Which Index funds to invest in?

SloughSally

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.😂😂😂

Enzo_L

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. 😂😂😂

Middle_of_the_Road

SloughSally said:

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

This IS Money Saving Expert though, not money spending expert 🙂
Heck of a first post by the way...

Enzo_L said:

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. 😂😂😂

Having that security is a wonderful thing, but accepting that the state could claim a substantial part of it isn't very MSE 🤔

masonic

Middle_of_the_Road said:

Enzo_L said:

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. 😂😂😂

Having that security is a wonderful thing, but accepting that the state could claim a substantial part of it isn't very MSE 🤔

It does depend. If it's destined for charity then this is not a concern.

Linton

Cus said:

Deciding to invest based on market caps is to me an active decision similar to  deciding to invest based on other values, such as valuations, earnings, whatever.  I've no issues with that.  My concern is the perceived belief, based on a number of internet investment movements over many years, that investing in market cap based weightings is the default goto and will deliver the best long term results, and that an individual should not engage their own research as how can they beat a market. For many, just being invested is better than historically not being invested and that's a good result of these movements, but I think it's self fulfilling and dangerous.

I agree with you that there are many ways to sensibly set up a portfolio to meet one's needs and that carrying out your own research to construct an appropriate portfolio can be very beneficial both to your finances and also to your knowledge and understanding of investing.

However where I would disagree is that a sensible reason for doing so is to beat the market.  So far no one has found a way to do that safely and consistently. If they did and everyone followed that method prices would adjust to  invalidate it as large numbers of people would try to buy the same recommended investments.  It follows that over the long term any balanced diversified hands-off portfolio is likely to achieve much the same results.  If that was not true and some investment strategy was consistently suboptimal you could, in principle, create a market beating strategy by simply doing the opposite.

However what one can do is to influence the volatility which may not matter much when in the accumulation phase but could be important if your investments are funding your day to day expenses.

Cus

Yes agree, my wording is not what I wanted to purvey, and I am not suggesting people should be actively trying to beat markets as as a benchmark.

I think it would be better if I had said that people assume that there is no better option than to invest based on market caps as the default, and that to think about adjusting based on other factors is pointless as 'you can't beat the market, active managers can't etc etc' so you are only doing yourself a disservice, whereas it's much more nuanced that this, and doesn't take into account many other factors, including designing a personal investment strategy based on your own factors and needs.

michael1234

Cus said:

Yes agree, my wording is not what I wanted to purvey, and I am not suggesting people should be actively trying to beat markets as as a benchmark.

I think it would be better if I had said that people assume that there is no better option than to invest based on market caps as the default, and that to think about adjusting based on other factors is pointless as 'you can't beat the market, active managers can't etc etc' so you are only doing yourself a disservice, whereas it's much more nuanced that this, and doesn't take into account many other factors, including designing a personal investment strategy based on your own factors and needs.

I'm not sure if you're an FA or not but I always smile internally when I hear that phrase. The strategy is always to make more money. Sooner, later, regularly, in lump sums but always to make more of the stuff. 

I agree wholeheartedly with everything else.

I wonder if a provider managed to supply a parameterised fund template whether that would work. i.e. Your investment would go into the equities managed by that fund but you could override the allocations. e.g. a "global cap index fund" bought with parameters 0, 0, 0, 0, 0, 0, 0 would mean nothing in the top 7 and that money to be allocated in proportion to the rest of the funds stocks. Very naïve I'm sure... 

Linton

michael1234 said:

Cus said:

Yes agree, my wording is not what I wanted to purvey, and I am not suggesting people should be actively trying to beat markets as as a benchmark.

I think it would be better if I had said that people assume that there is no better option than to invest based on market caps as the default, and that to think about adjusting based on other factors is pointless as 'you can't beat the market, active managers can't etc etc' so you are only doing yourself a disservice, whereas it's much more nuanced that this, and doesn't take into account many other factors, including designing a personal investment strategy based on your own factors and needs.

I'm not sure if you're an FA or not but I always smile internally when I hear that phrase. The strategy is always to make more money. Sooner, later, regularly, in lump sums but always to make more of the stuff. 

I agree wholeheartedly with everything else.

I wonder if a provider managed to supply a parameterised fund template whether that would work. i.e. Your investment would go into the equities managed by that fund but you could override the allocations. e.g. a "global cap index fund" bought with parameters 0, 0, 0, 0, 0, 0, 0 would mean nothing in the top 7 and that money to be allocated in proportion to the rest of the funds stocks. Very naïve I'm sure... 

Really?  Only if you are dealing with small amounts which dont materially affect your quality of life.  At some point you are likely to find that losing half your money brings more unhappiness than can be matched by the joy from doubling it.  Then it is rational to spend more effort on retaining what you already have than trying to get more.

InvesterJones

Yeah I'd say the urge to just make as much money as possible is something that only people who haven't actually got a plan aim for. Once you start planning you can assess how much you actually need to make to meet your goals and can then chose a strategy that meets that at the lowest risk. 

Cus

michael1234 said:

Cus said:

Yes agree, my wording is not what I wanted to purvey, and I am not suggesting people should be actively trying to beat markets as as a benchmark.

I think it would be better if I had said that people assume that there is no better option than to invest based on market caps as the default, and that to think about adjusting based on other factors is pointless as 'you can't beat the market, active managers can't etc etc' so you are only doing yourself a disservice, whereas it's much more nuanced that this, and doesn't take into account many other factors, including designing a personal investment strategy based on your own factors and needs.

I'm not sure if you're an FA or not but I always smile internally when I hear that phrase. The strategy is always to make more money. Sooner, later, regularly, in lump sums but always to make more of the stuff. 

I agree wholeheartedly with everything else.

I wonder if a provider managed to supply a parameterised fund template whether that would work. i.e. Your investment would go into the equities managed by that fund but you could override the allocations. e.g. a "global cap index fund" bought with parameters 0, 0, 0, 0, 0, 0, 0 would mean nothing in the top 7 and that money to be allocated in proportion to the rest of the funds stocks. Very naïve I'm sure... 

Well, I'm certainly not an FA (or anything similar) but I think I know why you said it. There is a trend to default assume that an IFA investment plan cannot be better than a DIY investment plan that the internet movement would suggest (e.g. market cap index).

Imo, the IFA plan would take into account the needs and demands of the individual and design accordingly.  A lot of people don't do this as they don't trust them or have been persuaded that they are not worth it. I don't agree that they should then continually take say 0.5% of a pot, and that adds to the idea that they are not to be relied on.  In fact, that i feel that puts people off as their advice doesn't justify that fee, and it's easier to just go with the internet opinion flow and do what the movement says, (don't question it, see the fund managers who can't beat the index (which to me is misleading), stock pickers etc, you can't do better, easier to just tell yourself you are doing the right thing, stick to market cap trackers)

I honestly worry about that trend.  For many people this is better than sticking it in a bank account, but I wonder how much distortion this is causing.  I cannot work out why one would happily buy a mag7 as a large part of a market cap index investment that never had paid a dividend but thats another thread.

I like your investment idea for a provider, but either it not worth there while, or the regulatory burden makes it pointless