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

[snydau]

Hi,

I need a kind guidance/suggestion from people who have more experiences with passive investment strategy. I'll give a short background info and the goal I am trying to work towards:

1. I have a stock and shares ISA with iWeb containing 10 holding mostly dividend paying, I started building up about 5 years ago and adding about £10K per annum. My original plan was to grow my capital as much as possible and to educate myself in equity investing as much as possible. In this 5 years and without putting out figures I believe I have succeeded to break even. I do read about a lot on equity investment including books and have read many of warren's letters to shareholders.
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.

I now want to accept this realisation out of personal experiences and was wondering if anyone here could add more any advise. My goal is to prepare for retirement and am still about 15 to 17 years away from it. Also, will like to be handoffs completely.

QQQ
- I will like a passive world tracker - would people recommend any of the Vanguard's options.
- I will also like an S&P 500 index tracker - would people recommend any pf the Vanguard's options.
- Should I close my iWeb account and transfer everything to a new funds provider (Vanguard, Fidelity etc) or buy the funds with iWeb?

Any opinion from people who have experience with passive index funds will be appreciated.

[Alaric]

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

Provided the funds you are interested in are available on iWeb and there are no adverse charges, there doesn't seem a case to switch. You may with to consider opening a new account and keeping the existing one. That's to give resilience in the event of a problem with one of them. If outside an ISA or SIPP you need to be aware of CGT implications of changing strategy.

[Urbandreamer]

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.

While I am not convinced of that statement, I would accept that an index tracker does have a place in most peoples portfolios and that for many it's preferable as they invest purely for the returns or to avoid depreciating currency.

While I've always been an active investor I do have 20% in a Vanguard world tracker. I'd advise NOT picking the one that I picked (VWRL). Nothing actually wrong with it and it is less UK centered than their Lifestrategy product. However it distributes dividends in USD, which leads to a FX cost.

Possibly VWRP would suit better, as the lack of distribution avoids FX.

Personally I see no reason why you need to move your account. I hold VWRL in II, who cope with multiple currencies. Moving to Vanguard would limit you to their products.

FWIW, I also hold a gold ETF in the same account, and Vanguard do not offer that option.

[mc2fool]

Hi,

I need a kind guidance/suggestion from people who have more experiences with passive investment strategy. I'll give a short background info and the goal I am trying to work towards:

1. I have a stock and shares ISA with iWeb containing 10 holding mostly dividend paying, I started building up about 5 years ago and adding about £10K per annum. My original plan was to grow my capital as much as possible and to educate myself in equity investing as much as possible. In this 5 years and without putting out figures I believe I have succeeded to break even. I do read about a lot on equity investment including books and have read many of warren's letters to shareholders.
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.

I now want to accept this realisation out of personal experiences and was wondering if anyone here could add more any advise. My goal is to prepare for retirement and am still about 15 to 17 years away from it. Also, will like to be handoffs completely.

QQQ
- I will like a passive world tracker - would people recommend any of the Vanguard's options.
- I will also like an S&P 500 index tracker - would people recommend any pf the Vanguard's options.
- Should I close my iWeb account and transfer everything to a new funds provider (Vanguard, Fidelity etc) or buy the funds with iWeb?

Any opinion from people who have experience with passive index funds will be appreciated.

Welcome to The Lemon Fool.

Small point of order, the Vanguard LifeStrategy funds aren't strictly index funds not strictly passive but rather "...is actively managed in that the Investment Adviser has discretion in respect of the Associated Schemes [Vanguard passive index funds] in which the Fund may invest and the allocations to them, each of which may change over time."*, and they choose to have a relatively heavy weighting to the UK (compared to the world indices).

In answer to your questions: VWRL/VWRP (inc/acc) seem to be the go-to ETFs for a world tracker round here, although you won't go wrong with one of the iShares options either. One of the usual suspects will undoubtedly point out that you can shave a bit off of the ongoing charges of VWRL/VWRP by going for 90.7% VEVE/VHVG (Developed World) plus 9.3% VFEM/VFEG (Emerging Markets) for the same end exposure, but then of course you'll need to rebalance them occasionally if you want to maintain them as a VWRL/VWRP clone.

Re an S&P tracker, again, you'll not go wrong with either a Vanguard or iShares one, but the question really is do you want to be so US heavy? I don't know the answer to that, but world trackers are already majority USA, e.g. VWRL is currently 62.2% USA.

