Maximum to hold in a single fund?

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I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

wmb194

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I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Aged

wmb194 said:

Aged said:

I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Hi, thanks for responding. Not meaning to be rude, but I'm not asking what other people do, I'm asking for a definitive answer to this question. The reason I'm asking this now is that I'm having difficulty finding similar funds to the one I'm already invested in (Vanguard FTSE Developed World Ex-UK Equity Index Fund) and yes, my 'sleep level' is exactly the issue here!

poseidon1

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wmb194 said:

Aged said:

I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Hi, thanks for responding. Not meaning to be rude, but I'm not asking what other people do, I'm asking for a definitive answer to this question. The reason I'm asking this now is that I'm having difficulty finding similar funds to the one I'm already invested in (Vanguard FTSE Developed World Ex-UK Equity Index Fund) and yes, my 'sleep level' is exactly the issue here!

There can be no definitive answer to that.

By definition every single investor will be different  and have their own view whether they it feel necessary to have a diverse number of funds tracking the same index (or near equivalent) , or simply stick to what they perceive to be a  single trusted provider.

Others may come up with ideas for a near equivalent to the fund you hold, but beyond that they cannot give objective advice of how many they feel should be held for your reassurance. Only you can subjectively determine what you will be personally comfortably with. As the saying goes 'one man's meat is another man's poison'.

Eyeful

1. You might want  to consider these funds 
Legal & General Global Equity (ex UK) Index Fund
BlackRock World ex UK Equity Index Fund
Invesco Global ex UK Enhanced Index Fund

2. Your question is like "How long is a bit of string". and you may not like the answer.
We are not you and we all have different risk tolerance. 
Your investments should let you sleep at night and not cause you worry.

3  Investments that do cause you worry or not sleep at night mean you are investing above your risk tolerance (which only you will know).

4. You need to adjust your investment to a level you are comfortable with (again only you will know what that is)

eskbanker

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wmb194 said:

Aged said:

I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Hi, thanks for responding. Not meaning to be rude, but I'm not asking what other people do, I'm asking for a definitive answer to this question. The reason I'm asking this now is that I'm having difficulty finding similar funds to the one I'm already invested in (Vanguard FTSE Developed World Ex-UK Equity Index Fund) and yes, my 'sleep level' is exactly the issue here!

Perhaps worth clarifying what you do perceive the risk to be - obviously if you're looking for similar funds to track the same index that you're already invested in, then the underlying assets will be the same, or close to it, so your eggs would still ultimately be in the same baskets, and that would presumably imply that you see the risk in terms of fund manager viability rather than the funds themselves?

As above, there isn't a definitive answer to your question, but would you perhaps feel more secure if no more than x% of your portfolio is held by any individual fund manager?  Clearly some fund managers have substantially higher assets under management than others, so they're not all equal, and some will be more profitable than others, so you could refine a methodology to prioritise larger and more sustainable companies?

Or you could choose to hold no more than y% out of any given fund, so, for example, that Vanguard ex-UK one is about £18bn, so even if you held, say, £180K in it, you'd still only have a 0.001% share of it, whereas other funds will be significantly smaller (or larger)....

masonic

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wmb194 said:

Aged said:

I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Hi, thanks for responding. Not meaning to be rude, but I'm not asking what other people do, I'm asking for a definitive answer to this question. The reason I'm asking this now is that I'm having difficulty finding similar funds to the one I'm already invested in (Vanguard FTSE Developed World Ex-UK Equity Index Fund) and yes, my 'sleep level' is exactly the issue here!

There are several funds that are similar to Vanguard FTSE Developed World Ex-UK Equity Index Fund you could consider:

• L&G International Index Trust I Fund
• Aviva International Index Tracking SC2 Fund
• iShares Developed World Index Fund D (contains ~3.5% UK equities)
• UBS Core MSCI World ETF (contains ~3.5% UK equities)

Or you could just split it into one or more US, Europe, Developed Asia and Japan fund, where there are even more choices.

If you are just trying to avoid eggs in one basket, then you'd hold these with different investment platforms. So for example if you held the Vanguard fund on Vanguard's own platform, then you could hold the L&G fund at AJ Bell and the Aviva fund at Hargreaves Lansdown etc, remembering that as you increase the number of counterparties involved in managing your assets, you increase the likelihood that if an asset manager fails at some point you'll be exposed. This is especially true if you are forced to compromise on quality when spreading your assets around.

There isn't any sort of definitive answer to this question, except that there is no need to do any of this at all if you select one of the big asset managers with trillions under management. In this case holding a seven figure sum in one place would not be unreasonable. Whereas if you opt for one of the start-up trading platforms like Lightyear or Robinhood, the risk of failure is considerably greater and in that case I wouldn't hold more than the FSCS compensation limit in one of their accounts.

