Great video, Toby. The classification of countries might be boring, but its good for people to know if they're mixing and matching a FTSE Developed World fund with an MSCI Emerging Markets fund, for example.
The other point I would add is the difference between Acc and Inc (which to be fair applies to all funds). Acc is the way to go ... Reinvesting dividends straight back into the index automatically with no trading costs.
Used to think investors lose out amid crash, meanwhile some make profits, I also thought folks went out of business during the great depression, but some went into biz. Bottom line, same time there's a crash, there's cash flow too, depends on your level of preparation.
Hi there. I find your videos very informative and educational. I know you are not a licensed financial advisor, so don’t worry about it. I am 50 and have just started investing in index funds. From diversification point of view, do you think it might not be too crazy to invest in let’s say S&P 500 and FTSE all world index funds? Thanks you in advance
Welcome and thanks. Remember that the FTSE all world has all of the S&P 500 stocks in already so I’d say you don’t need both. If you buy both you end up overweighting US stocks which is fine if you want but then that’s up to you 👍
The S&P 500 has averaged 11.95% for the last 10 years. I have no idea what mutual funds Dave Ramsey buys :) Any actively managed funds will cost you a lot more money than passive ones, and you are guaranteed to pay higher fees. People also make a lot of money pushing you into managed funds, especially financial advisors. Why do you ask the question?
I assume an index fund like the Vanguard S&P500 would be subject to tax now due to the gov uturn on fractional shares? Making my long investment plans go out the window. A higher rate tax payer would be giving almost half of their earnings to HMRC if this is the case making index funds a lot less appealing. Or do index funds not fall into this class?
An index fund is not a fractional share :) (although a fractional ETF could be classed as one not a mutual fund or a unit trust). I'm keeping an eye on this story but personally I don't think it will go anywhere
@@TobyNewbatt oh well that’s good news. I assumed because an index fund is made up of multiple shares it would be subject to the rule (if it goes ahead) so it’s only fractional shares you buy directly on platforms like T212..I guess that makes sense :/
I have fallen into the trap of having a fair few etfs in my SIPP. Most is in VWRL at 0.23% but then i also have others that are 0.5% and one at 1%. If i simplify it by putting it all into VWRL the likelihood is that Hargreaves Lansdown will charge me a fee for switching so im not entirely sure what to do!
HL charge a single trading fee for each time you buy or sell an ETF. Each trade is £11.95. So, if you have several ETFs to sell, you multiply the trading charge by the number of ETFS to get the total cost. If you are thinking of getting rid of non-ETF funds, you may need to consider the spread (ie, buy versus sell prices) if there is one. But non-ETFs, do not incur a trading charge. Investment Trusts also incur a trading charge. So you need to know what you hold. Assuming you complete all the sales before you re-invest, that would then be a single £11.95. So calculating the cost of doing it is fairly simple. You can cut your annual charges by half or more, which is a saving you get every year. I simplified in a similar way last year, and I am glad I did. Less fuss.
REITS are already included in a global index fund :) Not every single REIT but you get a huge exposure, so there's no need to add more. Unless you really want to. Nothing is guaranteed to outperform and I would not be betting on REITS to do that :)
Nice work again Toby, really helpful with my index investing. Keep them coming. Could i ask, if i manage to put £2000, £3000 for example in my Invest Engine stocks and shares ISA, do i have to move the money to a new provider and open a new one? 👍
Not sure on your question here mate, but if you ever want to move money from an old ISA to a new one then you can transfer it. The only thing you cannot do is open a new stocks and shares ISA in the same tax year if you have already put money into one.
@@TobyNewbatt Sorry mate didn't put the question across right. Thanks for the reply. I should have said, can I just keep using my IE S/S ISA next year with my current balance of say 2k or 3k?
