A global tracker fund takes care of all your equity diversification needs in a single investment product. In this post, we’ll explain how to choose the best global tracker fund for you and we’ll list our picks from the choices on offer.
What is a tracker fund?
A tracker fund is an investment fund that tracks an index like the S&P 500 for the US or, in the case of a global tracker, an index such as the FTSE All World.
Your money is pooled alongside the global tracker’s many other participants. Together this capital is invested by the fund’s management team into every major stock market on the planet.
As an investor in an index fund, you effectively get a slice of ownership in thousands of world-class firms. As a result you buy into the prospects of entire industries, countries, and continents at a stroke.
The index followed by a global tracker fund is essentially an international league table of the world’s leading companies, from Apple to Nvidia to Taiwanese semiconductor giant TSMC.
Global tracker funds trade stocks to replicate their chosen index as faithfully as possible. The index meanwhile is driven by the fortunes of its constituent firms. Over the long-term, company valuations rise and fall consonant with their performance, investor sentiment, and global capital’s best estimate of their future earnings.
Investing this way is known as index investing or passive investing. It is the best strategy to choose in order to maximise your chances of meeting your financial goals.
Investing giants like Warren Buffet recommend index funds. Even ex-hedge fund managers have switched sides and urge everyday investors to pick global index trackers.
Global tracker funds – what really matters?
All-World – Most products labelled world index funds only encompass developed world countries. They skip the emerging markets, including the likes of China and India.
Such ‘world index trackers’ are less representative of the global economy. Instead look for ‘All-World’ or ‘Global’ index funds that include emerging markets.
Alternatively, if you do choose a developed world solution, you can add an emerging market index fund to your portfolio to make up the difference.
Diversification – Following on from the above, compare how many stocks your shortlist of global tracker funds includes. The more the better, because your index fund will then do a better job of representing the global stock markets that it follows.
Cost – This is the most important factor that will impact your returns and that you can control. There’s often little performance differential between global index trackers. If in doubt, pick the cheapest by Ongoing Charge Figure (OCF) / Total Expense Ratio (TER).
Reassuringly expensive price tags will not secure you a superior global equity tracker fund. Go for cheap, plain vanilla flavour trackers. Don’t worry about bells and whistles.
Don’t fret about small changes in cost, either. An OCF differential of 0.1% on £10,000 is just £10. That would cost you £50 a year on a £50,000 investment if, for example, your fund’s OCF is 0.25% instead of 0.15%.
Only you know your personal hassle threshold. Try to work out whether the impact of costs over your investing lifetime is worth switching.
Investor compensation – You’re covered for up to £85,000 if your global index fund is based in the UK. ETFs are not included. Note, investor compensation schemes only kick in if your broker or fund manager goes bust and your money disappears. Stock market losses are not covered!
The index – You should Google the tracker’s index to make sure it’s truly global. If it isn’t, find out what’s missing. Check your product’s factsheet, too.
Global index fund or global ETF?
ETFs and index funds are both types of index tracker. They’re both excellent ways of quickly diversifying your investments across the globe for an amazingly low cost.
We’re equally happy using ETFs or index funds and include both in our best global tracker fund table below.
The only time the fund type is a deal breaker is if:
- You want your tracker to be covered by the FSCS compensation scheme. If so, then check this list of UK-domiciled index funds including global options.
- Your stockbroker charges an ETF dealing fee that costs more than 1% of your typical transaction value.
- The same broker allows you to trade index funds for free.
In the latter case, we’d invest in a global index fund in preference to the global ETF. That’s because the impact of a high dealing fee is surprisingly damaging over the long-term.
See our cheap broker comparison table for more. Percentage fee brokers often allow you to trade global index funds for nothing.
A few brokers also enable you to trade global equity ETFs for £0. Check out InvestEngine, Freetrade, and Vanguard for that option.
Best global tracker funds – compared
| Tracker | Cost = OCF (%) | Index | Emerging Markets (%) | No of holdings | Domicile |
| HSBC FTSE All-World Index Fund C | 0.12 | FTSE All-World | 8.5 | 3,571 | UK |
| SPDR MSCI ACWI IMI ETF | 0.17 | MSCI ACWI IMI | 7.5 | 3,504 | Ireland |
| iShares MSCI ACWI ETF | 0.2 | MSCI All Country World (ACWI) | 7 | 1,703 | Ireland |
| Vanguard FTSE All-World ETF | 0.22 | FTSE All-World | 8 | 3,643 | Ireland |
| Vanguard FTSE Global All Cap Index Fund | 0.23 | FTSE Global All Cap Index | 8 | 7097 | UK |
Source: Morningstar and fund provider’s data.
There is very little to choose between these five global equity trackers:
- HSBC’s global index fund is the cheapest and so tops the table.
- The SPDR and iShares ETF follow MSCI indexes whereas the others follow a FTSE index. The indexes vary somewhat in country composition but have performed almost identically over the last decade.
- Vanguard’s Global All Cap index fund and SPDR’S MSCI ACWI IMI have about 5% small cap exposure and thus greater diversification than the rest.
The reality is these shades of grey haven’t made much difference to results over the longer term. More on that in a moment.
There are two relatively new entrants into the global tracker fund market to keep an eye on. They’re low cost but haven’t had time to build a track record yet:
- Amundi Prime All Country World ETF – OCF 0.07% (The cheapest global tracker fund available.)
- Invesco FTSE All World ETF – OCF 0.15%
I’ll also throw two other choices into the pot because they do something a little different:
- Fidelity Allocator World Fund W – OCF 0.2%
- Vanguard LifeStrategy 100 fund – OCF 0.22%
Vanguard’s LifeStrategy funds include a UK equity bias of around 20%. That compares to a 4% UK allocation for the true global index trackers in the table. You could choose LifeStrategy 100 if home bias suits your situation. Go for LifeStrategy 20-80 if you want an all-in-one fund that includes government bonds.
The Fidelity fund is actively managed. It features a REIT exposure and small cap allocation of about 10%.
Both are funds-of-funds. They manage their asset allocation by holding other index trackers instead of trading the shares of listed firms.
Here’s a useful piece on how to compare index trackers.
Best global tracker funds – results check
Source: Trustnet’s Multi-plot Charting tool
I’m most interested in the ten-year annualised (nominal) returns for the global tracker selection above because that’s the longest comparison period we have for most of the funds in the mix.
I’ve paired the leading index trackers with their underlying index using the coloured boxes because a well-functioning passive fund should perform in line with its benchmark.
(In fact, most trackers should lag their index because the fund pays fees whereas the index doesn’t bear that cost. Intriguingly, the SPDR ETF leads its index – suggesting management have got a trick or two up their sleeve.)
You can see that there’s nothing between the two leading global tracker funds that sport 10-year returns.
HSBC’s FTSE All World index fund is the best performing fund over five years, though its lead versus the iShares ETF has been narrowed.
The margin looks too slim to take seriously.
That said, the HSBC tracker has maintained a consistent lead over its Vanguard FTSE All-World rival.
However, the Vanguard ETF was a 0.1% nose ahead of the HSBC product a few years ago.
It could be that HSBC’s significant fee advantage is starting to tell. Or that some other minor variation in their respective holdings means advantage HSBC.
But it’s best not to put too much weight on short-term return results which can easily be reversed by market moves.
Stress-free investing
If you’re starting from scratch then by all means choose the HSBC FTSE All World Index fund.
