≡ Menu

Low-cost index trackers that will save you money

This is our September 2020 update of the cheapest index trackers for British investors. If you’ve checked out this page before then know the main action this time is in the gold, UK gilts, total global bond, developed world, and emerging market equity categories.

Also, I’ve chucked out the UK value and global value categories and replaced them with dividend income picks instead. Sometimes you just have to go with the flow.

ETFs continue to drive down costs. There’s a few categories now where the lead ETF is half as cheap as its nearest rival, or has forced competitors to slash their costs, too.

Amundi has put serious pressure on the developed world and UK mid cap categories by choosing cheaper Solactive indexes rather than the big-name FTSE and MSCI alternatives.

Invesco has forced the pace in the short and intermediate gilt categories, and new entrants have livened up the total global bond category – no doubt anticipating yield-hungry investors sniffing around for any alternative to negative interest rates!

Lower costs – that’s the name of the game for passive investors. Performance is unpredictable and elusive, but costs are nailed on. They nibble away at your returns like a satanic mouse – harmless enough at first, until you realise all your cheese has gone.

As Morningstar puts it:

If there’s anything in the whole world of mutual funds that you can take to the bank, it’s that expense ratios help you make a better decision.

That’s why I try to leave no penny un-pinched when searching for cheap funds.

High cost funds gobble returns

As a passive investor, I concentrate mostly on index funds and Exchange Traded Funds (ETFs). That’s because they are the simplest cut-price vehicles available. However, some asset classes aren’t well served by index trackers, so I’m happy to use low cost active funds to fill the breach.

My picks are based purely on price as measured by the Ongoing Charge Figure (OCF). There are other factors to consider when buying a fund (like tracking error, liquidity, and size) so it’s always worth reading any documentation to make sure it fits your bill.

Identifying tickers or ISIN codes are given in brackets. If there are any other wrinkles worth mentioning, I’ll throw them in along the way.

Finally, if you’re looking for the cheapest place to buy and hold these funds then take a butcher’s at our online broker comparison table.

The UK’s cheapest index trackers

Right, let’s grab some bargains!

Note: Anything not labelled ETF or ETC will be an index fund. Codes are given for accumulation funds variants where available. We don’t include platform exclusive funds – they’re generally not a good deal overall.

UK large cap equity

Cheapest

  • HSBC FTSE All Share Index Fund Institutional (GB0030334345) OCF 0.02%

Next best

  • L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%
  • Fidelity Index UK Fund P (GB00BJS8SF95) OCF 0.06%
  • HSBC FTSE All Share Index Fund C (GB00B80QFX11) OCF 0.06%
  • Vanguard FTSE UK All Share Index Unit Trust (GB00B3X7QG63) OCF 0.06%

The L&G ETF has a socially responsible investing (SRI) remit.

UK mid cap equity

Cheapest

  • Amundi Prime UK Mid and Small Cap ETF (PRUK) OCF 0.05%

Next best

  • Vanguard FTSE 250 ETF (VMID) OCF 0.1%
  • L&G UK MID Cap Index Fund I (GB00BQ1JYX87) OCF 0.14%

UK small cap equity

There are no good tracker options in the UK small cap asset class for DIY investors – the iShares ETF is more of an expensive FTSE 250 tracker. The rest are active funds and shown as a selection of what’s available rather than a comprehensive survey.

Cheapest

  • Schroder Institutional UK Smaller Companies Fund (GB0007893984) OCF 0.51%

Next best

  • JP Morgan UK Smaller Companies Fund (GB0031835001) OCF 0.6%
  • Baillie Gifford British Smaller Companies B Fund (GB0005931356) OCF 0.67%

UK equity income

Cheapest

  • Vanguard FTSE UK Equity Income Index Fund (GB00B59G4H82) OCF 0.14%

Next best

  • WisdomTree UK Equity Income ETF (WUKD) OCF 0.29%
  • SPDR S&P UK Dividend Aristocrats ETF (UKDV) OCF 0.3%

World equity – developed world and emerging markets (total world)

Cheapest

  • HSBC FTSE All-World Index Fund C (GB00BMJJJF91) OCF 0.13%

Next best

  • Vanguard FTSE All-World ETF (VWRL) OCF 0.22%
  • Vanguard LifeStrategy 100% Equity Fund (GB00B41XG308) OCF 0.22%
  • Vanguard FTSE Global All Cap Index Fund (GB00BD3RZ582) OCF 0.23%
  • Fidelity Allocator World Fund W (GB00B9777B62) OCF 0.25%

Vanguard LifeStrategy and Fidelity Allocator invest in other index trackers. Fidelity invests in REITs and small caps.

World equity – developed world only

Cheapest

  • Amundi Prime Global ETF (PRIW) OCF 0.05%

Next best

  • L&G Global Equity ETF (LGGG) OCF 0.1%
  • Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.12%
  • Lyxor Core MSCI World ETF (LCWL) OCF 0.12%
  • Vanguard FTSE Developed World ETF (VHVG) OCF 0.12%
  • SPDR MSCI World ETF (SWLD) OCF 0.12%

The L&G ETF has an SRI remit.

World ex-UK equity

Cheapest

  • L&G International Index Trust I Fund (GB00B2Q6HW61) OCF 0.13%

Next best

  • Vanguard FTSE Dev World ex-UK Equity Index Fund (GB00B59G4Q73) OCF 0.14%
  • Aviva Investors International Index Tracking SC2 Fund (GB00B2NRNX53) OCF 0.25%
  • Xtrackers FTSE All-World ex-UK ETF (XWXU) OCF 0.4%

You can also pick ‘n’ mix using individual US, Europe ex-UK, Japan, and Pacific ex-Japan trackers.

World income equity

Cheapest

  • Vanguard FTSE All-World High Dividend Yield ETF (VHYL) OCF 0.29%

Next best

  • Xtrackers MSCI World High Dividend Yield ETF ETF (XDWY) OCF 0.29%
  • iShares MSCI World Quality Dividend ETF (WQDS) OCF 0.38%
  • Vanguard Global Equity Income Fund (GB00BZ82ZW98) OCF 0.48%

The Vanguard fund is active but gives you a non-ETF option.

World small cap equity

Cheapest

  • L&G Global Small Cap Index Fund (IE00BG0VVG79) OCF 0.2%

Next best

  • Vanguard Global Small-Cap Index Fund (IE00B3X1NT05) OCF 0.29%
  • iShares MSCI World Small Cap ETF (WSML) OCF 0.35%

Emerging markets equity

Cheapest

  • ComStage MSCI Emerging Markets ETF (E127) OCF 0.14%

Next best

  • HSBC MSCI Emerging Markets Index ETF (HMEF) OCF 0.15%
  • iShares Emerging Markets Equity Index Fund (GB00B84DY642) OCF 0.18%

Socially responsible investing

Cheapest

  • L&G UK Equity ETF (IE00BFXR5R48) OCF 0.05%

Next best

  • L&G Global Equity ETF (LGGG) OCF 0.1%
  • HSBC Emerging Market Sustainable Equity ETF (HSEF) OCF 0.18%
  • Vanguard ESG Developed World All Cap Equity Index Fund (IE00B76VTN11) OCF 0.2%

The SRI (or ESG) options above are meant to enable you to build a complete SRI portfolio, as opposed to listing the top three or so funds with the lowest OCF from any old category.

Multi-factor

Cheapest

  • JPMorgan Global Equity Multi-Factor ETF (JPLG) OCF 0.19%

Next best

  • Invesco Global ex UK Enhanced Index Fund Y (GB00BZ8GWR50) OCF 0.23%
  • HSBC Multi Factor Worldwide Equity ETF (HWWA) OCF 0.25%
  • Amundi ETF Global Equity Multi Smart Allocation Scientific Beta ETF (SMRU) OCF 0.4%
  • iShares Edge MSCI World Multifactor ETF (FSWD) OCF 0.5%

All factor based investing is effectively straying into active management territory – you hope that the chosen subset of the market can outperform. The important thing is to choose products underpinned by sound financial theory, a verifiable set of rules, and a commitment to low costs.

Regional ETFs are available but we’ve stuck to global multifactor products for simplicity.

Property – UK

Cheapest

  • iShares UK Property ETF (IUKP) OCF 0.4%
  • iShares MSCI Target UK Real Estate ETF (UKRE) OCF 0.4%

Next best

  • No index fund alternative

Property – global

Cheapest

  • iShares Global Property Securities Equity Index Fund D (GB00B5BFJG71) OCF 0.17% 

Next best

  • L&G Global Real Estate Dividend Index Fund I (GB00BYW7CN38) OCF 0.2
  • Amundi ETF FTSE EPRA/NAREIT Global ETF (EPRA) OCF 0.24%
  • SPDR Dow Jones Global Real Estate ETF (GBRE) OCF 0.4%

The SPDR ETF includes emerging markets exposure.

All-commodities

Cheapest

  • L&G All Commodities ETF (BCOM) OCF 0.15%

Next best

  • Invesco Bloomberg Commodity ETF (CMOD) OCF 0.19%
  • Lyxor Commodities Thomson Reuters/CoreCommodity CRB TR ETF (CRBL) OCF 0.35%

Gold

Cheapest

  • Invesco Physical Gold A ETC (SGLP) OCF 0.15%
  • WisdomTree Physical Swiss Gold ETC (SGBX) OCF 0.15%
  • iShares Physical Gold ETC (SGLN) OCF 0.15%

Gold trackers are Exchange Traded Commodities (ETCs).

