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

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  • masonic
    masonic Posts: 23,253 Forumite
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    Hoenir said:
    masonic said:
    John464 said:
    masonic said:
    John464 said:
    There is another reason I think the UK stock market is undervalued.  UK investors have largely deserted the UK stock market because Government interventions in the housing market have made housing more attractive to investors.  Over 60% of UK equities are foreign owned by people who weren't in a position to capitalise on the UK rentier economy.
    On top of that, there are other huge incentives to invest in other assets - like agricultural land and trusts which can be passed on free of inheritance tax.  All of which starves the UK market of investment and adds to the under-valuation.
    Do you really think this is the case? UK investors make up a very small proportion of the market. I find it hard to believe that Government interventions in the housing market are impacting the appeal of UK-listed stocks. Supposing inheritance tax is abolished, as has been leaked to the press, will this really result in UK stocks becoming the preferred place for capital to be parked? I'm really struggling to see domestic housing policies influencing the FTSE100, or even the FTSE All share, though happy to be corrected.
    My thinking is that, since UK money has gone into buy to let (because its been more profitable) or agricultural land and everything else thats exempt from inheritance tax, that is UK money that might otherwise have gone into UK stocks and raised the price. 
    They are also unlikely to be interested in a market containing so many old world companies. This shift has also been seen in the most popular funds amongst private investors on DIY platforms. 
    ?

    Over 90 constituents of the S&P 500 index were founded over 100 years ago. The earliest dates back to the 1700's. Social media endlessly perpetuates myths. 
    It was a reference to the sectors they are in and the way they operate, not their incorporation date.
  • John464
    John464 Posts: 341 Forumite
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    masonic said:
    John464 said:
    masonic said:
    They are also unlikely to be interested in a market containing so many old world companies.
    40 years ago when I started investing and the FTSE100 was formed, people were saying that about tobacco companies.  As it turned out, BAT has been the FTSE100 top performer, even after the recent crash. From what I have seen the average old world company has done better than the average new world company.  Whenever there was a new craze - going back to the canals and railways and more recently dot com, the overwhelming majority went bust.
    But its like the lottery - people only remember the big winners, and forget twice as much was lost.
    So I want a bit of each - and if old world companies are cheaper a bit more of them.
  • masonic
    masonic Posts: 23,253 Forumite
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    edited 2 January at 2:22PM
    John464 said:
    masonic said:
    John464 said:
    masonic said:
    They are also unlikely to be interested in a market containing so many old world companies.
    40 years ago when I started investing and the FTSE100 was formed, people were saying that about tobacco companies.  As it turned out, BAT has been the FTSE100 top performer, even after the recent crash. From what I have seen the average old world company has done better than the average new world company.  Whenever there was a new craze - going back to the canals and railways and more recently dot com, the overwhelming majority went bust.
    But its like the lottery - people only remember the big winners, and forget twice as much was lost.
    So I want a bit of each - and if old world companies are cheaper a bit more of them.
    Yes, over 20 years, BATS has an annualised total return of over 11% compared with the FTSE100 of under 5% and FTSE World of about 9.3%. There is obviously a very large standard deviation for individual companies around the market return. Investing everything in BATS would have been a very rewarding strategy, but a hugely risky one. Meanwhile, there are examples of even more stellar returns elsewhere, for example $100 invested in Netflix 10 years ago would be worth nearly $11k today a nearly 60% annualised return, before accounting for gains due to devaluation of the pound. In the end it is a numbers game, and for the market return to be higher, it means on average the companies making up the market performed better. Though for most people the pull of investing globally is more about diversification.
    To be clear I am not criticising anyone's decision to invest in any company or type of company. Just listing reasons why I don't think a cessation or reversal of government housing interventions would lead to much of that capital flowing into the FTSE100. The UK faces a triple-whammy factors that would discourage former property investors buying the FTSE100: (1) not having the risk appetite to move to equities in general; (2) the remainder generally having a reduced appetite for home bias; and (3) an increase in adoption of ethical investing. I think out of those, factor (3) is of least significance.
  • Linton
    Linton Posts: 17,143 Forumite
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    edited 2 January at 3:15PM
    Now it's a world market dominated by large players trading globally.  The majority of UK listed shares are foreign owned.  UK private investors own about 10% of UK listed shares. 

