Multi asset funds & global funds

Linton

B0bbyEwing said:

bostonerimus said:
You are asking excellent questions and doing some research to understand your choices. But be careful not to ascribe too much significance to small differences and understand that there are multiple good approaches for you - do not fixate on trying to find the "optimal solution" because it doesn't exist. There are multiple products available, many of which are the same thing just with a different name. If you don't want a UK bias then avoid VLS funds, but any global index equity fund from Vanguard, Fidelity, HSBC will work for you just fine. If one doesn't have EM or Indonesian pork bellies don't worry about it because how do you know if that's good or bad right now? A criticism of the Vanguard platform in the UK and it's VLS funds is that they are "fettered" ie you can only have access to Vanguard funds. Well there's plenty of choice just within Vanguard and more choice really isn't worth much and it can actually lead to a paralysis are worry where you are always second guessing yourself. Being in an unfettered environment might give you more choice, but I don't think it's of much use in the end.

Keep things simple and keep fees low. Use multi-asset and index funds and try not go "fund shopping happy" where you buy a bit of everything. Keep the number of your funds in single digits maybe even below five. There's no need for most people to get more complicated.

Thanks.
To take my explaining one step further - I was actually looking at our SIPPs. I set these up a few years ago & went with VLS as at the time I was even more clueless than I am now but knew I needed to make a start because doing that was better than doing nothing.

Over the years that have passed, I've learned a little more about global markets & their weightings, why people say VLS has a heavy UK bias (read it at the time but didn't understand what this meant) etc. and thought it's about time I took a look at what our money is invested in and move away from VLS to something a little more geographically accurate in terms of being in line with the global markets.

When searching global funds, I don't think the HSBC Global Strategy range came up & I didn't understand why. 
I started looking in to what did come up. I liked the look of the Fidelity option I linked to (with Fidelity, not HL), its global spread and on going cost.

I'd seen VLS & even the HSBC ranges get mentioned frequently on here and other online areas but wondered what the exact differences were - hence coming here to ask.

Glad I did. Very helpful replies.

HSBC Global Strategy is a multi-asset fund, not a global one.  "Global" as a category means 100% equity.

aroominyork

bostonerimus said:

B0bbyEwing said:

Trying to get an understanding on this & I'm sure I'll end up using some incorrect terminology along the way but here goes...

Now I understand the need global diversification. 
Note - I'm not wanting to play cat & mouse where someone asks "well why is there a need".

To give you a look at what angle I'm coming from...

After reading books by Tim Hale & Lars Kroijer especially, I feel what they were saying applies to me. I don't know more than the next person. I'm looking to replicate the global market in somewhat similar but not necessarily precise ratios, do this cheaply, set and forget.

I understand that Vanguard's LifeStrategy range has heavy UK weighting & as said before, I have no basis to say the UK are going to do exceptionally well to justify that selection.
As such I was looking at the HSBC Global Strategy range (specifically Dynamic / Adventurous), but I'm also wearing about being an eggs-in-one-basket kind of guy.

I have my SIPP and my LISA. My wife also has her SIPP and LISA which we all manage ourselves. For out contribution amounts and pot sizes, we don't think it's worth paying someone to do it.

So why would someone select something such as HSBC Global Strategy <specific> vs something like say Fidelity Index World Fund P.

And vice versa.

I understand the former is a multi asset fund? And the latter is just a global fund? But so what. Why would one be selected over the other? Is it literally just personal preference such as why did you pick those 6 numbers on the lottery instead of a different set of 6 numbers or is there more to it than that?

I know through Fidelity the HSBC is somewhere around 0.22% charge and the FIWFP is somewhere around 0.12% (may be slightly out on those) but as I say before, I'm weary of being eggs in one basket. I didn't want to just select one HSBC fund (for example) and have that run throughout everything - both our SIPPs and both our LISAs, which caused me to look at other options ... which then brought up questions.

If you don't want a UK bias then avoid VLS funds, but any global index equity fund from Vanguard, Fidelity, HSBC will work for you just fine. If one doesn't have EM or Indonesian pork bellies don't worry about it because how do you know if that's good or bad right now?

You’re suggesting it is fine to invest in developed markets only. But you are not a typical investor, bostonerimus – you are a Brit who lives in the US and has a high proportion of your investments in US markets (from what you’ve told us), so for you ‘the rest of the world’ can more easily ignore EMs. For those of us living in the UK who do not want to be overweight to the US, EMs have a clearer role.

