Correct overall allocation

Linton

20122013 said:

dunstonh said:

20122013 said:

dunstonh said:

There are thousands of benchmarks and you can get trackers for money of them. 

You would use trackers to match your chosen benchmark or trackers in individual country/regions that match your chosen benchmark.

Would you mind saying in simpler terms, please?

its multi layed - so I will address each layer.

There are multiple benchmarking firms.  FTSE Russell, MSCI and Bloomberg for example.   Each will have its own methodology.   So, that is your first layer.

Lets pick one of those firms, FTSE Russell.  Here are their 1773 benchmarks (not including custom ones)
https://www.lseg.com/en/ftse-russell/index-resources/factsheets

If you want a global benchmark that follows large cap companies only, you can have that.
If you want one that is weighted by Market capitisaion, you can have that
If you want one that is weighted by GDP or an alternative weighting, you can have that.

You then find a tracker that matches that benchmark.   In some cases, you wont easily find a single global tracker that does.   However, you can use multiple tracker funds.  For example, a tracker fund that tracks FTSE North America (US and Canada), a tracker fund that tracker Developed Europe, another for Developed Asia and another for Japan and Emerging Markets etc.

You mentioned FTSE All World.   That is large cap (so restricted on mid and small cap).  If that is what you are after, then that's easy as there are many funds that can match that (either singularly or individual country/region funds - which is the cheaper way but involves more work)

You mentioned bias in your post.
Market capitalisation has a bias towards US.  That was great in the 10 years prior to 2024 when US was the best market.    However, it was bad thing in the cycle before that as US was one of the worst places to be.

Looking ahead, some feel this could be the point where US equities underperform the RoW.  So a tracker biased to US may not appeal in that scenario. So, an alternative weighted tracker or portfolio of trackers may appeal.

The HSBC fund has a bias to large cap and US.

This is my interpretation : find a benchmark which suits my plan and then find a tracker which matches it as closely as possible ? 

and need to rethink what to do with my FTSE All World,  will wait till it bounces back (could be a long wait)  or I can switch funds

I think you will find if you plot a few graphs that which particular index(es) you use makes very little difference to the long term return.  There are more important things to worry about.

20122013

I already hold a (well diverse but volatile) global index tracker. I would like to invest in different S&S ISA funds/ products (for various reasons) ? My dilemma is that the global tracker is well diverse,  I would love to be able to select small caps, commodities, infrastructure, index linked bonds , gold / in different sectors, industries but as I am not at the level yet .  So the other option I can think of is a ‘multi asset allocator'  or  a different index tracker fund with targeted risk or  something else? will this disturb my global tracker or other options?

masonic

A global index tracker will already cover all investable sectors to some extent. Smaller companies exposure is unlikely to decrease volatility. There is little point buying more of the same. So that would leave bonds of various flavours, gold (if you can swallow the current price). Commodities are another option, although not without its own risks.

Hoenir

20122013 said:

I already hold a (well diverse but volatile) global index tracker.

There's both concentration and geographic risk. In isolation certainly not diverse. 

20122013

What would be the ratio for asset allocation, for my home, cash, equities and anything else?  My plan is to leave the capital and small pension invested for the next 10 years. I am keeping 2 instead of 6 years spending money so I have more to invest, is this thinking realistic? as I have not worked out what to invest in.   how to allocate my money so from year 3 I will have small amount of income from my investment.

kempiejon

20122013 said:

What would be the ratio for asset allocation, for my home, cash, equities and anything else?  My plan is to leave the capital and small pension invested for the next 10 years. I am keeping 2 instead of 6 years spending money so I have more to invest, is this thinking realistic? as I have not worked out what to invest in.   how to allocate my money so from year 3 I will have small amount of income from my investment.

How is your money allocated at the momement? A coule of year's spending seems fair if you're working, where did you get the idea of 6 years from seems too much but that's just for me? An equity portfolio, with a proportion of cash/bonds alongside is a well hackneyed plan you pick your ratio in respect to your attitude to risk.
Other assests to add into that balance might include things like commodities, metals, oil, gas etc - but perhaps your mining shares would cover that, ditto gold but I think it is different because of its hitoric connection with goverments and as a store of wealth. Infrastructure, commercial property, private equity are other themes.
I pick listed companies and have a mix of for income and for growth, a hangover from my pre index times. A global cap wieghted etf is now my usual buy, although I have gold, bonds, fixed interest collected and occasionally added to on whims.
Is your home really part of your investable wealth? Direct ownership has associated costs.
Will you be drawing some income from year 3, can you take income from selling units or do you need natural yield? That could alter choices - not necessarily for the greatsst return.

Eyeful

1. You can make investing as simple or as complicated as you like.
Making it "complicated" does not mean it will do any better than "simple".
Making it complicated does mean you spend more time on it and it may also cost more.

2. You state "I only have some basic information about investing". Which suggest you are new to investing.
So why are you already trying to make it more complex.
As you plan to stay invested for 10 years, I suggest you just invest in either:
(a) Low cost passive Global World Tracker Fund or ETF (Which you already have) 
(b) Low cost Global Multi Asset Fund, with a share/bond split or risk level you are comfortable with.
Then relax and do something you like or expand your knowledge of investing. 

3. The following may be of interest or help to you.
Watch on YouTube:
https://meaningfulmoney.tv/2022/09/26/how-much-investment-risk-should-i-take/?sfw=pass1745234774
https://www.kroijer.com/
Vanguard Lifestrategy Funds Explained | The only fund you will ever need? (Investing for beginners). By James Shack.