    See https://www.ons.gov.uk/economy/investmentspensionsandtrusts/bulletins/ownershipofukquotedshares/2022

    What is important about UK shares comes from the sector allocation.  The UK stock market is overweight in mining, oil, and consumer staples (eg Unilever)  and very under-weight in Technology. In the over weight sectors generally most of the business is done outside the UK.


    So I cant see investment into or out of UK BTLs or much else in the UK internal economy making a significant difference.
     
  • Exodi
    Exodi Posts: 2,861 Forumite
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    edited 2 January at 3:47PM
    LHW99 said:
    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.
    (while it may be too late as the OP has raised a sell order), if you're open to the faff of re-balancing every now and then, you also save on OCF.

    For example, the Global All Cap the OP has an open switch for to has an OCF of 0.23% (Vanguard really needs to re-look at their pricing of their global funds).

    Based on the last FTSE All Cap Index (released end of Nov, but being updated imminently), you could replicate this by investing in the following on Vanguard:

    62.82% US Equity Index
    12.25% Developed Europe ex-UK Equity Index
    11.74% Emerging Markets Stock Index
    6.37% Japan Stock Index
    3.86% UK All Share Index
    2.95% Pacific ex-Japan Stock Index

    You can invest in the ETF equivalents if preferred (which the OP may, as they were already invested in VUSA). Let's not get into the advantages and disadvantages of ETF's.

    This reflects just over 97% of the index. The main country missing from the above being Canada, which represents 2.76% of the index, which if included would cover 99.8% of the index.

    If you're happy to forget about Canada and invest as per the above, the total OCF is around 0.12%... about half that of investing in the All Cap directly.
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  • masonic
    masonic Posts: 23,253 Forumite
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    edited 2 January at 4:13PM
    Exodi said:
    LHW99 said:
    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.
    (while it may be too late as the OP has raised a sell order), if you're open to the faff of re-balancing every now and then, you also save on OCF.

    For example, the Global All Cap the OP has an open switch for to has an OCF of 0.23% (Vanguard really needs to re-look at their pricing of their global funds).

    Based on the last FTSE All Cap Index (released end of Nov, but being updated imminently), you could replicate this by investing in the following on Vanguard:

    62.82% US Equity Index
    12.25% Developed Europe ex-UK Equity Index
    11.74% Emerging Markets Stock Index
    6.37% Japan Stock Index
    3.86% UK All Share Index
    2.95% Pacific ex-Japan Stock Index

    You can invest in the ETF equivalents if preferred (which the OP may, as they were already invested in VUSA). Let's not get into the advantages and disadvantages of ETF's.

    This reflects just over 97% of the index. The main missing constituent from the above being Canada, which represents 2.76% of the index, which if included would cover 99.8% of the index.

    If you're happy to forget about Canada and invest as per the above, the total OCF is around 0.12%... about half investing in the All Cap directly.
    I think some of that would miss the smaller company exposure present in the All Cap index. If you look at the factsheet provided for the index itself here for All Cap vs here for All World, you'll see the All Cap fund covers $75.3tn of assets across just over 10,000 companies, while All World covers $67.8tn across just under 4,300 companies. So there is an additional 10% of global market cap covered in the All Cap fund. Also, Vanguard US Equity index invests in about 3,600 stocks that make up the S&P Total Market Index, while VUSA covers only the largest 500 or so. The US index fund actually covers more of the US market than the FTSE Global All Cap index (1762 companies), whereas FTSE All World covers pretty much just the S&P500. 
    These differences may seem trivial and negligible, but compare with the FTSE 100 vs FTSE All share at £1.8tn vs £2.2tn market cap respectively, the FTSE 100 making up almost 82% of the All share. That extra 18% has been enough to lead to pronounced differences in performance.
    Not arguments against selecting any particular fund, but if greater diversification was one of the reasons for selecting the original fund, it should be appreciated that this may be impacted by changes.
  • Exodi
    Exodi Posts: 2,861 Forumite
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    edited 2 January at 4:44PM
    masonic said:
    Exodi said:
    LHW99 said:
    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.
    (while it may be too late as the OP has raised a sell order), if you're open to the faff of re-balancing every now and then, you also save on OCF.