But there’s no need to switch out of the other top five funds because of this result.
Index trackers are typically cookie-cutter products. The results demonstrate the top five all work just fine. They are practically interchangeable.
The fact is we’re not checking performance to crown the one, true, best global tracker fund.
With me-too products, you don’t have to over-optimise. Any candidate from a field of well-matched rivals will probably be good enough.
Our performance check just ensures that nothing on our shortlist is broken, or isn’t what we think it is.
A world of difference
All the same, the performance check does enable us to see that the Fidelity fund and Vanguard’s LifeStrategy do trail the pack significantly over ten years.
If their tilts towards UK shares or global REITs go on a hot streak then one of the bottom two could easily shoot up the table. But if you want a pure global market cap strategy then stick with the top five.
Here’s a few other things to note.
Fund sizes – All five index trackers in our top table have hundreds of millions in assets under management (AUM). Efficiencies of scale typically kick in above £100 million. The iShares ETF is more than eight times the size of the SPDR ETF, but their performance is neck-and-neck over ten years.
Fixed income – The trackers in our table are equity funds. Owning additional high-quality government bonds is crucial to help you not to freak out during a stock market crash.
Check out our best bond fund choices to find your fixed income Venus for your equity Mars.
Understanding how to build your asset allocation will help you work out how much you need to put in safer assets.
Income versus accumulation – All of our best global index tracker picks come in both flavours, except the iShares and SPDR ETFs which are only available as an accumulating fund.
World and World ex-UK – I excluded these trackers, because it makes no sense to only include the Developed World or skip the UK when you’re trying to diversify across the whole world.
KISS
The beauty of the single global equity tracker strategy is its simplicity.
Yes, you could shave away a little cost by building a similar portfolio from separate regional trackers.
But is it worth the aggro in time and dealing fees? And can you trust yourself to stick to the global market’s verdict? Or will you justify trimming back on Japan or the US or wherever because you can apparently spot a bubble that everyone else has missed?
Fill your boots if you psychologically need the control – but know that you don’t have to.
Nobody can predict which strategy will win over your investment lifetime. But putting a global tracker fund at the core of your asset allocation is a rational choice in an insane world.
Take it steady,
The Accumulator
Thanks @TA for the update. I can’t remember how many times ive read this article over the years but somehow you keep it fresh (in words and numbers) so it’s worth reading every time.
There’s a new World ETF available.
Invesco FTSE All-World UCITS ETF (FWRA) listed on London Stock Exchange with a total expense ratio (TER) of 0.15%
Best wishes
Metro
Thanks TA.
It’s worth revisiting this article at least once a year because monthly investing in a cheap tracker is the best way for new investors to start. I know this blog has been going for a long time and you guys are in the big bucks but spare a thought for us 4/5 digit portfolio people adding a few hundred each month.
My strategy is to monthly invest into a no cost global index tracker then switch large portions to etf versions to benefit from stop loss options.
@Metro – please see recent preceding posts for discussion of variants of this.
I read this article last year and have allocated 50% HSBC FTSE All World Acc, 25% Fidelity Index USP Acc and 25% Legal & General Global 100 Acc. I am about 75% USA but I can tilt this as I want to. All of the above perform well and are CHEAP, both to buy monthly with my limited funds, and in terms of OCF.
I’m squirrelling away in the Legal & General International Index Trust (I) Acc.
It’s got 2,230 holdings. The ongoing charge is currently 0.13%, so it was interesting to read comment #1 from back in 2015 when the same fund was charging 0.14%. Just need the market to perform now.
Very useful post, thank you.
I am currently all in with Vanguard 80-20, held with Halifax Share dealing . It is very inexpensive to do this but I have built a substantial amount (outside ISA as I am non-resident). Does it make sense to divide the holdings between brokers? Should I divide the holdings between trackers?
I have never been clear about the risk to my holding by having it all with one dealer for simplicity or all in one investment for ease of management. Vanguard is so simple to track and purchase.
@Subbuteo — Every time we debate the topic of the risk of holding all your money in one place, it eventually boils down to personality types. Some people (like me) would never have all my eggs in one basket. Other people think the practical risks are so small with behemoths like Vanguard that it’s not worth the hassle of diversifying, and that it may even marginally increase risk if it means you’re now more likely to have more money with the black swan broker that fails (because you’ve spread your money across more brokers).
Personally I am the cynical and paranoid sort and am diversified up the wazoo across everything but I’m not the target market here. 😉
For passive investors trying to keep it simple, I’d say diversifying across two very reputable fund management companies and two best in class platforms is a lot of diversification reward for not too much extra hassle. There’s a reason we have two lungs, two kidneys, two ears, two eyes etc (okay well there’s sensory benefits also but you get the point).
Personally I wouldn’t diversify by keeping all my equities on platform A and all my bonds on platform B, incidentally, because if something weird does happen sufficient to disrupt, say, Vanguard or Blackrock, then it might start hitting assets in an idiosyncratic manner, too, at least for a while.
For example, you have all your bonds on Platform A, somehow it unthinkably fails, and the general panic crashes the stock market, cratering also your equity value on Platform B.
Note that the biggest likely-unlikely risk with the giant platforms and fund groups is that you lose access to your money for a period of time (Rather than that they are actually Madoff investments V2.0 or similar).
Obviously none of this is personal financial advice. I have no crystal ball. 🙂
These articles — and just as much the comments after them — may be worth a read:
https://monevator.com/investor-compensation-scheme/
https://monevator.com/assume-every-investment-can-fail-you/
https://monevator.com/even-brokers-can-fail-you/
@Curlew #198 at the risk of sounding stupid, if you’re buying unhedged, what is the difference between the USD and GBX iterations on LSE? Is there a currency risk in buying the former please?
Thanks for the nice overview! I believe that another source of deviation from the benchmark index may be due to securities lending performed by the fund… again not necessarily a good or bad thing per se, but worth knowing.
Finally, in some countries (not familiar with the UK) while evaluating global products one must pay attention also to dividend withheld at the source country: often times this “leakage” is of similar magnitude as the TER.. but not advertised anywhere.
@ Slow Hare – HSBC FTSE All-World Index Fund C is what HSBC call it:
https://www.assetmanagement.hsbc.co.uk/en/individual-investor/funds/gb00bmjjjf91
I often find that other platforms label funds slightly differently and there can be confusion over different share classes.
Use this ISIN number to make sure you’re looking at the right fund: GB00BMJJJF91
@ D_D & Curlow – Here’s a UK link for FWSD the GBP hedged version:
https://etf.invesco.com/gb/financialprofessional/en/product/invesco-ftse-all-world-ucits-etf-gbp-pfhdg-dist/trading-information
Thanks Curlow! Didn’t spot I’d wandered off to Switzerland there.
@ Where2How & Asdf – Sometimes TI and I aren’t sure about the right balance when it comes to new material versus updates of older material, so it’s good to know you find this useful. Cheers for the support!
@ Martin T – There’s no currency risk advantage with GBP priced fund. This piece helps explain:
https://monevator.com/currency-risk-fund-denomination/
But GBP priced can help you avoid FX fees on trades:
https://monevator.com/fx-fees/
@ TLI – That was a great article but I’ve had a chance to compare the MXWS vs other MSCI World ETFs with a similarly long track record… over nearly 13 years its cumulative returns are slightly behind its physical replication rivals.
