Advice re ETF portfolio
Discussion
Couldn’t find a similar thread so apologies if duplication.
I’m planning on going down the DIY route with Investengine & have chosen the following ETFs. I am going 100% into equities as I am looking at a timeframe of at least 20 yrs. I was just wondering what more experienced heads felt about the regional spread (& even the choice of ETFs themselves)
Invesco S&P 500 - 30% weighting
SPDR Russell 2000 - 25% weighting
iShares MSCI Emerging Markets IMI - 15% weighting
iShares FTSE 100 - 15% weighting
SPDR Europe Value - 15% weighting
Portfolio X-ray tools suggest the following geographical breakdown:
N. America 50.2%
UK 16.5%
Europe ex-UK 15%
Emerging markets 8.8%
Asia ex-Japan 6.4%
Rest of world 3.1%
I wonder if maybe too much in UK equities, given only accounts for 8-9% global markets (although felt by many to be undervalued / not grown as much as other markets).
I’m planning on going down the DIY route with Investengine & have chosen the following ETFs. I am going 100% into equities as I am looking at a timeframe of at least 20 yrs. I was just wondering what more experienced heads felt about the regional spread (& even the choice of ETFs themselves)
Invesco S&P 500 - 30% weighting
SPDR Russell 2000 - 25% weighting
iShares MSCI Emerging Markets IMI - 15% weighting
iShares FTSE 100 - 15% weighting
SPDR Europe Value - 15% weighting
Portfolio X-ray tools suggest the following geographical breakdown:
N. America 50.2%
UK 16.5%
Europe ex-UK 15%
Emerging markets 8.8%
Asia ex-Japan 6.4%
Rest of world 3.1%
I wonder if maybe too much in UK equities, given only accounts for 8-9% global markets (although felt by many to be undervalued / not grown as much as other markets).
Personally, I agree with your thoughts on the UK. To me (a complete layman), I think its a bit US-heavy - despite being about right per market weighting. Historically, that would appear a good allocation, but if you look at the skewing of the S&P weight towards a few tech companies, I’m skeptical it can continue at least in the medium term.
I’m merely a casual learner on this, but while the S&P has boomed under the ultra-low interest and raining money environments, I’m of the belief that the FTSE100 actually contains companies that tick over through tightening environments. They’re dinosaurs, but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before.
Will we buy Teslas in a recession? Will our data and being subjects as advert recipients continue to command sky-high valuations? Not entirely convinced. Don’t get me wrong - the US always has an uncanny ability to bounce back and adapt - and it comprises of many excellent companies, but as a default model, the FTSE100 seems to be quite well tailored to surviving a downturn with less of a kicking.
I’m merely a casual learner on this, but while the S&P has boomed under the ultra-low interest and raining money environments, I’m of the belief that the FTSE100 actually contains companies that tick over through tightening environments. They’re dinosaurs, but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before.
Will we buy Teslas in a recession? Will our data and being subjects as advert recipients continue to command sky-high valuations? Not entirely convinced. Don’t get me wrong - the US always has an uncanny ability to bounce back and adapt - and it comprises of many excellent companies, but as a default model, the FTSE100 seems to be quite well tailored to surviving a downturn with less of a kicking.
Edited by Royal Jelly on Friday 11th March 03:43
What is your rationale for selecting those funds & weights instead of a single global equity index tracker fund?
It seems to me you're setting yourself up for regular reallocations if you want to stick with those weights.
You are overweight UK (usually 4%) but there is a school of thought that doing so reduces volatility. This is why VLS100 holds around 20% UK.
It seems to me you're setting yourself up for regular reallocations if you want to stick with those weights.