UK Government bonds – intermediate duration

Cheapest

  • Invesco UK Gilts ETF B (GLTA) OCF 0.06%

Next best

  • Vanguard UK Government Bond ETF (VGOV) OCF 0.07%
  • iShares Core UK Gilts ETF (IGLT) OCF 0.07%
  • Lyxor Core FTSE Actuaries UK Gilts ETF (GILS) OCF 0.07%
  • iShares UK Gilts All Stocks Index Fund (GB00B83HGR24) OCF 0.11%

UK Government bonds – long

Cheapest

  • Vanguard UK Long-Duration Gilt Index fund (GB00B4M89245) OCF 0.12%

Next best

  • SPDR Barclays Capital 15+ Year Gilt ETF (GLTL) OCF 0.15%
  • iShares Over 15 Years Gilts Index Fund (GB00BF338G29) OCF 0.16%

UK Government bonds – short

Cheapest

  • Invesco UK Gilt 1-5 Year ETF (GLT5) OCF 0.06%

Next best

  • Lyxor FTSE Actuaries UK Gilts 0-5Y ETF (GIL5) OCF 0.07% 
  • iShares UK Gilts 0-5 ETF (IGLS) OCF 0.07%

UK Government bonds – index-linked

Cheapest

  • Lyxor Core FTSE Actuaries UK Gilts Inflation-Linked ETF (GILI) OCF 0.07

Next best

  • iShares £ Index-Linked Gilts ETF (INXG) OCF 0.10%
  • iShares Index Linked Gilt Index Fund D (GB00B83RVT96) OCF 0.11%
  • Vanguard UK Inflation Linked Gilt Index Fund (GB00B45Q9038) OCF 0.12%

Total global bonds hedged to £ (government and corporate)

Cheapest

  • iShares Core Global Aggregate Bond ETF (AGBP) OCF 0.1% 

Next best

  • SPDR Bloomberg Barclays Global Aggregate Bond ETF (GLAB) OCF 0.1%
  • Vanguard Global Aggregate Bond ETF (VAGS) OCF 0.1%
  • Vanguard Global Short Term Bond Index Fund (IE00BH65QG55) OCF 0.15%
  • Vanguard Global Bond Index Fund (IE00B50W2R13) OCF 0.15% 

All hedged back to Sterling.

Global inflation-linked bonds hedged to £

Cheapest

  • Xtrackers Global Inflation Linked Bond ETF (XGIG) OCF 0.25% 
  • Royal London Short Duration Global Index Linked Fund M (GB00BD050F05) OCF 0.27%

Next best

  • L&G Global Inflation Linked Bond Index Fund I (GB00BBHXNN27) OCF 0.25%
  • Smith & Williamson Global Inflation Linked Bond Fund X (IE00B7RG6563) OCF 0.27%
  • Royal London Global Index Linked Fund Z (GB00B53R4H74) OCF 0.36%
  • ASI Short Duration Global Inflation Linked Bond Fund (GB00BP25RB79) OCF 0.46%

All hedged back to Sterling, short and intermediate options. Royal London, ASI and Smith & Williamson funds are active.

UK corporate bonds

Cheapest

  • Vanguard UK Investment Grade Bond Index Fund (IE00B1S74Q32) OCF 0.12%
  • iShares Corporate Bond Index Fund (GB00B84DSW83) OCF 0.12%

Next best

  • iShares Core £ Corporate Bond ETF (SLXX) OCF 0.2%

Concluding thoughts on low-cost trackers

If you’re new to passive investing then it might seem like you now have a lot of decisions to make after reading all that.

This piece on designing your own asset allocation will help you construct your own portfolio. If you want a quick shortcut then you can do a lot worse than picking a fund-of-funds instant portfolio solution.

We only update this list periodically. Quoted OCFs may date, as fund groups fight their turf wars by undercutting each other (hurrah!) but this article should still prove an excellent starting point for your research.

If anyone comes across any better index tracker options I’d love to hear about them in the comments below.

Take it steady,

The Accumulator

Note: Some comments below may refer to an older collection of low cost index trackers. Scroll down for the latest thoughts.

Receive my articles for free in your inbox. Type your email and press submit:

{ 767 comments… add one }
  • 399 theta August 7, 2015, 1:36 pm

    Last update on this:
    The following report http://media.morningstar.com/eu/Events/ETFEU/ETFEU14/ETF_Industry_Report_4Nov.pdf has details for the last 3 years of return enhancement from securities lending for all ETFs. Maybe you can take the average and update (if needed) the league tables?

  • 400 The Accumulator August 7, 2015, 3:59 pm

    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.

  • 401 Charles1968 August 29, 2015, 2:01 pm

    Can anyone explain to me why HSBC’s funds available through iWeb are split into two groups with what look like very similar funds (but different ISIN numbers): one group with annual management charges of 0.1% and all fund names ending “NAV”; and one with charges of 0.25%.

    Link: https://halifaxiweb.digitallook.com/cgi-bin/fund_browse.cgi?username=&ac=&action=manager

    Clicking HSBC Global Asset Management takes you to funds charging 0.25%. Clicking HSBC Investment Funds take you to the cheaper funds with almost the same names.

    I ask because I’m invested in the more expensive ones and want to transfer to a new fund manager (from HSBC Global Asset Management) to iWeb.

    thanks

  • 402 eagleuk August 30, 2015, 7:49 am

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

  • 403 Snowman September 23, 2015, 1:32 pm

    Fidelity are shaving a small amount off their UK(-0.01%), US(-0.01%), emerging markets (-0.02%) and World inc UK (-0.05%) tracker charges (from 1st October I think).

    The new charges for super clean funds on their own platform are shown on the following page

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

    But if you click through to the relevant funds it shows the old charges still.

    There are corresponding reductions on their clean trackers

    Tracking difference (that is not reflected in the OCF) remains a concern for me for Fidelity trackers based on their UK tracker’s high historical additional tracking difference.

  • 404 @algernond September 28, 2015, 7:48 pm

    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.

  • 405 The Accumulator September 28, 2015, 8:48 pm

    Equal value = a slight skew to small cap. But seeing as the power of small cap resides in the micro rather than the mega caps of the FTSE 100 this has a potent niff of gimmick to me. That’s not to say it won’t do slightly better than the FTSE 100. It might. It might not. No one knows in advance. But that’s quite a cost differential for it to overcome versus the cheapest FTSE 100 trackers.

  • 406 Snowman October 12, 2015, 6:05 pm

    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

  • 407 The Accumulator October 13, 2015, 8:27 pm

    Thanks, Snowman! As ever.

  • 408 MQM October 25, 2015, 11:53 pm

    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…

  • 409 The Accumulator October 26, 2015, 11:23 am

    Hi MQM,

    Not a silly question at all. Here’s a couple of posts that explain more:

    http://monevator.com/the-value-premium/
    http://monevator.com/uk-value-premium-funds/

  • 410 TT November 12, 2015, 5:30 pm

    Blackrock FTSE all share tracker drops from 0.16 to 0.07%

  • 411 PHB November 16, 2015, 11:44 am

    In general I am a fan of trackers, but I have to say that for Emerging Markets they are rubbish. I have held VFEM and other low cost trackers before that and over the years they have all fared much worse than carefully chosen active funds. I have just sold the last of my VFEM and won’t be going back in a hurry.

  • 412 The Investor November 16, 2015, 2:57 pm

    @PHB — There’s no evidence at all that over the medium to long-term average emerging market active funds beat passive funds, let alone for the latter to “fare much worse”.

    For instance, Morningstar research found:

    …the average surviving [emerging market active fund] returned 8.5 percent annually in the 15-year period over which these funds were ranked.

    [Various passive ETFs such as] VEIEX returned 9.0 percent, DFEMX returned 8.9 percent, DEMSX returned 11.7 percent and DFEVX returned 11.0 percent.

    The average return of the four passively managed funds was 10.2 percent, or 1.7 percentage points higher than for the average fund.

    Believing in the active management myth has been expensive indeed.

    Of course some active funds have done better, which allows your “carefully chosen funds” comment some air space — the trouble is they have to be carefully chosen *before* the time period, not afterwards. Some active funds will always beat tracker funds.

    I think it’s particular tricky to be clear-minded in the EM space, because it’s so easy for active funds to take very divergent bets by underweighting different currencies/countries, compared to say UK large cap trackers. This means we’ll likely see a wider dispersal of returns. It’s important to look at the losers, too, which self-evidently were “carefully chosen” by their investors, too, and remember all the active funds that shut down due to poor performance altogether.

    Finally, active investing in the emerging markets is a zero sum game for exactly the same reason as it is in the developed markets, so it is literally mathematically impossible for passives as a group to do worse than actives as a group. (I appreciate you weren’t saying this, just for wider readers interest).

    I think people always question strategies most heavily after poor returns, and the emerging markets have been through the ringer for years.

    All that said I’ve got nothing against anyone using active funds if they want / feel lucky / believe they can pick superior funds, and understand the higher costs and the high probability of underperformance. Each to their own, I am overwhelmingly an active investor myself.

    But I believe one should do so with your eyes wide open knowing the odds are against you, and most will fail to beat the equivalent trackers. 🙂

  • 413 PHB November 16, 2015, 3:05 pm

    As I say, I am a fan of trackers and particularly like Vanguard.