Essentially, it’s a photo-finish – only a couple of percentage points in it over 13 years. I threw Xtracker’s MSCI World Swap-based ETF into the mix as well, again it lagged ever so slightly. So it doesn’t seem to me that swap based ETFs confer an advantage overall.
MSCI ACWI vs FTSE All World are also neck and neck. Korea isn’t making much difference either way and I couldn’t call it either way ex ante. Do you have a preference?
Many thanks @TA.
On MSCI ACWI v FTSE All World, former seems more widely followed, but it’s not just a US orientation thing (i.e. Morgan Stanley v FT Actuaries) as Vanguard use the latter. Not much to choose between them as far as I can tell, so I’ve no clear preference there.
However, all things being equal, I would much prefer one single All World ETF or OEIC fund for global equities over DIY set ups comprised of either:
– Country by country (US, Canada & Japan) and regional (Europe and Asia-Pacific ex- Japan) ETFs, plus a separate EM (& maybe a Small Cap) ETF; or,
– To an arrangement of MXWS.L, as the backbone (84%), and with HMEF (8%), WLDS (7%), and EMSM (1%) as the ribs.
That preference points toward Vanguard’s Global All Cap OEIC fund (@23 bps OCF).
But the problem which I’ve got is that, whilst I’ve moved SIPP provider (using Monevator affiliate link) from HL to ii (which was a painless, smooth transfer & ii have been good so far on service with much cheaper fees, plus there was the joining incentive); my ISA remains with HL.
Some years ago they agreed to reduce their 45 bps/25 bps tiered fee for OEICs when I said I’d leave them if they didn’t. But now my ISA is about £450k, and that 25 bps platform fee is still costing me £93 p.c.m in order to hold Vanguard Global All Cap, which adds up.
If I now moved to an ETF option instead then it would cap the platform fee at £45 p.a. (i.e. in effect just 1 bps).
However, I have to consider the spread (MXWS.L has an indicative spread of 13 bps, for example), and also what impacts of US WHT would be (circa 19 bps p.a. according to Finimus).
Going for a swaps ETF for the Developed Markets would have a paper advantage, because of avoiding US WHT; but it’s both super interesting and intriguing that you found that MXWS.L hadn’t outperformed it’s non swapped based counterparts in the global tracker field; or at least not by what you might have expected it to have done so by with the 19 bps p.a. for US WHT added back in.
I also very vaguely recall someone (maybe Terry Smith, can’t remember now) railing against ETFs that were swaps based and / or which did stock lending. Too risky they said.
Against all of that is seeing £93 leaving the ISA as platform fees each month, which is painful.
I could of course move to Vanguard UK, keep their Global All Cap fund, and cap those platform fees at £375 p.a.; but that’s another transfer to have to go through, and they’ve had some mixed reviews on their customer service.
@TLI
You can try iweb for ISA as they don’t charge extra or platform fees for funds.They charge one off joining fees.regards
Invesco FTSE All World UCITS ETF – (FTWD) TER 0.15%
Thanks @Akash #214. That’s very helpful. In specie transfer to iWeb may well be the way to go. Keep Vanguard Global All Cap, keep diversified using different platforms for SIPP & ISA, avoid using platform with same provider as for global tracker fund itself (an issue with Vanguard), avoid the spread on ETF purchase(s), and avoid HL’s ‘tax’ for holding funds rather than ETFs.
Just to mention, for completeness, that @TA covered transaction costs for cheap tracker funds, including in the All World sector, in the article and list last year at:
https://monevator.com/low-cost-index-trackers/
I’ve found that list very useful indeed.
No other list I’ve seen has had as much current, relevant and comprehensive detail. Monevator really is best in class!
@TLI, you could take a look at InvestEngine. Relatively new, but no fees at all. ETFs only though.
I have a relative with a Vanguard SIPP, paying in the £3600 per year gross allowed for people with no employment income and he has split 10:1 between the Vanguard Developed Markets ETF VEVE and their Global EM ETF VFEM. VEVE has charges of only 0.12% compared with VWRL 0.22%. The combined OCF of his combination is 0.129%, but he is a little underweight EM (9:1 would be about right at the moment). A good compromise between simplicity and cost.
I think Vanguard have a lot of nerve applying the same charges to the All World ETF as they do to their Global EM ETF. The charge may come down of course now there is more competition in the All World space.
Many thanks @Naeclue #218. Vanguard missed a trick when they decided not to reflect the lower break out cost of VEVE & VFEM in VWRL. Also, VWRL is 22 bps OCF, but if you go for their OEIC Global All Cap Fund you also get Developed Small Cap in there for 23 bps, just one extra pip. That makes the pricing of VWRL (compared to VEVE + VFEM) somewhat nonesensical.
FWIW, I think Vanguard missed another trick when they opted to launch in the UK with a 15 bps platform fee (albeit capped at £375). IMO, if they had landed with 10 bps then they’d gotten better momentum at the outset, achieved a bigger market share and would now be further along pathway to critical mass for long term commercial viability in the UK. They succeeded stateside because they were the cheapest. If they want to be the disruptor here then they need the same approach.
For UK investors seeking a distributing fund, remember all World ETFs pay out in dollars so you’ll be stung by your platform’s forex charge when converted into sterling. No such problem with the UK domiciled OEIFs which all pay out in pounds, so no cost leakage there.
This hidden cost will not show in the performance tables.
Not a problem if selecting accumulating funds.
As others have posted I use L&G International Index Trust that follows FTSE World exc. UK. Widely available for 0.13% but via HL at 0.08%. Supplement this with L&G UK Index at 0.04% (also discounted) – cheapest near-world tracking I’ve found. I also add in Vanguard Global Small Cap at 0.3% for even wider diversification. There are cheaper platforms than HL but it’s where my company pension is so kinda stuck with it.
A quick update on why invest in a cap weighted global (All World) tracker. In May Hendrik Bessembinder (W P Carey School of Business) updated his 2018 research on the skewness of US equity returns. His previous work covered all US listed companies from 1926 to 2016 (he’s also separately looked at Global equities from 1990 to 2019). This research updates the US picture up to 2022, so now with 97 years of data. Summarising, it shows 60% of stocks failed to earn returns in excess of Treasury bills; and only 2% created more than 90% of all aggregate added wealth. The extreme skewness of returns suggests two approaches for investors: either seek broad diversification to capture all the winners with certainty, or instead build a portfolio that tries to avoid all the wealth destroyers while owning only the wealth creators. The former is easy with an All World tracker, whilst the latter is all but impossible unless you are gifted with extraordinary skill, luck or both. Links to analysis from Morgan Stanley and to the updated Bessembinder paper are both below:
https://www.morganstanley.com/im/en-us/institutional-investor/insights/articles/birth-death-and-wealth-creation.html
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4448099
Much obliged TLI! It does rather suggest that active managers should be making a killing if they could reliably identify the 2% of wealth creators.
In fairness, Scottish Mortgage Investment Trust have that approach, to try and identify the next long term winners. They did very well out of Tesla.
Excellent point @Simon Hinchley #224. SMT’s approach transparently tries to ID prospectively most likely disruptors, as covered in James Anderson’s “Graham or Growth” series for Ballie Gifford (‘BG’):
https://magazinebailliegifford.com/Graham-Or-Growth/contents/
On that basis, after falling from £15 to £7, I brought SMT for GIA active investing itch side portfolio (I recall BG previously helped fund Bessembinder’s research).
