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  • FIRST POST
    • Twointhebush
    • By Twointhebush 8th Oct 19, 9:55 PM
    • 92Posts
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    Twointhebush
    Shadowing a Tracker Fund?
    • #1
    • 8th Oct 19, 9:55 PM
    Shadowing a Tracker Fund? 8th Oct 19 at 9:55 PM
    If I were to copy the percentages of investments in a tracker fund, would that save or cost me more money? Maybe tracker funds are constantly being modified and I wouldn't be able to keep up anyway?
Page 1
    • AnotherJoe
    • By AnotherJoe 8th Oct 19, 10:02 PM
    • 16,282 Posts
    • 19,536 Thanks
    AnotherJoe
    • #2
    • 8th Oct 19, 10:02 PM
    • #2
    • 8th Oct 19, 10:02 PM
    it would be cripplingly expensive and ridiculous to even try.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • MarkCarnage
    • By MarkCarnage 8th Oct 19, 10:14 PM
    • 133 Posts
    • 94 Thanks
    MarkCarnage
    • #3
    • 8th Oct 19, 10:14 PM
    • #3
    • 8th Oct 19, 10:14 PM
    Why on earth would you want to do that? It costs buttons to buy and hold one? The costs of continued replication not to mention time spent would be horrendous.
    • Linton
    • By Linton 8th Oct 19, 10:25 PM
    • 11,400 Posts
    • 11,832 Thanks
    Linton
    • #4
    • 8th Oct 19, 10:25 PM
    • #4
    • 8th Oct 19, 10:25 PM
    What is your pot size? The smallest member of the FTSE100, to take an example, is 1/500th the size of the index. So unless you have perhaps £1M to invest the faffing around with trivial holdings would not be worth the effort.


    Although the constituents of the index dont change that much you have the time and cost of re-investing the dividends.
    • AnotherJoe
    • By AnotherJoe 8th Oct 19, 10:25 PM
    • 16,282 Posts
    • 19,536 Thanks
    AnotherJoe
    • #5
    • 8th Oct 19, 10:25 PM
    • #5
    • 8th Oct 19, 10:25 PM
    Not to mention the huge minimum investment and complete inability to reinvest dividends appropriately.
    Imagine trying to replicate VLS80 and buying 3,500 equities world wide plus I don't know how many bonds across oerhaps 20 different stock markets. . And probably minimum size of a(edit) hundreds of millions
    Even the FTSE 100 would likely have a minimum investment size of at guess £100k or so. Edit make that several million due to dividend reinvestment minimum sizes.
    There would be no issue "keeping up" though once you've spent your several million because they aren't constantly being modified.
    Last edited by AnotherJoe; 08-10-2019 at 10:28 PM.
    • Thrugelmir
    • By Thrugelmir 8th Oct 19, 10:43 PM
    • 65,552 Posts
    • 57,670 Thanks
    Thrugelmir
    • #6
    • 8th Oct 19, 10:43 PM
    • #6
    • 8th Oct 19, 10:43 PM

    Although the constituents of the index dont change that much you have the time and cost of re-investing the dividends.
    Originally posted by Linton
    Every quarter 3 are relegated and 3 promoted. That's 24 transactions a year.

    Depending upon the weighting given to the new entrants in the index. That will require the portfolio to be rebalanced every so often.
    ““there really is no such thing as ‘the future’, singular. There are only multiple, unforeseeable futures, which will never lose their capacity to take us by surprise.””
    ― Niall Ferguson
    • AnotherJoe
    • By AnotherJoe 8th Oct 19, 11:11 PM
    • 16,282 Posts
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    AnotherJoe
    • #7
    • 8th Oct 19, 11:11 PM
    • #7
    • 8th Oct 19, 11:11 PM
    So, if you prorated VLS to that, something getting towards one thousand transactions a year.
    Before you did any rebalancing for the new entrants or for dividend reinvestment.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • jim1999
    • By jim1999 8th Oct 19, 11:31 PM
    • 54 Posts
    • 53 Thanks
    jim1999
    • #8
    • 8th Oct 19, 11:31 PM
    • #8
    • 8th Oct 19, 11:31 PM
    It's possible to do it with VLS if you buy the constituent ETFs / funds that make it up (I think around 8-10). It does shave a small amount off the fees, but for the vast majority would not be worthwhile for that reason alone.
    • MaxiRobriguez
    • By MaxiRobriguez 9th Oct 19, 10:37 AM
    • 616 Posts
    • 454 Thanks
    MaxiRobriguez
    • #9
    • 9th Oct 19, 10:37 AM
    • #9
    • 9th Oct 19, 10:37 AM
    Transactions costs money.

