How can 1 US company be worth more than the top 350 UK companies?

GeoffTF

SneakySpectator said:

GeoffTF said:

InvesterJones said:

SneakySpectator said:

GeoffTF said:

SneakySpectator said:

The issue isn't how stable the deep rooted the companies are, the issue is how much my money will go up if I invest in them. You will never get tech level returns on oil & gas, mining, insurance, banking etc because these are essentially zero growth stocks.

If I wanted a 4% return per year investment I'd just put it into government bonds.

UK companies tend to pay out big dividends. That comes off the capital growth. If you get 4% dividends with inflationary growth of dividends and capital, you are a winner with 7% total return. There is the alternative of tech stocks with sky high valuations, but they do not have to disappoint much to lose you money. There is also the possibility that Trump will levy high taxes on your US investments, or worse:

https://www.youtube.com/watch?v=2S7gWNxzlvE

I do not know what will happen, so I spread my risk.

I'll watch the video in a bit but take the https://www.ishares.com/uk/professional/en/products/251807/ishares-uk-dividend-ucits-etf index as an example. The dividend yield on that fund is 5.04%. Now subtract the average annual inflation rate of 2.8% and you're left with 2.24% real return per year. 

In what universe is this considered an acceptable return for investing in the stock market? If I'm going to risk my money in the stock market I either want a 5 % - 7% real return per year or a 5% - 7% real dividend yield per year. 

FTSE all share (ie 350) funds returned ~9.3% the last year (eg. https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-uk-all-share-index-unit-trust-gbp-acc/overview), so they seem to match your 'acceptable return' requirements, if the performance continues.

ISF (FTSE 100) returned an annualised 10.22% over the last 5 years:

https://www.fidelity.co.uk/factsheet-data/factsheet/IE00B810Q511-vanguard-funds-plc/performance

IUKD (UK high yield warts and all) returned an annualised 11.53%:

https://www.fidelity.co.uk/factsheet-data/factsheet/IE00B0M63060-ishares/performance

IIRC iShares changed the original methodology for IUKD after it suffered a spectacular meltdown. Investing in a small market has its risks. Investing in a subset of that market is riskier still, but can pay off sometimes.

The UK market has delivered handsome returns over the last five years. There was miserable period before that, and better days prior to that.

I've always been told we shouldn't base our expectations off of short term history, so using the last 5% as some kind of benchmark to suggest that a UK dividend fund or FTSE100 fund is holding it's weight is a bit deceptive.

The London market has outperformed the US market over long periods of time and it has been outperformed by the US market for long periods of time. If the market thought that the UK market would do worse than the US market going forward, the UK market would be priced even cheaper relative to the US market than it is. As I have said, I do not know which market will do better going forward. That is why I hold both. I did buy the FTSE 100 five years ago, and it has not done badly for me so far. Nonetheless, I have a lot more money invested in the US than in the UK. That is because it is a bigger market, not because I think it will do better.

SneakySpectator

thunderroad88 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

IanManc said:

Pathfinder000 said:

........ we are a small country, without any real money and a slowly sinking economy .......  

SneakySpectator said:
........ but yeah it's pretty dead on the island nowadays ........

The UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

However, it has a sizeable portion of its population which glibly talks the UK down contrary to the evidence.

The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc. 

Just for fun I removed banks, oil & gas, insurance, mining, and tobacco from the FTSE 350 and the market cap drops by 45%. So nearly half of the market cap is made up from those relic companies.

I removed those same sectors from the S&P500 and the market cap drops by just 26%. 

The contrast is undeniable. I don't really mind if the UK stock market is fuelled by high profit no growth companies, but I better be getting a 10% dividend yield as a result.

You cannot think of any companies operating in Britain and for which people work that aren't listed on the LSE?

Of course there are but that same logic can be applied to how many US company operating in the states that aren't listed.

The point is the ones that are listed, are massively dragging down the index with their 0 growth dead end sectors.

So the things you value are happening in Britain but in this thread you've be saying* that 'almost nothing but dinosaur' things happen in Britain... Try some Socratic thinking; can you think of exceptions that you can use to modify your statement?

What are you trying to achieve in this thread? You don't think banking and insurance et al will exist in 100 years' time? If it's an attempt to try to decide where to invest I thought you'd settled that for yourself in another recent thread: 100% in a US S&P500 tracker.

*"The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc."

The issue isn't how stable the deep rooted the companies are, the issue is how much my money will go up if I invest in them. You will never get tech level returns on oil & gas, mining, insurance, banking etc because these are essentially zero growth stocks.

