Thank you for all the replies I really appreciate it.
Based on the replies I understand that the best option is that I invest in an index fund (which is what I expected and what I intended to do); and most recommend the Vanguard FTSE All-World UCITS ETF. This leads me to some more questions:
There seems to be many different Vanguard index funds available (e.g. index fund focused on US market; an index fund based on European market; an index fund based on World market); for example what is the difference between the “Global stock index fund”, the “Vanguard FTSE All-World UCITS ETF (VWRL)”, the “Vanguard World Total Stock ETF” (and I’m sure I could add any other few to the list)?
So how do I go about selecting the best fund to invest in? (I assume that you have recommended the Vanguard World market index fund because is spreads the risk – i.e. has stocks from many companies from each market worldwide, and so is not dependent on the performance of the market in any one country (@RWD I guess this is what you mean when you say “broad market index fund”)
When selecting an index fund what are the most important points to consider? (E.g. in the world index fund do you check which countries are covered in the index fund? which currencies are the stocks and dividends paid in?). What are the important factors which influence your decision when selecting which index fund to invest in?
Also, would it be a good idea to invest in more than one Vanguard index fund? Or is it better to focus all investment on one single index fund? If the former, then which mix of Vanguard index funds would you recommend?
There are a couple of different categories of index when talking about global indexes.
1. developed vs emerging
developed has 23 countries and are politically and ecomonicall stable
everging has 23-24 countries that are still emerging (China, Thailand, Philippines, etc)
deveoping is 90% of the market by capitalisation (by valuation of the market), and emerging is 10%
2. company size: small, mid, large size by capitalisation
large makes up 70% of the investable marekt, mid is 15% and small is 15%
large are companies that are more stable, have estblished themselves, and have slighlty lower return and volatility. smaller companies have more room to grow (or collapse) and have slighlty higher return and volatility.
The global funds pretty much all have developed large and mid caps, so they all cover at least 76.5% of the investable market and this is the more well estalished companies and you could comfortably be ok with that just.
Some funds tend to included
either emerging or small caps (but annoyingly, many leave out the other I don't know why).
developed+emerging large+mid will be 85% of the investable market
developed large+mid+small will be 90% of the investable market
Rarely, but occasionally you will get the whole lot
It's a good idea to strive for all market segments to maximise diversification, but it's really not going to make much of a difference to leave out one of small or emerging.
I saw vanguard has an all caps, which is everything and has a fee of 0.24%, but I did not see a ticker symbol so I am not sure if it is offered as an ETF or just a mutual fund.
They also have VWRL which is dev + em and is lge/mid but no small, with a fee of 0.20%, and this is not bad. If you want you could then also buy their small caps ETF and keep it in a proportion of 85:15
IShares has IWLD which is developed lg/mid, and you can buy that with their small, and also their emerging, and keep a proportion of 75:15:10 dev lg:dev small:em, or you could just leave out small or just leave out em, it's really up to you and won't make that much of a difference.
I know this seems vague, and for me I prefer the whole lot because then there is no decision left to make in a situation where there is no known right or wrong and decisions are guesses and I don't want to rely on guesses.
Also, while Vanguard is the best company in the US because it is actually set up so the customers "own" the company which is why their fees are silly cheap and the goals of the company are specifically to put the customers needs as the goal of the company, outside the US this is not the case, and outside the US, iShares is a perfectly good option, and in some cases come with cheaper fees.