You are overweight UK (usually 4%) but there is a school of thought that doing so reduces volatility. This is why VLS100 holds around 20% UK.
alfa aficionado said:
I’m planning on going down the DIY route with Investengine & have chosen the following ETFs. I am going 100% into equities as I am looking at a timeframe of at least 20 yrs. I was just wondering what more experienced heads felt about the regional spread (& even the choice of ETFs themselves)
Invesco S&P 500 - 30% weighting
SPDR Russell 2000 - 25% weighting
iShares MSCI Emerging Markets IMI - 15% weighting
iShares FTSE 100 - 15% weighting
SPDR Europe Value - 15% weighting
Portfolio X-ray tools suggest the following geographical breakdown:
N. America 50.2%
UK 16.5%
Europe ex-UK 15%
Emerging markets 8.8%
Asia ex-Japan 6.4%
Rest of world 3.1%
I wonder if maybe too much in UK equities, given only accounts for 8-9% global markets (although felt by many to be undervalued / not grown as much as other markets).
Extreme diversification !
Do you want to increase your own wealth, or line other people's pockets ?
Think you need to watch Warren Buffett's video, where he speaks about diversification.
How can you argue with the most successful self-made investor in the World
.
LeoSayer said:
What is your rationale for selecting those funds & weights instead of a single global equity index tracker fund?
It seems to me you're setting yourself up for regular reallocations if you want to stick with those weights.
You are overweight UK (usually 4%) but there is a school of thought that doing so reduces volatility. This is why VLS100 holds around 20% UK.
No particular reason - just getting into this. Rather spread the risk than go all in with 1 fund & there are no platform or trading fees through Investengine. My thinking is that I am more likely to benefit from moves in Emerging markets / small caps etc this way than if I had a single global tracker? It seems to me you're setting yourself up for regular reallocations if you want to stick with those weights.
You are overweight UK (usually 4%) but there is a school of thought that doing so reduces volatility. This is why VLS100 holds around 20% UK.
Re. allocations - I believe they don't automatically sell shares to reach a target weight but rather purchase more of the ETFs that are below their target weights and less of others, to make the overall allocation as close as possible to the chosen weights. Presumably this would always be the case with multiple funds? Is there a drawback if there are no dealing charges?
Royal Jelly said:
Personally, I agree with your thoughts on the UK. To me (a complete layman), I think its a bit US-heavy - despite being about right per market weighting. Historically, that would appear a good allocation, but if you look at the skewing of the S&P weight towards a few tech companies, I’m skeptical it can continue at least in the medium term.
I’m merely a casual learner on this, but while the S&P has boomed under the ultra-low interest and raining money environments, I’m of the belief that the FTSE100 actually contains companies that tick over through tightening environments. They’re dinosaurs, but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before.
No, I think I agree with you - US stocks have risen dramatically and I'm not sure how much longer this can keep happening. I am investing for the long term though and am hoping to just 'check in' on the portfolio once or twice a year. Maybe I should cut back on the S&P 500 for now, hoping the market falls a bit and then readjust weightings then?I’m merely a casual learner on this, but while the S&P has boomed under the ultra-low interest and raining money environments, I’m of the belief that the FTSE100 actually contains companies that tick over through tightening environments. They’re dinosaurs, but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before.
Edited by Royal Jelly on Friday 11th March 03:43
alfa aficionado said:
No particular reason - just getting into this. Rather spread the risk than go all in with 1 fund & there are no platform or trading fees through Investengine. My thinking is that I am more likely to benefit from moves in Emerging markets / small caps etc this way than if I had a single global tracker?
I can't see how. Pick the right whole of world tracker and it will include emerging markets and small caps. Vanguard FTSE Global All-Cap for example holds over 7,000 stocks including 10.2% in emerging markets which is lower than your proposed allocation of 8.8%.alfa aficionado said:
Re. allocations - I believe they don't automatically sell shares to reach a target weight but rather purchase more of the ETFs that are below their target weights and less of others, to make the overall allocation as close as possible to the chosen weights. Presumably this would always be the case with multiple funds? Is there a drawback if there are no dealing charges?
That's not how execution only platforms work. Normally if you want to change the weight, or bring them back into line with your original allocation then you need to adjust the holdings by buying and selling. Of course, weights change within global trackers automatically with the relative market capitalisation of each region.
alfa aficionado said:
US stocks have risen dramatically and I'm not sure how much longer this can keep happening. I am investing for the long term though and am hoping to just 'check in' on the portfolio once or twice a year. Maybe I should cut back on the S&P 500 for now, hoping the market falls a bit and then readjust weightings then?