If I wanted a 4% return per year investment I'd just put it into government bonds.

InvesterJones said:

SneakySpectator said:

IanManc said:

Pathfinder000 said:

........ we are a small country, without any real money and a slowly sinking economy .......  

SneakySpectator said:
........ but yeah it's pretty dead on the island nowadays ........

The UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

However, it has a sizeable portion of its population which glibly talks the UK down contrary to the evidence.

The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc. 

Just for fun I removed banks, oil & gas, insurance, mining, and tobacco from the FTSE 350 and the market cap drops by 45%. So nearly half of the market cap is made up from those relic companies.

Despite being corrected several times, you're still confusing the economy with stock exchanges.

I'm not, but investors make their money when the index goes up so if the companies are not in the index it's irrelevant.

In the past year or so you'd have done really well in British and continental European banks and insurers. Don't forget to add back dividends when looking at their performance.

I thought you were an all of market tracker investor so why are you trying to pick? Buy an all world tracker or stick with your preferred S&P500 tracker.

I'm still 100% in VWRP I'm not going to swap and change anything, I'm just having a discussion to see other people's perspectives and opinions. 

Why? You said you genuinely believe that 100% global index tracker is right, so why do you care what anyone else’s perspective is? You seem to me to just ask the same question, albeit you phrase it slightly differently, over and over again, are you seeking reassurance? Ok then, VWRP is a good fund…leave it be, you’re relatively young, just go live your life. Come back in 20 years when you have some real decisions to make…

A bit of both I guess. Yes I want reassurances that the decision I've made is the correct one, but I also enjoy talking to other people about what they think. Even though I won't change the fund I'm investing in, I still like to hear the thoughts of others. Maybe that's confusing to some but it's quite normal for me.

GeoffTF

SneakySpectator said:

Here's the bigger 17 picture of IUKD

You seem to be obsessed with IUKD. It bought lots of financial companies that had high dividend yields because they were risky. Lots of those companies went bust in the Great Financial Crisis of 2008. As I have said, I believe iShares has changed the stock selection algorithm, but I would not buy the fund nonetheless. I use market weighted trackers.

Hoenir

SneakySpectator said:

thunderroad88 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

wmb194 said:

SneakySpectator said:

IanManc said:

Pathfinder000 said:

........ we are a small country, without any real money and a slowly sinking economy .......  

SneakySpectator said:
........ but yeah it's pretty dead on the island nowadays ........

The UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

However, it has a sizeable portion of its population which glibly talks the UK down contrary to the evidence.

The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc. 

Just for fun I removed banks, oil & gas, insurance, mining, and tobacco from the FTSE 350 and the market cap drops by 45%. So nearly half of the market cap is made up from those relic companies.

I removed those same sectors from the S&P500 and the market cap drops by just 26%. 

The contrast is undeniable. I don't really mind if the UK stock market is fuelled by high profit no growth companies, but I better be getting a 10% dividend yield as a result.

You cannot think of any companies operating in Britain and for which people work that aren't listed on the LSE?

Of course there are but that same logic can be applied to how many US company operating in the states that aren't listed.

The point is the ones that are listed, are massively dragging down the index with their 0 growth dead end sectors.

So the things you value are happening in Britain but in this thread you've be saying* that 'almost nothing but dinosaur' things happen in Britain... Try some Socratic thinking; can you think of exceptions that you can use to modify your statement?

What are you trying to achieve in this thread? You don't think banking and insurance et al will exist in 100 years' time? If it's an attempt to try to decide where to invest I thought you'd settled that for yourself in another recent thread: 100% in a US S&P500 tracker.

*"The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc."

The issue isn't how stable the deep rooted the companies are, the issue is how much my money will go up if I invest in them. You will never get tech level returns on oil & gas, mining, insurance, banking etc because these are essentially zero growth stocks.

If I wanted a 4% return per year investment I'd just put it into government bonds.

InvesterJones said:

SneakySpectator said:

IanManc said:

Pathfinder000 said:

........ we are a small country, without any real money and a slowly sinking economy .......  

SneakySpectator said:
........ but yeah it's pretty dead on the island nowadays ........

The UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

However, it has a sizeable portion of its population which glibly talks the UK down contrary to the evidence.

The problem is the companies that make up the overwhelming bulk of our "large economy" are in no growth sectors. Banks, oil, mining etc. 

Just for fun I removed banks, oil & gas, insurance, mining, and tobacco from the FTSE 350 and the market cap drops by 45%. So nearly half of the market cap is made up from those relic companies.

