that prevails social media in that the major indices used by passive trackers are market cap weighted. .  

eskbanker

Thrugelmir said:

eskbanker said:

Thrugelmir said:

eskbanker said:

Thrugelmir said:
A true Global Weighted Index would have an exposure to China nearer 20% and a reduction of US companies to a similar level

By what specific measure would China be weighted on a roughly equal basis with the US, and do any such indices (with trackers) exist?

Market capitalisation of publicly listed companies. None as far as I am aware.

Not all shareholders are equal. The Ford family (as an example) only own 2% of the company but control 40% of the vote. Many Chinese companies have the state amongst their largest shareholders. 

So do you feel that free-float indices are inferior, or are you just making the point that this is inherently an adjustment and therefore less 'true' in a purist sense?  Why do you think there aren't global indices that follow your preferred methodology?

Think that you are misconstruing my observations. In summary benchmarks are in themselves are man made and not unadulterated. Which is the misconception that prevails social media in that the major indices used by passive trackers are market cap weighted. .  

Still seems to me that you're essentially seeing perfect as the enemy of the good - it seemed that you were criticising those who use global index trackers that do exist, but the hypothetical existence of something purer doesn't negate the value of such products!