    If you make thousands of them to replicate an index then you pay a thousand times transactions costs.

    If you buy an index fund you pay once.

    Index funds can shoulder the cost because they're splitting transaction fees over thousands and thousands of customers.

    You stand zero chance of bettering an index funds on the cost front. Zero.
    • barnstar2077
    • By barnstar2077 9th Oct 19, 10:48 AM
    • 228 Posts
    • 384 Thanks
    barnstar2077
    It's possible to do it with VLS if you buy the constituent ETFs / funds that make it up (I think around 8-10). It does shave a small amount off the fees, but for the vast majority would not be worthwhile for that reason alone.
    Originally posted by jim1999
    I could see someone using a VLS fund, or any fund of funds, as a starting point. So, say you like the look of one of those funds but you want less exposure to the american market, you could replicate the funds but adjust the percentage allotted to the S&P 500. However, normally you could probably just find another fund that already does it.

    I suppose in a way I am doing this by buying the VLS 100 and bond funds separately, instead of buying a VLS that already has bonds in it.
    If you don't have your own plan, then you're following someone else's!
    • MarkCarnage
    • By MarkCarnage 9th Oct 19, 11:22 AM
    • 133 Posts
    • 94 Thanks
    MarkCarnage
    I could see someone using a VLS fund, or any fund of funds, as a starting point. So, say you like the look of one of those funds but you want less exposure to the american market, you could replicate the funds but adjust the percentage allotted to the S&P 500. However, normally you could probably just find another fund that already does it.

    I suppose in a way I am doing this by buying the VLS 100 and bond funds separately, instead of buying a VLS that already has bonds in it.
    Originally posted by barnstar2077
    In which case you are creating a bespoke allocation using tracker funds, presumably actively managed to reflect your own views on asset allocation. Which is a different thing from the original question, which everyone agrees makes no sense.
    • mollycat
    • By mollycat 9th Oct 19, 11:45 AM
    • 1,263 Posts
    • 2,582 Thanks
    mollycat
    I bought the Times Newspaoer today and paid £1.80.

    Then i thought about it; surely it would be cheaper to just google every single bit of local and national news, sports results and analysis, buisiness and money opinion, lifestyle fashion music and recipe piffle, television listings, etc etc etc and print them off onto some old newsprint I have in the garage and staple them together into a homemade "newspaper".
    (Not that all the news would be out of date once I'd finished or anythin!)

    As I considered this, i looked at the bottle of Smirnoff (other brands of reality banishing liquids are available) I had newly cracked open what seemed only half an hour ago, and was amazed to see it was nearly empty!

    OK, it's a crap analogy, but OP, come on, you must be having a laugh, right?
    • AnotherJoe
    • By AnotherJoe 9th Oct 19, 5:42 PM
    • 16,282 Posts
    • 19,536 Thanks
    AnotherJoe
    I bought the Times Newspaoer today and paid £1.80.

    Then i thought about it; surely it would be cheaper to just google every single bit of local and national news, sports results and analysis, buisiness and money opinion, lifestyle fashion music and recipe piffle, television listings, etc etc etc and print them off onto some old newsprint I have in the garage and staple them together into a homemade "newspaper".
    (Not that all the news would be out of date once I'd finished or anythin!)

    As I considered this, i looked at the bottle of Smirnoff (other brands of reality banishing liquids are available) I had newly cracked open what seemed only half an hour ago, and was amazed to see it was nearly empty!
    When its empty have you considered planting seed potatoes, harvesting the crop 6 months later, boiling them up, leaving to ferment, and distilling?