Despite being corrected several times, you're still confusing the economy with stock exchanges.

I'm not, but investors make their money when the index goes up so if the companies are not in the index it's irrelevant.

In the past year or so you'd have done really well in British and continental European banks and insurers. Don't forget to add back dividends when looking at their performance.

I thought you were an all of market tracker investor so why are you trying to pick? Buy an all world tracker or stick with your preferred S&P500 tracker.

I'm still 100% in VWRP I'm not going to swap and change anything, I'm just having a discussion to see other people's perspectives and opinions. 

Why? You said you genuinely believe that 100% global index tracker is right, so why do you care what anyone else’s perspective is? You seem to me to just ask the same question, albeit you phrase it slightly differently, over and over again, are you seeking reassurance? Ok then, VWRP is a good fund…leave it be, you’re relatively young, just go live your life. Come back in 20 years when you have some real decisions to make…

A bit of both I guess. Yes I want reassurances that the decision I've made is the correct one, but I also enjoy talking to other people about what they think. Even though I won't change the fund I'm investing in, I still like to hear the thoughts of others. Maybe that's confusing to some but it's quite normal for me.

I'd suggest you start at your local library. Consume whatever business books etc are on the shelves, make the most of the free quality newspapers and magazines that available. As you've opened a Pandora's Box. There's no neat 100 page guide of what to expect over your lifetime investment journey. Things happened in the past for a reason. Today is shaped by history. Tomorrow will be shaped by events happening today. Like an iceberg. 10% are visible. 90% lies beneath the water line. Only when something hits the iceberg can the extent of the damage be ascertained. The line between financial solvency and insolvency always ever being wafer thin. 

SneakySpectator

GeoffTF said:

SneakySpectator said:

Here's the bigger 17 picture of IUKD

You seem to be obsessed with IUKD. It bought lots of financial companies that had high dividend yields because they were risky. Lots of those companies went bust in the Great Financial Crisis of 2008. As I have said, I believe iShares has changed the stock selection algorithm, but I would not buy the fund nonetheless. I use market weighted trackers.

I'm not obsessed with anything, it was the fund that one of the users here mentioned at returning 11% per year or whatever over the last 5 years and I was just highlighting that 5 years of data doesn't mean much.

GeoffTF

SneakySpectator said:

GeoffTF said:

SneakySpectator said:

Here's the bigger 17 picture of IUKD

You seem to be obsessed with IUKD. It bought lots of financial companies that had high dividend yields because they were risky. Lots of those companies went bust in the Great Financial Crisis of 2008. As I have said, I believe iShares has changed the stock selection algorithm, but I would not buy the fund nonetheless. I use market weighted trackers.

I'm not obsessed with anything, it was the fund that one of the users here mentioned at returning 11% per year or whatever over the last 5 years and I was just highlighting that 5 years of data doesn't mean much.

It does if you were holding the fund. It would also have mattered if you had been holding that fund when it was stuffed with the riskiest financials in a financial crash. As I have repeatedly said, it is a daft fund to buy. I said the same on the Motley Fool when it was first launched with marketing based on back testing. Others were starry eyed about the dividend yield. I was soon proved right. Just in case anyone thinks that buying IUKD is passive investing:

https://www.youtube.com/watch?v=RPYJFv5aPc8

SneakySpectator

GeoffTF said:

SneakySpectator said:

GeoffTF said:

SneakySpectator said:

Here's the bigger 17 picture of IUKD

You seem to be obsessed with IUKD. It bought lots of financial companies that had high dividend yields because they were risky. Lots of those companies went bust in the Great Financial Crisis of 2008. As I have said, I believe iShares has changed the stock selection algorithm, but I would not buy the fund nonetheless. I use market weighted trackers.

I'm not obsessed with anything, it was the fund that one of the users here mentioned at returning 11% per year or whatever over the last 5 years and I was just highlighting that 5 years of data doesn't mean much.

It does if you were holding the fund. It would also have mattered if you had been holding that fund when it was stuffed with the riskiest financials in a financial crash. As I have repeatedly said, it is a daft fund to buy. I said the same on the Motley Fool when it was first launched with marketing based on back testing. Others were starry eyed about the dividend yield. I was soon proved right. Just in case anyone thinks that buying IUKD is passive investing:

https://www.youtube.com/watch?v=RPYJFv5aPc8

Cool video thanks for sharing. So I have to ask, the passive index fund I'm in is VWRP https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-accumulating/overview Now I'm wondering if it is a genuine passive index fund because for example the 10th holding in that fund is Eli Lilly but Eli Lilly's market cap is actually 15th in the world. 

