Low-cost index funds UK

Hi Theta, to take into account this factor and all the others that aren’t included in the OCF / TER you need to perform a tracking difference / tracking error check. It’s not easily done and the results are not exact. If you search the site using those those search terms then you’ll discover the best ways I’ve found to do it.

selftrade is offering HSBC FTSE All share fund @ocf 0.02% to sipp accounts.
Similarly,Fidelity index world is @ocf 0.09% at iweb.

Hi – Anyone got thoughts about FTSE 100 equal value ETF? db-X trackers have recently launched one (XFEW). Again wondering if the higher TER (0.25%) is worth it.

HSBC are cutting their tracker charges from 16th November 2015

HSBC European Index Fund C: 0.1%pa (was 0.2%)
HSBC American Index Fund C: 0.08%pa (was 0.18%)
HSBC FTSE all share C: 0.07%pa (was 0.17%)

http://citywire.co.uk/wealth-manager/news/hsbc-slashes-fees-on-three-key-tracker-funds/a848566?ref=wealth_manager_all_stories_list

Maybe a silly question, but what is the difference between “Domestic Equity” and “Domestic Value Equity”? I can’t seem to understand the difference, and Google is not helping much…

Blackrock FTSE all share tracker drops from 0.16 to 0.07%

@PHB, I assume you accept that (as TI says) for any given sector “it is literally mathematically impossible for passives as a group to do worse than actives as a group”. If so, then logically either:
a) You are unusually good at picking EM active funds that will outperform, which seems unlikely, given that any such skills would surely mean you could also pick outperformers in other sectors;
b) There’s something about EM sector that means it is easier to spot winning funds than in other sectors. But that seems unlikely, because if this were true, we would all spot the winning funds and they would have all the money, and so they would “be” the market.
c) This sector for some reason experiences a greater proportion of investors who don’t bother to “carefully choose” their active funds. I can’t see why this would be the case.
d) The EM sector is very heterogeneous, so you could get very different performance depending on whether the fund in question invests in, say China. So perhaps you are just favouring some active EM funds that happen to have a portfolio mix that has outperformed over the last few years and is different from the indexes. So, inadvertently, you are not comparing like-for-like.
e) You have just been very lucky. Humans are very good at being fooled by randomness.

I don’t have much faith in EM active funds, Templeton Investment trust ‘was’ an amazing performer so if you picked this using some clever active management past performance test/great manager insight/ etc, you wouldn’t be happy now.

@PK, perhaps, but I don’t think PHB is claiming to be a better than average picker of active EM funds. The apparent outperformance of his/her EM funds is contrary to his/her expectations, rather than being a confirmation.

@ivanopinion, as you say perhaps, but here’s a thought; why would you choose to purchase an active fund in the first place? The expectation could not be considered to be purely that it would perform less well than the sector trackers to which it would be compared. Perhaps there was just be a small portion of hope that a choice has been made that would do better than the tracker. Based on what PHB wrote he more than one….
It’s a very difficult thing to be a truly rational evidence based investor speaking as one who has failed.The workings our psyche and mechanisms such as confirmation bias I suspect are rather more complicated than your comment suggests??

@PHB

Yes, I realise this is not just an academic question. Which is precisely why it is important not to draw unjustified (and improbable) conclusions that just because A has made you more money than B for a few years it will continue to do so.

But that’s not to say it definitely won’t. 🙂

Some folk deduce for the blatantly obvious reasons that most of the time passive investing is better than active for most folk most of the time, but may occasionally under certain circumstances select an active fund.

Some folk believe that 100% passive investing is the right religion.

No one can see the future, zero sum game, passive beats average of active.

Time to move on.

@PHB – Passive investing a religion? It’s logical, rational and based on good, well tested evidence – not quite the same as most other religions I can think of.
We all make choices; based on the best evidence, on average, your approach will more often do less well than a truly passive approach.
No one is arguing with your right to choose whatever approach you wish, just unhappy with your conclusions.
May the force be with your active fund selection!

I wonder why there’s such a difference in whether the fund is denominated in euros or pounds? Do active funds tend to hedge FX movements, and this happens to have paid off more for sterling denominated funds?

In my portfolio, I have found that only one active manager consistently performs poorly.

Why did I feel the need to invest in Russian Oil, Portuguese Telephones, Gold Mines, or UK Fracking? They all seemed like jolly good ideas at the time, but fortunately I restrict myself to comparitively small sums when overcome by the need to have a dabble on the side.