However, the odds by chance alone of selecting all of the winning 528 company shares (out of 28,114 companies in total) which Bessembinder’s updated research shows accounted for 90% of all net wealth creation by US equities as a whole since 1926, and of selecting no other shares but those 528 firms, is beyond miniscule. More precisely it’s (528 ÷ 28,114) ^ 528, which is 3.3 x 10 ^ -912 or 0.00 and then another 910 zeros and then 33. That’s as close to nil odds as makes no difference.
Clearly, the only hope here is if person or fund or investment trust selecting the shares has such a great level of skill that it outweighs the collective skill set of the other market participants as a group, whose decisions in aggregate set the share price; otherwise, the potential of those winning firms would already be capitalised in their share prices, and they wouldn’t offer any excess future returns.
Can I ask some advice from more experienced hands? I have a Vanguard LifeStrategy 80/20. I’m wondering whether to introduce a US equity fund alongside it in my stocks and share ISA to counterbalance the UK home bias. Is this a good idea? Or should I really ditch the LS and go for a Vanguard FTSE Global Cap? I’m 35 and don’t plan on touching the funds until I am 60-65. TIA!
@Mr Cambridge #226: not sure that I’d describe myself as a “more experienced hand”, but I have held Vanguard Global All Cap for a while.
If VLS 80/20 is just 80% VLS 100 + 20% bonds, then its UK equities’ exposure would be about 16% (i.e. 80% of 20%, per the figure in @TA’s article).
That compares to about 3% (80% of 4%) for the UK equity market weighting in a cap balanced (hypothetical) global 80/20 equity/bonds index.
So, there’s perhaps an excess of 13% or so, which isn’t too bad if your aim is to track the notional global equivalent index.
There are arguments that could be made here both for leaving be or, instead, for leaning in to more non-UK exposure.
On the one hand, based upon naive P/E metrics, the UK All Share index (and even more especially the FTSE 100 index) are pretty cheap at the moment on a relative basis to other markets and also to their own histories, but that may mean nothing at all for future returns (e.g. the SP500 has certainly trounced them both since 2009).
Then again, perhaps it does indicate a bargain in terms of expected returns.
Frankly, no one knows (or, indeed, can ever know in advance).
The only things that I’d say here are that if you personally did happen to think that low valuation metrics on simple P/E (and Cyclically Adjusted P/E) bases are positive indicators for future returns (based upon mean reversion), then there are some cheaper markets and market segments out there when compared to UK shares.
For examples, European and Emerging Market Small Cap Value are quite a bit cheaper still than the UK market in terms of P/E and CAPE.
Then again if, on the other hand, you instead think that starting valuations using plain vanilla P/E or CAPE aren’t good indicators, you may well conclude that the US on a high P/E and CAPE is not a warning sign.
If so, then perhaps you might then want to slightly up your US equity exposure to counterbalance the VLS’ overweighting of the UK.
VLS presumably overweight the investor’s home market to try and hedge out some of the currency risk of being invested in global equities which are dominated by US $ denominated shares, and not by GBP.
FWIW, I personally have found the US $ exposure via global equities more helpful than not. When global shares head south the dollar tends to rally a bit as a risk off currency safe haven, thereby at least partly counteracting the fall in global share prices, in dollar terms, when those prices are converted into Sterling. This then tends to reduce portfolio volatility a bit in terms of £ measured values, which is a good thing.
Having invested in Vanguard Global All Cap Fund for some time now though, I’m getting a bit fed up with paying up for the platform fees for holding it as a fund in circumstances where I’d basically avoid those fees if I had either an ETF or an ETF combination which did the same job (and which would also possibly cost a bit less in terms of Vanguard’s ongoing charges), for which see comments #218 and #219.
Hope that this helps.
@Mr Cambridge
Fwiw I have recently transferred all my funds bar 1 (a naughty Activity managed fund which will be sold when I break even) have. been placed into an FTSE All World Fund, because of its market cap weightings, meaning that I don’t have to mess about rebalancing and trying to chase performance. The only devil is that I have to pay Fidelity 0.35% for a platform fee, and 0.13% for the fund fee (HSBC FTSE All World Acc as recommended by Monevator).
@Time like infinity
@ Simon Hinchley
Thanks for your insightful thoughts. Well I took the plunge today and switched my Vanguard TargetRetirement pension for a 100LS, and my ISA 80LS for a FTSE Global All-cap. It was a bit painful as I’ve had around 5% returns of late, which is the highest I’ve had since starting investing. But I know if I’m not touching this for 30years, ditching my bonds for now and rebalancing is a better longer term approach. I’m only starting my investment journey this year, but like all walks of life I’ve learnt that you have to heed advice and not just blindly march on!
@ Mr Cambridge
The Vanguard is an excellent fund. Just keep adding now and try to leave it, resist the temptation to’fiddle’ with it. That will be the hardest bit…staying the course lol
@Simon Hinchley
Noted! I guess the only fiddling would be to possibly top the LS100 up with a 10-15% of VUSA.. maybe. But maybe I should just leave it! Out of interest do you hold 100% equities, and if you have bonds, when did you feel it appropriate to start introducing them to your portfolio? I’m 30 years away from wanting access to my funds, so I see bonds as more of a drag in my case.
@Mr Cambridge
I am 100 % equities. I don’t need my money as I am living quite a frugal lifestyle. However, I intend to turn it over to my daughter in 25 years, and hopefully she will leave it well alone, to allow for compounding. As for bonds, unless you need a guaranteed yield, I personally don’t see the point of them. I view them as an over-all performance drag. However, they are supposed to be useful along with gold as a downturn hedge. But a down turn is equally the best time to buy equities. This is just my view and isn’t an endorsement. Every investor’s goal is different. I am relatively new to investing too, and it’s taken me a few years to arrive at where I now chose to place my money. Hope this helps.
@Simon Hinchley
Thanks – and of course, as a new investor I ask a lot of questions in forums to get a lay of the land based on everyone’s goal and time horizon, so this is appreciated!
I’m sure your daughter will be pleased. I have set up a Vanguard junior ISA for my one year old, though I plan not to tell him about it until a) he’s 21 b) he understands compound interest.
I am new to investing (was savings accounts only in past) but recently started investing in passive global/dev world tracker funds thanks to Monevator.
I am pretty paranoid about safety (probably why I haven’t invested before now) so split across funds between different fund managers in cheapest funds (and between different platforms). I don’t want to invest in ETF’s due to lack of FSCS protection – probably wouldn’t sleep at night so figure it’s not worth it!
I have obviously read this post and others such as “Low-cost index funds UK” for guidance on choosing the best low cost funds but after investing in VANGUARD/HSBC/FIDELITY/LEGAL & GENERAL there do not seem to be a great deal of other cheaper global/dev. world funds to invest in. (I am only investing in dev world funds as cannot find enough cheaper global/all world to invest in – seems to be a problem really if you don’t use ETF’s.
I am aware of an iShares fund (Developed World Index Fund D) but that is domiciled Ireland, so like ETF’s, I believe no FSCS protection. Also Aviva one (Aviva Investors International Index Tracking SC2 Fund) but I’m not too keen on Aviva (once had a pension with them but they were terrible/had lots of problems so had to transfer it out).
So I am not sure if there are any more fund managers out there who provide cheap diversified tracker funds? But if anyone could point me in the right direction, would be very grateful.
Many thanks.
@ J – You’ve listed all the main index fund providers, the only other outfit who offer a decent range is Royal London. I have a feeling they don’t offer an All-World / Dev fund from memory, but worth a quick check all the same.