Re broker, I'd say definitely stick with IWeb. As you know, there's no holding or annual charges, whereas Vanguard charges 0.15%pa (max £375), which if you have £50K, as implied by your OP, is £75pa, and Fidelity 0.35%, capped at £90pa if you hold only ETFs. You can do quite a few £5 IWeb trades for those amounts, and if you're passive you're not going to be doing many at all.

* https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/overview

[kempiejon]

QQQ
- I will like a passive world tracker - would people recommend any of the Vanguard's options.
- I will also like an S&P 500 index tracker - would people recommend any pf the Vanguard's options.
- Should I close my iWeb account and transfer everything to a new funds provider (Vanguard, Fidelity etc) or buy the funds with iWeb?

Welcome.
A world tracker will be about 65% USA so there will be a lot of replication between a passive world tracker and an S&P500 index tracker. And you are moving away from a globally capital weighted strategy to a USA biased investment.
There's no reason to necessarily close your iWeb as you can buy trackers in that account.

[snydau]

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

Provided the funds you are interested in are available on iWeb and there are no adverse charges, there doesn't seem a case to switch. You may with to consider opening a new account and keeping the existing one. That's to give resilience in the event of a problem with one of them. If outside an ISA or SIPP you need to be aware of CGT implications of changing strategy.

Many thanks for this suggestions - I am aware that I still need to keep within my ISA limit so my original consideration was for yet a second ISA account with vanguard in the new tax year next month. But replies here already suggests there is no need for a second account and the change in strategy can occur with the iWeb account.

[snydau]

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.

While I am not convinced of that statement, I would accept that an index tracker does have a place in most peoples portfolios and that for many it's preferable as they invest purely for the returns or to avoid depreciating currency.

While I've always been an active investor I do have 20% in a Vanguard world tracker. I'd advise NOT picking the one that I picked (VWRL). Nothing actually wrong with it and it is less UK centered than their Lifestrategy product. However it distributes dividends in USD, which leads to a FX cost.

Possibly VWRP would suit better, as the lack of distribution avoids FX.

Personally I see no reason why you need to move your account. I hold VWRL in II, who cope with multiple currencies. Moving to Vanguard would limit you to their products.

FWIW, I also hold a gold ETF in the same account, and Vanguard do not offer that option.

@urbandreamer - thanks for this. I also love the idea of being an active investor but the ultimate goal is to grow capital and my circa 5 years experience seems to teach me I'll be better off with a passive strategy. May be I'll start with a mixture first.

Just to sure - what is VWRL and what is VWRP - apology for my ignorance please

[snydau]

In answer to your questions: VWRL/VWRP (inc/acc) seem to be the go-to ETFs for a world tracker round here, although you won't go wrong with one of the iShares options either. One of the usual suspects will undoubtedly point out that you can shave a bit off of the ongoing charges of VWRL/VWRP by going for 90.7% VEVE/VHVG (Developed World) plus 9.3% VFEM/VFEG (Emerging Markets) for the same end exposure, but then of course you'll need to rebalance them occasionally if you want to maintain them as a VWRL/VWRP clone.

Re an S&P tracker, again, you'll not go wrong with either a Vanguard or iShares one, but the question really is do you want to be so US heavy? I don't know the answer to that, but world trackers are already majority USA, e.g. VWRL is currently 62.2% USA.

Re broker, I'd say definitely stick with IWeb. As you know, there's no holding or annual charges, whereas Vanguard charges 0.15%pa (max £375), which if you have £50K, as implied by your OP, is £75pa, and Fidelity 0.35%, capped at £90pa if you hold only ETFs. You can do quite a few £5 IWeb trades for those amounts, and if you're passive you're not going to be doing many at all.

I thunk I havent's considered the annual charges with Vanguard yet, so will defo make sense to stick with iWeb unless if there is any reason to have a second ISA shelter. Do people keep their ISA with just one provider?

I just wanted to be sure of what you're referring to. Please can you post a link to where the below are described so I can read up on them?

- VEVE
- VHVG
- VFEM
- VFEG
- VWRL
- VWRP

Many apology for my ignorance

[mc2fool]

I thunk I havent's considered the annual charges with Vanguard yet, so will defo make sense to stick with iWeb unless if there is any reason to have a second ISA shelter. Do people keep their ISA with just one provider?