    However, my personal experience over some years of passive versus active for Emerging Markets in my SIPP is that my active investments have done much better, and I really wanted that not to be the case.

  • 414 The Investor November 16, 2015, 3:42 pm

    @PHB — Yes, I understood you said that. I was just pointing out that your anecdotal evidence was at odds with the average returns data for emerging markets — in case you were not aware of it with respect to EM, and also for the benefit of any readers who read your comment and thought it meant anything at all statistically that should maybe influence their own investing, which it doesn’t.

    It’s one person’s tiny data set, over a fairly short run, and they are not you anyway, with access to your fund picks and so forth.

    Perhaps you are a very rare individual who can consistently pick the handful of active emerging market funds that beat passive emerging market funds, after all costs, over all market cycles. If you believe that to be the case and are prepared to take the risk of being wrong, and you’re interested in spending the time researching and following active EM funds, then it certainly makes sense for you personally to pursue an active strategy when it comes to emerging markets.

  • 415 eagleuk November 16, 2015, 3:42 pm

    Some EM active funds invest in emerging market segments of develop countries.If they are investing in UK & USA small company sector then they are bound to have higher growth.First State EM fund was removed from EM list by IMA.

    http://www.ftadviser.com/2014/10/16/investments/emerging-markets/first-state-emerging-markets-funds-forced-out-of-sector-S8VYhBj2FZOeK15MWpfd4I/article.html

  • 416 ivanopinion November 16, 2015, 6:00 pm

    @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.

  • 417 PK November 16, 2015, 6:18 pm

    re ivanopinion & PHB

    In my opinion it can often be traced back to the power of confirmation bias. 95% of us know that we are better than average drivers – just look at how well I drive!

  • 418 Geo November 16, 2015, 6:43 pm

    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.

  • 419 PHB November 16, 2015, 7:08 pm

    The majority of my holdings are passive trackers, I am a big fan of Vanguard and I really dislike high fund charges.

    I am much more comfortable with investing in passive trackers and letting them get on with it but, exceptionally in my experience, it simply hasn’t worked out with EM, I have had two goes at it over the last 5 years investing half in passive and half in active and in both cases passive flopped compared with active.

    Including trading costs, VFEM has lost me about 14% over the last 3 years, perhaps I chose the wrong passive tracker (twice).

    The active fund managers may well have varied the mix and may have even crossed IMA boundaries but the result was gains from EM exposure rather than losses.

    I am not an expert but I am capable of using Trustnet and Morningstar and passive investing is not a religion for me.

  • 420 ivanopinion November 16, 2015, 7:10 pm

    @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.

  • 421 ivanopinion November 16, 2015, 7:36 pm

    @PHB, I accept that this is empirically what you have experienced. I don’t accept the conclusions you draw. You need far more than just a couple of goes in order to draw any conclusions that are statistically valid.

    You may well have heard the anecdote about Apple having to “fix” the shuffle function on iTunes, because it was originally genuinely random and this sometimes meant that it would play several tracks from the same album or artist, back to back. Humans like to see patterns in things, so they assume that such coincidences cannot be just coincidences and thus the randomising must be faulty. Apple therefore had to add an override to the randomised results in order give more variety than might arise from true randomisation.

    Just as a true random selection of music from one’s iPod might give rise to two consecutive tracks by, say, Adele, so might two random choices of EM active funds outperform the index. It doesn’t mean they will continue to do so, any more than you can conclude that the third track will also be Adele. But our instinct (wrongly) tells us that both these things are likely.

  • 422 PK November 16, 2015, 7:51 pm

    @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??

  • 423 PHB November 17, 2015, 1:51 am

    This is my pension here, not an academic exercise.

    My starting point is that passive=good, active=bad but it simply doesn’t stack up for EM.

    Fidelity EM and FS (Stewart) Global EM Leaders and others trump VFEM (and the other low cost tracker that I used). My starting point was that I wanted (some) exposure to EM in my SIPP, do I care if the fund managers strayed outside the boundaries? Not if they made me more money.

    I still have most of my investments with low cost trackers, but I also have Woodford and it is doing very well, thank you, God willing.

  • 424 ivanopinion November 17, 2015, 10:01 am

    @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. 🙂

  • 425 The Investor November 17, 2015, 10:12 am

    @PHB — Your experiences are perfectly valid, as is your conclusion for *you*, if you trust your judgement to the appropriate extent.

    As I say perhaps you have some rare ability to discern which active fund managers will outperform in the emerging market space. I don’t know you or your returns over the long-term, so I will suspend judgement. 🙂

    I hope you can see therefore that I’m not dismissing your personal conclusions out of hand.

    Where the disagreement comes is that you keep extrapolating from the fact that you’ve identified (and invested in) a couple of outperforming active EM funds to say that the case for using trackers doesn’t “stack up for EM” because “for EM they are rubbish”.

    As I’ve shown you with evidence, rather than anecdote about a couple of funds someone happens to have owned, this is not true.

    EM trackers beat on average active EM funds.

    If the fact that a minority of active funds beat trackers is enough to make *you* believe that the case does “not stack up” then *you* should probably reconsider your tracker investments in other areas of the market, too.

    That is because in pretty much all sectors there are a handful of active funds that have a long-term record of out-performance, whether through luck or skill.

    You, presumably, have happened not to invest in those ones in those sectors, so you still believe trackers are appropriate there.

    It’s this logical fallacy that is at the heart of this spirited (but happily good natured 🙂 ) disagreement.

    Your surprise at (apparent, but statistically meaningless) EM tracker underperformance might be novel to you but it is an everyday observation for me.

    Every few days a comment will pop up on an old post or in an email to me saying: “Hey, I read that you said active funds can’t beat trackers, but I read the literature for XYZ fund and it did over however many years.”

    We’ve never said some small number of active funds can’t/won’t beat trackers. They do. Even my dedicated passive co-blogger The Accumulator notes this, although he sees only luck / benchmarking sleights of hand whereas I’ll even allow for skill.

    The issue has always been that most people demonstrably can’t identify such rare outperformers in advance. Therefore most people are better off playing the probabilities, and accepting average performance via trackers.

    You’ve either got skill at selecting EM funds or you’ve spun the roulette wheel and won. 🙂

    Either way, you’ve not upended the reality of historical performance or the certainty of active investing being a zero-sum game in EMs, like everywhere else.

  • 426 PHB November 17, 2015, 10:49 am

    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.

  • 427 MrL November 17, 2015, 11:13 am
  • 428 PK November 17, 2015, 11:16 am

    @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!

  • 429 Stuart November 17, 2015, 11:48 am

    I too am a fan of passive investing in tracker funds.
    And they have done me very well financially over the years.
    It is clear (to me) that trackers beat active funds on average for large well researched markets like UK and US equities.
    Nevertheless, I have read that for less well researched markets like Emerging Markets, there should be scope for good active fund managers to beat the market.
    As others have commented above, of course you have to find these good managers who don’t have just a short term flash in the pan because of good luck.

  • 430 The Investor November 17, 2015, 11:57 am

    @Stuart — It’s a myth, which is directly tackled by the Larry Swedroe article I linked to in my original reply to @PHB.

    Alternatively, look at the SPIVA data link just posted. It shows that over the past 10 years, benchmarks beat EM funds 86% of the time.

    Of course, some of those who bought into the small minority of EM funds that beat the benchmarks will decide they have uncovered some superior way of investing in EM as a result, regardless of the overall data.

    They may start to look for or even talk about “reasons” (“EM is less researched, EM is dominated by large state-backed companies you can avoid, EM is dominated by commodities you can add to / reduce, EM includes several basket case countries a skilled manager can sidestep”) and you can be sure EM fund managers with successful funds will use such narratives in their marketing! 🙂

    Remember, that data shows the majority of EM funds underperform.

    But the financial services industry has never let the facts get in the way of a good story.

    We shouldn’t do the same. 🙂

  • 431 ivanopinion November 17, 2015, 12:14 pm

    I must admit I had always believed/assumed that there is more scope to beat the index in the EM sector. However, those SPIVA figures seem to show the opposite. Whereas only 14% of active EM funds beat the index over ten years, nearly 30% of active UK or European funds manage this.

    So, if you are going to try to pick, in advance, the fund managers who will outperform, your chances are much better in the UK large-cap sector or Europe.

    That’s for sterling denominated funds. For euro denominated, active managers are even less successful, but again they struggle more in the EM sector.

  • 432 ivanopinion November 17, 2015, 12:17 pm

    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?

  • 433 The Investor November 17, 2015, 12:26 pm

    @ivanopinion — As I understand it it’s just short run data (yes, 10 years is short run! 🙂 )

    Many UK active funds that supposedly invest in large caps hold a greater proportion of smaller cap shares than the indices. These have outperformed in the past 10 years, especially since the financial crisis.

    Also, small caps will tend to outperform over the long-term. A purist would say in that case these funds are taking on more risk for their extra returns, versus a “pure” tracker that actually follows the benchmark.

  • 434 PHB November 17, 2015, 12:30 pm

    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.

  • 435 MrL November 17, 2015, 1:38 pm

    The full set of reports can be found here (including USD/US data): https://us.spindices.com/search/?ContentType=SPIVA

    US Emerging Market active funds are even less successful then their GBP and EUR cousins.