SPDR Barclays Capital Sterling Aggregate Bond ETF is no more, I’m afraid; cancelled due to lack of interest

Hi Julio,

This series is made for you:
http://monevator.com/how-to-buy-index-trackers/

Note, we write from a UK perspective

I was given a free copy of the FT this morning with a large cover advertising iShares by BlackRock. They focused on the 0.07% OCF/TER for the FTSE100/500 funds and thought they looked potentially interesting:
https://www.ishares.com/us/strategies/ishares-core-suite-explorer

Anyone have any thoughts on these? Looks like TER varies from 0.03% to 0.12%.

@ Simon – that should show up on the product factsheet rather than the KIID. Also, there’s a link to a list of non-reporting funds maintained by HMRC. You can find it in this piece:
http://monevator.com/avoid-income-tax-with-reporting-funds/

Vanguard are launching 4 new ETF funds based on (global) factor investing based on value, momentum, liquidity and volatility criteria

http://citywire.co.uk/wealth-manager/news/vanguard-launches-four-new-etfs/a866505

Hi all,

My first post here, but I have been lurking for a while.
I have recently began reading this blog, because now I have a pension scheme through my employer (in the UK) and I want to save the best I can. By default, they put me on BlackRock Aquila 50:50 Global Equity Index (B1G5113). Since I’m so new to this, I don’t know if this is a good choice or I should be looking to change.

On the tin, this has an annual charge of 1%. But throught my employer, this is effectively reduced to 0.20%. There seem to be no other charges. But I can’t tell if this is passively or actively managed. It looks like a passive tracker, holding 5 other funds:
BlackRock Aquila (BRA) UK Equity Index (49.8%);
BRA US Equity Index (17%)
BRA European Equity Index (16.6%)
BRA Pacific Rim Eq Idx (8.3%)
BRA Japanese Eq Idx. (8.3%)

In theory, this is close to what I want: a diversified global passive tracker, although I’d maybe change the weights a bit to give more US and less UK.

But is this a good fund or can I find better?

Thanks all.

@The Accumulator

Much appreciated for your answer. Thank you!

It’s good to know it is ok in charges. I usually am very distrustful of Emerging Markets so I was not too bothered for missing on them. But is this a bad idea? Is it better to have a full world exposure instead of, for example, just the UK, US and Europe?

I’m going to look into asset diversification. Do cash ISAs count for diversification, or are they too much of wimpy in returns?

Thanks a bunch.

Morning,

I thought you might like a heads up:

If you purchase the Fidelity Index UK Fund W via Cavendish online (online broker whose linked with Fidelity), you pay only 0.07%, in addition to the broker fees (total of 0.25%) you pay a total fee of 0.32% (includes fund manager charge, all purchasing/selling fees, platform and subplatform charge).

This makes this tracker the cheapest of the lot (same price for wrapping in an ISA also).

Hope that helps,

Sam

I like the *idea* of the cheap beta global value products from Vanguard, db-x and iShares, but they’re too young. Will be sticking to the proxy VHYL and XGSD for global value for now. Shame these have been bumped from the comprehensive and valuable list.

Excellent article.

However, after checking the Fidelity website it looks as though Fidelity have reduced the charges on their tracker funds from those you have quoted.

https://www.fidelity.co.uk/investor/tracker-funds/our-range.page

Given the charges for holding investments in ISAs and SIPPs, could one perhaps save useful amounts by holding them exposed to tax, but exploiting the new tax-free dividend allowance (from 16/17)?

Add me to the VHYL not VVAL list.

VVAL is an active fund that is not tracking an index. It is not a passive low cost index tracker. It might be a better choice than VHYL for many people, including otherwise passive investors, but it deserves commentary, and preservation of alternatives.

@ Algernond – It is a perplexing mystery. I checked out the factsheet here:
https://sglistedproducts.co.uk/productdetailspage/symbol:GILI/

It says 0.07. But the web page says 0.22 as does the KIID. That’s 2-1 in favour of 0.22, so I suspect you’re right. I will ask ’em.

Intriguingly, GILS, the non-inflation linked one is listed at 0.07 on the webpage and the factsheet, but 0.18 on the KIID. Making this… a farce.

@ Fremantle – I agree, the value (and multi-factor ETFs) are still green but the dividend funds are value’s poor relation. Maybe I should list them separately under income investing, though. That’s a fair shout.

