Author Topic: Is this a good Index Fund for a UK based Investor?  (Read 935 times)

mmcg33

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Is this a good Index Fund for a UK based Investor?
« on: February 18, 2019, 05:50:57 AM »
Hi there,

I'm looking to invest in a single index fund here in the UK.

I was invested in an HSBC FTSE UK All Share index until recently, but looking to get more of a global exposure, especially because of all of this frustrating brexit nonsense going on at the moment!

I recently found this one:
HSBC All World Index - Accumulation.
https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/h/hsbc-ftse-all-world-index-class-c-accumulation/charts

Its top 10 funds are all US based, e.g. Apple, Microsoft and Amazon.

Here's the asset allocation:

International Equities   88.05%
UK Equities 5.42%
Cash and Equiv.   4.01%
Property 1.98%
Other 0.53%
Managed Funds   0.01%
International Bonds 0.00%
Alternative Trading Strategies 0.00%

And here's the costs:
Management charge 0.45%
Net ongoing charge 0.16%

Is this a good index fund for me to invest in do you think? Does it matter that I'm investing in non-UK based assets? Are there any better funds for me?

Thanks for your help.

daverobev

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #1 on: February 18, 2019, 11:43:08 AM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #2 on: February 18, 2019, 12:31:12 PM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.
VWRL is actually _more_ expensive: 0.25% vs 0.19% TER for the HSBC fund, while following the same index.

I don't know much about the HSBC fund - perhaps it has some hidden drawbacks. But at first glance it seems like a decent choice.


To OP's question: I'm not in the UK, but in a country with market cap of similar dimensions. I invest on a worldwide weighting (although I do adjust a few things, like US down relative to current weighting, everything else up).

daverobev

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #3 on: February 18, 2019, 01:23:27 PM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.
VWRL is actually _more_ expensive: 0.25% vs 0.19% TER for the HSBC fund, while following the same index.

I don't know much about the HSBC fund - perhaps it has some hidden drawbacks. But at first glance it seems like a decent choice.


To OP's question: I'm not in the UK, but in a country with market cap of similar dimensions. I invest on a worldwide weighting (although I do adjust a few things, like US down relative to current weighting, everything else up).

I don't think it is as simple as the TER, though. I think you can only get those C class units if you're paying a platform fee - so from the HL link, you're paying HL 0.45% on top, for a total (they say) of 0.65%.

mmcg33

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #4 on: February 18, 2019, 02:16:20 PM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.

Thanks for this - very useful.

I'm in the accumulation phase at the moment, 43yrs old, looking to put away as much as possible for retirement - so accumulation makes sense.

It looks like Vanguard charge an annual account fee of 0.15%, and this fund has an ongoing charge of 0.15%
https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-developed-world-ex-uk-equity-index-fund-accumulation-shares

Therefore it's cheaper to run than the one I mentioned - which is through Hargreaves Lansdown.

So sounds like a good idea for me to make the switch!

frugledoc

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #5 on: February 18, 2019, 02:25:12 PM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.
VWRL is actually _more_ expensive: 0.25% vs 0.19% TER for the HSBC fund, while following the same index.

I don't know much about the HSBC fund - perhaps it has some hidden drawbacks. But at first glance it seems like a decent choice.


To OP's question: I'm not in the UK, but in a country with market cap of similar dimensions. I invest on a worldwide weighting (although I do adjust a few things, like US down relative to current weighting, everything else up).

I don't think it is as simple as the TER, though. I think you can only get those C class units if you're paying a platform fee - so from the HL link, you're paying HL 0.45% on top, for a total (they say) of 0.65%.

HL cap the platform fee at £45 for non fund holdings.

They are actually extremely cheap if you are an etf investor

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #6 on: February 18, 2019, 11:38:50 PM »
I'm really unfamiliar with all the UK based options, but all these ongoing fees do seem odd (I don't pay an ongoing fees for my holdings - but I also don't live in the UK...).

A very common option, both in the UK and beyond, is Interactive Brokers. They have no ongoing fee once you have > 100k (USD) assets, and you can buy on any exchange (so you can still buy the various forms of VWRL/VWRD). Their per-trade commission is around GBP 6.00 for orders on UK exchanges, which again I can't compare to the options in this tread due to lack of familiarity.

(If you have < 100k in assets, then you are charged USD 10 per month - but the commissions you pay on trades count towards that USD 10.)