  • 436 TFW November 30, 2015, 9:49 pm

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

  • 437 Julio December 3, 2015, 2:17 pm

    first of all, thank you for this post! I am a fan of jCollins series so I was very pleased to find this blog in Europe too! I’m planning to invest in a tracker fund in the UK so I needed some info on where to get the index funds like Vanguard, Amundi, Pictet? Do you buy them directly or a third party, i.e. banks?

    Thank you

  • 438 The Accumulator December 3, 2015, 7:03 pm

    Hi Julio,

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

    Note, we write from a UK perspective

  • 439 Simon December 8, 2015, 2:39 pm

    Hi Accumulator,
    I’ve heard (http://www.morningstar.co.uk/uk/news/69342/Taxes-and-ETFs-A-Guide-for-British-Investors.aspx) that 25% of ETFs in the UK have gains that are liable for income tax rather than CGT! I’ve tried looking at the KIID but am struggling to check whether ETFs have ‘distributor’ or ‘reporting’ tax status. Please can you help me workout where to look for this information for ETFs (e.g. Vanguard LifeStrategy).
    Thanks!

  • 440 Lydgate December 8, 2015, 4:30 pm

    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%.

  • 441 The Accumulator December 8, 2015, 5:42 pm

    Hi Lydgate,

    You’ve linked to ETFs available to US investors. Here’s the UK equivalent:
    http://www.ishares.com/uk/individual/en/campaign/core-series/ishares-core-series-ind

    Between iShares and Vanguard you should be able to find pretty much everything you need.

  • 442 The Accumulator December 8, 2015, 7:07 pm

    @ 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/

  • 443 Simon December 9, 2015, 9:25 am

    I thought there must be something about this here, but hadn’t spotted that article. Thanks Accumulator!

  • 444 Snowman December 10, 2015, 3:54 pm

    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

  • 445 The Investor December 10, 2015, 7:05 pm

    Cheers @Snowman, I’ve popped up some deets as the youngsters say:

    http://monevator.com/vanguard-factor-etfs/

  • 446 AP December 13, 2015, 12:58 pm

    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.

  • 447 The Accumulator December 13, 2015, 6:27 pm

    Hi AP,

    Main observations are that the fund puts you 100% in equity. Not many people can handle this much volatility. So may want to consider an allocation to UK government bonds.

    Here’s a couple of pieces on that:

    http://monevator.com/shares-deliver-the-best-long-term-returns-so-why-invest-in-bonds/

    http://monevator.com/asset-allocation-strategy-rules-of-thumb/

    As a globally diversified portfolio, the main thing it’s missing is emerging markets and, as you mention, it’s massively overweighted to the UK. You’d only really want that if you’re close to retirement or wear Union Jack underpants.

    Here’s a good piece on the strategy that underpins global portfolios:

    http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/

    Here are some alternative choices.

    http://monevator.com/how-to-chooose-total-world-equity-trackers/

    A 0.8% annual charge isn’t too shabby if this is all you’re paying including the platform fee and there aren’t any dealing fees. Make sure there’s not a bigger OCF or TER figure lurking beneath the water line.

    If you were investing into your own SIPP then you wouldn’t do much better than 0.35% for the platform and 0.25 for the fund.

    http://monevator.com/compare-uk-cheapest-online-brokers/

    Either way, you certainly want to put enough in to get the maximum employer match and if you are contributing through salary sacrifice then so much the better as you’ll be saving on national insurance too.

  • 448 AP December 14, 2015, 9:04 pm

    @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.

  • 449 The Accumulator December 14, 2015, 9:32 pm

    Hi AP, you can and should count cash – assuming you intend to use it for the same objective as your other investments.

    So your asset allocation might be something like:

    60% equities
    30% bonds
    10% cash

    Over the long term you can expect cash to have the weakest returns but it has many other advantages including stability. Search the site for articles about cash.

    Re: emerging markets = more diversification, higher expected returns, more volatility at a fund level, lower correlations with developed world equities so potentially less volatility at a portfolio level. Also a major part of the global economy. You can of course leave them out and that’s entirely reasonable if you don’t like the risk. Alternatively you could try a 5% – 10% slug to see how you get on.

  • 450 Sam December 21, 2015, 1:40 pm

    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

  • 451 @algernond February 23, 2016, 11:20 am

    Hi Accumulator,

    Just to let you know, for the Lyxor ETF iBoxx £ Gilt Inflation-Linked (GILI) it says 0.22% on their website, not 0.07%.
    (Also my broker says 0.22%)

  • 452 Fremantle February 23, 2016, 12:00 pm

    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.

  • 453 The Rhino February 23, 2016, 12:26 pm

    @TA are you a fund or an ETF type of guy in your actual portfolio?

  • 454 Malcolm February 23, 2016, 1:32 pm

    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

  • 455 Atlantic Span February 23, 2016, 1:55 pm

    Please accept a metaphorical shake of the hand for updating this article.
    I really appreciate the amount of work you must have put into it.
    Many thanks.

  • 456 dearieme February 23, 2016, 2:15 pm

    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)?

  • 457 The Investor February 23, 2016, 2:52 pm

    @dearieme — No. People who crazily advanced the “Save £10 by not using an ISA because dividends are tax free for basic rate taxpayers” should be making daily pilgrimages to the steps of the London Stock Exhange to prostrate themselves on the steps now that the new regime has come in.

    But at least they had the (mild) defence that the situation had been stable for years.

    Any investor who now doesn’t use their ISA to its maximum extent each year yet owns shares (outside of a SIPP) has gone from being misguided to something even less flattering in my book.

    Sorry if this seems a bit of an OTT reaction but after many years of urging people to use their full ISA allowance — and then seeing the new regime bring icing to the cake — I can’t really believe anyone would now suggest anything otherwise. 🙁

  • 458 Rg February 23, 2016, 6:19 pm

    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.

  • 459 Gregory February 23, 2016, 6:40 pm

    @Rg — Yes, Vanguard Global Value Factor ETF (VVAL) is an active fund.

  • 460 The Accumulator February 23, 2016, 8:52 pm

    @ 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.

  • 461 Hariseldon February 23, 2016, 11:48 pm

    ISF at .07% is a good UK FTSE100 tracker from iShares

  • 462 Rg February 24, 2016, 8:23 am

    @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.

  • 463 charlie February 25, 2016, 1:20 pm

    Thanks so much for this resource. I just wanted to ask if the ticker symbol given here is correct?

    “db X-trackers Global Sovereign ETF (XG7S) OCF 0.25%
    Hedged back to Sterling.”

    The Deutsche Bank website seems to think XG7S is the ticker for the unhedged flavour. It lists both hedged and non-hedged variants as follows:

    Unhedged: XG7S ISIN:LU0908508731
    GBP Hedged: XGSG ISIN:LU0641006290

  • 464 Max Kidd February 25, 2016, 2:28 pm

    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?

  • 465 goldghost February 25, 2016, 3:51 pm

    Haha!

    I cannot believe you have just posted this update! I have spent the evening researching trackers and fund costs. I thought ” why not check Monevator for info?” And look what I find – a just updated post on cheapest trackers and oodles of useful info. Wonderful. Many thanks.

  • 466 Gregory February 25, 2016, 5:20 pm

    @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

  • 467 Snowman February 25, 2016, 5:32 pm

    Some new (US and European) fixed interest ETFs have been launched by Vanguard. All 0.12%pa (OCF)

    https://www.vanguard.co.uk/uk/portal/investments/all-products

    Vanguard USD Corporate Bond UCITS ETF
    Vanguard EUR Corporate Bond UCITS ETF
    Vanguard EUR Eurozone Government Bond UCITS ETF
    Vanguard USD Treasury Bond UCITS ETF

  • 468 The Accumulator February 25, 2016, 7:57 pm

    @ 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.

  • 469 Planting Acorns February 25, 2016, 10:43 pm

    @TA…thanks this is a great resource! I love your slow and steady portfolio which I borrow from perhaps more heavily than you’d like…wonder how many others are out there.

    On the Charles Stanley Direct website you can get a graph comparing funds which has the returns on one axis and volatility on the other… I don’t know if I can name names but the Vanguard UK FTSE all share with an OCF of 0.08pc appeared to me to have higher returns and lower volatility than two lower cost FTSE all share trackers (all acc)… You’ve touched on this before with your tracking difference post…

    …what I do is compare the cheapest few and if one looks better on a return/ volatility basis go for that one…

  • 470 Planting Acorns February 25, 2016, 10:45 pm

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

  • 471 Comet February 26, 2016, 1:49 am

    db x-trackers FTSE All-World ex-UK (XWXU) is now XDEX

  • 472 The Accumulator February 27, 2016, 1:20 pm

    @ Planting Acorns – that’s a nice graph tool, thanks for sharing! I personally go the extra mile and look at tracking difference and you are effectively doing the same thing here with the added bonus of volatility info, so it’s a good approach. The graph does overdramatise fractional differences though. What would you do if your alternative choice showed less return but less volatility too?

    @ Comet – my thanks to your eagle eyes. Updated.

  • 473 Planting Acorns February 28, 2016, 10:18 am

    @TA…probably pump for the lower volatility… which makes me wonder if I should be investing in shares at all ;0)

  • 474 Nicholas Stone March 2, 2016, 8:29 am

    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!