@ TA – Thanks for that, just thought I’d ask if anyone knew of any others as I drew a blank – will have a look at Royal London and see.
The only other sort of world fund I saw was UBS MSCI World Minimum Volatility Index Class C (ongoing charge of 0.2 according to HL) but obviously tracks a different index, focussing on low volatility and only has 356 holdings so not very well diversified compared to others so not really sure it fits the bill well enough for a world index tracker.
I suppose there won’t really be many fund providers offering global funds with having to compete on low fund charges. If not I’ll have to risk more across the 4 main fund providers I already have and hope those funds stay afloat (or as these not FSCS protected above 85K, maybe risk an ETF after all with a different but large provider so at least more diversified even though no FSCS).
Thanks again TA, the info is much appreciated.
@j
UBS do a Rafi 1000 developed world fund, that has equal weightings …looks like a steady fund and is an Open ended index fund. There’s a Legal & General Global 100 which is another good fund.
@Simon Hinchley
Thanks for the heads up about that UBS dev world fund – I hadn’t heard of this one. I don’t have anything with UBS so looks like it could do the job for further diversification between fund managers, in the unlikely event one of them went up the creek.
Yes I know of the L&G Global 100 fund but I am already invested in L&G International Index Trust fund (which although excludes UK it is more diversified as has 2222 holdings) so wouldn’t provide me with any additional diversification across different fund managers.
Thanks for the info – much appreciated Simon.
@j
No worries and best of luck!
Hello All
I have a silly question!
Is it worth buying the Vanguard Lifestrategy 100 fund or better to buy individual trackers from its top 10 allocations?
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc
GB00B3X7QG63:GBP
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc
GB00B59G4Q73:GBP
Vanguard U.S. Equity Index Fund GBP Acc
GB00B5B71Q71:GBP
Vanguard S&P 500 ETF USD Acc
Vanguard Emerging Markets Stock Index Fund GBP Acc IE00B50MZ724:GBP
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc
GB00B5B71H80:GBP
Vanguard FTSE 100 ETF GBP Acc
Vanguard Japan Stock Index Fund GBP Acc
IE00B50MZ948:GBP
Vanguard Pacific ex-Japan Stock Index Fund GBP Acc
IE00B523L313:GBP
Vanguard FTSE 250 ETF GBP Acc
Over the long run would the life strategy fund overtake the individual funds or the other way round? (As you are paying OGF for each one)
Hi @Manish. It’s not a silly question. In fact, it’s an excellent one. The individual Exchange Traded Fund and Open Ended Fund elements that make up each option within the Vanguard Life Strategy range may have lower ongoing charges figures than the VLS fund as a whole which they individually correspond to.
So, mathematically speaking, buying the separate elements may be cheaper just in terms of ongoing fees. But please do bear in mind here:
a). Normally there will be a fee to pay from your fund platform each time that you buy or sell an ETF (albeit, if Vanguard UK are your platform, then you may be able to avoid paying this). Paying for several transaction fees compared to one will eat into the savings on ongoing costs.
b). Unless you buy all of the elements making up the VLS 100 fund in the same proportions as they are present in that fund, and then rebalance them (by buying and selling parts of each element to keep their proportional weightings constant) at the same time and in the same way as the VLS 100 fund does, then you won’t exactly replicate the performance of the VLS 100 fund.
c). Each time that you rebalance, by buying and selling part of an ETF holding to match its target weighting, there will probably be some transaction fees to pay (again, unless you’re actually with Vanguard themselves, as your platform provider).
d). There is also a spread between the bid and the ask price on the purchase or sale of an ETF which is, in effect, another cost to weight up. For open ended fund units there will sometimes be ‘swing pricing’, which can have a similar effect.
e). Obviously, there is some effort in doing this rebalancing. It’s not much of a stimulating activity in itself, just a chore really after the novelty of going through the process for the first time. So, you may want to give a notional monetary value to the time each year that you’d realistically have to spend doing this, and then factor that in as another cost.
f). I don’t know what the saving might be in terms of ongoing charges from buying all the elements separately as compared to just buying the VLS 100 fund as a whole. But if the saving, just picking a random but vaguely plausible figure out of the air here as an illustration, were around, for the sake of argument, 0.1% p.a., then if you were looking to spend £10k overall the saving would only be a tenner a year. However, if you had a million to invest, then it would be a grand a year saved in ongoing charges. I’d suggest that it’s probably not worth the hassle, yet alone the multiple transaction costs incurred, for a tenner a year saved on the OCF. On the other hand, it might well be worth the hassle, and perhaps also the transaction costs involved, for saving a grand a year in ongoing charges. So, the decision will probably be sensitive to the scale of the investment.
Also, please do have a read on this site of Finimus’ recent article on how low can you get fund fees and, in particular, I’d highlight what he has to say about US dividend withholding tax on ETFs tracking US indices like the S&P 500. You may want to factor than in too when you make your decision.
Hope that this helps and good luck with your decision.
@Time like infinity
Thanks for the comprehensive answer on my question.
The advantage of getting the VLS 100 fund would be the rebalancing of the portfolio for you -saving you the time and effort.
The point about buying all the constituents independently would then allow you to make a valid comparison on performance against VLS 100 was something I didn’t think off!
I will definitely read up on Finimus’ recent article -re the withholding tax on S&P 500.
I’m putting a portfolio together and want to have as few funds as possible – so far I was looking into the VLS 100 as a core and then HSBC FTSE All World Index C Acc and also considering (VUAG) Vanguard S&P 500 ETF USD Acc GBP
Hoping to cover the whole world with minimal funds!
Hopefully, I am on the right track -as I want to build up my SIPP and SS ISA with these.
If you have any comments on the above -much appreciated!
Thanks
@Manish Shah
Sorry if this a repeated answer..
The HSBC fund covers the whole world…it’s contains the S&P 500 so you will only be reproducing and overlapping your portfolio with VUAG. Tbh, all you need is the HSBC FTSE All-World fund and that’s it, an all-in one fund, market cap and country weighted. Personally, I think it’s the ultimate low cost ‘set-it and forget it’s fund. Just my opinion and not advice. Good luck.
@Simon Hinchley & @Manish Shah, for the avoidance of doubt, I fully agree with Simon 🙂
Manish, apols also for length of my reply yesterday.
The HSBC FTSE All-World Index Fund C looks to be the cheapest all in one truly global tracker fund available in the UK right now. It has very substantial levels of diversification between different equity markets and includes both Developed World and Emerging Markets. For 0.13% p.a. OCF (i.e. just £13 annual ongoing charges per £10,000 invested in it) it’s a bargain, IMO.
It may be that you wanted the higher than global market share weighting (aka ‘home market bias’) towards UK equities that’s used in the VLS100 fund (I don’t know here, but I was assuming that might be why you were looking at it), and – if that’s so – then it is true that holding a higher proportion of UK listed shares will reduce currency risk. However, if the global equity tracker that you choose is one which is not hedged to sterling (and it will cost more to do so) then currency fluctuations can both work in your favour as well as against you. It’s not a one way street. Again, as with Simon, just my opinion here and not any sort of advice (I’m not in finance, just a small scale private investor).
One thing that I think can be said with certainty is just buying an all in one fund is the simplest solution, with the least possible hassle, including avoiding rebalancing manually.