I just wanted to be sure of what you're referring to. Please can you post a link to where the below are described so I can read up on them?

- VEVE
- VHVG
- VFEM
- VFEG
- VWRL
- VWRP

Many apology for my ignorance

Ah, I thought as you'd mentioned Vanguard index funds in your OP you'd probably already be familiar with them. Here's VWRL/VWRP, for the others just stick the ticker into the search box at the top right of the page.

https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-ucits-etf-usd-distributing/overview

[Urbandreamer]

Just to sure - what is VWRL and what is VWRP - apology for my ignorance please

Vanguard do a range of ETF's and funds.

VWRL:
Vanguard FTSE All-World UCITS ETF USD Distribution: I.E a index tracker like you wanted, but distributing any dividends in $'s.
https://www.vanguardinvestor.co.uk/inve ... query=VWRL
VWRP:
Vanguard FTSE All-World UCITS ETF USD Accumulation: I.E, the same thing, but dividends are automatically reinvested to provide compound growth.
https://www.vanguardinvestor.co.uk/inve ... g/overview

Both are purchased and sold in £'s.

Apologies for using the tickers. They are just how I think of them and identify the difference.
Also apologies, I assumed that IWeb would buy and sell them, but a quick web search seems to suggest that they may not.

I do have ISA's with more than one provider, and you can now (recent budget) contribute to more than one in the same year.
There are costs to using more than one, but arguably it can be as cheap. Different providers charge differently and offer different services and levels of service. I use II, A J Bell and a traditional stockbroker (who are not cheap).

[kempiejon]

Also apologies, I assumed that IWeb would buy and sell them, but a quick web search seems to suggest that they may not.

I have bought the accumulating Vanguard global tracker VWRP in my iWeb ISA within this tax year.

[mc2fool]

Do people keep their ISA with just one provider?

For most it's a matter of size and/or mission criticality. Many look at having a second ISA when their first goes over the FSCS compensation limit of £85K, just to sleep better at night. However, very very few (if any) get a new provider for each £85K. While many split their holdings between two or sometimes three, I don't recall anyone on these boards saying they'd gone any further than that, irrespective of how big their portfolios are. There's been plenty written on TLF about FSCS cover for brokers, I suggest you search for previous discussion rather than let this one get diverted that way.

The other common reason for using more than one is mission criticality. While, as long as you stick to the "big" names it's unlikely you'll ever need to call on the FSCS for compensation, what is more likely to happen is that a broker has an issue that stops your access for a while, maybe an extended while. Some people that depend on their portfolios for their income or part thereof will go for a second (or third) broker just so that if that happens they don't stop receiving all of their income until the problem is sorted.

[xxd09]

I think your daughters Junior ISA says it all and this is an index tracker with a U.K. bias-a true world tracker would probably have done better!
A world equity index tracker is all an amateur investor needs -use a reputable company ie Vanguard etc
Then leave the fund alone -let the stockmarket do its thing-no tinkering-and as well live frugally,save as much as you can and keep those investing expenses down-all 3 of these under your direct control
xxd09

[GeoffF100]

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.

I'd advise NOT picking the one that I picked (VWRL). Nothing actually wrong with it and it is less UK centered than their Lifestrategy product. However it distributes dividends in USD, which leads to a FX cost.

Possibly VWRP would suit better, as the lack of distribution avoids FX.

USD dividends lead to an FX cost only if you use a platform that charges for converting the dividends. Vanguard, iWeb, Halifax, Lloyds and Bank of Scotland do not. IBKR charges very little. The situation is improving but the accumulating versions of the Vanguard equity funds still usually have wider spreads and bigger premium/discounts than the distributing ones.

VEVE plus a market weight of VFEM is cheaper than VEVE, but VEVE usually has a wider spread and a bigger premium/discount than VWRL.

[GeoffF100]

One of the usual suspects will undoubtedly point out that you can shave a bit off of the ongoing charges of VWRL/VWRP by going for 90.7% VEVE/VHVG (Developed World) plus 9.3% VFEM/VFEG (Emerging Markets) for the same end exposure, but then of course you'll need to rebalance them occasionally if you want to maintain them as a VWRL/VWRP clone.

