Rebalancing

20122013

Eyeful said:

...... 3. The Global Index Tracker is for
(a) Those who can take higher risk and have a long time frame to retirement, (lets say 30 to 40 years).
(b) Who know what they are doing when constructing a more complex investment portfolio.
Your previous post suggest to me neither of the above apply to you.
This is why I suggest the "Simply Investing" approach.'

I am interested to know why say '30 to 40 years'?

Eyeful

20122013 said:

Eyeful said:

...... 3. The Global Index Tracker is for
(a) Those who can take higher risk and have a long time frame to retirement, (lets say 30 to 40 years).
(b) Who know what they are doing when constructing a more complex investment portfolio.
Your previous post suggest to me neither of the above apply to you.
This is why I suggest the "Simply Investing" approach.'

I am interested to know why say '30 to 40 years'?

Investing in a Major Global Index Fund can be beneficial over 10 years.
Investing over 30 to 40 years has some advantages:

1. "Time in the market not market timing". The compounding of returns should be greater.
2.The younger investor can afford to take on more risk, potentially leading to higher returns
3. Smoothing of market volatility should be better.
4. The probability of positive returns should be much better.

5. A Global Index Tracker will have about 60% in the USA. 
Last time I looked, 3 Market Valuation Models for this market are shown below:
Price to Earnings Ratio (PER): Strongly Overvalued
Buffett Indicator: Strongly Overvalued
S & P 500 Mean Reversion: Strongly Overvalued 

If that market falls greatly so will the Global Index tracker.
Someone with a 30 to 40 year timeframe will most likely be OK. 
If your time frame is 10 years, who knows how you will do.  

eskbanker

But is there any reliable statistical analysis that suggests 30-40 years is materially less risky than 10 years?

The oft-cited Nutmeg analysis, based on MSCI World Equity Mid and MSCI Large Cap Total Return in GBP, 1 January 1972- July 2022, flatlines at zero loss-making periods of 13+ years:


https://www.nutmeg.com/nutmegonomics/increasing-your-chances-of-positive-portfolio-returns-the-facts-about-long-term-investing

masonic

When you're searching within the bottom 5% of outcomes for a failure, you are already asking for more certainty than a backtest can provide. A 95% historical probability of success ought to be good enough given there is some risk that can never be eliminated. Based on other data (back to 1900), a positive real return is achieved in almost 90% of 10 year periods for a globally diversified 100% equities portfolio.

20122013

Appreciate all the posts which is helping me to think more with my basic understanding which is:

- Passive index trackers all world / global fund  - well diversified,  low cost very voliatile and can have an average return of around 5% after inflation, could take at least 10 + years  - no guarantee or I can even make a loss (and I will only put the amount I can afford to lose)

Hence, I want to hold more than one fund so when I need to sell I have more to choose from. But I am  not quiet sure how to achieve this - as the tracker is well diversified as have been instructed by my elders no need to invest in gold (personal reasons).  So I need to think of an alternative to gold as a second fund  5%?

Back to the Index tracker, I am looking at https://monevator.com/low-cost-index-trackers/ 

(there seem to be more categories to choose from)

I need to focus on 'as diverse as possible' as I do NOT know anything about the future,

so will choose from the Global equity – developed world and emerging markets (All-World) :

 

SPDR MSCI ACWI ETF (ACWI) TCO 0.12% (OCF 0.12%, Transaction 0%)

or

HSBC FTSE All-World Index Fund C (GB00BMJJJF91) TCO 0.15% (OCF 0.13%, Transaction 0.02%)
 

I was looking into HSBC FTSE All World Index Class C - ACC (as it had the lowest fee) but I was incorrect. as it seems SDPR has the lowest fee.

If investors should be keeping their fee as low as possible, is there any reason why the HSBC fund seem to get more mentioned as the fund to invest in as lowest fee?

masonic

20122013 said:

If investors should be keeping their fee as low as possible, is there any reason why the HSBC fund seem to get more mentioned as the fund to invest in as lowest fee?

There's been a fair bit of competition over fees of late. The HSBC fund was the cheapest all-world tracker until quite recently. The SPDR fund seems to have reduced its fee very recently to beat the lot - looks like it went in at the top of Monevator's list in November 2024. It is a fund that's been around for a while so it already has £3bn in assets, an Ireland domiciled ETF that has physical replication, so looks good for anyone choosing new investments today. I wouldn't switch just for a 0.03% reduction in fee though.

20122013

Yes,  about not switching for the reduced fee.   Out of interest why did you say 'looks good for anyone choosing new investments today'?

It will suit my needs to invest in more than one fund even if it seems they are tracking the same thing

70% HSBC FTSE All-World Index Fund C (GB00BMJJJF91) TCO 0.15% (OCF 0.13%, Transaction 0.02%)

20% Xtrackers MSCI World ex-USA ETF (XMWX) TCO 0.16% (OCF 0.15%, Transaction 0.01%)

10 %  to a small cap fund which is not an ETF. I was looking a this but it is an ETF: UBS (Irl) ETF – MSCI World Small Cap Socially Responsible (WSCR) TCO 0.24% (OCF 0.23%, Transaction 0.01%)

20122013

masonic said:

To me the gold price looks very high. But I thought it was high a year ago before it went up another 35%. People tend to hold gold as a store of value and inflation hedge, as over centuries it is unlikely to lose spending power. However, it can swing from very overvalued to very undervalued, or remain depressed for long periods of time. If you bought at the 1980 peak, you'd have been waiting until 2006 just to break even in nominal terms. How it will perform over the next 10-15 years is anyone's guess. That is one reason it is recommended to keep the allocation fairly low.

I don't know why you'd want to get your bonds exposure via a multi-asset fund and then buy a separate equities tracker. If you would be using the bonds to avoid selling equities at a loss during a crash, then it would make sense to keep them separate. The argument for a multi-asset fund is simplicity, but adding an additional overlapping equity fund negates that.

I have just seen this post - appreciate this.

20122013

I am rebalancing my S&S ISA and my Scottish Widow pension. My S&S ISA is 30% more than my pension both will be left investing for at least 10 years.

My question is, as I am getting a global index tracker am thinking I should get something different another type of funds / gilt / multi asset funds or something similar to the Vanguard 80/20  or something else to have something to fall back on, As the pension will give me 2 year spend so it has not been included in my future income (see it as bonus)   As such does it matter with fund goes where S&S ISA and pension does it matters which investment goes where?