Which Index funds to invest in?

chiang_mai

InvesterJones said:

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

An interesting read: https://www.investmentmagazine.com.au/2025/07/why-emerging-markets-are-back-in-focus/

Cus

InvesterJones said:

chiang_mai said:

InvesterJones said:

chiang_mai said:

michael1234 said:

So we're all sat here tweaking our fund portfolios.

Are we hoping the regions we've invested in will grow more than expected or are we hoping more folk like us will pour more of their money into the regions we're currently invested in ? Which is it ?

It depends which region(s) you're invested in. If you're invested in the US and parts of Europe for example, those markets are very expensive, if not overvalued. But if you're invested primarily in EM, Asia and the likes, the odds are that growth will drive those markets higher. It's for that reason that I have reduced my US holdings and inxcreased my EM and Asia holdings.

https://worldperatio.com/

Well no, odds (as determined by where other people are 'betting') are saying they will not grow as much for the risk as other markets, hence why you can buy them cheaper.

But there are other reasons besides growth to apply your own over/under weighting - whether that's a home bias, or countering another home bias (I think this is fair reason to consider slightly under weighting the US for e.g.) or simply having a different risk appetite (in either direction) than the market as a whole.

We don't agree on that point. I strongly suspect the average retail invester is more afraid to invest in EM and Asian markets and it is that fear that prevents them from investing furtther, not the percieved lack of returns. 

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

Non active investing in the S&P is around 20% to 60% of total (true numbers are hard to identify) versus 25 years ago when it was 1% to 6%. So a much larger amount is relying on the idea that if the active decisions are to invest in certain places, then logically following it is logical. However I feel that many active/ professional investors also react to this, like some sort of virtuous circle to keep it going. If the professional investor truly trusted the market to reward value investing with future share prices, they all would do it.  They don't, perhaps worried that they can't fight the 'illogical' tide.

Edit to add: I would guess that a number of professional investors cannot afford to go against the crowd as they will lose their jobs..

Cus

michael1234 said:

AlanP_2 said:

michael1234 said:

So we're all sat here tweaking our fund portfolios.

Are we hoping the regions we've invested in will grow more than expected or are we hoping more folk like us will pour more of their money into the regions we're currently invested in ? Which is it ?

Neither as such.

I'm pondering lowering my US exposure, particularly the Mag 7 exposure, a bit just to play safe as much as anything.

Unlike a professional money manager I don't need to be concerned about my "results" in the short term as long as I achieve my objective which is to protect the assets we have built up against inflation and allow us to spend it down in our retirement.

A professional will get caned if they lag their peers / the market for a while so they almost have to be invested in US / Mag 7 whether they personally think it is a sensible long term approach or not.

Private investors can do what they want, when they want and only have to answer to their spouse (that could just be me  )

The US is at a very high valuation , particularly the Mag 7, and the fact that ex-US trackers are now being offered provides a low cost, easy opportunity to decrease US exposure using a passive approach without going to the hassle of holding multiple country / region funds. 

Theoretically the cheaper assets purchased should do better over an extended period as they are starting from a lower base but Whether the Rest Of The World grows faster than the US or whether other folk do similar is of no relevance to me. 

Given you're the second person to say it you're probably right but I don't understand your reasoning.

And by the way, I agree with your comments about the US but I also think there will be a significant number of investors who think like you and therefore there will be money moving out. That said, Trump will not want to see businesses' harmed and their may be an element of truth in his ambition to move more production back to the US. Its all more risky than it was though.

So that aside, if a region doesn't grow and if there is no more money added, why might it still be an attractive region to invest in?

Imo, one would be hoping that at some point others would realise the potential future value of that region (assume you mean index) and so validate your hope.  However since so many investors are not interested in value, then ride the passive wave. Personally I don't think there will be a snap change, just a slow multi year's/decade movement towards more passive investing of active value funds as people realise whats going on 

InvesterJones

chiang_mai said:

InvesterJones said:

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

An interesting read: https://www.investmentmagazine.com.au/2025/07/why-emerging-markets-are-back-in-focus/

But again that's not secret sauce. Reading that isn't suddenly going to make me spot an opportunity that the rest of the market doesn't know about. They do know about it, and still cause the odds to favour elsewhere.

masonic

Cus said:

InvesterJones said:

chiang_mai said:

InvesterJones said:

chiang_mai said:

michael1234 said:

So we're all sat here tweaking our fund portfolios.