  • 475 The Investor March 2, 2016, 9:52 am

    @Nicholas — With respect to question (2), have you read our articles on Currency Risk and overseas investing?

    I’d suggest reading through:

    http://monevator.com/currency-risk/
    http://monevator.com/currency-risk-fund-denomination/
    http://monevator.com/investing-overseas-can-diversify-portfolio/
    http://monevator.com/reduce-risk-by-investing-foreign-shares/
    http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/

    I appreciate some seem a bit off-topic (e.g. the last one on a World Tracker ETF) but I include them to illustrate that your problem is pretty conventional, even though your situation (and your response) might not be.

    For instance, our regular contributor Lars Kroijer, who wrote the article on why all you need is a World Tracker, recommends this as the one tracker fund required by UK investors. (They will of course have other £-denominated assets, like cash or bonds).

    Consider that, from memory, only about 5% of the world tracker is in UK assets, and as you’ll understand after reading my second link above, that means some 95% of your *equity* money is directly exposed to non-UK assets, under Lars’ plan, even if you were a UK investor putting money into an ISA in Croydon or Glasgow.

    i.e. Such a UK investor would be massively exposed to currency risk, as a by-product of their investing strategy. But it is presumed that for long-term investors in globally diversified portfolios it all comes out in the wash, essentially.

    I won’t comment on your specific strategy, except to say that there’s a difference between not understanding currency risk, and trying to be “clever” with making an extra return as a result of your currency exposures. Be sure you know what is really troubling you. I am not saying the latter is good or bad, but it’s different. (It’s also difficult!)

    Your issue of not knowing where you’ll end up is indeed a difficult question. However I personally think it’s more an issue for bulky non-equity and non-diversified exposure such as cash savings, perhaps a property you own, bonds, etc.

    Please note I’m not a financial advisor, and this is just food for thought and your own research in making your own decisions. 🙂

  • 476 Nicholas Stone March 2, 2016, 2:47 pm

    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.

  • 477 Planting Acorns March 2, 2016, 3:20 pm

    @Nicholas … I also have ten funds, some of which are near perfectly correlated with each other but the final proportions work out where I want them. As I can see it, no easier to hold seven than ten if you’re buying them all through the same fund supermarket (which I am)?

  • 478 The Accumulator March 5, 2016, 9:45 am

    @ 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.

  • 479 The Accumulator March 5, 2016, 2:33 pm
  • 480 Snowman March 17, 2016, 10:32 pm

    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

  • 481 The Accumulator March 18, 2016, 9:21 pm

    Thanks as ever Snowman. Have updated

  • 482 NewConvert March 22, 2016, 12:47 am

    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.

  • 483 The Accumulator March 22, 2016, 6:44 pm

    Hello there,

    Here’s a piece about holding gilts directly or through a fund and there’s some useful links to the Debt Management Office if you decide to go direct:
    http://monevator.com/buy-gilts-directl-or-invest-in-a-gilt-fund/

    yes, you should be able to hold gilts in your ISA through a broker.

    Personally speaking, I would use a bond fund because it’s a lot less hassle. Especially if you’re still building your assets. However, if you’re ready to sell assets down (i.e. you are de-accumulating) then a gilt ladder is worth considering as you can match your assets to liabilities. In other words if you know you need £20,000 in 2 years time and another £20,000 in 3 years time then you can match a gilt ladder to that liability.

    Note, a gilt ladder doesn’t save you from loss if interest rates go up, it just means you can be sure of your capital’s value if you hold to maturity.

  • 484 TT April 1, 2016, 4:46 pm

    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/

  • 485 Age of Bronze April 4, 2016, 12:58 am

    I am a US citizen who has a UK ISA. This means, effectively, that the only index funds which I can only buy must be US-domiciled. (To do otherwise will incur extremely unfavourable tax treatment.) And to follow the UK rules on ISAs, any funds I own must be Recognised or Authorised by the FCA. Thus, I have been using the search engine here to try to find low-cost, US-based tracker funds (FCA calls them CISes) which I can buy from within my ISA:

    https://register.fca.org.uk

    I have not turned up even a single Vanguard, iShares or Fidelity fund which is US-based. The vast majority are UCITS—all of which are EU-domiciled.

    Does anyone have any tips on where to find a US index tracker fund which is ALSO UK-Recognised? Bonus points for having non-silly (<0.3%) ER fitting into one of these broad categories:

    http://portfoliocharts.com/portfolio/ivy-portfolio/

    The only other alternative I can see is to invest directly in individual stocks or REITs. That's far from ideal, but I'm beginning to despair that I'll find an alternative.

    (Apparently investing my SIPP money is infinitely easier, with effectively no UK restrictions at all. Glad to hear it, but I have find something to do with my ISA cash…)

  • 486 The Investor April 4, 2016, 9:59 am

    @AoB — I don’t have specific tips for you, but you might find this post has some pointers for further research: http://monevator.com/expat-investing-and-tax-us-and-uk/

  • 487 The Accumulator April 4, 2016, 5:07 pm

    @ AoB – See the links for ex pat US investors in the article linked to above by The Investor.

    To the best of my knowledge, you won’t be able to investing in US mutual funds, but you can invest in ETFs which count as index funds.

    This should link to a spreadsheet that includes US ETFs that are also reporting funds:
    https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

  • 488 Learner April 5, 2016, 7:24 am

    @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.

  • 489 Chris April 8, 2016, 3:26 pm

    In fact the Blackrock UK Equity Tracker can have a charge as low as 0.01% via the X class units – but only if you have a minimum of £10m to invest in one go. To get 0.06% you need a minimum of £100,000 via the D class units.

    If, like me, you want this in an ISA, you have to pay 5% initial charge and 0.51% annual charge. So not very cheap at all!

    So as usual small investors are taken to the cleaners. I guess some of the platforms will rebate some of the initial charge, but then you have to add platform fees on top. So it appears that 0.06% is not attainable unless I am missing something?

  • 490 The Accumulator April 9, 2016, 8:40 am

    @ 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.

  • 491 Alexander April 10, 2016, 12:03 pm

    Looks like robo-investing has really taken off in the US, especially among young, novice investors like myself. Does anyone know of a UK equivalent to Betterment with more attractive fees than Nutmeg? Thanks!

  • 492 Jonny April 14, 2016, 7:31 am

    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?

  • 493 The Accumulator April 14, 2016, 8:15 am

    Hi Jonny, they’re different share classes of the same fund. The P version is the one Fidelity make available on their own platform and discount slightly to attract customers.

    The I and W versions are more generally available at 0.15% elsewhere.

    I’ve just googled the ISIN code of I and Fidelity are quoting a price for it here: https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/fees.page?idtype=ISIN&fundid=GB00B7LWFW05&UserChannel=Direct

  • 494 Snowman April 22, 2016, 4:35 pm

    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

  • 495 @algernond April 26, 2016, 10:16 pm

    Hi.
    In my work pension, I’m invested in a Scottish Equitable Blackrock 75/25 blend fund. The fund sheet says the OCF is 0.05%, which sounds really good. However, I am wondering if in fact there are also charges for the individual funds that make up the blend. Anyone any idea how to find out?

  • 496 The Accumulator April 27, 2016, 8:44 pm

    Email Scottish Equitable.

  • 497 Steve June 25, 2016, 10:45 pm

    Can anyone recommend a FTSE All-Share ETF which is distributing rather than capitalising? The SPDR ETF https://www.spdrseurope.com/library-content/public/SPYF%20GY_factsheet_en.pdf looks cheap and fairly good but it’s capitalising. I’m looking for something I can hold in a taxable brokerage account rather than a SIPP or ISA so I want the distributions to be explicit for ease of reporting to HMRC.

  • 498 The Accumulator June 26, 2016, 12:28 pm

    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.

  • 499 Steve June 26, 2016, 3:19 pm

    Thanks @TA, good to know this wasn’t just a failure in my search abilities. The trouble is that in the current market conditions I’m reluctant to accept the forward pricing that goes with buying index funds (normally I’m fine with it). I think I need to go look into just how onerous the tax return implications of a capitalising ETF would be; maybe it’s not as bad as I fear.

  • 500 Max July 4, 2016, 11:18 am

    Does anyone perhaps know of any ex Europe funds?

  • 501 Darren July 6, 2016, 6:49 am

    Thanks for all the info and comments.

    I don’t see any mention of the Legal & General UK Index Tracker which seems cheap at 0.10% (0.06% via HL).

    How does it compare with the Vanguard FTSE UK All Share Index which charges 0.08% with 0.2% initial cost?

  • 502 boardgamer July 13, 2016, 9:00 pm

    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.

  • 503 Mr optimistic July 13, 2016, 10:00 pm

    Regarding fund costs, I also have had difficulty establishing whether a fund of funds fund (did I really write that?) TER captures sub fund costs, wish they would say in the factsheet but usually they don’t. I also use something like HL to double check charges. This saved my bacon when a high income fund claimed a management fee of 0.65% in its fact sheet but HL reckoned 2.04%. HL were right once the annual report was examined. Fact sheets need care!

  • 504 @algernond July 28, 2016, 8:28 pm

    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?

  • 505 Jon Williams August 11, 2016, 4:44 pm

    With 10 year gilt yields at 0.582% what should I be using as the water to my whisky on a passive portfolio?
    Should I still keep drip feeding gilt index funds – or maybe international bonds hedged back to GBP or even investment grade corporate bond funds?