I quite like the rule of thirds: one-third North America; one-third UK & Developed Europe; one-third Japan, AP and EMs, although I am closer to 40/30/30 respectively.

older_and_no_wiser

I hold the majority of my pension and investment ISAs in HSBC Global Strategy Dynamic and Fidelity Index World P.  You can become obsessed with keeping percentage ratios in different assets/sectors/countries. The HSBC fund is actually all you need...if you want to keep it simple. Over the long term, you may be a little up or down over any other strategy but I doubt it would be a huge difference. 

I also decided to have a satellite fund in an actively managed BG Emerging Markets fund and also a few others in small cap funds mainly because the multi asset funds or global index trackers have very little or no small cap exposure. This may or may not be important to you. 

Personally I think keeping it simple (more simple than my portfolio) is the best. The important factor is that you pick something you believe in and stick with it regardless. Keep investing regularly through pension contributions and monthly contributions into investment accounts if you can afford it.

B0bbyEwing

older_and_no_wiser said:

I hold the majority of my pension and investment ISAs in HSBC Global Strategy Dynamic and Fidelity Index World P.  You can become obsessed with keeping percentage ratios in different assets/sectors/countries. The HSBC fund is actually all you need...if you want to keep it simple. Over the long term, you may be a little up or down over any other strategy but I doubt it would be a huge difference. 

You would probably be spot on for the size of my pot and what I'm putting in to it.

If I was a big earner putting in maximum amounts and had a huge pot maybe the difference while  in terms of ratios would be the same but in terms of numbers after that £ sign may be huge.

But I'm not that person, unfortunately.

older_and_no_wiser said:

I also decided to have a satellite fund in an actively managed BG Emerging Markets fund and also a few others in small cap funds mainly because the multi asset funds or global index trackers have very little or no small cap exposure. This may or may not be important to you. 

It might be important to me.

Thing is, I don't know what that is lol.

A small cap to me is a hat that doesn't fit. No idea what it means in investing sense. I see all caps, small caps, there may be some other kind of cap in there somewhere. 

aroominyork

My approach also is index at the core with satellites for (mostly) small caps and EMs, but they are active caps you can easily ignore, OP, with no risk of serious harm. It's good that you are going for simplicity and what feels right to you 

older_and_no_wiser

B0bbyEwing said:

You would probably be spot on for the size of my pot and what I'm putting in to it.

A small cap to me is a hat that doesn't fit. No idea what it means in investing sense. I see all caps, small caps, there may be some other kind of cap in there somewhere. 

Haha. Small caps are just smaller companies. However they're still massive companies but small compared to companies like Apple and banks. 

The theory is that small caps are more nimble and can adapt better/quicker to global and local shifts in conditions. However they tend to be more volatile and they have big share price shifts up and down. So currently, my funds are way down due to this great market. It can be quite stressful so you need a strong stomach! 

older_and_no_wiser

B0bbyEwing said:

there may be some other kind of cap in there somewhere. 

Yes, mid caps 

Linton

older_and_no_wiser said:

B0bbyEwing said:

You would probably be spot on for the size of my pot and what I'm putting in to it.

A small cap to me is a hat that doesn't fit. No idea what it means in investing sense. I see all caps, small caps, there may be some other kind of cap in there somewhere. 

Haha. Small caps are just smaller companies. However they're still massive companies but small compared to companies like Apple and banks. 

The theory is that small caps are more nimble and can adapt better/quicker to global and local shifts in conditions. However they tend to be more volatile and they have big share price shifts up and down. So currently, my funds are way down due to this great market. It can be quite stressful so you need a strong stomach! 

Another advantage of small caps is that they are more affected by local conditions and so provide diversification from the very large companies that all operate in the same global marketplace.

For my growthinvestments I have the same roughly 40:30:30 NAmerica/Europe/Asia&EM geographic split mentioned by @aroominyork but also have a 50:35:15 split of large, medium and small, which is arguably a liitle too hairy.

eskbanker

B0bbyEwing said:
A small cap to me is a hat that doesn't fit. No idea what it means in investing sense. I see all caps, small caps, there may be some other kind of cap in there somewhere. 

If you're looking for investing definitions, you could do worse than Investopedia, which, while heavily US-oriented, does explain most terms reasonably clearly, such as https://www.investopedia.com/terms/s/small-cap.asp, but in summary 'cap' refers to the market capitalisation of a company, i.e. a common measure of its scale, as calculated by number of shares multiplied by their price.