Depending on how Brexit goes, perhaps you'll no longer be subject to the EU's PRIIP's rules, in which case you might be able to start buying US-based ETF's such as VT: the advantage there is that they have lower TER, and only cost USD 1 to trade at Interactive Brokers. (But you'd want to check dual-taxation between the UK and the US, because the US will withhold a certain percentage of the dividend for taxes: that's fine if you can claim it back for UK taxes, but if you can't then it could be more expensive.) Given that the UK seems to want to keep a lot of EU rules, that might not happen - but there are other European countries closely aligned with the EU who still manage to avoid PRIIPs, so who knows.

Andy R

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frugledoc

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #8 on: February 19, 2019, 03:04:56 AM »
Remember much of the FTSE 100's earnings (and hence much of UK listed companies, because the FTSE 100 is 80% of UK listed market cap or there abouts) comes from abroad. So even when you're buying 'UK', you aren't really (see: HSBC, Barclays, BP, all the mining companies, etc).

Not sure who you're with but have a look at Vanguard's offerings in the UK - they are generally cheaper. I don't know about Platform Fees and all that nonsense; I have ETFs (so, VWRL.L would be the equivalent), and use low fee options (iWeb Share Dealing for ISA, for example).

If you just want a single stock market 'thing' based on market weightings, what you selected and VWRL.L will do the same (I think), except the fund won't pay out dividends (it's an Accumulating fund) but the ETF will.

Buying 'the world' based on market cap is fine.

An alternative is the Vanguard LifeStrategy funds, which can include fixed income as well, all in a single package. So, LifeStrategy 60 for example is 60% stocks (with more UK stuff than the UK's market weight would generally suggest - this is called home country bias) and 40% bonds/gilts/treasuries.
VWRL is actually _more_ expensive: 0.25% vs 0.19% TER for the HSBC fund, while following the same index.


I donít think they do track the same index.

VWRL is the only ETF I have found that tracks the FTSE all world index which includes market weight to emerging markets, hence the higher cost.

The other global trackers track the MSCI all world which excludes emerging markets.

At the moment I use VWRL exclusively despite its higher cost as I value the simplicity.  I may buy the individual ETFs at the point it starts saving me over 1k/year

MrOnyx

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #9 on: February 19, 2019, 03:24:14 AM »
Vanguard LifeStrategy gets another vote from me. Their blended LifeStrategy funds are a liiiittle more expensive than their regular index funds, but it makes it easier to split your AA between stocks and bonds. The LS funds also perform really well, and offer quite a smooth ride compared to some of their other funds (in my limited observation and experience).

Tyler

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #10 on: February 19, 2019, 09:07:04 AM »
The specific HSBC fund listed in the OP seems decent on the surface as it tracks a good index, but the details mention that it also uses financial derivatives which I'm not a huge fan of.  So IMO it might be worth comparing a few options.

As far as Global equity ETFs in the UK go, my personal short list looks like this:

Vanguard: VWRL
iShares: SWDA
SPDR: ACWI
Xtrackers: XWLD
Lyxor: WLDD

And if you want to find more, my go-to resource for index funds in the UK is justETF

BTW, if you're looking for portfolio ideas beyond a single fund you might try my personal project Portfolio Charts.  Each page has an option to change the home country to the UK which translates all portfolio data to a UK-based equivalent. 

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #11 on: February 19, 2019, 10:17:40 AM »
I donít think they do track the same index.

VWRL is the only ETF I have found that tracks the FTSE all world index which includes market weight to emerging markets, hence the higher cost.
If you actually open OP's link you'll see the name "HSBC FTSE All World Index C Acc".

mmcg33

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #12 on: February 25, 2019, 02:37:50 AM »
Thanks for all the replies here, lots to think about.

I think the book I read which got me here in the first place (The simple path to wealth by JL Collins) should be renamed as "The simple path to wealth, unless you live outside the U.S., in which case there's a lot more to think about and it's not as simple as you'd think"

daverobev

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Re: Is this a good Index Fund for a UK based Investor?
« Reply #13 on: February 25, 2019, 02:45:34 AM »
No, things are actually simpler in the UK.

1. No need to worry about healthcare

2. Reeeally generous allowances

3. No need to do a tax return

Sure there aren't as many funds or ETFs available, but there are enough.

VWRL.L is perfectly acceptable as a single ETF for all your stock needs. If you want more emerging, you can buy some VFEM. If you want more UK, buy some VUKE and VMID.

Now - I've moved back from Canada so I'm much more 'into' ETFs than funds, and there seem to be both pros and cons of ETFs (higher dealing costs but lower maintenance fees.

On the UK Personal Finance subreddit a lot of people talk about Smarter Investing by Tim Hale.

Make an overall plan. Don't worry about 0.1% MER here or there IF it will stop you taking action at all.

You know, between pension and ISA room, most people won't need to worry about other places to invest.