  • 506 The Accumulator August 11, 2016, 8:41 pm

    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.

  • 507 DonF September 11, 2016, 11:09 am

    @TA: Why don’t you list IWFS under World small cap equity?

  • 508 The Accumulator September 11, 2016, 10:18 pm

    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

  • 509 Redcactus November 21, 2016, 4:12 pm

    @TA Have you seen/have a view on the new FTSE All Cap Global Index fund introduced by Vanguard in the UK ?

    https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=8617&assetCode=EQUITY##overview.

    Your site has converted me to Lars Kroijer’s philosophy that by understanding you don’t have an edge, one should therefore “own shares in all the market’s stocks, weighted according to their fraction of the overall value of the market”.

    I’m therefore of the view that dripfeeding into this fund each month rather than the Lifestrategy 100 I currently pay into, would better accord with Lars’s approach as it includes small cap companies across the world as well as avoiding the UK overweighting inherent within LS100.

    0.24% OCF and I am not sure that it is yet available on the major platforms but is this one to add to your list for the benefit of purists?

  • 510 NOBUNAGA December 1, 2016, 11:43 am

    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.

  • 511 NOBUNAGA December 1, 2016, 2:04 pm

    Since posting my previous comment I’ve read a post by algernond that GILI has a TER of 0.22 not 0.07 as I thought. I looked at the KID, Factsheet, Prospectus and Web site but still come up with 0.07 can someone clarify this please.

  • 512 Paul Harsley January 3, 2017, 8:35 pm

    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!

  • 513 Jonathan January 4, 2017, 2:50 pm

    Does anyone know of an alternative to the Vanguard LifeStrategy fund that does a similar thing but on an ETF basis (or even actively within an Investment Trust provided it is low cost). I have my SIPP with HL and am trying to shift it all to shares and ETFs due to their annoying double charging structure. I’ve got rid of most funds/trackers now and replaced with ETFs and Investment Trusts, but I can’t work out how to get rid of the LifeStrategy fund short of buying lots of individual ETFs (and even then, it wouldn’t really replicate, as I would lose the automatic rebalancing).

  • 514 The Accumulator January 8, 2017, 10:13 pm

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

  • 515 The Accumulator January 8, 2017, 10:30 pm

    Thanks Redcactus. Looks like it’s 8 – 12% small cap, so theoretically expected returns should be a smidge better. If you google: ftse global all cap index then you can download a pdf which shows the all-cap nudging ahead of the all-world over 5 years. The all-world goes down to mid cap level. It probably won’t make much difference overall but it certainly offers a touch more optimisation.

    Will put it on the list.

  • 516 The Accumulator January 8, 2017, 10:43 pm

    @ 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.

  • 517 BlackSamurai摩天楼 January 11, 2017, 12:13 pm

    thanks for this @Accumulator. This is helping me make my choices, as well as the series you and the Investor on all this 🙂

  • 518 Kayvaan January 15, 2017, 12:58 pm

    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?

  • 519 The Accumulator January 15, 2017, 8:23 pm

    Slightly different benchmark by the looks of things: FTSE EPRA/NAREIT Developed Dividend Plus Index.

    That’s not why it’s not in the list though. It was too new last time we updated.

  • 520 Kayvaan January 16, 2017, 12:10 am

    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!

  • 521 hyperhypo January 18, 2017, 3:48 pm

    Re. the Blackrock global property tracker Class D (which i hold)…through a clerical error on .y part i’ve inadverently moved from Class D into Class H …which i’m sure wasn’t around when i first gotten use to my new SIPPs s/w…anyway Class H is a tad cheaper at 0.2% but i can’t for the life of me work out what the difference is …someone put me straight please..it don’t want to hold both classes …inclination is to line up here on Class D but i’d like to know of the difference. Thanks ..

  • 522 The Accumulator January 18, 2017, 7:24 pm

    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.

  • 523 Dan January 19, 2017, 7:29 am

    Vanguard have cut the OCF on their Lifestrategy range from 0.24% to 0.22% as of 18 Jan.
    Every little helps

  • 524 hyperhypo January 19, 2017, 10:26 pm

    @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.

  • 525 Kayvaan January 20, 2017, 1:31 am

    The Blackroack Global property securities fund class H on Hargreaves Lansdown looks to have a buy sell price of 141.30/148.70. Correct me if I’m wrong but isn’t that an atrocious bid offer spread? Losing around 5% immediately seems like a terrible choice.

    Meanwhile the same fund as a class D from bestinvest for example has a bid offer spread of only 0.17%, with 0.23% OCF.

    Surely a far superior deal?

  • 526 hyperhypo January 20, 2017, 5:14 pm

    @Kayvaan

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

  • 527 vtk February 22, 2017, 11:53 am

    Hi,

    The ‘HSBC FTSE All-Share Index Fund Institutional Accumulation’ (http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=f0gbr06i7o) has an OCF of 0.03%.

    Does that make it the cheapest on your list or am I reading something wrong?

    Many thanks!

  • 528 The Accumulator February 22, 2017, 8:37 pm

    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.

  • 529 vtk February 23, 2017, 12:21 pm

    Hi TA, thanks for your response. I’m a regular Joe invested in this fund (‘HSBC GLOBAL AM UK FTSE ALL SHARE IDX INST ACC’ code MDSAC) via an iWeb ISA…

    https://iwebfunds.webfg.com/index.php?section=sheet&idShareclass=F0GBR06I7O

  • 530 vtk February 24, 2017, 8:18 pm

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

  • 531 The Accumulator February 25, 2017, 9:21 pm

    Interesting, vtk. That fund has come up before and some Monevator readers reported being unable to buy into the fund at the time. Are you currently investing in it? When did you first invest? I ask because sometimes funds are available to existing investors but not new ones. Great news though if anyone can buy into it.

    re: S&P 500. Just check out the main players: Vanguard, Blackrock, iShares, SPDR, Fidelity, HSBC

  • 532 cheapo March 30, 2017, 11:49 am

    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

  • 533 The Accumulator April 2, 2017, 8:58 pm

    Hi Cheapo – great name btw, made me smile. Personally I wouldn’t bother for an 11 year pay-off. Sometimes it’s better to turn these calculations into actual £ amounts and realise that the difference is £10 a year or whatever. Here’s a piece I wrote on bid-offer spreads: http://monevator.com/bid-offer-spreads-and-etf-costs/

  • 534 cheapo April 5, 2017, 11:55 am

    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).

  • 535 Todd April 9, 2017, 3:59 pm

    Hi Accumlator,

    Newbie here. Read lots of articles on here and hear index funds with someone like Cavendish is a good start since I am new with small funds. Is the Vanguard Lifestrategy fund suitable for a beginner? I just want a suitable fund that is low cost but effective so I can leave alone. Thanks

  • 536 The Accumulator April 9, 2017, 7:36 pm

    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!

  • 537 Robbo April 12, 2017, 2:36 pm

    Hi,

    I am currently invested in the Vangaurd LifeStrategy 100%, however I am thinking about about moving to a world equity tracker instead for this years ISA allowance due to the UK home bias of the LS100.

    I noticed this article includes the Vanguard FSTE Developed World instead of the Vanguard FTSE All-World. Is that due to the higher OCF on the VWRL or some other reason? I would like some emerging markets so do you think the VRWL would be a better option?

    Vanguard FTSE Developed World UCITS ETF (VEVE) 0.18%
    Vanguard FTSE All-World UCITS ETF (VWRL) 0.25%

    Thanks!

  • 538 Mick June 29, 2017, 8:29 am

    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

  • 539 Dan July 2, 2017, 11:21 pm

    It appears that BlackRock tracker funds are currently being rebranded to iShares (see the news article on HL dated 28 Jun). This will bring all of their tracker offerings, whether fund or ETF, under the iShares branding.
    The Global Property Securities Equity Tracker currently has the KIID branded as iShares but the factsheet branded as BlackRock.

  • 540 Fremantle July 11, 2017, 9:55 am

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

  • 541 Gregory July 11, 2017, 10:07 am

    Vanguard Global Value Factor ETF (VVAL) is active. Some ETFs are not physically based.

  • 542 Adrian July 11, 2017, 12:02 pm

    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

  • 543 ABC123 July 11, 2017, 1:59 pm

    Strange that iShares have a Global Property ETF (IWDP) charging 0.59% whilst offering a similar fund charging 0.22%
    I’m wondering if it’s worth the cost of changing – to the L&G fund perhaps.

  • 544 optimistic July 11, 2017, 7:15 pm

    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.

  • 545 grey gym sock July 12, 2017, 1:49 am

    i see that L&G UK MID Cap Index Fund tracks the FTSE 250 ex. Investment Trusts Index, not the FTSE 250 Index (which most UK mid-cap trackers follow).

    IMHO, excluding investment trusts is an advantage, because it avoids an extra layer of charging – from the investment trusts themselves. mostly, those ITs are just investing in quoted UK and ex-UK shares, which you can own a piece of more cheaply via tracker funds. though some ITs do also invest a bit in unquoted shares and other stuff you can’t get via trackers.

  • 546 AtlanticSpan July 12, 2017, 9:27 am

    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.

