FTSE100 tracker

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Ari

Original Poster:

19,328 posts

214 months

Saturday 19th January 2019
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Thought it worth an update on this for anyone interested.

As you probably know, the FTSE100 slipped a lot last year, with inevitable results for my tracker. I think at one point I was at about -£900. It's recovered a bit, currently -£440.

I'm still putting in the regular £250/month, there is £10,900 into it currently, and it's worth £10,470 (in round numbers). I've also been adding a few extra chunks when I think it's particularly low, although it is currently close to as low as its gone so far, so those haven't been advantageous, yet at least.

As said right at the beginning, it's a long term thing, so I'm seeing these lows as a good thing in that I'm getting more for my money than would be if it were riding high. Time will tell of course how that works out in practice.

My world tracker I've not done much at all with, it's currently got about £1,000 in it and is about £40 down. Probably should put some more that way in future.

It will be interesting to see if and what effect Brexit, and post Brexit has.


bitchstewie

50,762 posts

209 months

Saturday 19th January 2019
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I'm still puzzled why you'd go with a FTSE100 tracker and ignore the world one?

FredClogs

14,041 posts

160 months

Saturday 19th January 2019
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I've been buying my ftse tracker since it fell under 7000 and will continue to monthly while it stays there.

Just a quick question to anyone...

I buy an accumulation fund... I used to understand but no longer do how the gain is calculated vs the income fund. I. E if I get the chart of the ftse 100 gain and overlay the income fund and the acc fund they track each other exactly... (minus a small error) so it seems the dividend acc is not taken into account.

If I chart them against price on the y axis I can clearly see the acc fund out performs the income and the index... How come the gain doesn't show this... Someone please explain.

200Plus Club

10,668 posts

277 months

Saturday 19th January 2019
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Marcus is still paying 1.5% for new accounts for the year.

Derek Chevalier

3,942 posts

172 months

Saturday 19th January 2019
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200Plus Club said:
Marcus is still paying 1.5% for new accounts for the year.
Not sure of the relevance?

200Plus Club

10,668 posts

277 months

Saturday 19th January 2019
quotequote all
Derek Chevalier said:
Not sure of the relevance?
In comparison purely to losing value as above. (Short term obviously compared to longer prospects).

Edited by 200Plus Club on Saturday 19th January 13:03

FWIW

3,041 posts

96 months

Saturday 19th January 2019
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200Plus Club said:
In comparison purely to losing value as above. (Short term obviously compared to longer prospects).

Edited by 200Plus Club on Saturday 19th January 13:03
confused

Ari

Original Poster:

19,328 posts

214 months

Sunday 20th January 2019
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200Plus Club said:
In comparison purely to losing value as above. (Short term obviously compared to longer prospects).
Curious to understand how you know that the FTSE100 will continue to lose money?

putonghua73

615 posts

127 months

Monday 21st January 2019
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Ari said:
Thought it worth an update on this for anyone interested.

As you probably know, the FTSE100 slipped a lot last year, with inevitable results for my tracker. I think at one point I was at about -£900. It's recovered a bit, currently -£440.

I'm still putting in the regular £250/month, there is £10,900 into it currently, and it's worth £10,470 (in round numbers). I've also been adding a few extra chunks when I think it's particularly low, although it is currently close to as low as its gone so far, so those haven't been advantageous, yet at least.


I have bolded the part that I wish to discuss. A bog-standard passive index tracker simply tracks the movement of a particular index or indices. The theory behind the investment vehicle is that (a) the investor usually invests a regular sum over a period of time [drip-feeding], and (b) expects to earn average market return over the investment period. You will not beat the market with this vehicle - simply achieve an average market return over the investment period.

I'm a big fan of passive index trackers for the majority of investors (inc. myself) because rather than squirrel the money in a savings account with an interest rate below inflation - thus the value of one's savings is going down in real terms over time - the investor can invest in the broader market irrespective of whether the market is over-valued, undervalued, or somewhat fairly valued.

Back to the bolded bit of Ari's post. There are two elements that I wish to extract:
- how do you determine if the market is over-valued, undervalued or somewhat fairly valued? Rises and dips do not necessarily correlate to the market being overvalued or undervalued.
- adding extra money to your investment [index tracker] can affect your price cost average because buy price (valuation) matters more

Here's a link to an Investopedia article on the CAPE ratio (and other valuation ratios). The point here is not to focus on valuations with an index tracker - their purpose is to track the market (the tracking error i.e. how well they track a particular index is important to focus on).

The odd chunk won't matter here or there, but a significant lump sum (in relation to your monthly savings amount) may matter.