@ Rhino – I’m agnostic. Whichever works out cheapest. I have both in my portfolio.

@ Malcolm – Cheers! The versions you’ve spotted are the Fidelity P index funds. These are a Fidelity exclusive i.e. only available on Fidelity’s platform. The slightly more expensive W funds are the ones that are widely available so I’ve plumped for those. Generally the cost of exclusives plus platform fees winds up being more expensive.

@ Atlantic – Cheers!

@ Dearieme – most decent brokers won’t charge you any more for an ISA versus a trading account. And you can’t get pension saving tax breaks without investing in a pension wrapper, so that’s a thumb’s down from me.

@ Rg – you’ve got three alternatives right below it. It is low cost and all factor funds are active choices. The fact that it doesn’t track an index is less of an issue for me given that many of the factor funds use custom indexes that belie one of the main points of index tracking (i.e. transparency) and also because Dimensional Fund Advisors use a similar model. The important thing is that it does the job it says it will. I’m pretty confident it will because Vanguard generally live up to their billing but Fremantle is right about giving it time to prove itself.

@TA. Fair enough. I’ll sooner go for an index tracker like the MSCI offering, even with a slight premium. Transparently convicted rules are important to me and an index provides that, sort of. Factor investing spans active through passive, as neatly shown on the Venn diagram here: http://bit.ly/1TEWaK5
I believe in Vanguard and am impressed by their Active performance, but VVAL is too active to entice me. I simply don’t believe it belongs on a somewhat authoritative list of low cost index trackers, except as a footnote alternative, but I’ll live with the anomaly.
Cheers for the updated article, good work appreciated.

What about high yield trackers?

FTSE All-World High Dividend Yield UCITS ETF
https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9506&assetCode=EQUITY##overview

S&P® Global Dividend Aristocrats
https://www.spdrseurope.com/product/fund.seam?ticker=ZPRG%20GY&

Any one uses them in their passive portfolio?

I was thinking of building a simple passive portfolio in the model of The Simplicity Portfolio as put up by The Escape Artist: http://theescapeartist.me/2015/07/28/the-simplicity-portfolio/

What do you guys think?

@The Accumulator – in the case of MSCI enhanced value You know the methology. https://www.msci.com/eqb/methodology/meth_docs/MSCI_Enhanced_Value_Index_Meth_Aug14.pdf

@ Charlie – XGSG it is. Much obliged. Have updated.

@ all – thanks for your comments and support, really is appreciated. Caning it on work-related deadlines right now so must get back to the grindstone.

Does that seem like a sensible approach or will the lowest OCF normally be better?

Hello,

I’ve got 2 questions, if anyone wouldn’t mind helping 🙂

1.) SPDR MSCI World Small Cap ETF (WOSC) OCF 0.45% (I can’t get the Vanguard one from my broker). However, currently I am buying 2 iShares funds, CES1 (Europe) and CUS1 (USA). Each comprises 5% of my portfolio, and that is my attempt to build up a global small cap holding.

However, would I be better off buying the SPDR etf recommended here? It is slightly cheaper than the two iShares and I’d incur slightly less commissions in buying (my commissions are very, very low, about £1.15 per trade).

Last time I enquired about this etf, I was warned off it – can’t remember exactly, but maybe the bid/offer spread was bad, or the fund was too small, meaning it might get closed.

2. I really, really don’t understand currency risk. I live outside the UK, and I have no idea where I will end up retiring. So what I’ve done is invest in 3 currencies: I’ve got 5% in very safe Singapore dollar denominated bonds (I live in Singapore). Then I’ve got 38% in USD and 57% in GBP.

My concern is that if I don’t retire in the UK and I have a lot in GBP, I could lose out to a sudden drop in the pound, like we’re seeing now. I have split my world equities allocation (44% + 6% emerging markets) into half: 22% goes to VEVE (GBP) and 22% to IWDA (USD). My commission costs are low so it doesn’t cost me much, if anything, to make two trades instead of one.

Is what I’m doing sensible or insane? Is there any possibility of enhanced dollar cost averaging here? I note that I started buying both VEVE and IWDA at the same time, and IWDA is down 5% and VEVE is up 1% (approx). When you convert the USD to GBP however, the two are both worth 22% each. So the 6% swing has to be due to the fall in sterling, right?

I’d be very grateful for any thoughts/comments!

Thank you, Investor, for taking the time to answer my question.

