Suggestion on transferring individual stock selection strategy to an Index funds strategy

[snydau]

Once again, many thanks to all that have contributed some suggestions here and those suggestions has taken me to read up on a few topics that I have been ignoring for many years. I am now leaning towards focusing to research on just two funds or just two etfs as follows:

- a global/world stock market index tracker fund
- a global/world bond market index tracker fund

My thinking at this point is to gradually sell off all my individual stock holdings and transfer to above. I am a newbie to funds/etfs and don't know much of the ropes yet other than they are safer/better.

QQQ
Can anyone here who have more experience in this field advise on how I can equip myself with more knowledge that will help me take more informed decisions? I am looking for things like - how do I choose from the different providers? how do I compare the cost? how do I allocate between the two? What risks or expected things have people experienced in the past? etc etc and anything really ....

[TUK020]

Once again, many thanks to all that have contributed some suggestions here and those suggestions has taken me to read up on a few topics that I have been ignoring for many years. I am now leaning towards focusing to research on just two funds or just two etfs as follows:

- a global/world stock market index tracker fund
- a global/world bond market index tracker fund

My thinking at this point is to gradually sell off all my individual stock holdings and transfer to above. I am a newbie to funds/etfs and don't know much of the ropes yet other than they are safer/better.

QQQ
Can anyone here who have more experience in this field advise on how I can equip myself with more knowledge that will help me take more informed decisions? I am looking for things like - how do I choose from the different providers? how do I compare the cost? how do I allocate between the two? What risks or expected things have people experienced in the past? etc etc and anything really ....

Try reading this:
https://monevator.com/category/investin ... investing/

[monabri]

- Should I close my iWeb account and transfer everything to a new funds provider (Vanguard, Fidelity etc) or buy the funds with iWeb?

Transfer from iWeb to VG : No.

As others have said...there are sometimes cheaper alternatives to VG's products...you couldn't buy these if you were with VG. If you search previous posts on TLF you will find suggestions/ discussion.

[monabri]

Suggestions

....post a list of your current shareholdings ( company name and percentage holding) and solicit opinions ( board Portfolio Management & Review). A strategy for retirement might be to keep what you have and build up new holdings in the tracker funds. What I'm suggesting is to not just dump individual shares because you think / recent past performance World Trackers are the way to go.

...... search TLF for posts regarding just having one trading platform and FSCS risk.

viewtopic.php?p=649775#p649775 ( follow the links in the posts as well...I've posted reviews on " my personal experiences".....a mighty fine ( long) read if I say so myself ... ).

[xxd09]

Monevator has a comparison pages on platforms and funds plus relevant U.K. info
Take your time and keep reading
A global equity index tracker and a global bond index tracker hedged to the pound is enough for most amateur investors
Cheap .simple and easy to understand and manage
xxd09

[monabri]

Monevator has a comparison pages on platforms and funds plus relevant U.K. info
Take your time and keep reading
xxd09

Yes, keep reading!

[Hariseldon58]

If you wanted to read one book on the subject of investing then I’d suggest the new revised edition of “The four pillars of investing” by William Bernstein. It’ll give you enough information to be pretty well informed and yes you can save £16 by browsing the net but it’s £16 well spent.

There are other great books but this one is very up to date and both detailed enough but not too complex

A Global Index fund of almost any variety is a great option for investing in equities.

With a seven figure portfolio that’s my only equity investments, albeit I spread the provider risk and use several funds/etfs.

Having invested in numerous Investment Trusts etc the simple solution just works at minimal cost.

(You might wish to add some bonds as well)

[Fluke]

I'd say you're on the right track, but a couple of points come to mind. If none of the books you've read is Hale's Smarter Investing head for your local library and get it: search.worldcat.org for your library. It's light years ahead of any of Buffett's newsletters for our needs. You can read some of it on google books.

Bit late coming to this thread, thanks for the book suggestion JohnW, not one I'd read, from the sample it looks very good. Can I ask did you construct a portfolio based on these principles? and if so what did you go for?

Thanks.

[JohnW]

Hale's book was bursting with commonsense based on financial history and logical arguments for me, written with a clear step by step approach to investing, and aimed at UK readers. Despite the reputation of books like A Random Walk down Wall street most don't come close to Hale for being practical. I thought an early edition put undue emphasis on REITs and the like at the expense of simplicity, but any differences in outcomes for investors would likely have been very small. So his approach is not the only way, nor is it unique being heavily based on Bogle and Vanguard's approach, but it's better to know it and decide 'it's not for me' than overlook it.
Because our individual circumstances, values and risk judgments are different I doubt anyone's individual portfolio should influence others' choices very much. Better, gather the merits and shortcomings of different options to see which suits each of us best. Bonds suit some folk but not others; just understand duration and inflation risk with bonds, and your and my choices can be very different but right in both cases.

[GeoffF100]

If none of the books you've read is Hale's Smarter Investing head for your local library and get it: search.worldcat.org for your library.