An ETF [exchage traded fund] may be a better vehicle for lump sums, and you can invest, if you so wish, in a wider variety of assets e.g. commodities, gold, etc.

Ari said:
It will be interesting to see if and what effect Brexit, and post Brexit has.
I'd be equally, if not more concerned about China's economic slowdown, the continuing US-China trade war, plus other rumbling on the horizon i.e. Italy's stand-off with the EU. Given that your only investment vehicle currently is an index tracker, then you do not need to worry as much in terms of your investment - with the exception of no guarantees that the average market return of a 10 year rolling period will match that of another 10 year rolling period - unavoidable really.

I have only checked my Fidelity index tracker (DC pension with a previous company, where payments were last made beginning of 2013) a couple of times in the last 6 years. I tried to be clever last month [December], and sold out of my 50/50 UK / ROW tracker to a 100% ROW excl UK tracker. Two key points:
- by selling and buying in at a price point w/ no drip-feeding, market valuation matters
- I've exchanged one risk (UK) for another risk (US) - except my regional allocation is worse because I stupidly didn't check the regional allocation when I bought the fund 65% US rolleyes

Keep up with the regular monthly payments, don't sweat the market valuation, try to check (if at all) a couple of times a year as opposed to a couple of times a month. Don't let greed and fear dictate your decision maklng - I've made that mistake!

Ari

Original Poster:

19,328 posts

214 months

Tuesday 22nd January 2019
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That is really interesting, thank you.

putonghua73 said:
Back to the bolded bit of Ari's post. There are two elements that I wish to extract:
- how do you determine if the market is over-valued, undervalued or somewhat fairly valued? Rises and dips do not necessarily correlate to the market being overvalued or undervalued.
- adding extra money to your investment [index tracker] can affect your price cost average because buy price (valuation) matters more
I'm determining it based purely on how it compares historically. You're absolutely right, just because it has dipped a bit doesn't mean it is 'undervalued', or that it isn't going to dip a bit (or a lot) more. However it does (presumably) mean I'm getting more for my money than I had been, and if it goes back up, I 'win'. (But of course if it doesn't, and continues to drop, I 'lose').

With regards to not checking it regularly, I was checking it every day at the beginning, but now the novelty is wearing off I check it probably once a month or less. It is irrelevant, I do get that. What it's worth in 15 years time (and what it's hopefully made by then) is what's relevant.

Ari

Original Poster:

19,328 posts

214 months

Tuesday 22nd January 2019
quotequote all
bhstewie said:
I'm still puzzled why you'd go with a FTSE100 tracker and ignore the world one?
I suppose because I foolishly believe that the FTSE100 market is depressed by Brexit at the mo, so a good place to be putting funds as it could bounce back a bit once the dust eventually settles (bearing in mind we're talking about a 10-15 year plan here).

This is based on absolutely zero financial acumen and flies completely in the face of the logic of investing this way, which is not to speculate. But there it is. biggrin

Ari

Original Poster:

19,328 posts

214 months

Tuesday 22nd January 2019
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Very interesting article about Vanguard here: https://digitaledition.telegraph.co.uk/editions/ed...

putonghua73

615 posts

127 months

Tuesday 22nd January 2019
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Ari said:
However it does (presumably) mean I'm getting more for my money than I had been, and if it goes back up, I 'win'. (But of course if it doesn't, and continues to drop, I 'lose').

With regards to not checking it regularly, I was checking it every day at the beginning, but now the novelty is wearing off I check it probably once a month or less. It is irrelevant, I do get that. What it's worth in 15 years time (and what it's hopefully made by then) is what's relevant.
With index funds, It is less about the day to day / annual market fluctations ('noise'), and more about your investment horizon (10 year rolling period). You are not timing the market, and invest via regular contributions irrespective of market movements i.e. rises and dips. The result will be an averaged return.

The capital element i.e. market price is a concern if in the short-term say 1-2 years, you'll probably need to draw-down upon the capital. If upon reaching retirement, you only require the income, you can remain invested. However, when relying on the income, you may want to rebalance your portfolio (% allocation across different asset classes) to 'blend' your annual income.

I'd like to thank you - and the other posters - because this thread (amongst others) forced me to view and think about my own financial situation re: company DC pension index fund and start asking some hard questions I should have asked years ago. My former company's pension scheme only has a small number of funds in the universe of Fidelity's (company pension scheme provider) available funds. 6 years after leaving my former company, I finally checked a nagging doubt that I had and received confirmation that none of the funds in the company's pension scheme were accumulation funds i.e. any dividends were reinvested. In fact, none of the scheme's fund paid dividends!

