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is FTSE 100 diversified enough?

Wider investment strategy discussions not dealt with elsewhere
hiriskpaul
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Re: is FTSE 100 diversified enough?

#151727

Postby hiriskpaul » July 11th, 2018, 12:05 pm

I think there is much to be said for a simple World tracker fund, ETF or OEIC, but other than slightly lower charges and control of weighting, the other reason I like to hold separate regional trackers is that of tax. By holding US listed ETFs in my SIPP I avoid 15% dividend withholding tax and I receive a tax credit on them outside my SIPP. The Japanese market has a lower dividend yield than Europe or Asia/Pacific, so I can reduce income tax by holding Japanese ETFs outside ISAs and other markets inside. It is certainly more hassle than holding World trackers, but overall I judge it worthwhile for me.

colin
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Re: is FTSE 100 diversified enough?

#151730

Postby colin » July 11th, 2018, 12:22 pm

richfool wrote:

OhNoNotimAgain wrote:

tjh290633 wrote:
A small investor has no hope of replicating market weighting, except by using a tracker fund. The only practicable way is to use nominally equal weighting and to be selective in stock selection to avoid over exposure to any one sector. The smaller companies in the main index are not necessarily less reliable than the giants.

As the article says, those who switch from other shares into tracker funds automatically enhance the price of the main constituents and depress those of the smaller constituents. Their weighting goes awry and the risk increases.

TJH



The evidence, Fama and French etc, tell us that smaller shares are riskier.

Most active managers, i.e. funds and private investors are overweight small caps because they think they know something about Tiddler PLC that no one else does. That was a winning strategy from 2009 to 2106 when QE favoured riskier shares. Since QE stopped at the start of 2016 the reverse has applied as evidenced by the relative performance of value strategies over those time periods.


I tend to see it that smaller domestically focussed companies have suffered because of concerns over Brexit, to the extent that their SP's have been disproportionately depressed, and that once Brexit is resolved, on whatever terms, they will recover, if not soar!



The data says otherwise:

FTSE 100 Yield 3.8% PE 13.4
FTSE 250 Yield 2.7% PE 15.2


No you are not looking at the data in enough detail, many FTSE 250 companies are exporters and so reporting increased earnings in sterling, fund managers have reported that the price of truly domestic focused companies have indeed been depressed by Brexit concerns.

richfool
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Re: is FTSE 100 diversified enough?

#151745

Postby richfool » July 11th, 2018, 1:40 pm

In response to "imagain", I don't track sectors, I rely on my IT managers to (actively) select the best stocks to hold.

In terms of mid and small caps, I hold SLS, MRC and ASCI, plus whatever (smaller) stocks the larger UK G&I trusts (e.g. SLET) hold .

OhNoNotimAgain
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Re: is FTSE 100 diversified enough?

#151783

Postby OhNoNotimAgain » July 11th, 2018, 4:42 pm

colin wrote:
No you are not looking at the data in enough detail, many FTSE 250 companies are exporters and so reporting increased earnings in sterling, fund managers have reported that the price of truly domestic focused companies have indeed been depressed by Brexit concerns.


That's probably because they bought them at a higher price. The FTSE 100 is more international than the the FTSE 250. As evidence for that I would cite the large percentage of FTSE 100 companies that account in dollars.

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Re: is FTSE 100 diversified enough?

#151825

Postby colin » July 11th, 2018, 6:29 pm

The FTSE 100 is more international than the the FTSE 250

well yes nobody would argue with that, i was trying to make another point which is that the average price level of FTSE 250 companies has been boosted by the exporters among them, whether they report in dollars or sterling doesn't make any difference, if sterling falls in value relative to other currencies then other countries will buy more of what these companies sell because they have become more competitive.
You seem to think that the price level of the FTSE 250 contradicts Richfools statement re Brexit hit companies . I am saying that it does not because the advantages arising to the exporters has overwhelmed the lack of interest in companies focused on our domestic market. If we want to present data as evidence then we need to divide the FTSE250 companies into two groups, those who export a lot and those who don't, problem is they don't always stay still long enough.


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