Ahh ok, I see now. So once we hit the new year - you have the same choice to make again as everything resets - if you put ANY new money into a stocks and shares ISA come April 6th THAT is the one you have to stick with for that tax year. Any old ISAs you can't add new money to. But you are free to buy and sell inside them with existing money. Hope that makes sense worth checking up on the rules yourself so you understand them fully.@@turner1622
index funds all the way, super simple super cheap and no real worries in the long term, but i also compliment that with simple bonds because I'm old and need to have a stable part to draw on when the markets are down. So far I've made nothing investing but I've only been doing it for the last 2 to 3 years and in that time the market has just done nothing but crash and recover a bit lol, the bonds I hold are in the form of short term 1 year so the rates are only just starting to make me money on that side but at least its something.
Do I believe in America’s best 500 companies more than I believe in the world’s best 100? No. Also Michael Burry is shorting the SP 500 so I’m thinking that the Legal and General global 100 ETF is probably going to fare better, maybe?
Personally mate I would not waste a single second of your life basing any decision on what Michael Burry does with his money. This is precisely why people end up losing money as they time the market and jump in and out. Just because he predicted the financial crises does not mean he can predict the future. Better to stick with the plan and focus on what you can control IMO
@@Asif24960 Ive got 1/3 of my investments in the SP500 and I don't intend to withdraw it but there are so many economists now predicting a recession or slowdown that I feel that the Global 100 index is a better bet. Any new funds now are going there, if you look at the details of it, it has all the ascending US Tech stocks included anyway. Ive only held it for. few months so time will reveal the results..
I like Legal and General global 100...it has outperformed the S&P 500 in recent years. Given that it's widely accepted that US stocks are over-valued currently, I'm putting more of my money into global funds and a balance of ~40% US, 30% Asia and 30% Europe...time will tell if I made the right choice!
People are saying there is going to be a global financial crash, ive been holding off transferring my cash isa in to a stocks and shares isa am i doing the right thing?
You could find an S&S ISA that pays interest on your cash balance, then transfer your cash ISA and DCA into stocks, if you're worried about a crash. That's what I'm doing with my SIPP that I recently opened with cash from a company pension. I'm with Interactive Investor and they currently pay 4% on cash balances in SIPP or ISA.
Hi Toby, great content as always! Do you know the percentage of a Global index (FTSE all world for example) is the S&P 500? I know how much is American stocks overall but struggling to find what that allocation is to the S&P500 itself? Thanks
If you go to a FTSE all World fund - check the portfolio weights, you will see that the US total stock market is 60% of the global equity market. Then, you can also go on S&P globals website to find out that the S&P 500 is 80% of the total US stock market. Therefore, 80% of 60% means that the S&P 500 represents around 42% globally just on its own. Just for reference, a global fund does not care about the S&P 500, FTSE does not look at the S&P 500 they look at the total US stock market by weight.
Great video Toby as usual. I am a bit confused about the currency exchange charges that some index fund charge I believe? Say S and P brought in dollars and you pay for that as we buy in pounds? Wonder how much that cost you over the years? VWRL is traded in pounds tho I believe so you don’t get that charge? Might be worth a vid? Or a reply if you have time! 😀 cheers
Thanks Colin, exchange rates are not in your control and no matter what happens you will always have the issue of what rate the pound is against the dollar. Sometimes it will be good, and other times it will be bad. Any price you see in pounds has already taken into account the exchange rate of the dollar, you can't escape it. I.e. what you see in your investing account in pounds, has already reflected the exchange rate :). Thats why in my view its important to diversify globally and dollar cost average.
One of the reasons ETFs are not having greater take up is because the stockbroker platforms do not actively promote them. The platforms make less money from ETFs than other type of funds.
