Still a noob in need of help lol

[plaguedbyfoibles]

Intending on opening a Stocks and Shares ISA (effectively the UK equivalent of a Roth IRA used for equity investing, for any Americans out there) with Vanguard, with my first investment being an index fund, pursuing a dollar cost averaging / drip feed strategy.

Given the volatility of sterling right now, should I prioritise a US oriented index fund rather than a FTSE one?

Or should I treat the sterling crisis as short term noise?

I earn £30,000 per annum at my current employer (who have a performance linked bonuses structure in place for which I am eligible), have about £60,000 in savings, have £3,416.85 as of 24th September 2022 from my previous workplace pension, and have no debt whatsoever, either short- or long-term (I never attended university, opting instead to undertake an apprenticeship).

Currently, I am 27 years of age.

[Gerry557]

Well in theory the US one has just become more expensive due to the change in FX and the drop in equities supports cheaper UK buying.

The pound has been falling for years against the dollar. If that continues into your time horizon then the price now won't matter.

If you think things might swing back in the future then stick with UK.

You could hedge your bets and buy both or 3 and get some Asian ones too.

[gryffron]

The companies making up the FTSE100 have 75% foreign earnings, so in theory it isn't closely tied to either the UK economy or sterling. Certainly, FTSE100 rises when sterling falls. Because profits are earned in forex but priced in sterling.

Dollar is very strong at the moment, so purchasing US assets is expensive compared to even a few weeks ago. As to whether it will continue to get stronger or fall back when Ukraine/energy crisis abates... who knows?

FTSE250 is a slightly better tracker of UK economy, with @50% foreign/UK earnings. Though whether that is a good thing?...

FWIW My personal call is that with the current suicide squad in Downing Street, likely to be followed by a Labour govt who always inflate/devalue, I'd expect US to do better than UK in the next few years. But even that doesn't necessarily mean S&P500 will outperform FTSE100. Maybe the relative performance is already in the current price? Or maybe the suicide squad's ideas will work?

This isn't helping much is it? Ok. Shares have outperformed cash over EVERY rolling 20 year period since 1900. So buy shares - somewhere.

Gryff

[MDW1954]

UK plc is currently on sale. I'd go for the more UK-focused FTSE 250, rather than the FTSE 100.

Don't pick individual shares -- you don't sound quite ready for that.

Plenty of cheap index trackers out there. Two-thirds FTSE 250/ FTSE All-Share, the balance elsewhere. S&P500 if equities are your thing -- you're young enough. A resource ETF? Something like that.

MDW1954

[mc2fool]

The companies making up the FTSE100 have 75% foreign earnings, so in theory it isn't closely tied to either the UK economy or sterling. Certainly, FTSE100 rises when sterling falls. Because profits are earned in forex but priced in sterling.

In theory rather than certainly ... GBP:USD vs FTSE 100, last 12 months

[kempiejon]

Given the volatility of sterling right now, should I prioritise a US oriented index fund rather than a FTSE one?

I have no idea which is better or rather will turn out to have been better USA of UK. As Gerry557 said you can try a bit of both. For the past few tax years I have dripped money into a vanguard global tracker, that's about 60% USA 6% Japan and around 2 or 3 percent in each of UK, China, Canada, India and decreasing percentages in a whole bunch of other regions. I use VWRP the accumulating version which means I do not have to re-invest dividends and as it's in an ISA avoids the nuisance of tax on rolled up income.
So that's a fair chunk into USA but also covers the rest of the world. You could top up that UK weighting with a 2nd fund in the FTSE if that's what you fancy. I like VWRP as a one stop shop that's good enough for my purposes. I also have a pretty diverse, mostly UK-listed holdings that I've built over a decade but for now I like the simplicity of one holding for each new ISA year.

[LooseCannon101]

One or more highly diversified global investment trusts e.g. F&C (FCIT), Alliance or Witan might be suitable as a long-term holding instead of a world equity index tracker.

Any investment needs to be for a minimum of 20 years, with dividends re-invested and within an ISA. Pound-cost averaging is also a good way to add to the pot without having to worry about timing. Drops in price of 20% are quite common and should be expected every 3-4 years. I can guarantee that there will be even bigger drops over the next 20 years+.

F&C (which I hold), has an excellent savings scheme, uses an All World equity index as its benchmark and achieved about 9% on average per year total return since 2002.

[Bubblesofearth]

Any investment needs to be for a minimum of 20 years,

So if your investment horizon is 19 years you would recommend cash?

BoE

[Urbandreamer]

Intending on opening a Stocks and Shares ISA (effectively the UK equivalent of a Roth IRA used for equity investing, for any Americans out there) with Vanguard, with my first investment being an index fund, pursuing a dollar cost averaging / drip feed strategy.

