Should I transfer all my S&P 500 into a global tracker?

[Deleted User]

Hey, 

When I first started with Vanguard, I put all my money into S&P500.  I've got about 50k worth.  I've since learned that UK investors are better off with a Global tracker.  Should I sell all my S&P500 and invest in All World/All Cap or just leave it as is and put all money going forward into the global indexes?  

Thanks

MK62

No way to know for sure in terms of which will produce higher returns, but holding only US equities is a little riskier than holding global equities........that said though, you'll probably find the the global equity fund has a high percentage of US equity exposure anyway, so it may not be quite the sea change you might think.......

JohnWinder

I've since learned that UK investors are better off with a Global tracker.

What's the source for that information? Is it specific for UK investors, or is it your impression that it applies to French or US investors? That might help start untangle it for you.

[Deleted User]

@JohnWinder it was an interview with JL Collins (possibly with the Mad Fientist iirc) who said he slightly prefers a global tracker for the UK investor rather than S&P 500.  Something about although it's got higher charges, the increased diversification and lack of currency conversion issues makes up for it.  

Linton

MK62 said:

No way to know for sure in terms of which will produce higher returns, but holding only US equities is a little riskier than holding global equities........that said though, you'll probably find the the global equity fund has a high percentage of US equity exposure anyway, so it may not be quite the sea change you might think.......

Yes in my view a global tracker would be far better than an S&P 500 fund simply because of the greater diversification, particularly considering the high % of a limited number of very large tech oriented growth shares in the US index and the fact that there are plenty of good investment oppoprtunities outside the US.  I avoid global trackers as their US % is too high for me.

masonic

A global tracker will be more diversified. All cap will have a higher weighting to the largest 'small companies', which may give rise to a risk premium. Though currency issues will still prevail because the UK makes up less than 5% of global markets. In the end it is your choice and some have chosen each of these options, as well as global developed markets or world ex-UK.

[Deleted User]

Thanks all.  I feel a bit nervous though about cashing in 50k worth of S&P and placing an order for a global fund instead.  What if  prices change dramatically in between the sell and the buy? 

Would I be better leaving S&P where it is but buying Global stuff going forward?

Thanks

Notepad_Phil

[Deleted User] said:

Thanks all.  I feel a bit nervous though about cashing in 50k worth of S&P and placing an order for a global fund instead.  What if  prices change dramatically in between the sell and the buy? 

Would I be better leaving S&P where it is but buying Global stuff going forward?

Thanks

A couple of possible options for you:

1) Do multiple sales and buys e.g £10k or maybe £5k at a time.
2) The next time you've got say £10k in cash, then at same time sell £10k of the S&P and buy £10k of Global, once you've got the £10k back as cash, do the sell/buy again.

If they have similar pricing points then you hopefully won't be too badly hit by market changes.

dunstonh

[Deleted User] said:

Thanks all.  I feel a bit nervous though about cashing in 50k worth of S&P and placing an order for a global fund instead.  What if  prices change dramatically in between the sell and the buy? 

Would I be better leaving S&P where it is but buying Global stuff going forward?

Thanks

100% US equity investing is not good quality investing.   However, it has pretty much paid off since 2008 as US equity was the place to be.    The previous cycle saw US equity being amongst the worst places to be.    

You generally find that US equity and global equity (inc UK) cycle over being better than the other, for UK investors.    Usually the key reason is the movement in Sterling against the dollar.

If you were investing today, then you wouldn't be picking 100% US equity.   A general rule of thumb is that you should be invested in the same way you would be if you were putting the money in today unless there are tax or cost reasons.  If you are nervous about switching then perhaps you should be nervous about being 100% equity?

MK62

[Deleted User] said:

Thanks all.  I feel a bit nervous though about cashing in 50k worth of S&P and placing an order for a global fund instead.  What if  prices change dramatically in between the sell and the buy?

It's always possible when switching funds that the market might move against you, but it's equally possible it might move in your favour........it's almost certain to move one way or the other though - by how much is unknown, and in reality unknowable, but statistically speaking it's unlikely you'd lose much (eventually you'll have to sell whatever fund you hold, so you'll have the same dilemma then anyway)

Having said that, if the global equity fund is 60-70% US equities, it'll likely move in the same direction as the US equity fund anyway.

LHW99

Another alternative could be to leave the S&P 500, and add in separate European, UK and perhaps Emerging market trackers in proportions you feel happy with. It would require you to do rather more planning / hands on management, and would definately not be such a "leave alone unmonitored" option. And would increase the risk level over a global tracker, as it becomes an active portfolio, even though it gets filled with trackers, because you are making decisions on proportions.