The market will correct this. And they are FARRRRRR from ever being saturated. If any price errors occur this is a perfect opportunity for traders to make money. There will ALWAYS be a market :)
Tony, is it worth having multiple ETF’s? I have VWRL but also EQQQ because I think tech is the future, is the QQQ fund pointless as all the companies are already in VWRL. Hope that made sense
This is really up to you, if you want to overweight tech because you think it will still outperform then go for it. I guess this is the same as me having some stocks on the side, because I think they might outperform the overall market :)
Since index funds/ETF's are made up by fractional shares, isn't the HMRC's crackdown on holding fractional shares in an ISA going to be problem for most of us? Wondering if it is even worth investing and instead, putting my savings into a normal cash ISA
Index funds and ETFs are not made up in fractional shares 👍. Although some newer platforms allow ETFs to be bought in fractions. This story will probably go nowhere im well aware of what’s being said. I would not let it decide my investing decisions
Thank you Toby, I have been wanting to move my actively managed SiPP/ISA portfolio to passive for some time but paralysed by the thought of putting a lifetime’s worth of savings into a single global fund - am I being irrational? I spoke to a FI who suggested a geographical split with multiple trackers but this would mean reviewing and rebalancing periodically and would also suggest I had an ‘edge’ on everyone else - any suggestions on how I can break the deadlock? Thank you
Ahh the good old challenge of investing in the real world where you have to fight your rational brain and your emotional one all at the same time. The only answer here is to do what works for you. We know that active management costs more, underperforms in the long run, and that as investors all we can do is control what we put in, and what costs we incur. Also, we know that keeping things simple and automated reduces our tendency to tinker and cause issues especially when we get emotional. One solution might be to move bit by bit, as there is no pressure to move all at once. But keep an eye on any fees that you might incur by doing that depending on the plaform. Good luck!
He means ETF index funds. Typically (and costs do vary) an ETF index fund can cost between 0.07% and 0.25% depending on what you go for. Non ETF index funds typically cost around 1.0% or more. So ETFs tend to beat them on price.
You don't need currency hedging on investments. Currency fluctuates up and down, it never trends always up or always down. If you own ftse100, then the value of that is pegged to the dollar each day, because around three quarters of earnings are international. You can safely ignore hedging as a retail investor. Hedging is something that importers and exporters need to match their predicted trade volumes over a time period.
@@coderider3022 they are not hedged. You are using the wrong terminology for the thing you want to achieve. A hedge is when you buy the opposite position in a related asset as part of a risk management strategy. You are describing diversification. Owning the Japanese index does not provide a currency hedge against your holding in a UK index fund.
Great video, Toby. The classification of countries might be boring, but its good for people to know if they're mixing and matching a FTSE Developed World fund with an MSCI Emerging Markets fund, for example.
Thanks Tom! Indeed devil always in the details as boring as it sometimes can be!
The other point I would add is the difference between Acc and Inc (which to be fair applies to all funds).
Acc is the way to go ... Reinvesting dividends straight back into the index automatically with no trading costs.
Used to think investors lose out amid crash, meanwhile some make profits, I also thought folks went out of business during the great depression, but some went into biz. Bottom line, same time there's a crash, there's cash flow too, depends on your level of preparation.
Excellent video. Theres so much crap and dumb hype videos on youtube about investing. Your streight up un biased, educational knowledge is appreciated
Excellent video, thank you for providing such great content for free!
This video will be helpful to so many new investors who have just started...thanks man!
Excellent advice & it seems many successful investors follow a similar path into index funds.
Absolutely!
Hi there. I find your videos very informative and educational. I know you are not a licensed financial advisor, so don’t worry about it. I am 50 and have just started investing in index funds. From diversification point of view, do you think it might not be too crazy to invest in let’s say S&P 500 and FTSE all world index funds? Thanks you in advance
Welcome and thanks. Remember that the FTSE all world has all of the S&P 500 stocks in already so I’d say you don’t need both. If you buy both you end up overweighting US stocks which is fine if you want but then that’s up to you 👍
Thanks Tony what do you think of Dave Ramsey who invests in mutual funds averaging 12%
The S&P 500 has averaged 11.95% for the last 10 years. I have no idea what mutual funds Dave Ramsey buys :)
Any actively managed funds will cost you a lot more money than passive ones, and you are guaranteed to pay higher fees. People also make a lot of money pushing you into managed funds, especially financial advisors.
Why do you ask the question?