If I understand correctly, buying world equities simultaneously represents a currency risk, but also a benefit over the long term, provided your portfolio is well diversified.

I’m trying to stick to a core strategy and I don’t want to keep switching, but as I’m basically only one year in to my 25 year long plan, I’m still open to making changes if I think they’d be better for me long term.

Currently I am 25% bonds, 75% equities. But I have 10 funds and I’m feeling it would be better if I could reduce that number. So if there’s no real benefit to owning IWDA and VEVE (and I also have 5% in VMID), I could amalgamate these three, and maybe do the same with CUS1 and CUS1 with WOSC.

That would get me down to a more manageable 7 ETFs, and I’d still have 3 asset classes (I have 10% in a REIT, I don’t have a mortgage or house).

For what it’s worth, I’ve also made a comprehensive spreadsheet for tracking transactions and showing returns etc. When I’m confident it’s the final article, I’d be happy to share it with other readers here. I noticed that some asked about the sheet you use for the Slow and Steady Portfolio.

@ Nicholas – no benefit to holding IWDA and VEVE. One global small cap fund the right way to go if you’d like a more manageable portfolio. VMID tilts you slightly towards UK mid caps but at 5% it’s neither here nor there.

HSBC have significantly cut charges on some of their ETFs

http://www.telegraph.co.uk/investing/funds/tracker-price-war-hsbc-cuts-fund-charges-to-as-low-as-005pc/

There’s a list of old/new charges in the article

Hi all,

I have been reading Monevator for some months now and am very happy to have found it. This and the Stock Series opened my eyes to the possibility of investment, and I am studying how to start doing it.
I have decided the asset class division, and this page has helped me zoom in on the necessary funds.
But there are things I still don’t know. I want to keep a part of my pot in gilts, for diversification, and although I am not sure if that would be better than holding them through a fund, I was thinking of buying them directly from the government, make a ladder and hold them to maturity.
But how do I buy them? I will use a brokerage account to hold a Shares ISA. Can I buy bonds via such an account?

Incidentally, would this be a sound plan, or is it better to go the fund-way?
Thanks.

Vanguard is finally launching their Target Retirement Date funds in the UK

http://www.telegraph.co.uk/investing/funds/new-funds-offer-cheap-route-for-buy-and-forget-investors/

@AoB: utilizing the generous ISA scheme(s) in the UK without the IRS treating them as a PFIC is nigh on impossible, in my experience. The US doesn’t want it’s citizens living (and investing) abroad.

SIPP is more feasible as you can declare it as a pension, which has allowances under the US-UK tax treaty. Unfortunately it is not practically possible to transfer the SIPP to a US based scheme so it will be UK based for good, involving significant currency risk as well as uncertain treatment on drawdown.

@ Chris – D class units are available through most online brokers with minimums of £50 and investible in ISAs. Though you will find factsheets out there that refer to £100,000 minimums they don’t account for the deals BlackRock struck with the brokers. Always check your brokers terms as everyone waives that 5% initial charge these days too.
I haven’t seen the X class available through any retail broker though.

The Fidelity Index World Fund I (GB00B7LWFW05) OCF 0.15%, ‘seems’ to have been replaced with Fidelity Index World Fund P-Acc (GB00BJS8SJ34) with a slightly reduced Ongoing Fund Charge (which I assume is the same as OCF) of 0.13%.

These funds seem similar, and are I suspect identical, though the percentage allocations differ slightly (which is probably explained by the different evaluation dates).

Why would Fidelity close one passive fund and open another identical one?

The new Vanguard target dated retirement funds, that have been previously mentioned, are now showing on the Vanguard website

https://www.vanguard.co.uk/uk/portal/investments/all-products?assetType=BALANCED

Email Scottish Equitable.

Hi Steve,

There isn’t another FTSE All-Share ETF. There is iShares MSCI UK UCITS ETF but also capitalising. You could split between FTSE 100 and FTSE 250 ETFs but simplest would be to choose one of the many FTSE All-Share index funds – income units.

Does anyone perhaps know of any ex Europe funds?

I stumbled across this article
http://www.finalytiq.co.uk/7im-crashes-dimensionals-party/
which lists a few useful looking value funds, allegedly comparable to Dimensional offerings. They seem to be tradable at HL (and probably others). Fees are somewhat lower than DFA, but there isn’t nearly so much historical performance data as with DFA funds.

