Changing funds/pension

dunstonh

Linton said:

dunstonh said:

Isnt the good performance of the FTSE100 simply due to that index having a much higher % invested in global energy and raw materials companies and a much lower % in technology rather than anything to do with the UK as such? 

Right place, right time.  When for so long its been the wrong place at the wrong time.

My point is that if you want to invest in the UK is the FTSE100 a good way of doing it?

Strictly speaking no.   The real UK is small and mid cap but it is a bumpy ride.

So one might conclude that although one can argue about whether UK home bias is a good thing to do, investing in say VLSxx is not a very good way of doing it.

That would be fair to say.  At the end of the day, the investor has to decide whether they like the management decisions of the fund or not.  

monaymadlol

The more I've read and watched, the more of I've realised the target retirement fund is not the best idea. I already have some SS ISA with vls60 & HSBC global st balanced, so my thoughts currently are leading in this way for a SIPP, invest and leave. Will of course do more research on that, and also annuities Vs drawdown etc

JohnWinder

dunstonh said:

Linton said:

So one might conclude that although one can argue about whether UK home bias is a good thing to do, investing in say VLSxx is not a very good way of doing it.

That would be fair to say. 

Just for a reality check, this thread was about possible alternatives for a diverse SW portfolio that might have been a bit expensive, that might be self-managed. So getting down to the level of 'if one wants UK equities, it might better to be in the small/mid cap space' seems beyond a realistic consideration.

We got down to considering a Vanguard target date fund or HSBC balanced fund, by the OP's choice. The HSBC fund has as its only UK equities a FTSE100 index fund. The Vanguard product has as its only UK equities a FTSE All Share Index fund. Not that I think it matters in the grand scheme.

Then the Vanguard VLS series was introduced. But, not surprisingly, the VLS series also use the FTSE All Share Index fund, not the FTSE 100.

I'm all for leaving the biases at home.

JohnWinder

‘Where UK vs global comes into play is currency fluctuations.   A higher UK equity allocation allows for a greater overall equity allocation compared to a lower UK equity allocation when the funds are targeting a volatility risk range. ’

This is a good consideration if one is to agonise over the HSBC option or the Vanguard option.

HSBC has a closer to global market cap weighting for its equities, while Vanguard goes for a UK home bias. Note, neither seem to use currency hedging for their equities.

So the HSBC fund can benefit, over Vanguard, from non-UK equities doing better than UK equities. But the HSBC fund could expect more volatility (that’s what the risk scales are all about), and so be more risky, because of currency fluctuations. To reduce that risk to the same level as the Vanguard approach, the HSBC approach would need to reduce its equities, thus losing some of the potentially better returns from equities compared to bonds. It’s probably not ‘six of one, half a dozen of the other’, but how could one be in any way confident that one approach would be better than the other if you’re comparing similar risk levels? It’s such fine print, and blurry print, that for most of us it’s academic.

It is however useful to be aware of the issues, I think, if only to avoid being shocked by it all in future and thinking ‘why didn’t I know about THAT before I invested as I did?’. 

One might ask why don’t HSBC and VG do some currency hedging for equities, as they do in other countries, but they don’t in UK. We live in an imperfect world. The enemy of a good plan is the dream of a perfect plan.

monaymadlol

After more reading and looking into charts etc, I'm thinking that transferring my whole ~70k SW pp to one SIPP as follows, either:

1) vls 80 til I reach 100k and begin to diversify (emerging, small caps etc), continuing 300/month but possibly look to increase if I can

2) vls 80 + HSBC global strategy balanced (or dynamic?), Equal split to reach 100k, lessening perceived UK bias with additional property exposure

3) combination of 1) & 2) possibly with additional split involving VG FTSE global all cap or Royal London sustainable world trust c?

Any comments or pointers welcome especially in terms of option 3.

Thank you