Great informative video as ever, Toby! Keep them coming, mate! 😃
Cheers as always Greg
Very informative and concise overview!
How will hmrc's new take on partial shares in Ida's affect holding index funds for the millions of us that hold in a stocks and shares isa
It won't. You own units, not the underlying shares.
@ChrisShawUK oh ok thanks for clearing that up. That's something at least
I assume an index fund like the Vanguard S&P500 would be subject to tax now due to the gov uturn on fractional shares? Making my long investment plans go out the window. A higher rate tax payer would be giving almost half of their earnings to HMRC if this is the case making index funds a lot less appealing. Or do index funds not fall into this class?
An index fund is not a fractional share :) (although a fractional ETF could be classed as one not a mutual fund or a unit trust). I'm keeping an eye on this story but personally I don't think it will go anywhere
@@TobyNewbatt oh well that’s good news. I assumed because an index fund is made up of multiple shares it would be subject to the rule (if it goes ahead) so it’s only fractional shares you buy directly on platforms like T212..I guess that makes sense :/
I have fallen into the trap of having a fair few etfs in my SIPP. Most is in VWRL at 0.23% but then i also have others that are 0.5% and one at 1%.
If i simplify it by putting it all into VWRL the likelihood is that Hargreaves Lansdown will charge me a fee for switching so im not entirely sure what to do!
HL charge a single trading fee for each time you buy or sell an ETF. Each trade is £11.95.
So, if you have several ETFs to sell, you multiply the trading charge by the number of ETFS to get the total cost. If you are thinking of getting rid of non-ETF funds, you may need to consider the spread (ie, buy versus sell prices) if there is one. But non-ETFs, do not incur a trading charge. Investment Trusts also incur a trading charge. So you need to know what you hold.
Assuming you complete all the sales before you re-invest, that would then be a single £11.95.
So calculating the cost of doing it is fairly simple.
You can cut your annual charges by half or more, which is a saving you get every year. I simplified in a similar way last year, and I am glad I did. Less fuss.
I'm averaging 6-7% yearly return a moment. Us equity n global all cap are my go tos now
REITS top of that chart… perhaps you could do a video on those and what the most important aspects to watch out for are when picking them? Cheers
REITS are already included in a global index fund :)
Not every single REIT but you get a huge exposure, so there's no need to add more. Unless you really want to. Nothing is guaranteed to outperform and I would not be betting on REITS to do that :)
@@TobyNewbatt thanks, didn’t know they were already part of the index!
Great video, Toby. I hope my lump sum starts growing again soon.
slowly but surely and always a bumpy ride!
Nice work again Toby, really helpful with my index investing. Keep them coming. Could i ask, if i manage to put £2000, £3000 for example in my Invest Engine stocks and shares ISA, do i have to move the money to a new provider and open a new one? 👍
Not sure on your question here mate, but if you ever want to move money from an old ISA to a new one then you can transfer it. The only thing you cannot do is open a new stocks and shares ISA in the same tax year if you have already put money into one.
@@TobyNewbatt Sorry mate didn't put the question across right. Thanks for the reply. I should have said, can I just keep using my IE S/S ISA next year with my current balance of say 2k or 3k?
Ahh ok, I see now.
So once we hit the new year - you have the same choice to make again as everything resets - if you put ANY new money into a stocks and shares ISA come April 6th THAT is the one you have to stick with for that tax year.
Any old ISAs you can't add new money to. But you are free to buy and sell inside them with existing money. Hope that makes sense worth checking up on the rules yourself so you understand them fully.@@turner1622
@@TobyNewbatt Spot on mate . Thanks for that.
Dear Toby, I started my investment journey very late, and you have been an inspiration! Great new things learnt from this one, as always! Thank you!
Never too late to start! Good luck in with you all the way
totally agree
Very informative as always, Toby, thank you.
My pleasure!
where can I get that wall clock??
Check it out it's called a Divoom Pixoo 64, you can program all kinds of things into it really easily.
index funds all the way, super simple super cheap and no real worries in the long term, but i also compliment that with simple bonds because I'm old and need to have a stable part to draw on when the markets are down.
