How to Fund the Life You Want - Investing in the S&P500

GeoffTF

We have had at least one person saying that LifeStrategy's home bias is bad. We do not know whether it will be good or bad. Vanguard has been on record more than once as saying that LifeStrategy has a home bias because Vanguard believes that a majority of investors want a home bias. A home bias is not necessarily bad. There is no withholding tax on UK dividends, and a home bias reduces the fund volatility (i.e. the amount the price jumps about) a little. Currently, UK shares are more cheaply priced than overseas shares for the same level of earnings and other measures of worth, so perhaps they are a bargain.

EthicsGradient

Strangely, a post on another website pointed to a review of the book, and that concluded:

But those still in the accumulation phase, with more time to weather losses, should consider a relatively ambitious portfolio, perhaps a mix of 80% equities and 20% fixed income. Investors can construct appropriate portfolios themselves using low cost index funds and ETFs as building blocks, but might consider one of the various ready made products (like me Powell and Hollow are admirers of the Vanguard LifeStrategy range) that take care of the periodic rebalancing necessary to ensure exposure to changing market conditions, and can be easily adjusted take account of the investor’s stage in their journey.

How to Fund the Life You Want: a review | by Justin Reynolds | The Patient Investor | Jun, 2023 | Medium

So without reading the book ourselves, we can't really be sure what it says, after all.

Exodi

GeoffTF said:

We have had at least one person saying that LifeStrategy's home bias is bad. We do not know whether it will be good or bad.

Sorry, I didn't see anyone say this?

Unless you mean the OP?

coastline

I'd be buying a global tracker despite the SP 500 recent outperformance but that's just me. There's much said about the SP500 being overvalued but you need to look under the bonnet.
This years performance has been dominated by a few stocks/tech.

Fxdky5SXoAY_ZB_ (900×495) (twimg.com)

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This one goes back to 1972 so a decent comparison . Top 5 are outperforming but nowhere near 2000 era. The media love it with their boom stories.

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Plenty evidence here to suggest US has usually carried a premium . Link is great value for free and updated.

MSCI Forward P/Es (yardeni.com)

So the FTSE is cheap but when is it going to happen . Many of the SP500 valuations are just P/E of 12 so not overvalued as suggested. Dragged up by tech that's all.

Six charts that show how cheap UK equities are (schroders.com)

Finally this doesn't have to play out but its something to be aware of.

Fed-Funds-and-Bear-Markets.jpg (968×519) (realinvestmentadvice.com)

JohnWinder

So without reading the book ourselves, we can't really be sure what it says, after all.

Yes, but it can feel good to succumb to the temptation to go off half-cocked sometimes.

InvesterJones

iNeed2P said:

Exodi said:

iNeed2P said:

Exodi said:

solidpro said:

I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100

solidpro said:

I actually try to avoid the UK purely because of the s-show that is at least 8 years of tory ineptitude with the UK economy.

I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.

Where the FTSE All World Index might show that the UK is approximately 4% of global market capitalisation, the UK makes up about 25% of VLS100.

Most global trackers will have ~60% invested in the US, going 'all in' on the S&P 500 is of course risky and is mainly promoted by those looking backwards not forwards.

I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.

How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.

I don't know what the future will hold, I generally invest in consideration of global market capitalisation.

My point was that of diversification. AMZN has provided tenfold returns over the past decade, but very few recommend going all in on Amazon in expectation that'll grow another tenfold over the next decade.

Second post on this forum, that, you don't know. However, S&P500 is diversified .

We can see each other's post count. Now you're up to four. Welcome.

The S&P500 is not very diversified. It's obviously extremely US-centric, but also a market-cap weighted fund of S&P500 will have a large proportion of just a few tech/communications growth companies with correlated assets.

Linton

iNeed2P said:

Exodi said:

iNeed2P said:

Exodi said:

solidpro said:

I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100

solidpro said:

I actually try to avoid the UK purely because of the s-show that is at least 8 years of tory ineptitude with the UK economy.

I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.

Where the FTSE All World Index might show that the UK is approximately 4% of global market capitalisation, the UK makes up about 25% of VLS100.

Most global trackers will have ~60% invested in the US, going 'all in' on the S&P 500 is of course risky and is mainly promoted by those looking backwards not forwards.

I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.

How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.

I don't know what the future will hold, I generally invest in consideration of global market capitalisation.

My point was that of diversification. AMZN has provided tenfold returns over the past decade, but very few recommend going all in on Amazon in expectation that'll grow another tenfold over the next decade.

Second post on this forum, that, you don't know. However, S&P500 is diversified .

I fuind it difficult to accept that a fund with nearly 25% invested in just 5 companies, 4 of which operate in the same market sector is well diversified.

LunaLater

aroominyork said:

dunstonh said:

The book seems to generally recommend simply switching to a passive S&P500 fund. Do Vanguard or HL do such a thing?

Why on earth would a book recommend an S&P500 tracker to a UK investor?  That would be poor quality investing.  I can understand it for a US based investor but not a UK investor who has to factor currency fluctuations.      Is the book written with UK investors in mind?

Does your firm overweight the UK and if so why and to what degree? It seems to me there are three reasons why people overweight their home country:

- familiarity: only a valid reason if you are stock picking from companies you think you have greater insight into

- belief the UK will outperform

- reduce currency risk: would a better approach be to currency hedge a global fund?

Another big reason is that you invest to avoid being left behind if your home country has a boom.

iNeed2P

Linton said:

iNeed2P said:

Exodi said:

iNeed2P said:

Exodi said:

solidpro said:

I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100

solidpro said:

I actually try to avoid the UK purely because of the s-show that is at least 8 years of tory ineptitude with the UK economy.

I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.

Where the FTSE All World Index might show that the UK is approximately 4% of global market capitalisation, the UK makes up about 25% of VLS100.

Most global trackers will have ~60% invested in the US, going 'all in' on the S&P 500 is of course risky and is mainly promoted by those looking backwards not forwards.

I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.

How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.

I don't know what the future will hold, I generally invest in consideration of global market capitalisation.

My point was that of diversification. AMZN has provided tenfold returns over the past decade, but very few recommend going all in on Amazon in expectation that'll grow another tenfold over the next decade.

Second post on this forum, that, you don't know. However, S&P500 is diversified .

I fuind it difficult to accept that a fund with nearly 25% invested in just 5 companies, 4 of which operate in the same market sector is well diversified.

Who mentioned  well diversified? Was comparing S&P500 to AMZN

LunaLater

iNeed2P said:

Exodi said:

iNeed2P said:

Exodi said:

solidpro said:

I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100

solidpro said:

I actually try to avoid the UK purely because of the s-show that is at least 8 years of tory ineptitude with the UK economy.

I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.

Where the FTSE All World Index might show that the UK is approximately 4% of global market capitalisation, the UK makes up about 25% of VLS100.

Most global trackers will have ~60% invested in the US, going 'all in' on the S&P 500 is of course risky and is mainly promoted by those looking backwards not forwards.

I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.

How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.

I don't know what the future will hold, I generally invest in consideration of global market capitalisation.

My point was that of diversification. AMZN has provided tenfold returns over the past decade, but very few recommend going all in on Amazon in expectation that'll grow another tenfold over the next decade.

Second post on this forum, that, you don't know. However, S&P500 is diversified .

It’s not, it’s 500 large companies all listed in the US. That’s not what people mean by diversified.

It’s heavily biased towards IT, healthcare and financial stocks.