Index tracker - Ftse 100 vs Global Tracker

Hundeverboten

I have a bit of money earned from a previous year where I was working as a tax-free contractor that I had earmarked for pensions.

I'm currently unemployed so I'm not going to get any tax benefits from a SIPP so I want to put this cash (about 10k) into an index tracker or two within an ISA.

A simple global tracker like the L&G International Index is what I'm thinking.

However, I just wanted to check if there is any point in allocating some money to a FTSE 100 tracker? I notice that the fees are about 0.06% less for the FTSE tracker but other than this I can't see why anyone would ever go with a FTSE 100 index? Surely you are going to be missing out too much on the large tech companies or the higher growth from other markets?

Doctor_Who

Hundeverboten said:

I have a bit of money earned from a previous year where I was working as a tax-free contractor that I had earmarked for pensions.

I'm currently unemployed so I'm not going to get any tax benefits from a SIPP so I want to put this cash (about 10k) into an index tracker or two within an ISA.

A simple global tracker like the L&G International Index is what I'm thinking.

However, I just wanted to check if there is any point in allocating some money to a FTSE 100 tracker? I notice that the fees are about 0.06% less for the FTSE tracker but other than this I can't see why anyone would ever go with a FTSE 100 index? Surely you are going to be missing out too much on the large tech companies or the higher growth from other markets?

You can still put £2880 net in a SIPP and get £720 tax relief even if you are currently a non-tax payer.

ColdIron

Hundeverboten said:

I'm currently unemployed so I'm not going to get any tax benefits from a SIPP

Why not? Even as a non earner you can still contribute £2,880 and get a tax rebate of £720

A simple global tracker like the L&G International Index is what I'm thinking.

This tracks the FTSE World (ex UK) Index

However, I just wanted to check if there is any point in allocating some money to a FTSE 100 tracker? I notice that the fees are about 0.06% less for the FTSE tracker but other than this I can't see why anyone would ever go with a FTSE 100 index? Surely you are going to be missing out too much on the large tech companies or the higher growth from other markets?

This is a matter of opinion and only you can decide what's right for you but unless you want to exclude the UK entirely (which you would with the L&G fund) then the obvious reason would be to include some exposure to the UK, though many would look at the FTSE All Share

There is some merit in investing in the currency where you live, work and spend your money but unless you want to overweight your exposure you could just use a global tracker

dunstonh

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

DennisTenus

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

eskbanker

DennisTenus said:

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

Diversification may reduce risk (versus individual equities) but certainly doesn't eliminate it - equities are still highly volatile, however many of them you hold!

dunstonh

DennisTenus said:

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

It is diversified within equities.  However, it is 100% equities.    So, capable of a 50% loss with major crashes and 80% in extreme rarer ones.  (in the last 25 years, you have had  43% loss, 45% loss and a 35% loss periods)

GeoffTF

DennisTenus said:

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified?

In theory is the most diversified equity fund. In practice, some stocks will not be included, notably very small ones, but that is not going to make much difference.

DennisTenus

dunstonh said:

DennisTenus said:

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

It is diversified within equities.  However, it is 100% equities.    So, capable of a 50% loss with major crashes and 80% in extreme rarer ones.  (in the last 25 years, you have had  43% loss, 45% loss and a 35% loss periods)

And in those extreme rarer cases, it took how many years to recover?

dunstonh

DennisTenus said:

dunstonh said:

DennisTenus said:

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

It is diversified within equities.  However, it is 100% equities.    So, capable of a 50% loss with major crashes and 80% in extreme rarer ones.  (in the last 25 years, you have had  43% loss, 45% loss and a 35% loss periods)

And in those extreme rarer cases, it took how many years to recover?

I believe the longest for the US is just under 20 years.

from 1872, 13 negative periods were in loss after 10 years but none were still in loss after 20 years.  (although half a dozen came close)

Japan is a recent example. It fell 80% between 1989 and 2009 and has yet to recover its previous peak when looking at market value.    However, with dividends it did recently (late 2020) get back above peak again.

Prism

DennisTenus said:

dunstonh said:

DennisTenus said:

dunstonh said:

Index tracker - Ftse 100 vs Global Tracker

Very different investments and not two options you would normally compare as they are not like for like.

e.g. UK large cap vs global all cap.

The FTSE100 tracker would typically be used by some people in building a portfolio of funds.   It would not be held in isolation.    A global tracker is a catchall fund for higher risk investors without the need to have a portfolio of other funds (unless you are using other asset classes to bring the risk down).

I thought a global tracker wouldn't be high risk as its like basically owning the whole stock market isn't it and therefore very diversified? 

It is diversified within equities.  However, it is 100% equities.    So, capable of a 50% loss with major crashes and 80% in extreme rarer ones.  (in the last 25 years, you have had  43% loss, 45% loss and a 35% loss periods)

And in those extreme rarer cases, it took how many years to recover?

From the start of the crash in the summer of 2000 it took the MCSI World Index until the start of 2011 - so almost 10 years.