So far I've made nothing investing but I've only been doing it for the last 2 to 3 years and in that time the market has just done nothing but crash and recover a bit lol, the bonds I hold are in the form of short term 1 year so the rates are only just starting to make me money on that side but at least its something.
Are you buying bonds etf? Curious about which one. I'm old too and looking to move from heavily weighted in equities to bonds and income.
Nicely done!.
Thanks!
Investing in index funds is passive investing and beats all the active funds manage by these over payed fund managers.
It’s actually active investing, just more efficient
Is that the stock market movements in real time on your wall toby? Cool. Where'd ya get that?
yeah I have it set to a few tickers to keep an eye on things. Its called a Divoom Pixoo 64 smart wifi clock :)
Do I believe in America’s best 500 companies more than I believe in the world’s best 100? No. Also Michael Burry is shorting the SP 500 so I’m thinking that the Legal and General global 100 ETF is probably going to fare better, maybe?
Personally mate I would not waste a single second of your life basing any decision on what Michael Burry does with his money. This is precisely why people end up losing money as they time the market and jump in and out. Just because he predicted the financial crises does not mean he can predict the future. Better to stick with the plan and focus on what you can control IMO
And it isn’t his own money he loses either .
But there’s so much cross over? The big US companies appear on both indexes
@@Asif24960 Ive got 1/3 of my investments in the SP500 and I don't intend to withdraw it but there are so many economists now predicting a recession or slowdown that I feel that the Global 100 index is a better bet. Any new funds now are going there, if you look at the details of it, it has all the ascending US Tech stocks included anyway. Ive only held it for. few months so time will reveal the results..
I like Legal and General global 100...it has outperformed the S&P 500 in recent years. Given that it's widely accepted that US stocks are over-valued currently, I'm putting more of my money into global funds and a balance of ~40% US, 30% Asia and 30% Europe...time will tell if I made the right choice!
People are saying there is going to be a global financial crash, ive been holding off transferring my cash isa in to a stocks and shares isa am i doing the right thing?
You could find an S&S ISA that pays interest on your cash balance, then transfer your cash ISA and DCA into stocks, if you're worried about a crash. That's what I'm doing with my SIPP that I recently opened with cash from a company pension. I'm with Interactive Investor and they currently pay 4% on cash balances in SIPP or ISA.
Hi Toby, great content as always! Do you know the percentage of a Global index (FTSE all world for example) is the S&P 500? I know how much is American stocks overall but struggling to find what that allocation is to the S&P500 itself? Thanks
If you go to a FTSE all World fund - check the portfolio weights, you will see that the US total stock market is 60% of the global equity market. Then, you can also go on S&P globals website to find out that the S&P 500 is 80% of the total US stock market. Therefore, 80% of 60% means that the S&P 500 represents around 42% globally just on its own.
Just for reference, a global fund does not care about the S&P 500, FTSE does not look at the S&P 500 they look at the total US stock market by weight.
@@TobyNewbatt great thanks Toby.
Great video Toby as usual. I am a bit confused about the currency exchange charges that some index fund charge I believe? Say S and P brought in dollars and you pay for that as we buy in pounds? Wonder how much that cost you over the years? VWRL is traded in pounds tho I believe so you don’t get that charge? Might be worth a vid? Or a reply if you have time! 😀 cheers
Thanks Colin, exchange rates are not in your control and no matter what happens you will always have the issue of what rate the pound is against the dollar. Sometimes it will be good, and other times it will be bad. Any price you see in pounds has already taken into account the exchange rate of the dollar, you can't escape it. I.e. what you see in your investing account in pounds, has already reflected the exchange rate :). Thats why in my view its important to diversify globally and dollar cost average.
@@TobyNewbatt Thanks for the reply Toby, it all makes sense now and it is what it is!
Very informative as always
Glad you think so!