I suspect that you may be restricted in what you can buy if you use Vanguard for your ISA. Nothing wrong with their products and their fees are good, I'm just pointing out that you may or may not be able to invest in the likes of FCIT (as suggested).

A podcast that I listened to today (Money Makers) pointed out that everything is down this year. In particular that the S&P is down 25%.... in $ terms. We don't see that entire fall because the £ has fallen against the $. Will the $ continue to be strong? Will our own economy continue to falter?

Personally I'm diversifying, which is not the same as buying a global tracker. Global trackers have the majority of their investments in US assets. Hence I'm buying an Alphabet of investment trusts. Everything from the FCIT mentioned to RICA (who are actually mostly in cash). I'm even buying small amounts of Bitcoin.

With respect to global trackers, they are a great product, as long as you know what you are buying. I stated that they are mostly invested in the US, but that was a generalization. In particular Vanguards lifestatergy has a distinct UK bias, unlike their other global trackers. If you are concerned about the UK, you might want to pick other products from Vanguard.

At the risk of causing you to put off or delay a choice, this article is a good read.
https://occaminvesting.co.uk/best-vangu ... r-fund-uk/

I hope this helps.

[LooseCannon101]

Any investment needs to be for a minimum of 20 years,

So if your investment horizon is 19 years you would recommend cash?

BoE

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

Buying a highly diversified global investment trust which has low borrowings and is well managed, re-investing dividends and buying monthly should deliver excellent returns. 9% on average (FCIT's past returns) means that the original investment will be 8 times larger in 24 years time.

Compound interest works wonders so long as you choose the right investment.

[XFool]

Any investment needs to be for a minimum of 20 years,

So if your investment horizon is 19 years you would recommend cash?

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

Buying a highly diversified global investment trust which has low borrowings and is well managed, re-investing dividends and buying monthly should deliver excellent returns. 9% on average (FCIT's past returns) means that the original investment will be 8 times larger in 24 years time.

Compound interest works wonders so long as you choose the right investment.

You are Pastcaring and I claim my £20 M&S voucher!

[TUK020]

Any investment needs to be for a minimum of 20 years,

So if your investment horizon is 19 years you would recommend cash?

BoE

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

Buying a highly diversified global investment trust which has low borrowings and is well managed, re-investing dividends and buying monthly should deliver excellent returns. 9% on average (FCIT's past returns) means that the original investment will be 8 times larger in 24 years time.

Compound interest works wonders so long as you choose the right investment.

Nominal or real?

[Bubblesofearth]

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

I've re-read the OP and cannot see a quote of 20.

Elsewhere I've seen between 5 and 10 years quoted as the minimum time horizon before investment in equities is advised. Often with the % allocation to equities increasing as this horizon gets longer.

The reason I'm picking up on this is because, IMO, it becomes riskier over long periods of time to hold cash. Not riskier defined by volatility of course but from the pov of erosion of capital from inflation.

I don't think I've ever seen 20 years as a minimum time horizon for investment before.

BoE

[GoSeigen]

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

I've re-read the OP and cannot see a quote of 20.

Elsewhere I've seen between 5 and 10 years quoted as the minimum time horizon before investment in equities is advised. Often with the % allocation to equities increasing as this horizon gets longer.

The reason I'm picking up on this is because, IMO, it becomes riskier over long periods of time to hold cash. Not riskier defined by volatility of course but from the pov of erosion of capital from inflation.

I don't think I've ever seen 20 years as a minimum time horizon for investment before.

BoE

OMG if we're going to be pedantic let's make an effort to understand what is being written. The 20 years was proposed by LooseCannon101 himself, a figure based loosely on his assessment of the OP's investment horizon based on the fact that the OP is 27 years old. Perfectly reasonable for the suggested funds IMV especially given that share duration is so high at the moment. 20 years is too little in some markets in fact, 40 years is about right for WTAN, for example.

GS

[1nvest]

Yes - Perhaps 10 might be the minimum, but 20 was quoted as the OP stated that he was 27.

I've re-read the OP and cannot see a quote of 20.

Elsewhere I've seen between 5 and 10 years quoted as the minimum time horizon before investment in equities is advised. Often with the % allocation to equities increasing as this horizon gets longer.

The reason I'm picking up on this is because, IMO, it becomes riskier over long periods of time to hold cash. Not riskier defined by volatility of course but from the pov of erosion of capital from inflation.

I don't think I've ever seen 20 years as a minimum time horizon for investment before.

BoE

Historically at 10 years the risk of stock compared to cash (3 year Gilt Ladder) was very low

[1nvest]

given that share duration is so high at the moment. 20 years is too little in some markets in fact, 40 years is about right for WTAN, for example.

Inverse of WTAN's 2.5% dividend yield to deduce a 40 year duration?

If so then what about FCIT's dividend yield of around 1.5% = 66 years!