Now in its fourth edition:

https://www.amazon.co.uk/Smarter-Invest ... B0CDG6YZMX

[Bubblesofearth]

2. About 4 years ago, I opened a junior ISA for my daughter and chuck some £££ into Vanguard LifeStrategy 100 and kind of forget about it. I had to to review the Junior ISA aa few months ago and to my surprise the performance is circa +50%. This experience is pushing me to accept the realisation of what I have read in many places that for an ordinary investor - an index fund is preferable.

Hi snydau

Worth looking at why this performance has been so good. It''s basically down to the strength of the US market which dominates Global trackers. It's anybody guess whether this trend will continue but IMO valuations for a lot of big US companies now look stretched.

Please note that, notwithstanding the above, I'm a fan of low cost index funds!

BoE

[hiriskpaul]

I am helping a relative sort out his investments. He was going to transfer everything into a global tracker, but I pointed out he could save money by holding regional trackers instead. This is the proposed asset allocation once everything is consolidated into his InvestEngine account:

62% I500 iShares S&P 500 Swap (0.05% TER)
16% PRIE Amundi Prime Europe (0.05% TER)
6% PRIJ Amundi Prime Japan (0.05% TER)
4% PAXG Amundi MSCI Pacific Ex Japan (0.12% TER)
3% HCAN HSBC MSCI Canada (0.35% TER)
9% EMGU iShares MSCI Emerging Markets IMI (0.18% TER)

These are close to the weights in VWRL and the intention is to update the target weights every year or so as the weights in VWRL change. The aggregate TER is 0.0735%, compared to VWRL at 0.22%, but there are other savings. The biggest is in US dividend withholding tax. I500 is swap based and as such avoids the 15% withholding tax on US shares. With a US market dividend yield of 1.4% before tax, that saves about 0.13% compared to VWRL (62%*1.4%*15%). The second saving is with the stock lending that iShares do in EMGU which brings the TER of EMGU down to about 0.07%. Once those savings are taken into consideration, this portfolio saves about 0.28% over VWRL.

I am not really convinced that HCAN is worth holding. Canada is only 2.4% of the World market (2.4% of VWRL) but is very expensive to track compared with the other trackers. Over the long term I doubt there would be much benefit including it.

[xxd09]

A interesting balance is to be struck between convenience,easy to manage and understand portfolios ie one fund and saving on costs with a five to six fund portfolio plus rebalancing work etc
Possibly if younger investor with interest in finance multi fund portfolio is the way to go (those fund costs really count over the long term ie 30+ years) and the older retired investor with less time and ability to manage more complicated portfolios will tend to a one fund portfolio
xxd09

[GeoffF100]

These are close to the weights in VWRL and the intention is to update the target weights every year or so as the weights in VWRL change.

You posted some time ago about under weighting the US, but seem to have given up on that. Is the capitulation of the last US bear an indication that the US market is about to crash?

[hiriskpaul]

These are close to the weights in VWRL and the intention is to update the target weights every year or so as the weights in VWRL change.

You posted some time ago about under weighting the US, but seem to have given up on that. Is the capitulation of the last US bear an indication that the US market is about to crash?

I do underweight the US in my own portfolio, but it is not a strategy that has worked!

There are good arguments to keep things simple and weight by market cap. However, the best indicator we have of long term market returns is starting valuation, CAPE, etc. By valuation, the US market is much more highly valued than non-US. OTOH this is common knowledge, so maybe this information is reflected in the price. I don't have an answer.

[hiriskpaul]

I am helping a relative sort out his investments. He was going to transfer everything into a global tracker, but I pointed out he could save money by holding regional trackers instead. This is the proposed asset allocation once everything is consolidated into his InvestEngine account:

62% I500 iShares S&P 500 Swap (0.05% TER)
16% PRIE Amundi Prime Europe (0.05% TER)
6% PRIJ Amundi Prime Japan (0.05% TER)
4% PAXG Amundi MSCI Pacific Ex Japan (0.12% TER)
3% HCAN HSBC MSCI Canada (0.35% TER)
9% EMGU iShares MSCI Emerging Markets IMI (0.18% TER)

These are close to the weights in VWRL and the intention is to update the target weights every year or so as the weights in VWRL change. The aggregate TER is 0.0735%, compared to VWRL at 0.22%, but there are other savings. The biggest is in US dividend withholding tax. I500 is swap based and as such avoids the 15% withholding tax on US shares. With a US market dividend yield of 1.4% before tax, that saves about 0.13% compared to VWRL (62%*1.4%*15%). The second saving is with the stock lending that iShares do in EMGU which brings the TER of EMGU down to about 0.07%. Once those savings are taken into consideration, this portfolio saves about 0.28% over VWRL.

I am not really convinced that HCAN is worth holding. Canada is only 2.4% of the World market (2.4% of VWRL) but is very expensive to track compared with the other trackers. Over the long term I doubt there would be much benefit including it.