GeoffTF

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wmb194 said:

Aged said:

I tend to be a bit nervous about having 'too much' in one fund and would prefer to split an investment between similar funds to spread the (what I perceive to be) risk over different fund providers. Is there a rule of thumb for this ie a maximum that it's recommended to hold in one fund? Please be kind - I'm super cautious by nature and I've had some pretty condescending comments when I've mentioned this before, but I'd like to know the answer to this serious question please.

If it makes you feel anxious then split your investment between multiple funds/fund providers in amounts you're comfortable with and don't concern yourself with what other people do. In regards to managing risk, there's an old saying in investing about finding your, 'sleep level.'

Hi, thanks for responding. Not meaning to be rude, but I'm not asking what other people do, I'm asking for a definitive answer to this question. The reason I'm asking this now is that I'm having difficulty finding similar funds to the one I'm already invested in (Vanguard FTSE Developed World Ex-UK Equity Index Fund) and yes, my 'sleep level' is exactly the issue here!

I have about a third of my portfolio invested in that fund, and about two thirds invested with Vanguard. I do not worry about it.

Albermarle

It could be argued that if Vanguard went bust, then the global financial system must have been collapsing, so probably having investments with Blackrock, L&G etc would not be much help. 

gm0

As others have pointed out this is a subjecitve threshold - "spread out enough". 

2 gets most of the benefit of hedging "unexpected" risk impact. 50:50

Once multiple platforms are in use anyway perhaps as a hedge against other failures and service interruptions.  Or for any other reasons of history and convenience - fund range being the most common where there is an existing restricted range pension - even if it offers drawdown.

Then perhaps multiple funds of core holding / common type could be used instead of one on each platform.  

Chosen from the majors on each platform but perhaps also tax wrapper hedged in ETF and fund formats.  To suit the fee structures of particular platforms.  Which introduces more "risk impact" hedging, but exposes you to some new risks on new legal structures perhaps not previously used. (A lot of pension schemes especially older are funds not ETFs).

So - as example.

L&G 
Blackrock iShares, 
Vanguard, 
HSBC.

or others you like better or that "happen" to exist on a scheme you have and are otherwise competitive.

Multi-assets can of course be woven in.  If the other asset classes in them are wanted.  And the fund mandate suits you.  There is often ~40% of global developed equities mixed in those.

For trackers - no expectation of any material real change in investment outcome from "which tracker" it is held in. In normal conditions.  Tracking error - should go away over time.  If there is a difference outside the noise floor (trustnet/morningstar).  Then something is off about real vs declared drag etc. or more likely - the funds are not actually - quite the same.  There is a difference.  Classically for multi-asset UK at weight <4% and UK home market at 10% is one such example.  FX and dividend treatment can be another and vary with wrapper, jurisdiction - it is one of the places fund management can still take a little less transparently declared drink.

That two platforms with multi-fund/etf model on each would get you up from 2 - to 6-8 without scrabbling around for odd little funds.  If you want that.

But much above that you are generating work for yourself and adding complexity faster than you are adding any further risk mitigation.  Subjectively.  This is controllable (via the extent of impact of a single organisation having a risk manifesting).  Yet it's not worth chasing too far down the rabbit hole. (Subjective).  

And some would say "more than 1" is unnecessary.  The bigger problems than that if Vanguard goes wonky argument.

Do not sweat it.  You will also find - I think - that the "how many funds" answer drops out of the overall design once you consider the desired portfolio, and try to build that out on the minimum number of platforms you like (cost, digital, existing scheme etc).   Not all funds/etfs and variants, acc,inc are available on all platforms.  So a level of compromise creeps in as you finish up.

Example . In my version of this.  I use 3 (global dev equities funds) from 2 providers - existing scheme provider and one new one I chose.  Two are insured "occupational pension type" funds so 100% FSCS.  And one is in a SIPP (uninsured/85k and UK custody protection arrangements). That one is an ETF not a fund which lowers platform cost.  The ETF on LSE traded in sterling. But base currency is USD.  UKFRS.  

All sterling and unhedged for FX.  FX cable GBP/USD.  is arguably the biggest risk still carried beyond the speculative risk of the equities themselves and their mix. I could not address this meaningfully without compromising another objective (cost).  I have hedged equity funds available. to me - existing scheme and SIPP.  I have chosen not to use them so far.

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poseidon1 said:

There can be no definitive answer to that.

By definition every single investor will be different  and have their own view whether they it feel necessary to have a diverse number of funds tracking the same index (or near equivalent) , or simply stick to what they perceive to be a  single trusted provider.

Others may come up with ideas for a near equivalent to the fund you hold, but beyond that they cannot give objective advice of how many they feel should be held for your reassurance. Only you can subjectively determine what you will be personally comfortably with. As the saying goes 'one man's meat is another man's poison'.

Thanks for your helpful input. Some people ridiculed me before when I mentioned this subject. Looks like maybe I'm not so daft after all!