    OK, it's a crap analogy, but OP, come on, you must be having a laugh, right?
    Originally posted by mollycat

    I expect the OP knits his own underwear. There a youtube channel for a guy that makes his own stuff from basic things, for example he starts with cotton plants and then weaves cloth and creates his own suit. Or he makes his own glass from sand an basic elemnts.

    The suit I think cost him $5k

    A sandwich cost him $1500
    I spent 6 months and $1500 to completely make a sandwich from scratch. Including growing my own vegetables, making my own salt from ocean water, milking a cow to make cheese, grinding my own flour from wheat, collecting my own honey, and killing a chicken myself.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • barnstar2077
    • By barnstar2077 9th Oct 19, 7:50 PM
    • 228 Posts
    • 384 Thanks
    barnstar2077
    Okay, enough already! Give the guy a break, he just wanted to know the answer to a simple question.
    If you don't have your own plan, then you're following someone else's!
    • AnotherJoe
    • By AnotherJoe 9th Oct 19, 9:42 PM
    • 16,282 Posts
    • 19,536 Thanks
    AnotherJoe
    Please dont try to spoil our fun. OP is not obligated to read this. And he wont be able to until he's finished constructing his own PC starting with etching circuits onto a silicon wafer he's filed smooth.
    • mollycat
    • By mollycat 9th Oct 19, 10:12 PM
    • 1,263 Posts
    • 2,582 Thanks
    mollycat
    Please dont try to spoil our fun. OP is not obligated to read this. And he wont be able to until he's finished constructing his own PC starting with etching circuits onto a silicon wafer he's filed smooth.
    Originally posted by AnotherJoe
    Update....just orderd a oil filter for my Honda from ECP.

    Only another 2000 individual parts to accumulate before I start working out how it all fits together.

    Some people seem to buy their cars fully assembled....dont they know this is MSE?
    • grnglide
    • By grnglide 10th Oct 19, 10:15 AM
    • 162 Posts
    • 63 Thanks
    grnglide
    And he wont be able to until he's finished constructing his own PC starting with etching circuits onto a silicon wafer he's filed smooth.
    But surely he needs to produce the wafer in the first place which involves producing the silicon in the first place and purifying it. Both require ovens with RF heating etc.


    Sounds like fun but could take a while!
    • AnotherJoe
    • By AnotherJoe 10th Oct 19, 10:17 AM
    • 16,282 Posts
    • 19,536 Thanks
    AnotherJoe
    Update....just orderd a oil filter for my Honda from ECP.

    Only another 2000 individual parts to accumulate before I start working out how it all fits together.

    Some people seem to buy their cars fully assembled....dont they know this is MSE?
    Originally posted by mollycat
    https://www.youtube.com/watch?v=sIuo0KIqD_E
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • EdGasketTheSecond
    • By EdGasketTheSecond 10th Oct 19, 10:27 AM
    • 1,349 Posts
    • 700 Thanks
    EdGasketTheSecond
    It is probably more worthwhile to replicate a more expensive Investment Trust where you can see what the top holdings are and just buy the shares directly and save the IT manager's fees. However you would probably only get quarterly updates at most as to the IT's holdings so your replication would be subject to lag.


    Yeah not really worth doing. Nevertheless it is interesting to see what ITs are invested in and you could form your own portfolio based on a selection of those shares.
    • aberlyfid_2000
    • By aberlyfid_2000 10th Oct 19, 12:50 PM
    • 72 Posts
    • 20 Thanks
    aberlyfid_2000
    If I were to copy the percentages of investments in a tracker fund, would that save or cost me more money? Maybe tracker funds are constantly being modified and I wouldn't be able to keep up anyway?
    Originally posted by Twointhebush
    what sacrilege ! how dare you ask such a question on this forum.

    Seriously though, you would need to have massive amounts of money to replicate a fund or an index fully.

    Fully being the operating word. Fully = matching all the holdings, including any rebalances and ensuring that divs are re-invested across all holdings.

    However:
    Its perfectly sensible to replicate the main holdings but then deciding to actively under/overweight certain holdings, and doing the same with dividend re-investments.I quite like the FTSE 100, save for the tobacco, consumer staples and oil sectors. Same for the S&P less all the frothy tech stocks.
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