Tyler9000 wrote: ↑Mon Dec 11, 2017 4:54 pm
EarlTheGreySnapper wrote: ↑Mon Dec 11, 2017 8:41 am
Living in the UK (as a British citizen with no plans to move abroad any time soon), what are the downsides (if any) to investing in a US portfolio like this?
If you're building a Golden Butterfly for the UK or any other smaller market, splitting the stocks between half local and half All-World might be a reasonable compromise. I could also see the argument for diversifying into a good unhedged international bond fund of the appropriate average maturity if one is available, although in the UK I'd probably just stick with gilts. But I would generally steer clear of investing all of your money in a foreign market, as completely detaching the engine of your returns from the inflation and currency of your home country may have side effects that are difficult to anticipate.
UK FTSE 250 midcaps (iShares MIDD) is small cap in US scale, and somewhat value'ish. It's also more reflective of the UK, around 50% of earnings sourced from foreign, whilst the FTSE 100 (largest 100 stocks by market cap) have around 70% of earnings sourced from foreign.
Combined with US S&P500 (CSP1) as the non-PP stock holding and since 2016 (Brexit referendum) ...
Code: Select all
+─────────────────+─────────+─────────+─────────+─────────+─────────+─────────+
| Calendar years | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
+─────────────────+─────────+─────────+─────────+─────────+─────────+─────────+
| IGLT TR | | 9.97 | 1.7 | 0.4 | 6.8 | 8.2 |
| IGLS TR | | 2.44 | -0.39 | 0.18 | 1.01 | 1.48 |
| MIDD TR | | 6.16 | 17.34 | -13.62 | 28.36 | -4.99 |
| SGLN $ | | 8.85 | 11.58 | -1.39 | 18.53 | 23.95 |
| CSP1 $ | | 11.54 | 21.4 | -4.72 | 31.02 | 18.02 |
| Year end £$ | 1.4746 | 1.2337 | 1.3529 | 1.2763 | 1.3269 | 1.3662 |
| SGLN £ | | 30.10 | 1.75 | 4.53 | 14.01 | 20.38 |
| CSP1 £ | | 33.32 | 10.70 | 1.00 | 26.02 | 14.63 |
| | | | | | | |
| GB (UK £) | | 16.40 | 6.22 | -1.50 | 15.24 | 7.94 |
+─────────────────+─────────+─────────+─────────+─────────+─────────+─────────+
Sourced from iShares
https://www.ishares.com/uk/individual/e ... ckerSearch except Pound/Dollar rates that were sourced from FRED
Many have been saying that long dated Treasury (Gilts) have only one way to go for years now, despite which IGLT has done OK. Short dated Treasury (IGLS) - low rewards has been the norm for years now. Gold (SGLN) has had a few good years in the last 5 years. 51.5% 5 year nominal gain, 8.7% annualised nominal gain. All values are total return (TR).
Physical gold/Gold fund wise, using data from 1939 with a 4% SWR applied to 30 year periods calendar year granularity and the worst run had 48% of the inflation adjusted start date value still remaining at the end of the 30 years (median run had 97%). That 48% was also the lowest low (yearly granularity). So if gold is 1/5th then 10% physical gold would likely have remained untouched, leaving 10% allocated to more liquid/tighter spread gold fund (ETF).
For a 3% SWR the lowest 30 year ended with 98% of the inflation adjusted start date amount available at the end of 30 years, lowest dip was down to 73%, suggestive of 15% physical gold unlikely being touched (so 5% gold fund/ETF). Median case ended with 164% of the inflation adjusted start date portfolio value at the end of the 30 years.
Personally given relatively wide physical gold spreads, it can feel more comfortable to defer purchasing physical and initially just hold gold funds until such times that good portfolio gains occur in a year and then use some of that 'other peoples money' to fund swapping some of gold funds over to physical gold. 5% physical gold premium above spot, 10% of total portfolio to be moved into physical gold, 0.5% cost relative to the total portfolio value ... so count 2016 as a 15.9% gain year instead of 16.4%. Whilst that's just mental trickery it's a trick that made things feel for comfortable for me personally.
Presently with ii brokerage, but contemplating opening several Freetrade accounts (multiple family members) and all of the above iShares funds are listed as being available in their free/general accounts
https://freetrade.io/etfs. Since ii took over from TD Waterhouse multiple monthly account fees whilst relatively small in the scale of things just doesn't feel right when it was free before.