US Markets Risk

chiang_mai

Again for clarity: I regard every Pound as important and treat them all the same, with the care that my risk tolerance will allow. I do not regard the money I have invested in markets as a muse or play thing, I care deeply about what happens to it. I therefore do not believe for one moment that I regard my investments with any less respect and care than I do any other asset I own.

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82021140#Comment_82021140

What's not to like? Historic underperformance. An equal weight S&P is essentially an anti-momentum vehicle - as soon as a stock gets up a head of steam it has to be sold.

Maybe pair your S&P with a Russell fund to get some mid/small caps?

Linton

https://forums.moneysavingexpert.com/discussion/comment/82021893#Comment_82021893

If you used a 10 year period starting in 2006 rather than 2016 you would find the Equal Weight fund outperformed the cap weighted one. Since 2003, the earliest available date on trustnet, you will find the performances of the two funds are very close.

Recency bias?

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/82022016#Comment_82022016

Thanks for that. I spent ten minutes trying to find one on Trustnet charting and the one I showed was the best I found. Interestingly, in 2024 HSBC launched an S&P equal weight OEIC. I still don't like the concept of selling winners and buying losers without any value screening.

masonic

I'm not a fan of equal weight personally, mostly for the reason ARIY has pointed out (scaling back winners / doubling down on losers). There are also turnover and efficiency grounds to dislike about the approach. Portfolio churn is an enemy to be avoided in my view. There are other ways to tilt that make more sense to me, whether it is playing with regional weightings, use of smart-beta, or even lower cost active funds with the right philosophy behind them.

chiang_mai

I also was pleasantly surprised that the performace figures are so close, I had always been led to believe that EW would underperform but this is not the case. I like the simplicity of combining MW and EW versions of the same fund, it requires little effort, knowledge or thought plus it gives easy simple access to mid Caps in a way that is easy enough to tweak. Of course the approach is not perfect, very little ever is, but it is simple and easy and in one fell swoop it dilutes Tech concentration to the point it is not a concern, who cares that it's not the most efficient approach. The US market for me, because of its sheer size, demands use of a tracker, I have never had sufficent knowledge or skill to pick focussed managed US funds that are consistent winners. Tech concentration has long been an issue with trackers, now it isn't and the solution isn't complicated. Now I can hold US assets at my prefered 32% and without extraneous other baggage that I didn't want or need, and I can eliminate concentration, I'm happy and can move on and look at other issues.

Linton

https://forums.moneysavingexpert.com/discussion/comment/82022085#Comment_82022085

surely if the churn factors were a significant problem with equal weight funds it would show up in the performance results. Perhaps the number of holdings makes a major out performance of any one holding relatively irrelevant.

I currently hold the Vanguard US full index fund and a US small companies fund to decrease the impact of the giant techs. However US small companies has been a poor performing sector so I am now planning to replace that fund with an equal weight one to provide the extra diversification I want.

aroominyork

The US market for me, because of its sheer size, demands use of a tracker, I have never had sufficent knowledge or skill to pick focussed managed US funds that are consistent winners.

Ten year performance of North American funds on Trustnet shows index funds around position 20 of 140 funds. It's pretty dumb trying to beat the index there.

Section62

https://forums.moneysavingexpert.com/discussion/comment/82022072#Comment_82022072

I added this HSBC fund to my collection last year with a modest sum in it. Mainly as an option to keep invested in the US but less tech heavy (~15% rather than the >35% of the HSBC American Index).

chiang_mai

https://forums.moneysavingexpert.com/discussion/comment/82022372#Comment_82022372

The Tech sector in HSBC American is currently 36% But you also have to add in the Comms Sector too because it is an extention of Tech so that's a further 11%. In total that almost 50% concentration in effectively one US sector whilst the remaining ten sectors are under populated. It just makes no sense to hold that sort of arangement, without some form of mitigation or dilution.