Which Index funds to invest in?

VincentHanna

Hi folks, at the moment I am in the fortunate position of having a sizeable pot built up in cash savings. From what I've heard this is probably not the best strategy to be so cash heavy versus investment ratio?

I have dabbled in the stock market over the past 5 years with varying degrees of success. Probably just about broke even, it's been a bit of a learning curve and I've realised I don't have the expertise to be this risky - so best to adapt a passive income approach. These were individual stocks.

Over the past year I've invested 20K into S and P 500 and 20K into Nasdaq 100 index funds, investing 10K upfront in each and then doing £ cost averaging for the rest of the year. Both were stocks and shares ISA's. They were doing well up until recently - however I realise it's a long term investment so not overly worried about that.

Next financial year I plan to add another 40K into stocks and shares ISA's however I'm wondering if I should diversify into other index funds other than the 2 above. Any advice? 

Voyager2002

The two index funds you mention are both in the USA, so particularly vulnerable to Trump's economic policy (in particular, the Nasdaq has taken quite a beating recently). There are arguments for the UK, for Europe, for different parts of Asia (India has done very well recently; China and Vietnam could be interesting; and Japan?); and of course for particular sectors such as defence equipment; energy; precious metals. The renewable energy sector has taken a real beating and so if those companies survive they are likely to prove to be real bargains at today's prices.

And if you want an exciting life, you could pile into Biotechnology...

dunstonh

Which Index funds to invest in?

That is a personal decision.  There are very many benchmarks and trackers are available to cover most of them.

Over the past year I've invested 20K into S and P 500 and 20K into Nasdaq 100 index funds, investing 10K upfront in each and then doing £ cost averaging for the rest of the year. Both were stocks and shares ISA's. They were doing well up until recently - however I realise it's a long term investment so not overly worried about that.

Investing in a single country is typically a bad investment decision.   You are putting all your eggs in one basket.

Next financial year I plan to add another 40K into stocks and shares ISA's however I'm wondering if I should diversify into other index funds other than the 2 above. Any advice? 

You need to balance your portfolio to include other countries and regions.

Labtebricolist

Personally, as above, I think a global tracker is better.  Whilst there are different indices (MSCI vs FT) over the long run there isn’t likely to be a massive difference in performance.  There is also the choice of whole world vs developed world and all cap vs large/medium cap.  Again, whilst they will differ, the difference isn’t that worth sweating about for most investors.

Vanguard VWRP (for an accumulating ETF) is a good choice, as is VAFTGAG for a fund rather than an ETF.  The VAFTGAG fund gives the broadest exposure.

Bear in mind that whilst these will give you exposure beyond just the US market, you’re also exposed to fx risk given that dollar based stocks will still dominate.  I’ve found, during the current Trump Slump, that fx losses are as significant to a U.K. investor as share price losses.  As the US administration wants to get more manufacturing back on-shore my hunch is that the USD will continue on a gentle downward trend for some time, though of course longer term this probably isn’t a reason to try and time the market.

Albermarle

Next financial year I plan to add another 40K into stocks and shares ISA's however I'm wondering if I should diversify into other index funds other than the 2 above. Any advice? 

There is also the possibility of diversifying away from 100% equity, with some bonds for example. Probably the easiest way to do this is with a multi asset fund, that is a mix of equity and bonds in different ratios.
Although probably 100% equity will give you the most growth in the very long run, it can be too much of a hairy ride for most people. 

Eyeful

You can make investing as simple or as complicated as you like.

Academic research repeatedly shows that most "active fund managers" after charges are applied,

    do not beat a MAJOR  GLOBAL WORLD INDEX. 

The Simple method of investing boils down to this:

(a) Low Cost Multi Asset Funds (for Cautious types & those that want more Control)

     A ready made portfolio, where you pick the share/bond split, you are most comfortable with.

Example:  https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced

(b) Passive Low Cost Global Index Tracking Fund or ETF (for the Adventurous with a very long time frame) 

     Here its shares = 100%. It may produce the highest return but is the most risky.

Example: https://www.trustnet.com/factsheets/o/kldq/hsbc-ftse-all-world-index

Before investing:

(a) Clear all expensive debt first (except for mortgage)

(b) Have a "Rainy Day" account for emergencies (6 months of house hold bills, is often quoted).

 SIMPLE INVESTING IN DETAIL (advantages, easy to understand  & implement).

(a) First watch this: https://www.kroijer.com/

(b) Then read these

     https://monevator.com/passive-fund-of-funds-the-rivals/

     https://monevator.com/best-global-tracker-funds/

jimjames

VincentHanna said:

Next financial year I plan to add another 40K into stocks and shares ISA's however I'm wondering if I should diversify into other index funds other than the 2 above. Any advice? 

You can only add £20k of new money into ISAs every tax year. When you say "you" are adding £40k, is that split between you and partner?

surreysaver

jimjames said:

VincentHanna said:

Next financial year I plan to add another 40K into stocks and shares ISA's however I'm wondering if I should diversify into other index funds other than the 2 above. Any advice? 

You can only add £20k of new money into ISAs every tax year. When you say "you" are adding £40k, is that split between you and partner?

It could also be transfers in from cash ISAs?

VincentHanna

Yes, one is a 20k transfer from another ISA and another 20k per my yearly allowance