Which Index funds to invest in?

LHW99

Interesting that you regard Taiwan and Korea as "developed mature markets" when a good proportion of EM funds (and others) seem to include Taiwan (Semiconductors) and South Korea in the mix.

Enzo_L

SloughSally said:

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.👍

I didn't say that I have a desire to be the richest man in the cemetery. You've made that up.

Nor did I say that I "enjoy not spending". You've made that up too.

Cus

InvesterJones said:

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.

It would also be interesting to see the percentage of UK based investors who invest in the S&P versus the FTSE against  the same with US based investors, as well as the total number.  Our home bias I suspect is not as biased as US investors 

masonic

Cus said:

InvesterJones said:

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.

It would also be interesting to see the percentage of UK based investors who invest in the S&P versus the FTSE against  the same with US based investors, as well as the total number.  Our home bias I suspect is not as biased as US investors 

It depends also how you define bias. Some would consider 60% S&P and 3% FTSE not biased. Then how biased is 100% S&P for a US person vs 20% FTSE for a UK person.

I suspect home bias is much less of a thing in the UK than it was 20 or even 10 years ago, since it has been a drag on returns. Whereas in the US global diversification has been a losing strategy.

GeoffTF

masonic said:

Cus said:

InvesterJones said:

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.

It would also be interesting to see the percentage of UK based investors who invest in the S&P versus the FTSE against  the same with US based investors, as well as the total number.  Our home bias I suspect is not as biased as US investors 

It depends also how you define bias. Some would consider 60% S&P and 3% FTSE not biased. Then how biased is 100% S&P for a US person vs 20% FTSE for a UK person.

I suspect home bias is much less of a thing in the UK than it was 20 or even 10 years ago, since it has been a drag on returns. Whereas in the US global diversification has been a losing strategy.

The equity part of Vanguard UK LifeStrategy is 25% UK. For the US version it is 60% US. Vanguard has said more than once that the home bias is for marketing reasons, so those numbers should be a fair indication of what the market wants.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-60-equity-fund-accumulation-shares/overview

https://investor.vanguard.com/investment-products/mutual-funds/profile/vsmgx#portfolio-composition

The US version does not appear to have a home bias at all. Also note how much simpler the US portfolio is.

michael1234

Cus said:

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 

But isn't that the same as hoping that investors will pour more money into the index after you have ?

chiang_mai

LHW99 said:

Interesting that you regard Taiwan and Korea as "developed mature markets" when a good proportion of EM funds (and others) seem to include Taiwan (Semiconductors) and South Korea in the mix.

Yes, the defintion of Developed Asia is not always entirely agreed and doesn't have the same meaning to everyone hence it can be confusing at times. There is a certain amount of "creep" by Fund Managers where it is convenient to blur the distinction between EM and Developed Asia. The Artemis Smargarp Global Emerging Markets fund, for example, combines on third each of EM, Dev Asia and China, in the same way that some UK funds often include European holdings etc etc. But it does seem as though there is an understanding about what is a real EM, versus a devloped market that is surrounded by EM territories.  The IMF definition of "developed nation" is helpful to understand in this context since the IMF ratings offer some clues. Key components include strong governance, advanced infrastructure, stable markets and a developed economy. Of significant importance is their physical location and gateway abilities to large growth markets such as China.

chiang_mai

One other aspect of investing in Asia is that frequently, the bond market here is much more robust than the equities side. The Thai SET for example is a very poorly performing exchange but  BOT bonds are sought afrer globally and generate substantial internation capital inflows, so much so that the unconnected man in the street will struggle to buy them in the primary market. All of these things suggest that the profile of an "investor" in the West is quite different from that in the East hence making comparisons is very difficult. Moneytary policy is yet another dimension whereby many countries have currency controls in place, which make buying offshore and overseas funds difficult, if not impossible, in some cases. Here in Asia it is the Asset Management component of local banks that sell investments to the retail crowd, most of which are home grown and heavily favour the brokerage. But there again, the entire banking system here is quite different from what most Westerners are used to.  

leosayer

GeoffTF said:

masonic said:

Cus said:

InvesterJones said:

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.

It would also be interesting to see the percentage of UK based investors who invest in the S&P versus the FTSE against  the same with US based investors, as well as the total number.  Our home bias I suspect is not as biased as US investors 

It depends also how you define bias. Some would consider 60% S&P and 3% FTSE not biased. Then how biased is 100% S&P for a US person vs 20% FTSE for a UK person.

I suspect home bias is much less of a thing in the UK than it was 20 or even 10 years ago, since it has been a drag on returns. Whereas in the US global diversification has been a losing strategy.

The equity part of Vanguard UK LifeStrategy is 25% UK. For the US version it is 60% US. Vanguard has said more than once that the home bias is for marketing reasons, so those numbers should be a fair indication of what the market wants.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-60-equity-fund-accumulation-shares/overview

https://investor.vanguard.com/investment-products/mutual-funds/profile/vsmgx#portfolio-composition

The US version does not appear to have a home bias at all. Also note how much simpler the US portfolio is.

The difference in the number of underlying funds between the UK and US version is likely down to different regulatory requirements. 

I'm sure Vanguard in the UK would prefer to hold 3 underlying funds rather than the 15+ they currently do.

GeoffTF

leosayer said:

GeoffTF said:

masonic said:

Cus said:

InvesterJones said:

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.

It would also be interesting to see the percentage of UK based investors who invest in the S&P versus the FTSE against  the same with US based investors, as well as the total number.  Our home bias I suspect is not as biased as US investors 

It depends also how you define bias. Some would consider 60% S&P and 3% FTSE not biased. Then how biased is 100% S&P for a US person vs 20% FTSE for a UK person.

I suspect home bias is much less of a thing in the UK than it was 20 or even 10 years ago, since it has been a drag on returns. Whereas in the US global diversification has been a losing strategy.

The equity part of Vanguard UK LifeStrategy is 25% UK. For the US version it is 60% US. Vanguard has said more than once that the home bias is for marketing reasons, so those numbers should be a fair indication of what the market wants.

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-60-equity-fund-accumulation-shares/overview

https://investor.vanguard.com/investment-products/mutual-funds/profile/vsmgx#portfolio-composition

The US version does not appear to have a home bias at all. Also note how much simpler the US portfolio is.

The difference in the number of underlying funds between the UK and US version is likely down to different regulatory requirements. 

I'm sure Vanguard in the UK would prefer to hold 3 underlying funds rather than the 15+ they currently do.

What regulatory requirements? Many (but not all) IFAs use many funds when one or two would do to make it look as though they are doing more for their money. Vanguard is following this dubious practice in the belief that it sells. Using many funds costs Vanguard nothing.