Which Index funds to invest in?

dunstonh

michael1234 said:

nakie999 said:

I had the same wobble after loading up on S&P and Nasdaq, felt diversified until I looked under the hood and saw the same five names doing most of the lifting. I rewired the ISA to a plain global tracker with a small slice of short-dated gilts so I could breathe through the drawdowns

Let me guess, Apple, Microsoft etc ?

It seems difficult (for a laymen like me) to keep a geo balanced portfolio. The "all-world" fund mentioned above seems to be 65% USA based and that seems quite typical.

12 years ago, market cap for US was around  43%.   Tech and exchange rates have floated it to its 2024 high (its started reversing in 2025)

aroominyork

dunstonh said:

michael1234 said:

nakie999 said:

I had the same wobble after loading up on S&P and Nasdaq, felt diversified until I looked under the hood and saw the same five names doing most of the lifting. I rewired the ISA to a plain global tracker with a small slice of short-dated gilts so I could breathe through the drawdowns

Let me guess, Apple, Microsoft etc ?

It seems difficult (for a laymen like me) to keep a geo balanced portfolio. The "all-world" fund mentioned above seems to be 65% USA based and that seems quite typical.

12 years ago, market cap for US was around  43%.   Tech and exchange rates have floated it to its 2024 high (its started reversing in 2025)

If you took off your IFA hat, what do you think will be the global market cap % of the US in five years? Go on, take a punt.

michael1234

aroominyork said:

dunstonh said:

michael1234 said:

nakie999 said:

I had the same wobble after loading up on S&P and Nasdaq, felt diversified until I looked under the hood and saw the same five names doing most of the lifting. I rewired the ISA to a plain global tracker with a small slice of short-dated gilts so I could breathe through the drawdowns

Let me guess, Apple, Microsoft etc ?

It seems difficult (for a laymen like me) to keep a geo balanced portfolio. The "all-world" fund mentioned above seems to be 65% USA based and that seems quite typical.

12 years ago, market cap for US was around  43%.   Tech and exchange rates have floated it to its 2024 high (its started reversing in 2025)

If you took off your IFA hat, what do you think will be the global market cap % of the US in five years? Go on, take a punt.

Do I detect a willingness for it to shrink ? 

Nurse2047

https://youtube.com/@makingmoneypodcast?si=q_dvSkQJXrp8W13l This is worth a watch 

FTSE global all cap is a low cost global index fund - invest and forget 

dunstonh

aroominyork said:

dunstonh said:

michael1234 said:

nakie999 said:

I had the same wobble after loading up on S&P and Nasdaq, felt diversified until I looked under the hood and saw the same five names doing most of the lifting. I rewired the ISA to a plain global tracker with a small slice of short-dated gilts so I could breathe through the drawdowns

Let me guess, Apple, Microsoft etc ?

It seems difficult (for a laymen like me) to keep a geo balanced portfolio. The "all-world" fund mentioned above seems to be 65% USA based and that seems quite typical.

12 years ago, market cap for US was around  43%.   Tech and exchange rates have floated it to its 2024 high (its started reversing in 2025)

If you took off your IFA hat, what do you think will be the global market cap % of the US in five years? Go on, take a punt.

Predicting the unpredictable means you will always likely end up wrong.  Or possibly wrong for a while, then right again, then wrong again, and right again depending on how long you want to measure it over.

So, I try to avoid making such predictions.    However, two of the reasons market cap has increased is tech stocks and currency movements.       Many believe tech stocks are now overvalued and the dollar is now falling.    So, if tech stocks and the dollar continue to fall, then market cap would reduce.   Currency movements have played out many many times before. So, it is a cycle you would expect to see again.

ivormonee

I suppose the more one wishes to tailor their asset allocation, the more granularity they might need in its construction. Having one all world equity fund does mean you get something aligned with global market caps, but you end up overweight in the US in relative terms. To achieve a lower percentage allocation to the US you would need to include other funds into your portfolio, mixing accordingly to achieve the desired allocations.

Some time ago I decided I could optimise a portfolio to my liking by excluding a global fund/ tracker and instead having separate funds to cover different regions as I wanted. I haven't found it particularly more labour intensive to manage. The only requirement to maintain the strategic allocation is periodic rebalancing, which hasn't been necessary for much of the time anyway.