If I had known that at the time I joined the company back in 2011, and had known about SIPPs, I would have used a SIPP instead because I would have a wider universe of funds. Better late than never. FWIW, I'm in a DB scheme with my current employer (and have a DB scheme with a previous, previous employer).

I have a lump sum to invest, thus I need to factor in a whole raft of different considerations than if I were drip-feeding. An ETF would be a better investment vehicle than an index fund for a lump sum. Now I need to obtain fund transfer details from Fidelity inc. any charges, evaluate SIPP providers, what investment vehicle based upon a lump sum investment, and how and when I want to make the transfer.

I'll sit on my hands in terms of making any decisions over the next couple of months, and I'll post to the forum (different thread) to solicit consideration and feedback to review prior to making any decision.

Cheers!

Bluesgirl

766 posts

90 months

Tuesday 22nd January 2019
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FredClogs said:
I've been buying my ftse tracker since it fell under 7000 and will continue to monthly while it stays there.

Just a quick question to anyone...

I buy an accumulation fund... I used to understand but no longer do how the gain is calculated vs the income fund. I. E if I get the chart of the ftse 100 gain and overlay the income fund and the acc fund they track each other exactly... (minus a small error) so it seems the dividend acc is not taken into account.

If I chart them against price on the y axis I can clearly see the acc fund out performs the income and the index... How come the gain doesn't show this... Someone please explain.
As I understand it (and IANAE), the difference is that with an income fund, you're withdrawing dividends whereas with an accumulation fund, you're reinvesting the dividends so that you're purchasing more units in the fund. They aren't performing differently but you have more units in the accumulation fund than you would have if you had opted for an income fund.

Hoping that makes sense, but possibly not smile

Ari

Original Poster:

19,328 posts

214 months

Saturday 16th February 2019
quotequote all
So close to breaking even!

Personal rate of return -0.01

Currently £4.87 down.

The temptation now, having run it for over a year, seen it slip to over £800 down and finally stagger back to having recovered all my losses is to cash out with all my money (bar £4.87) while I can.

Which would of course be a stupid idea as the whole point is a long term investment. On the basis that it's at (close to) zero, I'm actually in the same boat as if I'd just put all the money in today, what it's done historically is, at this point, irrelevant. The past has no bearing on where it goes from this point in time.

Whether it still seems 'stupid' (cashing back out now) in six months or six years remains to be seen!

The other thought I had is that those oh so regular 'opportunity cost' posts from people financing their cars because 'it's easy to place your money and get 4% return, just need to make a little effort' are the bullst I always thought they were. Sure, you could argue that I put my money in the wrong place, or at the wrong time. But that's like saying 'it's easy to win at horse racing, anyone who doesn't win easily obviously just put their money on the wrong horse or on the wrong day'.

Anyway, sticking with it, not putting any extra in at the moment over my £250/month currently though.

bitchstewie

50,762 posts

209 months

Saturday 16th February 2019
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I use Trustnet to track my investments against trackers.

A world tracker would be 4.3% up by now. I think you've hit the nail on the head though, you've a year in isolation when it should be a long term game.

I'd hope nobody would ever advocate putting money in stocks for 3-4 years as a "sure fire" way to put their money to better use.

Ari

Original Poster:

19,328 posts

214 months

Saturday 16th February 2019
quotequote all
bhstewie said:
A world tracker would be 4.3% up by now.
I have a World Tracker, 31st Dec 2017 - 31st Dec 2018, -6.67% smile

Dr Mike Oxgreen

4,101 posts

164 months

Sunday 17th February 2019
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Ari said:
I have a World Tracker, 31st Dec 2017 - 31st Dec 2018, -6.67% smile
And since then you’ll have seen significant gains through Jan and Feb. I’m betting it’s in positive territory now.

bitchstewie

50,762 posts

209 months

Sunday 17th February 2019
quotequote all
Ari said:
I have a World Tracker, 31st Dec 2017 - 31st Dec 2018, -6.67% smile
I'm going off trailing 12 months.

If you don't have an account on Trustnet go create one and use the "Portfolio" option.

Totally free and you can build and track and compare pretty much whatever you want. Amazing tool for free.

Derek Chevalier

3,942 posts

172 months

Sunday 17th February 2019
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Ari said:
bhstewie said:
A world tracker would be 4.3% up by now.
I have a World Tracker, 31st Dec 2017 - 31st Dec 2018, -6.67% smile
Which one was this? Sounds steep when Vanguard equivalents were around 4.5-5% down