I hold a fair chunk of DFA funds myself, but they’re a bit of a faff as they’re via an IFA (on an execution-only basis), so I’d welcome a decent “normal” alternative. No Global value offering, although I guess you can construct a near-enough version from the US/Europe/UK/EM products.

Hi. I noticed for my workplace pension, I can get the institutional charge for the Vanguard funds (~ 1/3 lower OCF).

If I want to transfer to my SIPP in the future, but can only get the normal OCF, does anyone know if it would be in specie or have to be cash, because of the institutional vs standard OCF?

Hi Jon, international bonds hedged back to £ are a plausible alternative. I’ve just taken a look at Vanguard’s global bond fund:
https://www.vanguard.co.uk/uk/portal/loadPDF?country=uk&docId=2036

Yield to maturity is 1.2% vs 1% from their UK gov bond fund.

Average credit quality is the same although the global bond fund is spread over a wider range: from near 40% AAA down to 17% BBB.

Big difference is the duration. The global fund is near 7 years vs 12 for gilt fund. So, the global fund should theoretically be less volatile although currency risk could add a bit more – the hedging is unlikely to be perfect.

Fund costs are the same. I’d personally steer clear of corporate bond funds. They don’t offer the same downside protection in a recession that gov bonds often give.

Hi Don F, it’s not small cap. iShares currently say it invests in smaller cap companies but that doesn’t actually mean small. It’s a mid-cap to large cap mix. Take a look at the breakdown here:
http://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P00014E8B&tab=3

vs Vanguard Global Small cap:
http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000005OPT&tab=3

TA Lyxor have a new share class for index linked Gilts, GILI LN which although their office is in Paris the fund is domiciled in Luxembourg, so I assume this gets around the French withholding tax or am I missing something. It is a very new etf (10.11.16) is it wise to invest in something so young it tracks the same FTSE index as my index fund but far cheaper.

You have pointed out in other articles that the Fidelity Index World I Acc fund is not Total world as it doesn’t include emerging markets. In order to include emerging markets alongside this fund, which emerging markets fund would you highlight? I would like a simple passive index tracker portfolio using only funds that covers all world and emerging markets.

The Fidelity world mentioned above seems to perform really well but I would like an emerging markets component without a UK bias.

I am also struggling to work out which funds i can hold with different sipp brokers. It’s very confusing! They all offer different “class” funds and it’s starting to confuse me. How do I know whether I can hold specific funds within a specific sipp operator without signing up?

I would like to implement literally a 1/2 fund passive index tracker, fund it with around £300 and simply let it grow. Therefore I do not need big fancy platforms but they are making the charges and fund availability so confusing I can’t work out which is cheapest. Even using your table it simply isn’t as easy as you make it seem. If I’m funding it monthly with simply 1/2 funds in the portfolio do I pay a fund dealing fee (Youinvest@£1.50) every month for each fund?

Sorry there’s lots of questions I’ve been reading everything about this and still feel really confused! Please help!

Hi Jonathan, try VRWL and combine with a UK gov bond ETF. That’s the closest you will get

@ Paul – Vanguard’s LifeStrategy 100 is an index fund with a small percentage of emerging markets – around 7%. They’ve also recently released the FTSE Global All Cap Index Fund which is similar.

If you want a dedicated emerging market fund for a higher allocation then see the section above – Fidelity have a fund as does Blackrock. Vanguard also have an emerging index fund with an OCF of 0.27%.

Most decent brokers will let you see their fund list without signing up. You’ll need to dig around their site. Often the relevant section will be labelled Research.

I’m not sure what you mean by 1/2 fund. If you’re starting from scratch and investing £300 a month in a SIPP then take a look at a low cost percentage fee broker like Close Bros, Cavendish or Best Invest. They won’t charge you for trading funds and will be cheaper than Youinvest.

There is a cheaper world property fund, unless I’m mistaken.

Legal & General Global Real Estate Dividend Index I GBP Acc (GB00BYW7CN38) OCF 0.2%

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000W9M1

Seems to have almost identical holdings to the blackrock global property securities fund you listed. Has the same benchmark. Anything I’m missing?

Ah so it is. Would you recommend it as an adequate alternative to the blackrock fund if a broker doesn’t have the latter?

Thanks!

Are you on Hargreaves Lansdown, hyperhypo? If I’m remembering correctly, Class H is a version of the same fund that’s exclusively available on HL at a slight discount. Re: all those share class designations – the difference is the price of the fund.