Obviously, you’re only getting equities with both the HSBC fund and with other options for global equity only trackers; and therefore you’re not also getting exposure to other asset classes like, say, bonds. You’ll have to decide for yourself if that’s what you want.
For completeness only, you’re also not getting Smaller Capitalisation companies exposure with the HSBC fund. Vanguard Global All Cap fund, as mentioned in the article, does cover Small Caps, but it’s an OCF of 0.23% p.a., so a fair bit more in relative terms to the HSBC fund at an OCF of 0.13% p.a. for what is only a 5% allocation to Small Caps. As they say, sometimes the enemy of good enough is better.
Depending upon what amount you’re thinking of investing, you might want to also think about platform charges. When funds get as cheap as the HSBC one is here then platform charges can be more than the fund costs themselves. I think that there are some Monevator articles and threads on platform costs and Monevator also has an excellent platform comparison table, which gets periodically updated.
@Time like infinity
@Manish Shah
Thanks for the positive vibes.
Just to mention your comment on platform charges costing more than the fund….
Well that’s my experience with Fidelity….0.35% platform costs, but 0.13% charge for the fund….however, Fidelity are very transparent about the Transaction costs…they are good at this …so the transaction costs with Fidelity is -0.05% currently, which I just take as zero…
As a rule of thumb, be wary of transaction charges because sometimes they are more than the.fund, especially if it’s in aforeign currency or less liquid funds. The advantage of the HSBC fund is that it’s domiciled in the UK, not Ireland so if it goes bust, you are guaranteed back UpTo £85000 as opposed to €20000.
Sorry if I am repeating what others have already said.
@ Manish – some thoughts here on asset allocation / portfolio building:
https://monevator.com/investment-portfolio-examples/
Other than that, I agree 100% with TLI and Simon
Hi I just wanted to thank you all for your patience!
#Time Like Infinity
# Simon Hinchley
# Accumulater
All good pointers and comments to get my teeth into.
Portfolio building with allocations is quite a tricky task when being a novice and I am learning lots and lots from this site as well as elsewhere. There are so many funds to choose from.
My thinking is to build a port of index funds which cover global world funds also I wanted to ensure I covered USA as biggest stock market and then some UK based fund as primary home market.
I am not keen on Bonds just yet (unless I suppose I go for short dated).
The aim is to build core port on top of which I can then branch out to commodities (ETF / index) and technology (to ride the AI wave) and also a slant in the equities income area.
Its all a mess at the moment!
But reading your comments and links is helping.
I want to create a simple port for set it and forget and update once a year with a contribution in the SIPP and or SS ISA.
As for asset allocation I really don’t know what percentages to go for -as bonds not done well / emerging markets not done well / Gold not done well IMHO.
Maybe I should look into small cap value and small cap growth / mid and large cap value and growth to follow.
Its just daunting!
Thanks again for bearing with me – I am but a lowly novice (not even a grasshopper!)
@ Manish – It does seem overwhelming at the start – I felt the same way – but you’ll get there.
Reading a few great investing books helped me consolidate my ideas when consuming the entire internet was proving overwhelming 🙂
Updated editions have just been released of The Four Pillars of Investing by William Bernstein and Smarter Investing by Tim Hale.
Re: track records – I think it’s better to think in terms of what each portfolio component is for:
https://monevator.com/defensive-asset-allocation/
For example: emerging markets probably are dispensable because they’re highly correlated with other equities.
Whereas high-quality government bonds will typically be the asset class to hold during a recession as investors flee equities and shelter money in ‘safer’ assets.
Moreover, the drop in bond prices and increase in yields that accompanied their 2022 massacre make bond prospects look better than they have done for years. No guarantees mind.
The problem with ruling an investment out because it’s done poorly recently is that a bad run can auger good times ahead. To oversimplify:
– Asset class is oversold because it’s done poorly. Prices fall to rock bottom as investors steer clear.
– First movers recognise good value when they see it and fill their boots.
– Prices start to lift off again and outsized profits are made.
– Late-comers notice the action and jump aboard the gravy train as prices peak. They arrive just in time for the next crash.
– Repeat.
Thanks for your v. kind words @Manish. Trying to encapsulate the most important lessons I’ve learnt, often the hard way:
– The best investment strategy is the one that you can actually implement and stick to in all circumstances and which works for you and your goals.
– Simplicity is an asset all of itself.
– Nothing is certain in investment save for fees, volatility, opportunity and risk. It’s best to reduce your expectations and then be pleasantly surprised in the end.
– Focus on what you can control, not what you can’t. You can try and reduce fees and taxes. You can mitigate risks and increase the opportunity for gain by diversifying across an index, increasing the amount you invest, and investing for longer. You can control your own reactions to events and forward plan.
– But you never know how you’ll respond until you experience something first hand with your own money. How you feel about risks, losses and gains might be different at one time, and in one set of circumstances, to another one. Your own reactions to investing situations can surprise you for better or worse. To be oneself is not to know oneself.
– Nothing is ever as bad as it seems, or as good as it seems. Despair births optimism and optimism heralds despair. It’s an endless cycle. After a while, for me, the worse part is not seeing the market fall, and the portfolio shrink, but the long period where the market drifts, not appearing to have decided what to do next. When this happens, do not let boredom tempt you into misplaced or hasty activity. Boredom is even more risky a state of mind than panic at loss or elation at gain. Have good plan at the outset, and then stick to it (unless and until your own circumstances really have changed).
– No one knows what will happen next, but the past is modestly useful as a guide as it can sometimes rhyme with the present, even though it never quite repeats.
– Narratives and sentiment follow prices, not the other way around. Most narratives are just noise. A good story does not make a good investment. Any signals invariably are only evident in hindsight.
– The most important thing is to avoid total, irreparable loss of all capital. Whilst individual shares often fail, it’s practically impossible for all the shares in a broad market index to do so.
– Shares in individual companies may seem at first to offer more opportunity for gain, but most shares fail to beat a low return, lower risk free investment such as short term government bonds, and very many shares go to zero. Yet an index of all shares listed globally has, over any period of 20 years, delivered positive real returns (after inflation) with dividend income reinvested; over 30 years such an index has always produced at least decent real returns; and over 40 years it has given a higher real return than for any other investable income producing asset class. And over some 20, 30 or 40 year periods over the past 100 to 200 years the returns have been just great.
– So think long term. Spending as much time as possible invested in the market and not trying to time the market. Market timing involves getting two separate and very difficult decisions right. When to drop out of the market and, even more challenging still, when to buy back in. The odds of getting the first decision right are slim, but the odds of getting them both correct are nearly invisible. Nothing is more disheartening in investment than to sell in fear or apprehension only to see an investment recover and then go on to rise to a much higher price than what you sold for whilst you’re sitting on the sidelines wondering whether or not to buy back in. More money has been lost trying to avoid falling markets than has ever been made, or preserved, by avoiding falling markets.
– If your time horizon is less than 10 years then you probably shouldn’t be thinking about shares. If, however, your time horizon is several decades, then you might only want to think about shares.
– Share performance is skewed by winners and losers. The outliers typically drive the market return. But no one has ever reliably been able to repeatably and without fail tell winners and losers apart in advance. Even the greatest investors of all time have many losers that they’ve each invested in.
– The average investor today in individual shares is an institution with enormous informational and other advantages to you. It’s a fool’s errand to try and beat them.
– An index, as an average of all shares, performs much better than a typical randomly selected share from the ensemble of all shares within the index; or, put a different way, it outperforms an individual share half way inbetween the best and the worse performing share. It’s counterintuitive, but the average is normally better than trying to pick the parts.