I have realised that these weights are incorrect for MSCI index funds because South Korea is classified as an emerging market by MSCI, developed by FTSE, so the correct weighting is this:

62.2% I500 iShares S&P 500 Swap (0.05% TER)
15.5% PRIE Amundi Prime Europe (0.05% TER)
6.4% PRIJ Amundi Prime Japan (0.05% TER)
2.8% PAXG Amundi MSCI Pacific Ex Japan (0.12% TER)
2.4% HCAN HSBC MSCI Canada (0.35% TER)
10.7% EMGU iShares MSCI Emerging Markets IMI (0.18% TER)

Rounding produces this:

62% I500 iShares S&P 500 Swap (0.05% TER)
16% PRIE Amundi Prime Europe (0.05% TER)
6% PRIJ Amundi Prime Japan (0.05% TER)
3% PAXG Amundi MSCI Pacific Ex Japan (0.12% TER)
2% HCAN HSBC MSCI Canada (0.35% TER)
11% EMGU iShares MSCI Emerging Markets IMI (0.18% TER)

[GeoffF100]

There are good arguments to keep things simple and weight by market cap. However, the best indicator we have of long term market returns is starting valuation, CAPE, etc. By valuation, the US market is much more highly valued than non-US. OTOH this is common knowledge, so maybe this information is reflected in the price. I don't have an answer.

Common knowledge or not, the CAPE ratio has been a statistically good predictor of returns over the next ten years, particularly at the current extreme US valuation. Nonetheless, nobody can predict how much a bubble will expand before it bursts, let alone the timing. The non-US markets do not look particularly inviting. Too much money chasing too few investment opportunists may be the main issue.

I do not have an answer either. I have got a significant home bias and a market weight of emerging markets (relative to the other overseas shares), which dilutes the US a little. I allowed equities to become overweight when interest rates were low, and have mostly corrected that, but my crystal ball is clouded over.

[mc2fool]

There are good arguments to keep things simple and weight by market cap. However, the best indicator we have of long term market returns is starting valuation, CAPE, etc. By valuation, the US market is much more highly valued than non-US. OTOH this is common knowledge, so maybe this information is reflected in the price. I don't have an answer.

Common knowledge or not, the CAPE ratio has been a statistically good predictor of returns over the next ten years, particularly at the current extreme US valuation. Nonetheless, nobody can predict how much a bubble will expand before it bursts, let alone the timing. The non-US markets do not look particularly inviting. Too much money chasing too few investment opportunists may be the main issue.

I do not have an answer either. I have got a significant home bias and a market weight of emerging markets (relative to the other overseas shares), which dilutes the US a little. I allowed equities to become overweight when interest rates were low, and have mostly corrected that, but my crystal ball is clouded over.

January 2018: https://www.researchaffiliates.com/publ ... -are-wrong

We can have a spirited debate about whether the equilibrium US CAPE ratio is 16 or 20 or a notch higher. But at 32 times 10-year average earnings, no matter what adjustments we make, the US market is expensive.

US CAPE (cyclically adjusted price-to-earnings, or Shiller PE) ratios are at levels previously reached only in 1929 and during the tech bubble. In the fall of 2017, the US stock market surpassed a CAPE ratio of 32, nearly double its long-term historical norm of 16.6.

[hiriskpaul]

Common knowledge or not, the CAPE ratio has been a statistically good predictor of returns over the next ten years, particularly at the current extreme US valuation. Nonetheless, nobody can predict how much a bubble will expand before it bursts, let alone the timing. The non-US markets do not look particularly inviting. Too much money chasing too few investment opportunists may be the main issue.

I do not have an answer either. I have got a significant home bias and a market weight of emerging markets (relative to the other overseas shares), which dilutes the US a little. I allowed equities to become overweight when interest rates were low, and have mostly corrected that, but my crystal ball is clouded over.

January 2018: https://www.researchaffiliates.com/publ ... -are-wrong

We can have a spirited debate about whether the equilibrium US CAPE ratio is 16 or 20 or a notch higher. But at 32 times 10-year average earnings, no matter what adjustments we make, the US market is expensive.

US CAPE (cyclically adjusted price-to-earnings, or Shiller PE) ratios are at levels previously reached only in 1929 and during the tech bubble. In the fall of 2017, the US stock market surpassed a CAPE ratio of 32, nearly double its long-term historical norm of 16.6.

Yes and Jeremy Grantham has been on about it for years and turned out best ignored.

viewtopic.php?f=8&t=27232

If someone wants to buy a world tracker, or similarly weighted portfolio of geographical trackers they will get the market return, which is better than most fund managers get. Start playing around, thinking you know better than the market means taking on the risk of getting it wrong and underperforming. I am not going to argue with anyone who just wants market returns, CAPE or no CAPE.

[mc2fool]

January 2018: https://www.researchaffiliates.com/publ ... -are-wrong

We can have a spirited debate about whether the equilibrium US CAPE ratio is 16 or 20 or a notch higher. But at 32 times 10-year average earnings, no matter what adjustments we make, the US market is expensive.

US CAPE (cyclically adjusted price-to-earnings, or Shiller PE) ratios are at levels previously reached only in 1929 and during the tech bubble. In the fall of 2017, the US stock market surpassed a CAPE ratio of 32, nearly double its long-term historical norm of 16.6.

Yes and Jeremy Grantham has been on about it for years and turned out best ignored.

Methinks you mean that the all time high CAPE in 2017, which should have predicted poor returns going forward according to CAPEists, was best ignored (ok, there's still three years to go to the ten year mark).