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How to Fund the Life You Want - Investing in the S&P500
Comments
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Sorry, did you mean to say that's not what you mean by diversified?LunaLater said:
It’s not, it’s 500 large companies all listed in the US. That’s not what people mean by diversified.iNeed2P said:
Second post on this forum, that, you don't know. However, S&P500 is diversified .Exodi said:
How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.iNeed2P said:
I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.Exodi said:solidpro said:I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100
I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.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.
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 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.
It’s heavily biased towards IT, healthcare and financial stocks.
I don't recall saying that it was globally diversified, nor that it was biased towards certain sectors.
'diversified' have a look in a dictionary.0 -
Well yes but then holding just 2 shares is diversified compared with just holding 1. However the issue raised by the OP is whether purely holding an S&P 500 tracker is a sensible investment for a UK investor.iNeed2P said:
Who mentioned well diversified? Was comparing S&P500 to AMZNLinton said:
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.iNeed2P said:
Second post on this forum, that, you don't know. However, S&P500 is diversified .Exodi said:
How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.iNeed2P said:
I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.Exodi said:solidpro said:I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100
I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.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.
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 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.
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Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
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I think it's a bit misleading to make a point about lower UK diversification while comparing the FTSE 100 to the S&P 500. I don't think anyone would need to look up the fund analysis to know that a fund with 100 stocks is likely to be less diversified than one with 500 stocks in it...coastline said:Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
But anyway, I always forget just how big Apple is until I look at S&P500 security distribution... 7.24% is truly monstrous (though it seems their monopolistic practices won't be allowed to go on forever).
Know what you don't0 -
I'm with you. I don't buy into the USD/GBP currency issue line unless someone can post some empirical data that proves the quoted sentiment that holding a high percentage of US funds is detrimental over the long term for a UK investor with regular new contributions and dividend reinvestment due to fx variance.coastline said:Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
Nor do I buy the S&P500 is not diversified, it's plenty diversified enough to mitigate single share specific risk which is found to dissipate after 20 holdings.
Portfolio concentration has been studied in index funds and found not to contribute to risk: Effect of Index Concentration on Index Volatility and Performance | SpringerLink
Personally, I am weighted 88% US stocks in the index funds I hold across pensions & ISA. Will this be a good thing or a bad thing after another 10 years?. Let's compare performance then and we'll see.
0 -
Unfortunately comparing performance after 10 years wont prove anything. To make any meaningful statistical conclusion one would need a large number of 10-years periods from alternative universes. In the one perhaps the USA collapses with its economy being destroyed by China taking away its export markets and the culture wars turning into into civil strife and the country splitting up. In another China collapses and the US takes over the world. In another ....GazzaBloom said:
I'm with you. I don't buy into the USD/GBP currency issue line unless someone can post some empirical data that proves the quoted sentiment that holding a high percentage of US funds is detrimental over the long term for a UK investor with regular new contributions and dividend reinvestment due to fx variance.coastline said:Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
Nor do I buy the S&P500 is not diversified, it's plenty diversified enough to mitigate single share specific risk which is found to dissipate after 20 holdings.
Portfolio concentration has been studied in index funds and found not to contribute to risk: Effect of Index Concentration on Index Volatility and Performance | SpringerLink
Personally, I am weighted 88% US stocks in the index funds I hold across pensions & ISA. Will this be a good thing or a bad thing after another 10 years?. Let's compare performance then and we'll see.
But we dont know which of these alternative universes we will experience. In some 100% S&P 500 may work briliantly in others it could be a disaster. Arguably the best allocation is the one that provides the least worse outcome no matter what happens. What this allocation is I dont know but surely the requirement implies high diversification across all conceivable factors.0 -
No, I meant to write what I did. A single US index such as the S&P is not what is meant when people talk about investments being diversified.iNeed2P said:
Sorry, did you mean to say that's not what you mean by diversified?LunaLater said:
It’s not, it’s 500 large companies all listed in the US. That’s not what people mean by diversified.iNeed2P said:
Second post on this forum, that, you don't know. However, S&P500 is diversified .Exodi said:
How wonderful that your second post on this forum would be a sarcastic dig at me. Lovely to meet you.iNeed2P said:
I always choose my investments after studying their previous performance. Unlike yourself I struggle when trying to study their future performance.Exodi said:solidpro said:I have a bunch of ISAs and SIPPs all into Vangaurd LS 80/100
I'm sorry to be the bearer of bad news, but the Vanguard managed funds (VLS80 & VLS100) have a significant home (UK) bias.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.
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 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.
It’s heavily biased towards IT, healthcare and financial stocks.
I don't recall saying that it was globally diversified, nor that it was biased towards certain sectors.
'diversified' have a look in a dictionary.