  • 547 Chris B July 12, 2017, 9:54 pm

    When looking at costs, UK OEICs and unit trusts pay dividends in GBP. Good. However be aware that just about all ETFs pay dividends in EURO or USD which means your platform converts each payment into GBP at a very high currency spread – typically you will lose at least 1.5% of each dividend in Forex fees. Ouch!

  • 548 FIREin' London July 13, 2017, 7:19 am

    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

  • 549 Gizzard July 13, 2017, 3:30 pm

    I notice that the iShares UK Property ETF (UKRE) contains a mixture or REITs and index linked bonds; the latter in order to help negate the effect of REIT gearing and thereby better reflect the actual returns of UK property. Does anyone have any opinions on whether this ETF is a better/worse proposition than the iShares IUKP ETF?

  • 550 Hariseldon July 13, 2017, 6:31 pm

    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.

  • 551 StephenE July 14, 2017, 5:01 pm

    I’m reading Investing Demystified and looking at the ‘if you want to get more adventurous’ options around adding further Government and Corporate bonds to the returns generating portfolio component.

    Lars’s advice is to add an emerging markets government bond tracker, and add exposure to sub-AA rated developed world Government bond funds.

    I’m struggling to find any good options for the sub-AA Govt bonds, it looks very complicated to put this together. The only products I can see that come close to this are the db x-trackers II iBoxx Sovereigns Eurozone Yield Plus UCITS ETF, and Amundi ETF Govt Bond Lowest Rated EuroMTS Investment Grade UCITS ETF (though this may be subject to withholding tax).

    Any ideas on how to handle this, or should I just avoid the whole approach as overly-complicated?

  • 552 The Accumulator July 15, 2017, 3:54 pm

    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.

  • 553 The Accumulator July 15, 2017, 4:31 pm

    @ Atlantic Span & Gregory – I’ve put a note in the Value factor section covering why VVAL makes the list. Thanks for raising this. I have nothing against active management when the objective and methodology is clear and the product comes with a rock bottom price tag, but you’re absolutely right, it should be highlighted.

  • 554 Adrian July 15, 2017, 7:21 pm

    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?

  • 555 The Accumulator July 15, 2017, 8:07 pm

    Generally that would apply to an ETF bought on foreign exchanges. I wouldn’t expect to pay that for a US equity ETF bought on the LSE. Check the charges on your chosen platform to be sure though.

  • 556 Leon July 22, 2017, 8:34 pm

    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/

  • 557 The Accumulator July 23, 2017, 1:50 pm

    Hi Leon,

    The 0-5 year ETF you mention is the sort of thing you’re looking for. The 0-5 years refers to the maturity period of the bonds and you won’t find a tracker that is any more ‘short-dated’ than that. The UK gilts part of the name tells you that it invests in UK government bonds and by definition that means it’s AA-rated as that’s the current rating for UK gov bonds. You should be able to verify things like the average rating and maturity on the tracker’s web page.

    The ‘UK government bonds – short’ section in the list above includes some alternatives.

    The inflation-linked product you mention isn’t what you’re looking for. It’s full of long duration bonds which are highly risky.

    Indeed, there aren’t any short dated products available to fulfil Hale’s advice on this point, an issue he skirts around in the book.

    This post explains in more detail:
    http://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/

    There is no way around this at the mo.

  • 558 Leon July 26, 2017, 3:45 pm

    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…

  • 559 vaiix July 31, 2017, 6:01 pm

    First off – thanks for your website. The process of reading your slow-n-steady portfolio over the years has been intriguing and really captured how to invest for a newcomer like myself.

    I have my eyes set on the following, but any advice would be welcomed. I am unsure how I can meet the min £50 monthly investment that seems to be the norm when I wish to only add 5-8% (depending if I go 60/40 or 80/20) to my smaller asset allocations? I feel the below fully captures the concepts noted by Tim Hale, whilst trying to reduce the complexity.

    80/20
    Global -48%, if split then UK 5% / ex-UK 43%
    Global small-cap – 12%
    Emerging markets – 12%
    Global property – 8%
    Short bonds – 15%
    Inflation linked bonds – 5%

    I’d like to think it’d be easier to just invest in the Vanguard LifeStrategy – but they seem to hold a home-bias (which has evidence against in the book) and removes the ‘intimacy’ of managing your assets, or at least having the option to.

  • 560 The Accumulator August 1, 2017, 7:22 pm

    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.

  • 561 Rob August 5, 2017, 6:14 pm

    Hi,

    Firstly, thank-you for your huge selection of resources for the amateur investor. Alongside Smarter Investing it’s been invaluable for helping me make my initial investment decisions. I’ve got a 40 year plus horizon on my investments, a decent pension and a secure job so have a very healthy appetite for risk. I’ve designed a 90/10 portfolio allocation with a heavy tilt away from the UK and towards Emerging Markets, with the intention to rebalance towards 50/50 and relocate back into the UK the closer I get to the drawdown beginning.

    This is how I’ve split the return engine:
    40% Global Index – Fidelity Index World W (Tracking Difference 0.05%, TER 0.15%)
    10% Global Value
    10% Global Growth
    20% Emerging Index – iShares Emerging Markets Equity Index UK (TD -0.67%, TER 0.24%)
    20% Emerging Value & Growth

    I was wondering if you could help we with some OEIC recommendations for the non-global index/emerging index elements? I’ve spent the afternoon on MorningStar and FE Trust without much luck for being able to narrow down the options!

  • 562 The Accumulator August 6, 2017, 10:01 am

    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.

  • 563 Rob August 6, 2017, 8:15 pm

    Hi Accumulator,

    Thank-you! I think the fact that Intelligent Investor gives you the option of selecting Monevator when asking ‘where did you hear about II from speaks volumes.

    I must admit I’m a little confused by your comment about combining value and growth equally resulting in the index – would you mind clarifying?

    My understanding of the different sectors is that, broadly speaking, value stocks are undervalued large companies (generally those going through a difficult period such as Lloyds Bank), and growth stocks are small companies which could be tomorrows big companies.

    Now the index takes into account medium & large companies that are trading at value – these are stocks that feature in neither value nor growth indexes as they are neither undervalued nor offer potential for lots of future growth.

    Am I understanding this correctly?

  • 564 nobunaga August 8, 2017, 11:35 am

    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.

  • 565 The Accumulator August 12, 2017, 2:48 pm

    @ Rob – the definitive way that the growth and value segments of a market are created is to split the index in half. The 50% which are cheapest by your definition of value (e.g. price-to-book ratio) make up the value portion and the other 50% go into the growth portion. This is how the academics that authored the value factor theory do it. So if you tilt to value and growth, you’re just holding the market – assuming you tilt evenly.

    That said, there are many different ways to define value and retail products are rarely as rigorous as the academics. You may well be skipping portions of the market via your particular choice of value fund and growth fund. But you’re still likely to be picking products that cancel each other out to some degree. That strategy also deviates from evidence which suggests that value stocks add to returns because they are historically undervalued while growth stocks detract – they are historically overvalued.

  • 566 Fremantle October 17, 2017, 9:57 am

    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.

  • 567 Snowman October 20, 2017, 8:19 am

    I see Vanguard have switched to swing pricing rather than using a dilution levy

    https://www.vanguardinvestor.co.uk/articles/latest-thoughts/how-it-works/why-vanguard-is-moving-to-swing-pricing

    Of course it is a myth that selling and buying single priced funds involves no cost to the investor, because by its nature the price is swung up when more people are buying than selling and swung down when more are selling than buying.

    Don’t think swing pricing is fairer myself (although you can argue it both ways) because it’s down to luck whether you are caught on the wrong side of the swing when buying and selling.

    But at least removing the dilution levy will avoid the misunderstanding that the dilution was a charge paid to Vanguard rather than a charge paid into the fund.

  • 568 The Accumulator October 25, 2017, 6:58 pm

    Thank you, Fremantle! Updated.

    And thanks again to you Snowman. Funny how they claim one price enhances transparency yet that was exactly the argument for the dilution levy in the first place.

  • 569 Jim October 26, 2017, 12:10 pm

    Please check this but it seems Fidelity Index Emerging Markets Fund W (GB00BLT1YT76) OCF 0.23% appears to have been replaced with Fidelity Index Emerging Markets P Acc (GB00BHZK8D21) 0.21%.

    Thanks for all your work.

  • 570 The Accumulator October 27, 2017, 12:09 pm

    Thanks Jim! You are spot on. I’ve stopped being lazy and checked the rest of Fidelity’s index funds now. The P class World Index fund now takes top spot in the world equity category too.

  • 571 IanH October 31, 2017, 3:35 pm

    A month ago I invested in the vanguard ftse global all-cap fund. This has a really wide fund base with investments in nearly 5000 stocks worldwide. I just idly had another look at the mix of funds, and blow me if the 3rd ranked item, between MS and FB, isn’t an investment in a firm but a punt on the S&P 500 future market (namely S+p500 Emini Fut Dec17 Xcme 20171215) . I know that KIIDs say that using financial means other than direct investment is part of an fund’s activity, but I imagined they would be used as minor tweaks, for example to keep a fund close to its index when the fund can’t fully replicate its market. But 1.05% of the fund assets on a future – is that typical?

  • 572 Allan October 31, 2017, 7:23 pm

    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?