Are we hoping the regions we've invested in will grow more than expected or are we hoping more folk like us will pour more of their money into the regions we're currently invested in ? Which is it ?

It depends which region(s) you're invested in. If you're invested in the US and parts of Europe for example, those markets are very expensive, if not overvalued. But if you're invested primarily in EM, Asia and the likes, the odds are that growth will drive those markets higher. It's for that reason that I have reduced my US holdings and inxcreased my EM and Asia holdings.

https://worldperatio.com/

Well no, odds (as determined by where other people are 'betting') are saying they will not grow as much for the risk as other markets, hence why you can buy them cheaper.

But there are other reasons besides growth to apply your own over/under weighting - whether that's a home bias, or countering another home bias (I think this is fair reason to consider slightly under weighting the US for e.g.) or simply having a different risk appetite (in either direction) than the market as a whole.

We don't agree on that point. I strongly suspect the average retail invester is more afraid to invest in EM and Asian markets and it is that fear that prevents them from investing furtther, not the percieved lack of returns. 

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

Non active investing in the S&P is around 20% to 60% of total (true numbers are hard to identify) versus 25 years ago when it was 1% to 6%. So a much larger amount is relying on the idea that if the active decisions are to invest in certain places, then logically following it is logical. However I feel that many active/ professional investors also react to this, like some sort of virtuous circle to keep it going. If the professional investor truly trusted the market to reward value investing with future share prices, they all would do it.  They don't, perhaps worried that they can't fight the 'illogical' tide.

Edit to add: I would guess that a number of professional investors cannot afford to go against the crowd as they will lose their jobs..

It's going to be closer to 60% if you include closet trackers, which most active funds are to a large extent.

There are a small number of active US funds that have avoided the fashionable shares, but nobody is buying them because their track record is rubbish as a result. If the market strips the premium from today's fashionable investments, those contrarian funds could become popular themselves, but by then the damage will already have been done. Whereas they might not survive long enough for investors in them to bear any fruit. As Keynes put it "Markets can remain irrational longer than you can remain solvent"

Perhaps a safer bet is using an index fund tracking an alternative (factor/strategy) index. Interestingly, the biggest of these when it comes to the US market is equal weight, of which there are some multi-billion AUM choices, which should be at very low risk of closing. Value seems to be next most popular. At least investors cannot blame the poor choices of the fund manager when these underperform.

SloughSally

Enzo_L said:

SloughSally said:

GeoffTF said:

Eco_Miser said:

GeoffTF said:

 Alternatively, what is it that worries you about the US having so many companies that make such big profits and keep growing them?

For values of "so many" = 7. 

William Bernstein once said, “When you’ve won the game, stop playing.”  Anyone who was invested in those 7 corporations over the last decade has won the game and should stop playing  before their valuation crashes. It doesn't take share confiscation, just a government antithetical to those particular companies (or their owners/CEOs).

There are many more than seven US companies making big profits and growing them. People here are talking about under-weighting the whole US market, rather than😂just the magnificent seven.

Why should I stop playing? There is no chance that I will run out of money. I would incur a huge CGT bill if I sold my equities, and a huge income tax bill if I put the money in the bank. Doing nothing is a lot cheaper.

And eventually a far bigger Inheritance tax bill and money never spent and enjoyed.😂😂😂

You don't have to spend money to enjoy it. I really enjoy knowing that I'll never ever have to worry about paying my bills, paying for private medical care, or having anything I want to have, no matter how long I live. And I don't care about inheritance tax because I'll be dead then. 😂😂😂

I understand your richest man in the cemetery desire, it’s just not for me. 

And like you say you enjoy not spending, so good for you.👍

chiang_mai

InvesterJones said:

chiang_mai said:

InvesterJones said:

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

An interesting read: https://www.investmentmagazine.com.au/2025/07/why-emerging-markets-are-back-in-focus/

But again that's not secret sauce. Reading that isn't suddenly going to make me spot an opportunity that the rest of the market doesn't know about. They do know about it, and still cause the odds to favour elsewhere.