If the developed world part of VWRL grows by 100% and the emerging market part of VWRL grows by 50%, their market weights grow in the same proportion, so no rebalancing is needed.

VFEM does. however, contain more stocks than the emerging markets part of VWRL. It is possible that these extra tiddlers could grow faster (or slower) than the larger stocks in the emerging markets part of VWRL, but the overall effect on the market weighting is likely to be very small. You do not need to worry about rebalancing.

I just add new funds to the developed world, and occasionally add to VFEM when it has become significantly underweight. That saves brokerage commission. I am not worried about being a little underweight in emerging markets. They have underperformed in recent years, but that could of course change.

[GeoffF100]

At the end of last month VWRL had 62.2% in the US. That is more than enough for most people. The US market, and particularly the Magnificent 7, have outperformed for a long time, and their valuations have become very high as a result. Vanguard and others are consequently predicting that they will underperform over the next ten years. In reality, it is anybody's guess what will happen, but I would not overweight the US. You make money by buying low and selling high, not the other way around.

[snydau]

thanks to all who replied to my original questions and offer some helpful insights. I have now been able to dig into all those acronyms and and been able to make some sense of what they are. I have come up with a list from where I will select either one or a combination of two. The list is below:

1. VWRP
2. VHVG
3. VFEG
4. VUAG
5. VGL100A

However, I am hoping to gradually build up my funds/etfs portfolio for the long term and just pondering some additional questions to aid my own research.

1. What similar funds/etfs are available to us in the market that offers the same exposures / performance to the above products?
2. Are there cheaper alternatives to these funds/etfs.
3. How are people keeping their total cost of ownership down?

Any suggestion will be appreciated.

[GeoffF100]

However, I am hoping to gradually build up my funds/etfs portfolio for the long term and just pondering some additional questions to aid my own research.

1. What similar funds/etfs are available to us in the market that offers the same exposures / performance to the above products?
2. Are there cheaper alternatives to these funds/etfs.
3. How are people keeping their total cost of ownership down?

Any suggestion will be appreciated.

Building up a portfolio should mean having as few investments as you reasonably can. Simple is good. HSBC FTSE All-World Index Fund C is marginally cheaper. If you want super cheap, and do not mind an ETF, there is PRIW, and Amundi has a super cheap emerging markets ETF too. For bond exposure, you can use an individual gilt.

[JohnW]

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.

'I will also like an S&P 500 index tracker - would people recommend any pf the Vanguard's options.'

Yes, the SP500 has been a winning index for some years, but to choose that specifically smacks of performance chasing which is a poor strategy for choosing an asset mix and well recognised for second rate returns (see Morningstar's 'mind the gap' research). Some would say you've fallen prey to recency bias: undue influence by something prominent because it's recent. That aside, the theory is that the best returns for risk come from a market cap weighted holding, and adding the SP500 to a global index detracts from that. You'd be taking more risk, so you might get better returns (or worse returns) than just a global index; do it by all means if you understand all that, otherwise read Hale.

'I also love the idea of being an active investor but ...'

Yes, it can be fun to invest some your money that way if you can afford it, but don't imagine you'll likely benefit compared to the index funds alternative. The index investor can only, but must, get market returns less costs. That only leaves market returns for the active investors to squabble over, so on average they can only get market returns less costs as well (and their costs are usually higher). More money into the hands of the financial services industry and less into the hands of investors, it makes no sense.
To get better than market returns as an active investor you have to get it from active investors getting less than market returns. Don't imagine you'll do that by skill unless you're a real hot-shot because you're up against professionals with cadres of analysts behind them and Bloomberg terminals in front of them. But you could beat the market by luck. The market is already risky enough, do you want to add that extra risk of luck?
Some people around here think there's a place for bonds in a portfolio. If you can't put up a cogent argument for not wanting bonds, and you can't be bothered going to the library, read Ferri or Bernstein's books on asset allocation, or another couple free online: https://rickferri.com/wp-content/upload ... t-Talk.pdf and https://ia803405.us.archive.org/23/item ... esting/The Bogleheads' Guide to Investing.pdf

[Hariseldon58]

A slightly cheaper all world index fund is offered by HSBC, 0.13% pa , it is a fund rather than an ETF but you can hold this without any additional charges with ii. Same index as VWRL.

(There is also an Invesco ETF at .15% tracking the same index as VWRL)