Taking a bet by over or underallocating to a certain region require a strong nerve and the ability to look at it dispassionately, particularly when you realise you got it wrong. I realised a while ago that I don't have the time, skills or stomach for such things hence why global trackers work for me.Royal Jelly said:
.... I’m merely a casual learner on this, but while the S&P has boomed under the ultra-low interest and raining money environments, I’m of the belief that the FTSE100 actually contains companies that tick over through tightening environments. They’re dinosaurs, but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before. ....
Having been an investor for over 30 years, it is puzzling to see people completely over complicate the subject.
OP even mentioned, "there are no platform or trading fees". Think about it, charities in the financial world are very rare. More usual to have hidden fees within the funds.
Keeping everything simple is the proven approach.
'but we’ll all continue to buy oil, pharma, booze and fags in a similar way that we did before.'
This gave me hope when reading your post, because non-cyclical business (which are widely geographically diversified) need to form the core of a successful portfolio. Of those sectors, oil is a sensible hold, but remember that is a cyclical business. Every time the oil price is low ($23 a barrel just a few years ago), you will see the share price drop dramatically, so need to be a type who will still sleep at night. Watch the overall performance percentage, don't get bogged down with individual share price movements.
You mentioned fags, so here are some figures for British American Tobacco.
I have this data to hand, because the business has been part of my portfolio since 1985.
1978 .... Pre-tax Profit £ 435m ...... Dividend 1.88p ........... Share Price (year end) .... 29.5 p
2000 .... ..................... £1522m ..................... 29.0p ...................................................... 509.75p
2010........................... £4388m .................... 114.2p ..................................................... 2463.5p
2021 .......................... £9163m .................... 215.6p ..................................................... 2733.5p
A dividend increase from 2 pence to £2-15, means you have received your original investment back many times over, through dividends.
As for diversification, this UK business trades in over 160 countries around the world (geographic and currency spread), but only a single business sector of course.
Search for a number of good solid businesses (don't have to be modern flashy firms), where products or services have good demand, then be patient while the miracle of compounding works.
I hold 25 stocks, but it is only about half of those which have really contributed the big power to the overall performance.
Best of luck.
Edited by Jon39 on Friday 11th March 21:39
I personally own a world tracker, a FTSE 100 and a FTSE 250 tracker through Vanguard plus a few individual stocks.
I am overweight UK and own the individual stocks for historical reasons, but happy with this for the same reason as above - US tech stocks have done well in the decade of low interest rates but I think value stocks will have their day again.
This setup is low drama with low fees and I suspect it will all come out in the wash compared to the complicated setup above.
I am overweight UK and own the individual stocks for historical reasons, but happy with this for the same reason as above - US tech stocks have done well in the decade of low interest rates but I think value stocks will have their day again.
This setup is low drama with low fees and I suspect it will all come out in the wash compared to the complicated setup above.
Make it easy, especially if you are inexperienced.
1 holding, MSCI World ETF (or similar).
If you go down the ‘Top down macro allocation’ route it will be more work, more choices, more chance of underperforming a ‘world’ index.
I’m an experienced investment professional, working for one of the best, most respected, wealth management firms in Europe. I see clients do lots of different things, my advice if you are going 100% equity, make it simple!
Good luck
1 holding, MSCI World ETF (or similar).
If you go down the ‘Top down macro allocation’ route it will be more work, more choices, more chance of underperforming a ‘world’ index.
I’m an experienced investment professional, working for one of the best, most respected, wealth management firms in Europe. I see clients do lots of different things, my advice if you are going 100% equity, make it simple!
Good luck
Phooey said:
Out of interest what is your / your firms views on where you see markets going in the next few years?
