Great adviceOriginally Posted by Neil.C
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Great advice
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I’ve used Monevatpr for most of my research. It’s a very good site which explains everything and also shows some example portfolios and funds
https://monevator.com/category/inves...ing-investing/
I’ve used this for my SSISA and SIPP
We set up ones for our children with world index tracker when they turned 18.
Some interesting comments here, the key is not to be lazy and do a bit of research. There is loads of info on YT and elsewhere.
Below is not advice just sharing my own observations. I'm not and IFA or financial professional. There maybe errors in my understanding.
I'd defiantly focus on keeping costs to a minimum, I see no value in expensive advice or platforms, there is so much research showing that few actually beat the market.
When comparing indexes make sure you know what you are buying. You can not just compare indexes without taking into account the impact of the dividends and the compounding effect they can have. For example the FTSE100 pays a better dividend than the S&P500.
When looking at a global tracker make sure you understand what global means.
The below shows the composition of the MSCI index family.
Many global trackers track the MSCI World Index; but note that does not include any emerging markets including China and India, doesn't seem very global when you look at it like that.
The MSCI World Index is dominated by the USA and the USA is dominated by the magnificent 7 (The “Magnificent 7” refers to the group of the U.S. tech giants, including Amazon, Meta, Microsoft, Nvidia, Google, Apple and Tesla). All have seen their market caps increase recently as Big Tech continues to dominate the U.S. stock market's landscape.)
When you look at it like that the global tracker doesn't seem as diversified as you may think ... (20% of your global tracker is in just 7 companies)
The below shows the world markets, you may wish to think about that when selecting which indexes you may wish to track. Note some big ones not in MSCI World Index.
Also note that the size of the market doesn't match the size of the national economy. America is *only* 28% of the global economy but the USA markets are a much bigger share.
Also note that when selecting its probably best to compare the accumulation version of the trackers to get the dividend effects rolled in.
Here are some examples below which map onto the MSCI graphic above. Note that different funds do better at different times, also note the global fund seems to track the S&P500 as that is its major constituent.
Also note that geographic diversification isn't as obvious as you may think For example 80% of the revenue of the FTSE100 is global so just because they are listed in the UK doesn't mean it is a domestic investment. Compare that with the S&P500 and 60% of their revenue is domestic. So in a way the FTSE100 is more of a global investment than the S&P500.
The FTSE100 is oil, drugs, banks, miners and consumer goods (all out of fashion) where as the S&P500 is tech dominated (34% !!)
Sometimes the the world needs more real stuff rather than another website ... so diversification isn't just about global spread but investing in a range of sectors.
Note these figures were done about 2 weeks ago using data from hl.co.uk
The above shows how different indexes have performed at different times recently. Point is they are different and so blended together give a good coverage. Just putting all your money in a global tracker maybe doesn't give you what you think it might ...
Note all the funds in the above list have fees ranging from 0.06% to 0.23% so they are all low cost funds.
As I say it's worth doing your homework to know exactly where your money is invested and if you think that mix is right for you. An MSCI World Index fund seems very focused on US/tech ... yes that has had a great run but who knows if that will continue???
Last edited by Montello; 26th March 2024 at 22:33.
All salient point, and worth adding that what is held within a tracker automatically changes over time to reflect the moving markets. As a market or individual stock increases in relative size then the tracker fund will rebalance to hold more of it and slightly less of shrinking companies. 20 or 30 years ago Japanese stocks would have had a heavier weighting, alongside companies like Chrysler, Eastman Kodak, and Xerox. In another 20 years many think Indian stocks will surge, so would take a larger allocation of a global index. Hence the 'set and forget' comment - if happy with the construct of a tracker fund, then it will constantly rebalance to maintain its purpose (at low cost).
If you think India will surge in the next 20 years and you hold a MSCI World Tracker you will miss out on any gain for the reasons explained above.
I referenced global trackers and actually don’t hold any MSCI tracker.
Edit - I actually think your graphic shows that the MSCI ACWI does include India?
Last edited by Halitosis; 25th March 2024 at 22:52.
What global tracker do you hold that includes India?
I think many buy a global tracker without really understanding what is under the bonnet. In some ways the titles are misleading.
Indeed but that isn’t the MSCI World Index.
Do you hold a fund that tracks MSCI ACWI? It likely gives less than 2% India exposure.
Last edited by Montello; 25th March 2024 at 23:41.
Thanks for taking the time to provide such detailed comments, it is really helpful to understand some of the nuances in what I thought should be quite straightforward trackers!
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