Visa is 14th in the world and is weighted at position 14 so that's accurate, but bank of America is weighted at 30th but its market cap is actually position 26 in the world. 

It is only small differences so it's still pretty accurate although things start getting a bit skew whiff the further down the list you go. VWRP weighs Compass Group at 267th position but its market cap is 351st. 

What are you thoughts about this? Are there even any actual really accurate passive global index trackers?

GeoffTF

SneakySpectator said:

I'm wondering if it is a genuine passive index fund because for example the 10th holding in that fund is Eli Lilly but Eli Lilly's market cap is actually 15th in the world. 

Visa is 14th in the world and is weighted at position 14 so that's accurate, but bank of America is weighted at 30th but its market cap is actually position 26 in the world. 

It is only small differences so it's still pretty accurate although things start getting a bit skew whiff the further down the list you go. VWRP weighs Compass Group at 267th position but its market cap is 351st. 

What are you thoughts about this? Are there even any actual really accurate passive global index trackers?

Prices fluctuate.The Factsheet says that the FTSE All-World Index is a market-capitalisation weighted index. Vanguard's data is dated at the end of the previous month, but is not published until the middle of the current month. It is always at least two weeks out of date. What are you comparing Vanguard's numbers against, and how up to date is it?

masonic

SneakySpectator said:

GeoffTF said:

SneakySpectator said:

GeoffTF said:

SneakySpectator said:

Here's the bigger 17 picture of IUKD

You seem to be obsessed with IUKD. It bought lots of financial companies that had high dividend yields because they were risky. Lots of those companies went bust in the Great Financial Crisis of 2008. As I have said, I believe iShares has changed the stock selection algorithm, but I would not buy the fund nonetheless. I use market weighted trackers.

I'm not obsessed with anything, it was the fund that one of the users here mentioned at returning 11% per year or whatever over the last 5 years and I was just highlighting that 5 years of data doesn't mean much.

It does if you were holding the fund. It would also have mattered if you had been holding that fund when it was stuffed with the riskiest financials in a financial crash. As I have repeatedly said, it is a daft fund to buy. I said the same on the Motley Fool when it was first launched with marketing based on back testing. Others were starry eyed about the dividend yield. I was soon proved right. Just in case anyone thinks that buying IUKD is passive investing:

https://www.youtube.com/watch?v=RPYJFv5aPc8

Cool video thanks for sharing. So I have to ask, the passive index fund I'm in is VWRP https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-accumulating/overview Now I'm wondering if it is a genuine passive index fund because for example the 10th holding in that fund is Eli Lilly but Eli Lilly's market cap is actually 15th in the world. 

Visa is 14th in the world and is weighted at position 14 so that's accurate, but bank of America is weighted at 30th but its market cap is actually position 26 in the world. 

It is only small differences so it's still pretty accurate although things start getting a bit skew whiff the further down the list you go. VWRP weighs Compass Group at 267th position but its market cap is 351st. 

What are you thoughts about this? Are there even any actual really accurate passive global index trackers?

There are various global indices. They all have their filters and methods of determining market cap. Most common is a free-float adjustment to exclude share capital that is unavailable to trade, such as stakes owned by insiders and governments. S&P500 (and 400/600) famously has a profitability filter, so getting US exposure through these will exclude some companies in the wider market. MSCI and FTSE don't agree on what is an emerging market. Then there are providers like Solactive that undercuts the big boys on cost but imparts some ethical filters on their flagship index.

These subtleties make very little difference to the overall outcome. The main determinants are broader asset allocation and costs.

IanManc

GeoffTF said:

IanManc said:

Pathfinder000 said:

........ we are a small country, without any real money and a slowly sinking economy .......  

SneakySpectator said:
........ but yeah it's pretty dead on the island nowadays ........

The UK is the 6th largest economy in the world, and the 9th biggest manufacturer in the world.

However, it has a sizeable portion of its population which glibly talks the UK down contrary to the evidence.

The UK was 21st for median equivalised household disposable income in 2021:

https://en.wikipedia.org/wiki/Disposable_household_and_per_capita_income

The UK median equivalised household disposable income will be much less if we exclude London. We have nothing to be complacent about.

No one was being complacent, so that's a straw man.

Disposable household income is a different issue, as is inequality. Many people in this country, and clearly a number of regions, do not get to share in, or see the benefits of, the wealth of the country.

I was simply responding to the demonstrable untruths that I quoted.