– That’s why indexing is a good way to try and win the loser’s game. Investment is a loser’s game that you can easily win given diversification and time because, whilst most shares lose, the average of all shares wins, i.e. over long enough time periods the global index has always gone up, normally significantly so.
– One famous investor, Paul Tudor Jones, had the words ‘losers average losers’ on a piece of paper taped to the wall in front of his desk. I think that this is what he had in mind. If most shares ‘lose’, then you’re likely to end up picking losers if you just pick individual shares, at least unless you have a significant investing edge. But by buying an index, you guarantee to buy all the winners, as well as everything else; and the average of all the losers’ losses and the winners’ wins combined ends up being substantially net positive. So, in net terms, you in effect end up averaging winners, and not losers, over a long enough time period.
@Curlew #198 and others: I’ve been chasing HL for some time to add FWRG (Invesco FTSE All-World UCITS ETF USD Accumalation (GBP) | FWRG – IE000716YHJ7).
Firstly they added, instead, First Watch Restaurant Group (listed on NASDAQ)!!
Today they have replied saying they are unable to offer the LSE-listed ETF because they are ‘unable to settle trades through our market counterparties’, whatever that means. Seems pretty poor to me.
Hi,
I’m looking at investing in HSBC FTSE All-World Index Fund C. Does anyone know if this is available via HSBC Invest Direct? I’m struggling to find a list of products offered on this platform and seem to keep getting re-directed to HSBC Global Investment Centre. From the broker comparison page, my understanding is that Invest Direct and Global Investment Centre are different in terms of fees, the former being flat and the latter a percentage.
Thanks,
D_D
@D_D
Hi – Yes I can give you some info. No HSBC Invest Direct don’t do any funds. I hold this fund with HSBC GIC with 0.25% platform fee but no dealing or other charges. Note though that HSBC only do their own index tracker funds – you can’t get any other fund managers offerings. Also you must open a HSBC current account – I had to when I opened my GIC account this year (or some savings accounts will do I think also). Note that a First Direct current account (part of HSBC Group) will not do as I have one of those and would rather use that as better bank. They say you must have one though to transfer money in/out of your GIC account and to pay your platform fees from. I have found HSBC GIC good to deal with as they have phone line staffed by UK staff and not long getting through – but HSBC current account not very good and call centre is Indian or somewhere and not very good and long waits but I only use it for my GIC account so not really a problem.
I have it as I use mainly funds for FSCS protection, as ETF’s don’t have any, and have already got most of the cheaper brokers that do funds but my limit on fees is 0.25% – I don’t go any higher. This HSBC All World fund is a good global tracker and has the lowest fund fees so worth having.
You could hold via another platform though such as IWeb who only charge £5 dealing charge at minute as no £100 joining fee offer till end of year or Sharedeal Active I believe do this fund at £9.50 dealing fee and no platform % fee. However S/A do have some other charges – can find on their website such as account closure and cash withdrawals from the account. Also if you are putting a larger amount in (not drip feeding monthly amounts or only putting in a few thousand) Interactive Investor works out okay as can invest any amount for £11.99 per month with one free deal per month or upto 50K for £4.99 per month (no free deals but they did have an offer on for £50 trading credit to use by December if you open an account – not sure if it’s still on or not).
Check out Monevator’s brilliant “Broker comparison table” at this link and it tells you what they provide and costs/charges etc. – you’ll find it here:
https://monevator.com/compare-uk-cheapest-online-brokers/comment-page-15/#comment-1697979
Hope this helps you. All the best.
@ AS
Thanks for the info. I spotted the iWeb offer earlier and think that should provide a good way of holding the HSBC global fund
D_D
Time Like Infinity #249
Thank you an infinity!
For sharing your thoughts and important lessons you have learnt on your journey.
What struck home most was the ability to control what you can and what you cannot.
It makes sense to concentrate on that mostly and not think that you can try to beat the market whether via funds or individual shares.
Keeping it simple is the way to go.
The Accumulator #248
On your recommendations, I have been reading books and you tube and internet as well. Its all out there -you just need to look, filter out the noise and try to understand the direction of the individual asset classes.
I’m now focussed on looking at over OCF and also yield and where I can the over calendar performance over the usual 1,3 and 5 years and where possible 1,3,5 and 10 years. I think 1,3,5 and 10 will give you a better feel how the fund is performing. If you can also get max from fund conception -this should give you a better view on where the fund is going.
Yes its looking to the past -but at least it gives you some kind of view as to how the fund behaved in different market scenarios.
Your wonderful article on defensive asset allocation really highlighted the need for asset allocation in portfolios and potentially what to consider. This is really useful. I do need to add bonds into the portfolio I am building and also consider the other asset classes. I recently learned that not all Inflation linked gilt funds are actually inflation proof -so that was an eye opener!
Simon Hinchley #243
I understand that buying the HSBC FTSE All World covers the whole world and could be the only fund you ever need, however, it does feel like putting all your eggs in one basket. So, best to have that in the portfolio as a core holding, but add other asset classes too.
I heard on Paul Merriman’s podcast (although covers American market) state that if you can get an addition 1% or 1.5% more in growth than over 30 years etc you will make a lot more wealth and the best way to do it is via small caps.
Here are my main learnings:
Given that active investing you will occasionally beat the market, index trackers guarantee to track less some tracking error.
Rebalancing a port should be done -but up to you when and how often you do it.
You need a port with different asset classes to be able to weather down turns.
Why do we have thousands of funds to choose from – you look at the OCF and you look at (where given) 1,3,5 and hopefully 10 years performance surely you are better of sticking to 3-4 funds in your portfolio and you monitor their performance. Keep it simple.
Say you bought a fund when do you evaluate whether its worth keeping or not ie do you look at a years performance (too short?) or do you look at upto 2 or 3 years performance before you decide to sell it?? And when you are looking at performance I am assuming you look at the index its tracking for the comparison?
I guess I need to work out how to pick a fund be it tracker or ETF and use some kind of yard stick to justify buying it.
I am thinking of subscribing to this site to further my education and also to open my mindset on investing approaches.
Keep sharing the knowledge 🙂
SPDR MSCI ACWI IMI ETF is US dollar priced so trades result in an exchange fee. Worth watching out for platform exchange rates as they are often not that great. e.g. ii £->$ just now is at 1.247 vs 1.263 on Wise. That’s a lot of transaction cost. If it’s a trading account (or a flexible ISA), I guess you could take money out in GBP, convert somewhere efficient and then pay back in to trade. But, as you say, there are very similar fund choices available already in £ so…
Yes as Stuart @post#255 says the SPDR MSCI ACWI IMI UCITS ETF (0.17% TER) seems only available in USD trading currency (does state USD on TA’s Trustnet table above as well) but I thought a Global fund as large as this would be traded in GBP as well on the LSE but apparently not, as I have looked around and rang Hargreaves as well as AJ Bell and Interactive Investor and they all couldn’t find one although they can’t tell me definitively one doesn’t exist (staff seem a bit clueless to be honest). Hargreaves said if I do find one they might be able to add it and AJB & ii said they would speak to brokerage and get back to me but am still waiting …….. but I don’t believe there is one.