Linton

ivormonee said:

I suppose the more one wishes to tailor their asset allocation, the more granularity they might need in its construction. Having one all world equity fund does mean you get something aligned with global market caps, but you end up overweight in the US in relative terms. To achieve a lower percentage allocation to the US you would need to include other funds into your portfolio, mixing accordingly to achieve the desired allocations.

Some time ago I decided I could optimise a portfolio to my liking by excluding a global fund/ tracker and instead having separate funds to cover different regions as I wanted. I haven't found it particularly more labour intensive to manage. The only requirement to maintain the strategic allocation is periodic rebalancing, which hasn't been necessary for much of the time anyway.

With 9 carefully chosen funds I can get the overall geographic, large vs small, growth vs value, and sector allocations that meet my objectives.  It's a bit of an effort to set up but requires little ongoing maintenance.  I use a spreadsheet to monitor the allocations - this was previously done my morningstar Xray but that facility no longer exists.

Bostonerimus1

ivormonee said:

I suppose the more one wishes to tailor their asset allocation, the more granularity they might need in its construction. Having one all world equity fund does mean you get something aligned with global market caps, but you end up overweight in the US in relative terms. To achieve a lower percentage allocation to the US you would need to include other funds into your portfolio, mixing accordingly to achieve the desired allocations.

Some time ago I decided I could optimise a portfolio to my liking by excluding a global fund/ tracker and instead having separate funds to cover different regions as I wanted. I haven't found it particularly more labour intensive to manage. The only requirement to maintain the strategic allocation is periodic rebalancing, which hasn't been necessary for much of the time anyway.

I've basically had a 3 fund portfolio (4 if you include a money market fund) for the past 35 years; US Equity, International Equity ex US and a US dividend company and bond fund. I've rebalanced when my allocation got out of whack, but nothing more and have done well keeping things simple. I recently swapped some of the US dividend company and bond fund for the global equivalent as I don't like the trends in the US economy and debt load. Slicing and dicing geographically or on a sector basis is a strategy that is touted as squeezing out larger returns from a portfolio. That's debated, especially when implemented by an individual, but IMO it quickly slides into numerology. So spend a lot less than you make, use every tax advantage you can, buy the entire global market and think strategically not tactically.

Linton

Bostonerimus1 said:

ivormonee said:

I suppose the more one wishes to tailor their asset allocation, the more granularity they might need in its construction. Having one all world equity fund does mean you get something aligned with global market caps, but you end up overweight in the US in relative terms. To achieve a lower percentage allocation to the US you would need to include other funds into your portfolio, mixing accordingly to achieve the desired allocations.

Some time ago I decided I could optimise a portfolio to my liking by excluding a global fund/ tracker and instead having separate funds to cover different regions as I wanted. I haven't found it particularly more labour intensive to manage. The only requirement to maintain the strategic allocation is periodic rebalancing, which hasn't been necessary for much of the time anyway.

I've basically had a 3 fund portfolio (4 if you include a money market fund) for the past 35 years; US Equity, International Equity ex US and a US dividend company and bond fund. I've rebalanced when my allocation got out of whack, but nothing more and have done well keeping things simple. I recently swapped some of the US dividend company and bond fund for the global equivalent as I don't like the trends in the US economy and debt load. Slicing and dicing geographically or on a sector basis is a strategy that is touted as squeezing out larger returns from a portfolio. That's debated, especially when implemented by an individual, but IMO it quickly slides into numerology. So spend a lot less than you make, use every tax advantage you can, buy the entire global market and think strategically not tactically.

 My purpose in “dicing” geographically, sectorially, and on any other factor it is practical to do so, is not squeezing out extra returns but rather to maximise diversification by spreading the risk. 

 

This avoids changing long term allocations in response to short term events I don’t like. Keeping US down to 40% already took into account the possibility that something at some time could disrupt the US market. For similar reasons within the US I include a significant proportion of small companies to dilute the effect of the techs.

aroominyork

The choice comes down to maximising diversification, or identifying one or two key risks and trying to mitigate them. Although you are doing the former, Linton, it could be argued that the key risk is having 65% of equities in North America if global cap weighted, so by reducing that to 40% you have done enough to address the risk. That is my approach, and although it means I am slightly underweight in mid/small caps, by adding something like AVSG (which my itchy fingers think about) I would dilute too far my exposure to the tech/IT sectors which are dominant these days.