@TA…..no my Class H /Class D query ..is with my company Aegon ARC SIPP…i asked the admins and they included a couple of factsheets but weren’t able to be specific over differences ..suggested i check with Blackrock which is fair enough ..i only stumbled over H in error, and it would seem sensible to me to stick with Class D as per S&S.

@Kayvaan

Indeed it is and i’ve learned something in the process ….thank you for putting me straight!
Class D it is.

Hi vtk, Morningstar includes all kinds of weird and wonderful funds which aren’t available to us regular Joes and Josephines. As an institutional fund at that price it’s almost certainly only available to big financial players.

@TA – also, I have a question, please – what’s the best, cheapest way of investing in the S&P500 for a UK resident?

great article, i was wondering if you could help

I have a cheap L&G tracker at 0.1%. Should i transfer it to Blackrock at 0.06%?

Blackrock have a bid offer spread which seems to be 1p (currently 0.44%). That means if you buy on day 1, and sell on day 300, and the price is exactly the same, you will lose 0.44%. it seems therefore you have to hold the Blackrock investment for 11 years for it to be cheaper than the L&G investment

No article on cheap trackers seems to address this point, which seems odd

many thanks Accumulator, keep up the good work! It sounds like a real obsessive about costs / investing new money needs to keep an eye on the bid offer spread. If you were for instance looking to buy a tracker that tracked the FTSE all share index, perhaps you should look at a L&G UK all share tracker at 0.1% (but no bid offer spread) rather than a Blackrock uk equity All share UK tracker at 0.06% (but has a bid offer spread) because the bid offer spread essentially acts as an up front cost of c. 0.44% (obviously this upfront cost will depend on what the bid offer spread is at the time of acquisition).

Hi Todd,

The short answer is yes and slightly longer answers can be found here:

http://monevator.com/vanguard-lifestrategy/

http://monevator.com/using-vanguard-lifestrategy-funds-life/

Happy reading!

Should Legal & General International Index Trust I Acc with an OCF of 0.13% be on the list – it’s slightly better ( cheaper/bigger/more diversified) than the Fidelity world fund and with an Emerging Market component too

Be great to see the World Equity category split between developed World and Global (including developing), as per Lars recommendation.

worth a mention is Source Markets S&P 500 UCITS ETF A (SPXS) which at 0.05% is just about as cheap as it gets

It’s worth bearing in mind that headline cost is not everything, I looked at a Canadian tracker, iShares appeared the more expensive option by a sizeable margin but when one looks at performance , tracking error over a multi year period the others performed far worse. The article points this out but it’s not worth chasing the odd basis point or two, even with 15 plus basis points apparent advantage it does not necessarily translate into a better result.

As has been mentioned above by ‘Gregory’ the Vanguard Global Value Factor ETF (VVAL) is an actively managed fund. Would you mind clarifying whether you are moving away from highlighting purely passive products to funds offering the lowest OCF? Many thanks.

Thanks TA – this is a really useful list – not sure how I haven’t seen it before, but does mean I am going to re-evaluate some of the trackers I have… although I want to make sure not everything is in Vanguard so that my paranoia doesn’t stop me sleeping at night!
Cheers,
FiL

Gizzard

I must admit I have not come across UKRE before. It seems to hold around a third of its assets in Index Linked Gilts.

My first thought is that you could hold a mixture of IUKP and INXG (Index linked Gilts charges are .25% against .4% for the property ETFs) its cheaper and you could adjust the balance to your own judgement.

Given that Index Linked Gilts are priced to give a negative return I can’t say I find them attractive.

If you want a less geared exposure to property than there are property funds that offer just that but they can struggle with liquidity. The REIT is at least liquid and clearly the management judge gearing to be sensible and to hold them but try to undo the borrowing judged to be prudent by the management doesn’t seem to make sense.

Hi Stephen, I think this is overly complicated. ‘Adventurous’ is euphemism for ‘Prepared to take risk for higher expected returns’. Not the fruitiest euphemism of all time but there you go. Anyway, I think risk should be taken on the equities side while bonds should be a safe haven of domestic, high quality government bonds (i.e. gilts for UK investors) or £-hedged global, high quality government bonds if you really want to mix it up.

I’m looking to put £5K into a share dealing account and leave it there a few years – making one trade in an ETF that tracks US equity. Some share dealing accounts only charge for the trade which seems to me cheaper than paying .2 to .5 annual charge for a fund platform. But I read somewhere that most platforms would charge a 1%+ forex fee which would negate any savings from paying a platform charge. Is this the case?