  • 573 Allan November 1, 2017, 7:17 pm

    a lot of these recommended funds seem not to be available to the common DIY investors, for the Domestic large cap equity alone:
    100K  GBP Minimum Investments for iShares UK Equity Index Fund (UK) D Acc
    1000K GBP Minimum Investments for HSBC FTSE All Share Index C
    100K  GBP Minimum Investments for Vanguard FTSE UK All Share Index Trust

    only the Fidelity Index UK Fund P (GB00BJS8SF95) fits the bill with a required Initial Investment of just 500  GBP

    or did I get it wrong again?

  • 574 The Accumulator November 2, 2017, 2:24 pm

    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.

  • 575 The Accumulator November 2, 2017, 2:27 pm

    Allan, re: SIPPs and ISAs: http://monevator.com/sipps-vs-isas-best-pension-vehicle/

    Income vs accumulation. You could do exactly what you suggest. You could stay invested in acc funds and sell the units you need to create income. You could sell out of acc units and buy inc units. It’s largely a question of personal taste and circumstance.

  • 576 Humble Pie November 15, 2017, 1:37 pm

    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?

  • 577 Fremantle November 22, 2017, 11:45 am

    The Income C class of HSBC FTSE All-World Index Fund C (GB00BMJJJG09) has dropped the OCF to 0.2%, but interestingly the Accumulation C class (GB00BMJJJF91) is lower at 0.19% OCF. Not bad for grabbing a piece of the whole pie in one bite and is where my son’s JISA is invested.

    HSBC don’t make it easy to find their up to date info.

  • 578 Allan November 29, 2017, 7:27 pm

    @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)

  • 579 Tim December 14, 2017, 4:28 pm

    This is a super-useful page. I can’t help but think it’d be improved by adding “Multi-asset” as a category in it’s own right though. Sure there’s the “fund of funds” link to the LifeStrategy write-up, but there’s a few more almost as cheap options appeared, with some interesting differences in asset allocation strategy (including the degree of active meddling) and how they target a given level of risk. Ones I’m aware of are Lifestrategy (obviously) at 0.22% OCF, L&G’s Multi-index funds (0.24%-0.31% for “risk levels” 3-7) and Blackrock Consensus 35/60/70/85/100 (0.22%-0.23% OCF). Standard Life’s MyFolio funds sometimes also seem to get mentioned as a contender in this area, but as the OCFs are over 0.8% I haven’t looked any closer at those. None of them are as straightforward no-nonsense easy to understand as Lifestratgey.

    Interestingly L&G also have some Multi-index Income funds (not to be confused with the income units of the regular multi-index funds) which look like an attempt to answer The Greybeard’s “Can ETFs deliver a dependable income for deaccumulating investors” question. 0.31%-0.4% OCF over the various risk levels, yielding 2%-3.5%. Not obviously a slam-dunk compared with The Greybeard’s favoured CTY or the natural yield on a dirt-cheap FTSE tracker or dividend ETF, but surely more diversified and perhaps more sustainable (and they do pay income monthly).

  • 580 The Accumulator December 14, 2017, 7:17 pm

    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.

  • 581 Max January 26, 2018, 3:18 pm

    I just spoke to iWeb and they have the following listed as a Unit Trust – is that correct?

    L&G International Index Trust I (GB00B2Q6HW61) OCF 0.13%

    Thanks

    Max

  • 582 Playing with Fire March 1, 2018, 4:08 pm

    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?

  • 583 The Accumulator March 1, 2018, 6:26 pm

    Please send me a link to your source Playing With Fire. It would be unprecedented if it does – more likely to be some kind of category error by the platform you’re looking at or maybe some weird institutional variant you’ve found.

  • 584 Brenna March 2, 2018, 4:26 pm

    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!

  • 585 theta March 12, 2018, 3:27 pm

    On the EM ETF, AUEG has 0.2% OCF but it’s incorporated in France and there’s presumably a higher div tax there than in Ireland, where VFEM with 0.25% OCF is incorporated. I was wondering if the difference in div tax drag, if any, tips the scale in favour of the latter. The fact that they don’t track the exact same index makes it even more difficult to compare.

  • 586 theta March 18, 2018, 11:33 am

    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?

  • 587 Tim April 4, 2018, 10:41 am

    Another interesting entrant to the nebulous “ethical” or at least “sustainability” space recently launched by L&G in January: L&G Future World Equity Factors Index http://www.lgim.com/uk/ad/funds/future-world-equity-factors-index-fund/accumulation/class-i.html . 0.3% OCF isn’t bad, especially considering the multi-factor smart-beta chrome (the cheapest thing in your multi-factor section is 0.4%!). Some info on the index it tracks at http://www.ftse.com/Analytics/FactSheets/Home/DownloadSingleIssue?openfile=open&issueName=AWXWCBF&isManual=False and http://www.ftse.com/products/downloads/climate-balanced-factor-overview.pdf

  • 588 The Accumulator April 6, 2018, 7:52 pm

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

  • 589 The Accumulator April 6, 2018, 8:00 pm

    @ Theta – It looks fine. See:
    https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NUKX,NB:AFIA,NB:AFIB,NB:AFIC
    This area is a minefield and it can be tricky to get like for like comparisons. You have to be careful that you’re getting an apples-to-apples match-up across time frame, currency, indices, treatment of dividends… even then the data can be wrong.

  • 590 Tom Denley April 28, 2018, 11:19 am

    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.

  • 591 AnalysisParalysis July 19, 2018, 6:27 pm

    Hi, huge thanks along with everyone else for such a great resource; although my word there’s a lot of it: many weeks of reading and digesting!

    Quick question – how did you screen for the cheapest World Ex-UK funds above? I’ve been searching on Morningstar and haven’t found a convenient filter, category or search term to apply. There’s a Europe Ex-UK category but no World Ex-UK.

  • 592 Archer October 9, 2018, 10:34 am

    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.

  • 593 eagleuk October 14, 2018, 8:40 pm

    Re:Archer Fidelity Index emerging markets
    You can buy via minimum £50.00 monthly investing plan on the cavendish/fidelity website.The future payments /plan can be cancelled once your purchase is complete.

  • 594 Rob December 9, 2018, 4:49 pm

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

  • 595 Craig January 8, 2019, 8:14 pm

    Since my last post I’ve read Lars Kroijer’s book ‘Investment demystified’ and really liked the concept of tracking a global index and balancing this with bonds. I’m approaching 40 so was looking at a 60/40 split. I’m looking at a 15 year time frame so would it be more appropriate to be more aggressive (80/20)? My aim is to hold both funds in an ISA and keeps fees as low as possible. I’m considering a number of potential ways of executing this and would really appreciate your thoughts and feedback.

    Option 1:
    Vanguard FTSE Glb All Cap Idx Inv A £Acc OCF 0.24% (60% allocation) 0.114%
    Vanguard UK Infl-LnkdGltIdx A Grs Acc (Accumulation) OCF 0.15% (40% allocation) 0.06%
    Total 0.174%

    Option 2:
    Fidelity Index World Fund P (GB00BJS8SJ34) OCF 0.12% (60%) 0.072%
    Vanguard UK Infl-LnkdGltIdx A Grs Acc (Accumulation) OCF0.15% (40% allocation) 0.06%
    Total 0.132%

    Option 3:
    L&G International Index I Acc (Accumulation) (excludes UK) 0.13% (50% allocation) 0.065%
    HSBC FTSE All Share Index C Acc (Accumulation) 0.06% (10% allocation) 0.006%
    Lyxor FTSE ActrUKGltInflLnkd(DR)ETF DGBP (GILI) 0.07% (40% allocation) 0.028%
    Total 0.099%

    The Vanguard fund in option 1 is an all Cap and has exposure to emerging markets is that worth the higher fee (0.24) compared to funds which only invest in developed world and large CAP Fidelity (0.12) or L&G (0.13)?

    Is it better to keep costs even lower by having a world ex UK and holding a separate FTSE all share which seems a bit of a bargin at 0.06%?

    Is the Lyxor inflation linked gilt ETF a good alternative to Vanguard inflation linked bond fund, why is it so cheap at 0.07%? Am I missing something fundamental?

    Any other funds your would suggest reviewing?

    Many Thanks

  • 596 The Accumulator January 13, 2019, 6:53 pm

    Hi Craig, your asset allocation is a very personal decision and we can’t really advise you. However, these pieces may help you answer your own question:

    https://monevator.com/what-you-need-to-know-about-risk-tolerance/
    https://monevator.com/how-to-estimate-your-risk-tolerance/
    https://monevator.com/know-your-own-risk-tolerance/

    It looks like you’re only considering inflation-linked gilts? Inflation-linked bonds don’t tend to perform as well in recessions as conventional bonds, so you’re losing a diversification opportunity here. Moreover, UK linker funds carry substantial risks that are not obvious at first. Read this: https://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/

    Piece on the Lyxor ETFs: https://monevator.com/lyxor-core-etfs-very-low-cost-but-beware-some-wrinkles/

    Yes, low cost is generally better but there are diminishing returns. Once you’re saving 0.01% here and there then you’re saving £10 per year on £10,000.

    Personally, I’d want some exposure to emerging markets. The primary consideration is diversification rather than cost (as the cost is reasonable).

  • 597 The Accumulator January 13, 2019, 7:00 pm

    Craig, meant to give you this on constructing asset allocation: https://monevator.com/asset-allocation-construct/

    Sorry for all the reading!

  • 598 The Accumulator January 14, 2019, 9:29 am

    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 😉

Leave a Comment