You seem to want to redefine well-understood words which is foolish.0 -
Some choose to take risks and do not seek to eliminate all conceivable risks no matter how fanciful. I wager that if there is capitalism there will a strong US within it. My money, my choice.Linton said:
Unfortunately comparing performance after 10 years wont prove anything. To make any meaningful statistical conclusion one would need a large number of 10-years periods from alternative universes. In the one perhaps the USA collapses with its economy being destroyed by China taking away its export markets and the culture wars turning into into civil strife and the country splitting up. In another China collapses and the US takes over the world. In another ....GazzaBloom said:
I'm with you. I don't buy into the USD/GBP currency issue line unless someone can post some empirical data that proves the quoted sentiment that holding a high percentage of US funds is detrimental over the long term for a UK investor with regular new contributions and dividend reinvestment due to fx variance.coastline said:Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
Nor do I buy the S&P500 is not diversified, it's plenty diversified enough to mitigate single share specific risk which is found to dissipate after 20 holdings.
Portfolio concentration has been studied in index funds and found not to contribute to risk: Effect of Index Concentration on Index Volatility and Performance | SpringerLink
Personally, I am weighted 88% US stocks in the index funds I hold across pensions & ISA. Will this be a good thing or a bad thing after another 10 years?. Let's compare performance then and we'll see.
But we dont know which of these alternative universes we will experience. In some 100% S&P 500 may work briliantly in others it could be a disaster. Arguably the best allocation is the one that provides the least worse outcome no matter what happens. What this allocation is I dont know but surely the requirement implies high diversification across all conceivable factors.
Performance in the next 10 years may mean everything to someone who may only have 10 years left to live.0 -
Yeah if you're not happy with the SP500 or 60% of a global tracker invested in the US where do you go and why ? I'm talking like the majority here who are investing for decades and building for retirement. From 60 yo is another issue for another thread. So the majority have a state pension to come , some rainy day cash and a DC pot which needs to get there to make it all worthwhile. 10k a year state pension and another 10k pension just get's home. That'll be 300K in todays values. Might be a million in years to come. Just as well many have matching contributions from employers.Exodi said:
I think it's a bit misleading to make a point about lower UK diversification while comparing the FTSE 100 to the S&P 500. I don't think anyone would need to look up the fund analysis to know that a fund with 100 stocks is likely to be less diversified than one with 500 stocks in it...coastline said:Exposure to a few shares in the top ten is always an issue . Top 5 in UK is 32% and top three are higher than the US.
iShares plc Share Price (ISF) Core FTSE 100 UCITS ETF (Dist) | ISF (hl.co.uk)
Top 5 in SP 500 is 20%
Vanguard Funds plc Share Price (VUSA) S&P 500 UCITS ETF USD(GBP) | VUSA (hl.co.uk)
Top 5 in Europe ex UK is 16%
Vanguard Funds plc Share Price (VERG) FTSE Developed Europe Ex UK UCITS ETF (GBP) | VERG (hl.co.uk)
Top 5 in Japan is 13%.
Vanguard Funds plc Share Price (VJPN) FTSE Japan Equity UCITS ETF | VJPN (hl.co.uk)
If you took the view that SP 500 was overvalued and overweight you'd never have a penny in there. Where do you go from there ? Go with the flow I say unless you can time the markets. Any results from other posters welcome.
sp500_top5_historical_weights.png (687×395) (ofdollarsanddata.com)
FE1HWvEXMAo4P1K (735×405) (twimg.com)
But anyway, I always forget just how big Apple is until I look at S&P500 security distribution... 7.24% is truly monstrous (though it seems their monopolistic practices won't be allowed to go on forever).
I've posted links last night showing the US usually has a premium rating going back years . Not a great amount but its there. Check out that PDF file it goes back years . Why aren't fund managers buying up the UK and Europe and others on cheaper valuations.? They must think US is worthy of its rating. You can't wait forever taking the alternative route for returns. Most of the SP500 is on similar valuations to other countries anyway but my point doesn't seem to register.
FjiwVmPX0AAATbN (832×484) (twimg.com)
20 year history and similar premium for US. Remember the rating will include tech so rest of stocks will be closer to ex US rating.
US-stocks-versus-All-Country-World-exlcluding-the-US-Forward-PE-Yardeni-1536x908.jpg (1536×908) (pictureperfectportfolios.com)
Not dear at all..
Fe4-zlmVQAEEFoy (564×406) (twimg.com)
So pensions in default funds will be something like this ? Both these charts will go back to 2004.
Chart Tool | Trustnet
The more adventurous investor maybe this..
Chart Tool | Trustnet
This one will back to 1988 or 35 years so a fair bit of data. Dotcom boom in 2000 was a bit of a slump for SP500 but impressive since. In all my experience I've never seen any moves where the US markets slumped and the others didn't follow. If that did happen it would be the bargain of a lifetime.
Chart Tool | Trustnet
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If you want to invest in the S&P without being overweighted by the FANGs you could pick an equal weight ETF like XDWE and have 0.2% in each of the 500 companies. There is a solution for most problems... but do those solutions work out better...?
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