Hi all,

I’m a newbie and this is my first post. I’ve been reading for a few years now but have until now, for one reason or another, put off creating my own “slow and steady”portfolio. Having finally come around to doing it i’m finding myself struggling and must ask for your help. But before that thanks! I have found this, and many other posts really useful and helpful.

On to the issue at hand then. I’m trying to get together a traditional 60/40 portfolio and have been following Tim Hale’s guidance described in Smart Investing. Contrary to Tim’s advice however, in an attempt to reduce OCFs, I’m looking to use one total world equity tracker instead of a variety of funds to cover developed, emerging, and value markets as described in the “Total world equity trackers 4 U” post. I’m edging towards selecting the Vanguard FTSE All-World UCITS ETF (GBP) | VWRL but am unsure if I should supplement it with anything else. Any views on this would be appreciated.

Further to this I’m getting confused with which bonds to select. I get the point about GILTS and index-linked bonds but am struggling with the terminology in the post. I’m trying to identify and select a “Bonds (AA short dated 0-5 years)” fund and an “Index linked bonds (AA short dated 0-5 years)” as described in the book. Could anyone confirm that the following (described in the post above) are appropriate:
– Lyxor FTSE Actuaries UK Gilts 0-5Y (DR) UCITS ETF – D-GBP | GIL5;
– Lyxor FTSE Actuaries UK Gilts Inflation-Linked

Any help anyone can give me on this would be most appreciated (and any other advice on really!).

Many thanks,

Leon

PS: my “slow and steady” at the moment is looking as such:
– Total world equity: Vanguard FTSE All-World UCITS ETF (GBP) | VWRL (OCF=0.20),
– REIT: Legal & General Global Real Estate Dividend Index I GBP Acc (OCF=0.20),
– Bonds (AA short dated 0-5 years)”: Lyxor FTSE Actuaries UK Gilts 0-5Y (DR) UCITS ETF – D-GBP | GIL5 (OCF = 0.07);
– Inflation linked bonds (AA short dated 0-5 years): Lyxor FTSE Actuaries UK Gilts Inflation-Linked (OCF (0.07).

Total OCF = 0.54

Links:
Smart Investing: http://monevator.com/review-smarter-investing-by-tim-hale/
Total world equity trackers 4 U: http://monevator.com/how-to-chooose-total-world-equity-trackers/
How to construct your own asset allocation: http://monevator.com/asset-allocation-construct/

Hi Accumulator,

many thanks for taking the time to reply and share the info inc. the article on interest rates. As you say, Tim Hale does side step the issue in the book as you say. Having done a bit more digging I haven’t managed to uncover any 0-5 inflation linked bonds as predicted.

As you recommended in the ‘inflation risk’ article I’ve contacted Legal and General to inquire about the duration of the L&G Global Inflation Linked Bond Index I fund. No news so far…

Hi Vaiix, rather than investing in every fund monthly, you could invest in each fund every other fund or every quarter to make the minimums. That might mean you invest in all 6 every other month or 3 one month and 3 the next.

Another option is to simplify the portfolio – drop inflation-linked bonds and small caps for example.
Btw, if you’re trying to follow Hale’s advice on inflation-linked bonds then please read this piece. The situation is not as simple as Hale makes it look: http://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/

Finally, here’s a global tracker that offers a non-home biased alternative to LifeStrategy:
Vanguard’s FTSE Global All-Cap index fund.
https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-global-all-cap-index-fund-gbp-accumulation-shares/overview-tab

It includes a touch of emerging markets and small cap. You’d pair it with a bond fund.

Hi Rob, Thank you for that comment, I appreciate it.

7IM do a bunch of separate value funds – UK, US, Europe and Emerging Markets (this is how to get your EM value fund).

If you split an index into even growth and value components then you just end up with the balanced index’s result but after adding extra cost and complexity.

If you think value or growth will perform in the future then you’re best off choosing one or the other.

Could anyone please explain why the dividends generated by Luxor’s GIL5 appear to be so much better than iShares IGLS and SPDR’s GLTS for what looks like the same product, or am I missing the obvious.

Fidelity Index UK Fund W Acc has merged with Fidelity Index UK Fund P Acc with an OCF of 0.06%.

My Bestinvest SIPP handled it for me without issue.