One of the reasons ETFs are not having greater take up is because the stockbroker platforms do not actively promote them. The platforms make less money from ETFs than other type of funds.
no doubt that the real money is made by trading stocks back and forth and also in the mutual funds with various fees. Yep you're right.
What happens when an index fund is over saturated?
The market will correct this. And they are FARRRRRR from ever being saturated. If any price errors occur this is a perfect opportunity for traders to make money. There will ALWAYS be a market :)
Tony, is it worth having multiple ETF’s? I have VWRL but also EQQQ because I think tech is the future, is the QQQ fund pointless as all the companies are already in VWRL. Hope that made sense
This is really up to you, if you want to overweight tech because you think it will still outperform then go for it. I guess this is the same as me having some stocks on the side, because I think they might outperform the overall market :)
Baked beans are the ultimate British survival food.
you're making me hungry :P
You own the haystack.
Now you have to find needle to performance 😜
Since index funds/ETF's are made up by fractional shares, isn't the HMRC's crackdown on holding fractional shares in an ISA going to be problem for most of us? Wondering if it is even worth investing and instead, putting my savings into a normal cash ISA
Index funds and ETFs are not made up in fractional shares 👍.
Although some newer platforms allow ETFs to be bought in fractions.
This story will probably go nowhere im well aware of what’s being said. I would not let it decide my investing decisions
Ahh beautiful stuff. Thank you for replying pal 🙏🏽🙏🏽
You cannot beat the OG.
Great video as always Toby, thanks.
Thanks again!
Thank you Toby, I have been wanting to move my actively managed SiPP/ISA portfolio to passive for some time but paralysed by the thought of putting a lifetime’s worth of savings into a single global fund - am I being irrational? I spoke to a FI who suggested a geographical split with multiple trackers but this would mean reviewing and rebalancing periodically and would also suggest I had an ‘edge’ on everyone else - any suggestions on how I can break the deadlock? Thank you
Ahh the good old challenge of investing in the real world where you have to fight your rational brain and your emotional one all at the same time.
The only answer here is to do what works for you. We know that active management costs more, underperforms in the long run, and that as investors all we can do is control what we put in, and what costs we incur. Also, we know that keeping things simple and automated reduces our tendency to tinker and cause issues especially when we get emotional.
One solution might be to move bit by bit, as there is no pressure to move all at once. But keep an eye on any fees that you might incur by doing that depending on the plaform. Good luck!
can i edit your videos?
Great stuff, Toby! Always good to tune in :)
Much appreciated!
so index funds are better than etf?
He means ETF index funds.
Typically (and costs do vary) an ETF index fund can cost between 0.07% and 0.25% depending on what you go for.
Non ETF index funds typically cost around 1.0% or more. So ETFs tend to beat them on price.
ETFs tend to be better than mutual funds (both can be index funds)
More videos please Toby.
Thank Tim I’ll try!!! Always grateful for the support
Index funds are a no-brainer. The problem for many is that they are a bit boring and too easy.
It's life healthy eating, easy to say, hard to do consistently :)
👍
👍👍👍
First
And the gold award goes to 😉
Getting currency / hedging on the world funds is a challenge for uk investor. easier and cheaper to have us, uk, eu, jp and em etf/index.
You don't need currency hedging on investments. Currency fluctuates up and down, it never trends always up or always down.
If you own ftse100, then the value of that is pegged to the dollar each day, because around three quarters of earnings are international.
You can safely ignore hedging as a retail investor. Hedging is something that importers and exporters need to match their predicted trade volumes over a time period.
By owning multiple countries as you suggest, you are increasing diversification, not hedging currency.
@@ChrisShawUK is that why most vanguard funds are hedged, do they not need them either ?
@@coderider3022 they are not hedged. You are using the wrong terminology for the thing you want to achieve.
A hedge is when you buy the opposite position in a related asset as part of a risk management strategy.
You are describing diversification. Owning the Japanese index does not provide a currency hedge against your holding in a UK index fund.
@@ChrisShawUK I’m not using currencies to hedge anything, you didn’t follow my initial comment.