Which Index Fund?

Blisterman

Am a first time investor looking to transfer some of my savings into shares, for a 10-15 year investment. Since it's currently only about £2000 sterling, it appears the safest (well as safe as any stock market investment can be) option would be to put the bulk into an index fund, and as I gain further experience and knowledge, I can take greater risks in future purchases.

So, with that time frame in mind, what index would be the best to follow? I'm looking at all countries and currencies. Ideally I'd like it to be as diversified as possible in terms of markets and industries.

FTSE 100, FTSE 250, S&P 500, EEM, S&P Global 100, FTSE World Europe?

OfflerCrocGod

Difficult to say but over the long term I'd say the US would have the best growth. The think to make certain of is that you are well diversified. If you have a lot of your wealth tied up in one investment then it can be traumatic if it does badly and you may decide to sell and take a loss when if you just waited a few months it would recover.

Blisterman

Well, diversification is the reason why an index tracker is appealing to me. I'd only be investing about £2000, so I'm mindful of transaction fees.

colsku

You mentioned on an earlier thread that Bitcons are in a bubble.

I put it to you that almost all Western stock markets are in a bubble and the pin is getting closer every day. Stay out and grab a bargain in a few years.

Blisterman

Have decided that, with the uncertainty in the Eurozone, that a dollar based ETF is the best option in the medium term.

I know the dollar is also shaky at the minute, but there's always going to be doomsayers and things to worry about. Once the current crisis fades, there'll be something else.

Have changed my mind about investing my current savings though. Have decided a pound cost averaging strategy, where I invest small amounts at monthly intervals is safer, will have much lower transaction fees and keeps my current savings as an emergency fund. If the stock market does crash, maybe then I can try and pick up a bargain with it.

Now the question is which index tracker to go for. Both the S&P 500 and S&P 400 (which tracks medium cap stocks) are heavily invested in banking shares, an area I want to stay well away from. I know there's ETFs dedicated to particular sectors. Are there ETFs which invest in all sectors except for banking?

Blisterman

Forgot to mention, the NASDAQ seems to fit the bill somewhat, with its paucity of financial businesses. Is it diversified enough though, or too heavily weighted towards tech stocks?

hmmm

DCA is a good strategy, but unfortunately fees will eat up the savings you have. For the amount of money you have, something like a monthly investment into a Quinn fund would probably be cheaper than direct DCA share investment.

There are index funds out there that track the MSCI world (or similar) which would be extremely well diversified, for example VT or ACWI. The NASDAQ is weighted towards higher risk tech stocks. The NYSE is US dominated, FTSE London etc.

If it was my money I'd put it into a global index for now. You can then tweak the allocation to increase the risk as you gain more knowledge and confidence.

Blisterman

I'll be using III portfolio builder, which is only £1.50 a trade, so fairly inexpensive. ACWI was one I was looking at, but doesn't seem to be on III's list of ETFs. IWRD is, which is almost identical except distributing rather than accumulating.

I can easily set it up, so dividends are reinvested or put towards other stocks. Is there any major disadvantage to a distributing ETF as opposed to an accumulating one?

tolkarovers

50% in gld, 50% in appl

wait 3 years, double your money and buy S&P 500 tracker..

OfflerCrocGod

tolkarovers wrote: »

50% in gld, 50% in appl

wait 3 years, double your money and buy S&P 500 tracker..

Even if you did the above 3 years ago you wouldn't have doubled your money to the present and that's after those two have had a nice run. Be careful and don't make assumptions about returns.

Blisterman

Yep, I think I missed the boat with gold. Won't be investing in that.

And no offense tolkarovers, but any strategy that claims to double your money in three years is best avoided, cause if it sounds too good to be true, it probably is.