    For example, the Global All Cap the OP has an open switch for to has an OCF of 0.23% (Vanguard really needs to re-look at their pricing of their global funds).

    Based on the last FTSE All Cap Index (released end of Nov, but being updated imminently), you could replicate this by investing in the following on Vanguard:

    62.82% US Equity Index
    12.25% Developed Europe ex-UK Equity Index
    11.74% Emerging Markets Stock Index
    6.37% Japan Stock Index
    3.86% UK All Share Index
    2.95% Pacific ex-Japan Stock Index

    You can invest in the ETF equivalents if preferred (which the OP may, as they were already invested in VUSA). Let's not get into the advantages and disadvantages of ETF's.

    This reflects just over 97% of the index. The main missing constituent from the above being Canada, which represents 2.76% of the index, which if included would cover 99.8% of the index.

    If you're happy to forget about Canada and invest as per the above, the total OCF is around 0.12%... about half investing in the All Cap directly.
    I think some of that would miss the smaller company exposure present in the All Cap index. If you look at the factsheet provided for the index itself here for All Cap vs here for All World, you'll see the All Cap fund covers $75.3tn of assets across just over 10,000 companies, while All World covers $67.8tn across just under 4,300 companies. So there is an additional 10% of global market cap covered in the All Cap fund. Also, Vanguard US Equity index invests in about 3,600 stocks that make up the S&P Total Market Index, while VUSA covers only the largest 500 or so. The US index fund actually covers more of the US market than the FTSE Global All Cap index (1762 companies), whereas FTSE All World covers pretty much just the S&P500. 
    These differences may seem trivial and negligible, but compare with the FTSE 100 vs FTSE All share at £1.8tn vs £2.2tn market cap respectively, the FTSE 100 making up almost 82% of the All share. That extra 18% has been enough to lead to pronounced differences in performance.
    Not arguments against selecting any particular fund, but if greater diversification was one of the reasons for selecting the original fund, it should be appreciated that this may be impacted by changes.
    No drama here, everything you said I totally agree with. Whether it is trivial or not will depend on each person. In hindsight, it would have been easier to attempt a replication of the FTSE All World fund than the All Cap in my example with the funds available. No doubt, manual re-balancing comes with it's compromises (especially as Canada also doesn't feature in any non-Global fund so would also be MIA)!

    Unfortunately there is no 'perfect' replication possible. In an ideal world, Vanguard would re-look at their relatively high global fund OCF's.
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  • mr._prude
    mr._prude Posts: 162 Forumite
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    S&P500
    VUAG [OCF 0.07%] 53.6% (3Y) 6.6% (YTD)

    Global All Cap
    VAFTGAG [0CF 0.23%]  26.9% (3Y) 4.5%(YTD)

    FTSE 250
    VMIG [OCF 0.1%] 3.48% (3Y)  -2.3% (YTD)

    "Living in America, got to have a celebration!"

  • InvesterJones
    InvesterJones Posts: 698 Forumite
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    mr._prude said:
    S&P500
    VUAG [OCF 0.07%] 53.6% (3Y) 6.6% (YTD)

    Global All Cap
    VAFTGAG [0CF 0.23%]  26.9% (3Y) 4.5%(YTD)

    FTSE 250
    VMIG [OCF 0.1%] 3.48% (3Y)  -2.3% (YTD)

    "Living in America, got to have a celebration!"


    Well with the benefit of hindsight it's easy to say that investing in one stock would have been even better. But this thread is only since December 2023, so only 6.6% vs 4.5%, and at least another 9 3/4 or so years to go before a reasonable judgement can be made.
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