Can’t see that many UK investors wanting a USD version and having to figure out currency workarounds/having to open accounts with cheapest FX brokers etc. so will want GBP and ACC version so not landed with FX fees on trades/dividends, so this fund being listed as one of the best/cheapest global tracker funds will not be that much use to most UK investors I wouldn’t think. You would think that with it probably being one of the biggest global ETFs that it would/should have a GBP version??
However you could get SPDR MSCI World UCITS ETF for 0.12% (SWLD) priced GBP which is DEV World only and then add in an EM tracker as well. Although this may mean an additional dealing cost with some brokers – if you are brave enough to use the like of InvestEngine who have it (or similar broker that has no dealing fees) then you could have similar fund to this SPDR global one at no extra cost.
Good point about using the Dev world version plus emerging markets. One to watch our for however is HSBC MSCI Emerg Mkts ETF GBP which despite being the GBP version, is an income fund and its dividends are paid in USD.
Further to my point about taking USD out to somewhere with better rates etc. Yes, except that ii won’t let you use Wise as a USD bank account. They say to protect you (presumably from yourself 🙂 ). How kind.
Here in Japan the market leader MSCI ACWI fund manages £14.5 billion (¥2.8 trillion) and has an annual charge of 0.05775%
I’m sure it’s been answered before but I can’t find the answer so …
How do I tell if a distributing fund / ETF distributes in GBP (v. USD etc.)?
I am investing outside a SIPP / ISA so want to look at distributing funds to make dealings with tax reporting easier. While I can see fairly easily which funds I can buy/sell in GBP I can’t work out how to determine if distributions will be in GBP so I can then re-invest without incurring the cost of converting a USD distribution into GBP.
Thanks for any help!
@David — This information should be on the specific fund’s web page and/or factsheet.
Our article on how to read such has pointers:
https://monevator.com/how-to-read-a-fund-fact-sheet/
@TI – Merci Mille Fois
A pointer to exactly what I needed (and had forgotten you had written up)! Assuming of course I can find the info on the relevant fact sheet / fund website. In case anyone reads in the future and wonders, the key bits re my question seem to be:
A fund’s underlying currency determines your exposure to currency risk. Underlying currency equates to whatever the fund’s securities are actually valued in.
Base or denominated currency – The currency a fund reports its Net Asset Value (NAV) in. It distributes its dividends in this currency, too. But note that base currency has nothing to do with currency risk.
Trading currency – The currency in which the ETF trades on the London Stock Exchange.
Knowledge of the latter two currency types will help you avoid FX fees. (This is only an issue with ETFs. Index funds marketed in the UK trade and report in GBP.) Currency exposure depends on fund’s underlying currency and is a fact of life unless you hedge.
A few things:-
@David – “How do I tell if a distributing fund / ETF distributes in GBP (v. USD etc.)?” It’s not easy. In the case of the one I mentioned above (HMEF), the KIID is the same for the USD and GBP version so is not specific. I recently asked Vanguard about VWRL and they were able to tell me that dividends are in USD, but they convert en-masse at a “very competitive” exchange rate. Which is probably not. bad.
My experience with HMEF was that ii paid the dividends as USD to a USD cash sub-account for my Trading account, but in the ISA they automatically/invisibly converted using their FX rate. Understandable because USD can’t be held in an ISA, but it’s all less than transparent (the conversion is not shown on statements) and therefore less than ideal.
HSBC FTSE ALL-World’s OCF has been reduced from 0.13% to 0.12%.
Amundi made some news recently launching a 0.07% OCF All-World tracker. It does not yet seem to be available in the UK.
But when I searched for it I came across:
https://www.amundietf.co.uk/en/professional/products/equity/amundi-prime-global-ucits-etf-dr-d/lu1931974692
Which is a Developed World fund with a 0.05% OCF. It’s available on ii at least. This one is Income/Distribution class and GBP/£ priced. It tracks a Solactive index rather than FTSE or MSCI. Comparing the fund’s performance to one of the equivalent’s however does not show any great differences.
Sadly the accumulation version (LU2089238203) is USD priced.
p.s. Sorry – was trying to edit my comment above to say that Monevator already show the accumulation version of that Amundi fund as the cheapest Developed World tracker.
Hi
I am non UK resident and am currently with Interactive Brokers. Thinking of going with a UK domiciled ETF such as VWRP/A. I’m 34. Should I add any bonds such as the Vanguard UK Gilts? Thinking of 85/15% or maybe 90/10 then slowly change to more bonds than equity. Thoughts? I simply want a ‘set and forget’ approach. IFAs quoting me 1% fees.
Hi All
I use ii as my ISA/SIPP platform.
They give me interest on cash held.
Question is is it worth leaving cash as is or using a money market fund? What do peeps suggest??
Got my pension split between trend investing in active funds and trackers. Having done a comparison of the two approaches I’ve realised my HSBC World Tracker has done about 15-20% better than my active efforts over the last four years. The S&P 500 tracker has done even better. Quite depressing but glad I checked!
It might feel a bit like switching queues in the post office but I’m looking at going 80-90% into trackers and the remaining in bond funds and money markets. I’m close to drawing my pension and want to de-risk a bit of my portfolio against any market drops and so I can draw against the lower risk part in times of slump.
Instead of using the HSBC fund I’ve been using I thought I’d switch to the ETF equivalent, as Hargreaves Lansdown caps their charge on ETFs at £200pa. However, I’ve couldn’t find the exact same iShares ETF as you have in your tables and the SPDR ETF didn’t seem to come up at all in HL.
I found an iShares MSCI ACWI ETF USD Acc ETF, ISIN IE00B6R52259. It’s priced in GBP but I can’t figure if it’s hedged. However the hedged one I found: iShares MSCI World GBP Hedged ETF Acc, ISIN IE00B42YS929, has a charge of 0.55%!
Could you give the ticker or ISIN numbers please?
Great article. I invested in the HSBC fund a couple of years ago and very pleased I did. It’s made my active investing attempts look pretty poor so I’m switching to a set and forget approach.
I wanted to switch from unit trusts to ETFs to benefit from HL’s cap on ETF fees. However, I’ve found it virtually impossible to find the exact same ones using Morningstar/HL.
Could you give the ISIN or ticker numbers for the ETFs in your table please? It’s particularly the SPDR and iShares versions I’m interested in, assuming they are both hedged.
Apologies for the almost duplicate posts. When I submitted the first one it seemed to disappear. Then I realised I wasn’t logged in. Hadn’t copied the text so had to start over. Now I see the original has published. Sorry all!
@Curlew #198 @MartinT #250
HL has added FWRG (Invesco FTSE All-World UCITS ETF USD Accumalation (GBP) | FWRG – IE000716YHJ7)! Not sure when, but I found it today.
Only worry is HL’s inability to spell Accumulation! And Invesco showing that specific ETF, ISIN IE000716YHJ7 with a ticker of FWRA on their UK website. Both HL and JustETF show that ISIN reference as having a ticker of FWRG.
@Colin interesting, thanks. The mis-spelling appears everywhere, including Morning Star and Yahoo, so I guess it’s in the official name! HL are still showing First Watch Restaurant Group when you search, so investors need to be careful!
HL’s earlier refusal was a major factor in me transferring to AJ Bell, after 25 years of loyal custom…
SPDR ACWI ETF is now cheapest MSCI All Country World Index ETF (LSE:ACWI)
New TER 0.12% wef 1st August
If the OCF for a passive index fund or ETF is lowest should you transfer your holding to that one and should you do a bulk buy or drip feed or should you wait for some performance stats before investing?
Decisions decisions!