I have a few silly questions being a newbie to investment:
I noticed that the funds above are mainly proposed in their accumulation option; I can understand that the passive investor should prefer the accumulation class as there are no reinvesting charges but what happens when you get close to retirement? you tend to gradually buy more of the Income class when you rebalance?
Also do you discuss in a post the question of taxes? I understand that I can first include for £20k worth of funds in an ISA account and that there will be no taxes on that but what do you do once it is full? is it better to open a SIPP account or a normal account will do?

I’m afraid so, Allan. Ignore those minimums and just check the funds you want are available through the platform you choose. It’s the platform minimum that applies – usually in the realms of £50.

I was just looking to purchase the L&G Global Inflation linked and the L&G property funds through IWeb but they don’t seem to be available on that platform. I’ve just got off an online chat session with them where I was told that they weren’t available as they are institutional funds.
Looking further it seems other L&G “I” class funds seem to be available so I can’t help thinking maybe I was given a bum steer.
Before I phone them up to check again, I was wondering if others have had success in purchasing these funds through other platforms?

@Humble Pie

Did you get anywhere with the “L&G property funds” through IWeb? it could be next on my list.
did you see that “iShares Global Property Securities Equity Index Fund (UK) D Acc” is available on Iweb? it has similar characteristics.

also seen on IWeb, the “HSBC FTSE All-Share Index Fund Institutional Accumulation” with an OCF of just 0.03% seems to be available for purchase. I have seen that in a comment but that was too late for me as I had already bought the fidelity equivalent at 0.06% (6 K£). its is probably not worth me swapping now (anyone to help calculate the costs of swapping? I have seen it elsewhere but cannot find the comment anymore)

Thanks very much for the comment Tim, that’s on-the-nose feedback. I am planning to take another look at LifeStrategy competitors (there is a Blackrock Consensus post on the blog somewhere albeit it’s a few years old now) but I’m buried under ‘Monevator The Book’ at the mo.

HSBC MSCI World ETF (HMWO) has a rather nasty 3% entry and 3% exit fee.

Worth culling from the list on that basis?

Vanguard’s VWRL (.25% OCF) seems to do a much better job. Am I missing something?

Please use this link to access the SPDR FTSE All-Share ETF:
https://uk.spdrs.com/library-content/public/SPYF%20GY_factsheet_en.pdf
Thanks!

The HSBC MSCI World ETF (HMWO) OCF 0.15% seems to be the cheapest global equity fund of the ones you mention. However, when I checked its performance in the last several years it has consistently lagged considerably other ETFs that track the same index. There seem to be some considerable costs that don’t show in the OCF figure. Can you please take a closer look?

Thank you, Tim! I appreciate you taking the time. Will check it out

Mainly in response to http://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/ I’ve been looking at adding “International inflation-linked bonds hedged to £” to my portfolio rather than buy into the index-linked UK Government bond funds, which all hold lots of long-dated bonds.

Of the two cheap funds you suggest, neither seem viable: The L&G Global Inflation Linked Bond Index I has a minimum investment of £1million, and the db X-trackers Global Inflation Linked ETF (XGIG) doesn’t seem to be tradeable, at least not with iweb.

Looking at the list here: http://www.morningstar.co.uk/uk/fundquickrank/default.aspx?category=EUCA000860 the options are pretty poor. The cheapest one that seems available to the individual investor would be Legal & General Global Inflation Linked Bond Index Fund F Class Accumulation, with a minimum investment of £500, but an eye-watering OCF of 0.51%

Am I missing something? If not, I think you might want to re-evaluate your selection in this category. Either way, I’d be keen to hear your thoughts.

Hi, I was looking at the Emerging Market Equity Trackers and was particularly interested in the “Fidelity Index Emerging Markets Fund P”. My trading platform is Cavendish Online (hence Fidelity). The OCF is great!!

But what I noticed for this fund on the platform is that the minimum investment required is £500. That is too steep an amount and would make future top-ups and re-balancing a massive headache. Can anyone who is invested in this fund on Cavendish confirm whether that is correct? The fund is attractive as its got a better tracking than iShares but the minimum amount required is a put-off.

Good news: Fidelity Index World Fund P (GB00BJS8SJ34) now has an OCF of 0.12%

Maths error! Once you’re saving 0.01% here and there then you’re saving £1 per year on £10,000, not £10! Sorry about that. Been up all night worrying about that one 😉