This is not about secret sauce and spotting hitherto hidden opportunities. There is widespread acknowledgment that EM, for example, represent one of the best investment opportunities at present, yet many Western RETAIL investors are nervous at the risk and either don't invest or invest small sums, ditto Japan, ditto Developed Asia.  I take a different view, perhaps because I live in the middle of Asia Pac and read and see more about it daily and the people around me are focussed on this region.  I would expect a UK centric investment forum to be just that, Western centric. I have the freedom to invest where I wish globally. I choose not to have my portfolio dominated by the US, because it is so expensive and politically unstable at present. Instead I have more equally shared my investing accross all the regions, including equal shares for China, EM and Dev Asia. That others want to invest more in line with markets size is their choice, they rationalise that decion because it is supported mathematically whereas mine is supported by the degree to which the markets and P/E ratio's believe they are over or under sold and expensive or inexpensive. I suspect we could both list plenty of reasons why their  approach is right but that wouldn't necessarily make the alternative, wrong.

Linton

InvesterJones said:

chiang_mai said:

InvesterJones said:

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

An interesting read: https://www.investmentmagazine.com.au/2025/07/why-emerging-markets-are-back-in-focus/

But again that's not secret sauce. Reading that isn't suddenly going to make me spot an opportunity that the rest of the market doesn't know about. They do know about it, and still cause the odds to favour elsewhere.

It would seem to me that a large % of investors globally have a significant home bias and hence value opportunities in foreign countries lower than corresponding opportunities in their home market. If that was not the case the allocations adopted by investors in different countries would be the same.

Hence global markets are skewed by the locations of investors.

The argument that buying opportunities self correct may well apply within a market, but it is less clear that it works between markets.

InvesterJones

Linton said:

InvesterJones said:

chiang_mai said:

InvesterJones said:

If that was the case then the professional investor with more capital would take advantage and buy up EM/Asia to get increased returns for the price, bringing the cost up to the same risk adjusted return as other markets.

An interesting read: https://www.investmentmagazine.com.au/2025/07/why-emerging-markets-are-back-in-focus/

But again that's not secret sauce. Reading that isn't suddenly going to make me spot an opportunity that the rest of the market doesn't know about. They do know about it, and still cause the odds to favour elsewhere.

It would seem to me that a large % of investors globally have a significant home bias and hence value opportunities in foreign countries lower than corresponding opportunities in their home market. If that was not the case the allocations adopted by investors in different countries would be the same.

Hence global markets are skewed by the locations of investors.

The argument that buying opportunities self correct may well apply within a market, but it is less clear that it works between markets.

I made a similar point about US home bias a few posts back - that's the obvious mix of population size and home investment. EM does contain two of the most populous nations so *if* there was a similar home bias and large number of investors then it doesn't really make the case for going to EM for extra value either - of course, they don't have anywhere near the same number of investors as the US does I'm sure, but I'd love to see what the actual investor population is country by country.

chiang_mai

InvesterJones said:

I made a similar point about US home bias a few posts back - that's the obvious mix of population size and home investment. EM does contain two of the most populous nations so *if* there was a similar home bias and large number of investors then it doesn't really make the case for going to EM for extra value either - of course, they don't have anywhere near the same number of investors as the US does I'm sure, but I'd love to see what the actual investor population is country by country.

If the definition of an investor is defined by share owenership, the percentages in India and China are fairly small, as a percentage of the population, less than 10% as I recall. In the US, that ownership percentage is over 60%. But if the defintion were switched to say gold, the Chinese private sector alone holds over 30,000 tons and there has been a significant surge in younger people buying gold. A similar scenario exists in India, hence trying to compare the US retail investor profile with Asian countries, is challenging. In SE Asian countries, very few people own stocks and shares or investment funds but almost every family stores their wealth in gold jewelry and land. 

To add: devloped mature markets such as Japan, Hong Kong, Taiwan and Korea all have fairly robust economies that underpin them and their markets and investor take up rates are high - Japan is in transition currently as their new mionetary policy evolves. Emerging Markets such as China and SE Asia countries have less robust economies and this is mirrored by the investor community profile and the products in which they invest.