Which Vanguard index fund looks a good bet?

Nova1307

Hi all, 

I'm looking to put some money into a Vanguard index fund and intend to hold for at least five years. VUKE has done well over the past year or so but looking at the FTSE100 it doesn't look particularly cheap at the moment. Does VUSA (S&P500) look to be a better bet given that it's down 10% since this time last year? I note that inflation data is due out mid December and if the numbers are encouraging (like they were in November) then it could see the recovery continue. 

My plan would be to hold cash in an interest bearing easy access account and pound cost average in over the next year rather than invest a lump sum in one go.

Thanks

grumiofoundation

Why not go for a global index fund rather than trying to predict which countries stock market will perform best? 

(Note assuming you are happy with 100% equities)

JohnWinder

VUKE has done well over the past year or so but looking at the FTSE100 it doesn't look particularly cheap at the moment. Does VUSA (S&P500) look to be a better bet given that it's down 10% since this time last year?

Now, open a chart of each index or funds tracking them which covers about 5-10 years. Cover the chart with a piece of opaque paper, and start slowly dragging it across to the right, revealing the wiggly line slowly. Stop several times, and tell me how well you can predict where the line will be in several years time. ‘Cheap now’, ‘down 10%’, ‘potential to rise a lot’; you’re wasting your time. There are better bases for choosing an investment.

InvesterJones

Nova1307 said:

Hi all, 

I'm looking to put some money into a Vanguard index fund and intend to hold for at least five years. VUKE has done well over the past year or so but looking at the FTSE100 it doesn't look particularly cheap at the moment. Does VUSA (S&P500) look to be a better bet given that it's down 10% since this time last year?

What's your definition of cheap? Most people use the price divided by forward earnings estimates, or some variants thereof (Shiller CAPE etc.) - all of these show the S&P 500 to be more expensive than the FTSE100.

dunstonh

I'm looking to put some money into a Vanguard index fund and intend to hold for at least five years.

5 years is short term. So, any risk level due to investment risk is also increased due to timescale risk.  (I note the "at least five years" and that may be more but if 5 is the possible minimum then you need to take that into account.

VUKE has done well over the past year or so but looking at the FTSE100 it doesn't look particularly cheap at the moment.

1. Investing 100% into UK large cap would be bad investing 
2. Why do you think it doesnt look cheap?
3. 1 year is far too short a measure.    Especially a year when the dollar has risen as much as it has.

My plan would be to hold cash in an interest bearing easy access account and pound cost average in over the next year rather than invest a lump sum in one go.

Statistically, that will result in lower returns in most periods.  And as we are currently in a period after major falls, the odds of phasing being better are even lower.

ColdIron

Why bet the farm on a single geography?

No one can predict which one will fare best so back them all with a global index

100% equities for as little as 5 years could be considered 'courageous'. Have a look at multi asset funds where you can dial down the equity allocation

NoviceInvestor1

If you are only investing for 5 years, and pound cost average over the next year, then for a % of your pot you only actually have a 4 year investment horizon. That’s very short for being 100% equities (echoing what others have said).

I also agree with those suggesting that betting on which country will do best isn’t much of a strategy - I doubt many bet on Brazil at the start of this year for example. 

adindas

NoviceInvestor1 said:

If you are only investing for 5 years, and pound cost average over the next year, then for a % of your pot you only actually have a 4 year investment horizon. That’s very short for being 100% equities (echoing what others have said).

I also agree with those suggesting that betting on which country will do best isn’t much of a strategy - I doubt many bet on Brazil at the start of this year for example. 

Investing in VUSA (S&P500), you are not betting on a single country due ot the nature of the companies in S&P500. So imo it should not be compared with bet on Brazil alone.

Also too much diversification, balance portfolio is actually not good for the investment return in the long run.

This is the strategy that have been used and followed by proven millionaire investors. I have posted a few links about this in the past.  Also I have posted the chart as comparison.

NoviceInvestor1

adindas said:

NoviceInvestor1 said:

If you are only investing for 5 years, and pound cost average over the next year, then for a % of your pot you only actually have a 4 year investment horizon. That’s very short for being 100% equities (echoing what others have said).

I also agree with those suggesting that betting on which country will do best isn’t much of a strategy - I doubt many bet on Brazil at the start of this year for example. 

Investing in VUSA (S&P500), you are not betting on a single country. So imo it should not be compared with bet on Brazil alone.

Also too much diversification, balance portfolio is actually not good for the investment return in the long run.

This is the strategy that have been used and followed by proven millionaire investors. I have posted a few links about this in the past.  Also I have posted the chart as comparison.

I am getting a sense of deja vu.....

As stated before - when a market sells off or becomes unpopular, which can happen for a multi year timeframe, certainly for longer than 5 years, it does not matter where constituents derive their revenue from. Market sentiment can turn against a specific index/country, and herd behaviour occurs. 

Yes, S&P 500 companies derive 29% of their revenue from outside the US (far less than other indexes like Japan which are far more international), but if Mr Market decides the US is not the place to be for 5 years then the US will go nowhere for 5 years. 

You also cherry pick the strategy of certain millionaire investors as confirmation bias - I can find articles from other millionaire investors to prove whatever point I want. I can show you a millionaire investor saying Bitcoin is a load of junk going to zero and I can find you a millionaire investor saying to go all in on Bitcoin as it's the future. This doesn't prove anything. 

adindas

NoviceInvestor1 said:

adindas said:

NoviceInvestor1 said:

If you are only investing for 5 years, and pound cost average over the next year, then for a % of your pot you only actually have a 4 year investment horizon. That’s very short for being 100% equities (echoing what others have said).

I also agree with those suggesting that betting on which country will do best isn’t much of a strategy - I doubt many bet on Brazil at the start of this year for example. 

Investing in VUSA (S&P500), you are not betting on a single country. So imo it should not be compared with bet on Brazil alone.

Also too much diversification, balance portfolio is actually not good for the investment return in the long run.

This is the strategy that have been used and followed by proven millionaire investors. I have posted a few links about this in the past.  Also I have posted the chart as comparison.

I am getting a sense of deja vu.....

As stated before - when a market sells off or becomes unpopular, which can happen for a multi year timeframe, certainly for longer than 5 years, it does not matter where constituents derive their revenue from. Market sentiment can turn against a specific index/country, and herd behaviour occurs. 

Yes, S&P 500 companies derive 29% of their revenue from outside the US (far less than other indexes like Japan which are far more international), but if Mr Market decides the US is not the place to be for 5 years then the US will go nowhere for 5 years. 

You also cherry pick the strategy of certain millionaire investors as confirmation bias - I can find articles from other millionaire investors to prove whatever point I want. I can show you a millionaire investor saying Bitcoin is a load of junk going to zero and I can find you a millionaire investor saying to go all in on Bitcoin as it's the future. This doesn't prove anything. 

deja vu  to whom ??

Could you present the graph for a prolonged period of time regarding S&P500 and global tracking portfolio ??

Sensible people will follow the strategy from proven investors rather than random people on the internet. The best one id the one you where you do your research and believe.

I remember one YT channel about pension,. That channel sometimes get quoted here provoking a Scooby Doo investing strategy to comprise a lot in bonds. Those who follow that strategy see where it has ended up now.

NoviceInvestor1

adindas said:

deja vu  to whom ??

Could you present the graph for a prolonged period of time regarding S&P500 and global tracking portfolio ??

Why would I need a graph for a prolonged period of time, the OP has a sub 5 year timeframe.....