We tend to take a longer term view, and as a rule avoid short term market predictions, and short term tactical trading (its very hard / impossible to do consistently). One factor that is reasonably clear is the challenge in making a ‘real’ return over the next couple of years (ie a return above inflation). We are buyers rather than sellers in weak markets, primarily based on forward return calculations, in businesses we understand, and know well.
LeoSayer said:
Taking a bet by over or underallocating to a certain region require a strong nerve and the ability to look at it dispassionately, particularly when you realise you got it wrong. I realised a while ago that I don't have the time, skills or stomach for such things hence why global trackers work for me.
Do you have more than 1 global tracker or other funds alongside your global tracker?Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
Edited by alfa aficionado on Saturday 12th March 00:42
alfa aficionado said:
Do you have more than 1 global tracker or other funds alongside your global tracker?
Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
You can pay a lump sum of cash into a S&S ISA and let it sit there in the account as cash and allocate it over a number of coming months, you don’t have to buy stocks with it all right away. Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
Edited by alfa aficionado on Saturday 12th March 00:42
alfa aficionado said:
Do you have more than 1 global tracker or other funds alongside your global tracker?
Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
NoThinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
Edited by alfa aficionado on Saturday 12th March 00:42
Mankers said:
We tend to take a longer term view, and as a rule avoid short term market predictions, and short term tactical trading (its very hard / impossible to do consistently). One factor that is reasonably clear is the challenge in making a ‘real’ return over the next couple of years (ie a return above inflation).
We are buyers rather than sellers in weak markets, primarily based on forward return calculations, in businesses we understand, and know well.
Thanks. I'm no expert but also think the next couple of years are going to be 'challenging' wrt to real returnsWe are buyers rather than sellers in weak markets, primarily based on forward return calculations, in businesses we understand, and know well.
This topic has been intriguing, because it opened with the suggestion of diversification going to the ultimate extreme.
I have been lucky (but as golfers say, the more you practice the luckier you get) and have out performed the market for 30 years.
Even during the early years, I could see the performance was ahead of the market average during most annual periods, so fewer changes were made to the portfolio, until it became almost no changes at all.
If I had found my strategy was not working well, I would have simply put my money into the Vanguard FTSE 100 low-cost Tracker, to secure an average return with low fees. Many FTSE 100 businesses are trading worldwide, so your geographical and currency diversification is already present.
If you happen to have shares is just a handful of well performing businesses, then you diversify by adding scores of mediocre companies, your overall performance will obviously become worse.
https://www.youtube.com/watch?v=bHPzQIW_pww
alfa aficionado said:
Do you have more than 1 global tracker or other funds alongside your global tracker?
Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
No.Thinking more about your earlier question as to why this mix of funds instead of a simple global tracker - I think it’s because it’s a last minute ISA contribution before end of current tax year; drip feeding of funds usu the best approach but too late for that now so wanted to spread the risk of a lump sum investment by picking multiple sectors / regions etc. Does this make sense?
Look at https://www.vanguardinvestor.co.uk/investments/van...
1 fund. multiple sectors/regions.
Worth pointing out Buffett suggests most people use an S&P index tracker these days (the S&P is because he's American and there tends to be a big US bias too).
Buffett is incredible in what he's achieved but if you listen to any of his recent interviews he definitely isn't suggesting people try to make money the way he did by putting their wealth into a few concentrated bets like he did.
Buffett is incredible in what he's achieved but if you listen to any of his recent interviews he definitely isn't suggesting people try to make money the way he did by putting their wealth into a few concentrated bets like he did.
duckson said:
You can pay a lump sum of cash into a S&S ISA and let it sit there in the account as cash and allocate it over a number of coming months, you don’t have to buy stocks with it all right away.
I realised this but does it still apply at the end of a tax year, e.g. if I pay £12k now, before the end of the current tax year, is it then subsequently possible to drip feed this monthly into an ETF / portfolio on the basis that this is my 2021/22 Stocks and Shares ISA contribution?Could I then be making additional monthly contributions after 5th April that would go into my 2022/23 ISA contribution?
If so then this negates my original plan, which was to split the money across various trackers, because it was all going in at the same point in time.
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