Hi All,
I'm a student living in the UK and I'm attempting to forecast what my financial future could look like. My problem is that I'm having trouble working out the expected rate of return for the FTSE. (As im assuming it make sense to invest mostly within my own index due to currency risk)
MMM does an amazing job explaining his assumed rate of return from the S&P 500 in this article and I was hoping someone may be able to share something similar for the FTSE?
No reason to restrict your investments to the UK, which is after all a small proportion of the overall world economy. Put it another way, if investors knew that the S&P was going to have a different rate of return to the FTSE for the same risk, they would by the S&P, sell the FTSE and things would quickly correct. I don't see any reason to change much in the MMM article you linked for UK investors.
Many of the biggest companies in the FTSE-100 are global operations which expose you to some currency risk anyway (the FTSE-100 has shot up as the pound has fallen.) The thing is that the FTSE-100 has a certain bias - lots of oil & mining, banks but very little tech. There are some advantages to owning UK listed shares (foreign currency dividends can be a bit of a pain when it comes to tax returns) but it's sensible to diversify worldwide.
Look at things like the Vanguard Lifestrategy funds, or the various Vanguard ETFs you can buy through UK brokers. I have VWRL (tracks world index) and smaller amounts of VUSA, VEUR (europe) or VERX (Europe ex UK), VJPN, VAPX (Asia Pacific), VFEM (emerging markets.)