4. Read:

https://monevator.com/best-global-tracker-funds/

https://monevator.com/passive-fund-of-funds-the-rivals/

https://monevator.com/investment-portfolio-examples/

https://www.justetf.com/en/news/etf/msci-vs-ftse-which-etf-provider-is-the-best-index-provider.html

20122013

kempiejon said:

20122013 said:

What would be the ratio for asset allocation, for my home, cash, equities and anything else?  My plan is to leave the capital and small pension invested for the next 10 years. I am keeping 2 instead of 6 years spending money so I have more to invest, is this thinking realistic? as I have not worked out what to invest in.   how to allocate my money so from year 3 I will have small amount of income from my investment.

How is your money allocated at the momement? A coule of year's spending seems fair if you're working, where did you get the idea of 6 years from seems too much but that's just for me? An equity portfolio, with a proportion of cash/bonds alongside is a well hackneyed plan you pick your ratio in respect to your attitude to risk.
Other assests to add into that balance might include things like commodities, metals, oil, gas etc - but perhaps your mining shares would cover that, ditto gold but I think it is different because of its hitoric connection with goverments and as a store of wealth. Infrastructure, commercial property, private equity are other themes.
I pick listed companies and have a mix of for income and for growth, a hangover from my pre index times. A global cap wieghted etf is now my usual buy, although I have gold, bonds, fixed interest collected and occasionally added to on whims.
Is your home really part of your investable wealth? Direct ownership has associated costs.
Will you be drawing some income from year 3, can you take income from selling units or do you need natural yield? That could alter choices - not necessarily for the greatsst return.

I have small small amount of income from bank interests, hence I was putting aside 6 years of spending money but have changed it to 2 years.

About my equity portfolio, at the moment it is all in one global index tracker, and may also be switching all my personal pension funds  to another global index tracker, too. Hence, I wanted to find out how to balance assets with 10 years to invest without accessing them.

Is there any reason why you have chosen etf  ? As I am only just started to DIY in OEIC 

My home will be sold towards the end of my life / when I run out of funds etc, I would be interested to know what you mean by  direct home ownership has associated costs?

kempiejon

@20122013
I picked an ETF because I already held shares and the charging structure with my broker is higher for OEICs than etfs.
Owning a home has the costs of mortgage until settled and even then there's upkeep, insurnace, repair etc. Although it has a value I'd exclude it from investment total because it's a home not an investment  . Property investment I see as the 2nd property or via property and land companies via collectives like REITs or investment trusts.
If you have global trackers they do the balancing for you - they should reflect the index they track and reweight as that index changes. When you say you want to know how to balance assets with 10 years to invest did you mean rebalancing among your other investments, keeping asset allocation constant.
We all have to find our own levels of risk and volatility. I hold gold, bonds, gits and cash with equities. I am 80% equities currently, was >90% for most of the last decade. I often see it suggested that similar adjusted returns can be achieved with out the roller coaster risde of all equities. Millennia ago jewish scholars suggest a third each in stocks, gold and real estate. There is a rule fo thumb that the % equities declines as one ages,  A common rule of thumb is the "100 minus age" rule, which suggests subtracting your age from 100 to determine the percentage of your portfolio that should be in equities, with the remainder in bonds.
I'm not convinced.  

20122013

kempiejon said:

@20122013
Owning a home has the costs of mortgage until settled and even then there's upkeep, insurnace, repair etc. Although it has a value I'd exclude it from investment total because it's a home not an investment  . Property investment I see as the 2nd property or via property and land companies via collectives like REITs or investment trusts.

I agree.
Interesting I am thinking of whether to have some physical investment instead of holding in funds etc eg physical gold  instead of a tracker / fund (but the physical form will not be simple to buy and sell and also keep safe.Also, house/ flat - buy to let has less gains but then not sure about funds, I am currrently not looking to invest in these but using them as examples of holding the physical form vs funds

kempiejon said:
If you have global trackers they do the balancing for you - they should reflect the index they track and reweight as that index changes.

Global trackers - I will be leaving it along with my small pension for 10 years to let it grow (as starting over), cannot afford not to have 100% in equity, may consider selling when the price is high, if I need some money (I am training my mind that it is okay that my (bank) balance is decreasing - use it or lose it or someone else will benefit

kempiejon said:

When you say you want to know how to balance assets with 10 years to invest did you mean rebalancing 

among your other investments, keeping asset allocation constant.

I was interested to see whether the people who invest in a global tracker, what else they are invested in. 

I would like to understand whether I need to re-balance my other investments : I have a 'work place' / personal pension, OEIC and some cash, whether it is realistic to have 10% cash and the rest invested, if so how to beating inflation rather than what is the maximum return I can make. 

kempiejon said:

We all have to find our own levels of risk and volatility. I hold gold, bonds, gits and cash with equities. I am 80% equities currently, was >90% for most of the last decade. I often see it suggested that similar adjusted returns can be achieved with out the roller coaster risde of all equities. Millennia ago jewish scholars suggest a third each in stocks, gold and real estate. There is a rule fo thumb that the % equities declines as one ages,  A common rule of thumb is the "100 minus age" rule, which suggests subtracting your age from 100 to determine the percentage of your portfolio that should be in equities, with the remainder in bonds.
I'm not convinced.  

At the moment, I do not understand enough to invest in bond and gilts (I have done some reading )

I am 100% in equity..