1 00:00:00,000 --> 00:00:08,680 So I want to create essentially the cheapest and best ETF portfolio for the SID. 2 00:00:08,680 --> 00:00:12,360 But I also want to invest in the UK for Cam. 3 00:00:12,360 --> 00:00:14,600 So do those two objectives align? 4 00:00:14,600 --> 00:00:17,440 Well, let's have a chat about it. 5 00:00:17,440 --> 00:00:22,800 So what's been happening with the London Stock Exchange over recent years is as fascinating 6 00:00:22,800 --> 00:00:24,800 to me as it is disturbing. 7 00:00:24,800 --> 00:00:29,280 In last year, there's only about 80 new companies listed on the Stock Exchange. 8 00:00:29,280 --> 00:00:32,680 And that's down massively on historic averages. 9 00:00:32,680 --> 00:00:39,960 Also, big name companies like Tuoy and Flutter have actually upsticks and left London for 10 00:00:39,960 --> 00:00:42,560 the New York Stock Exchange. 11 00:00:42,560 --> 00:00:47,720 So how does this affect our decision on where we invest our pensions in the UK? 12 00:00:47,720 --> 00:00:54,160 Well, many of us have this image of men in colourful jackets shouting at each other over 13 00:00:54,160 --> 00:00:55,160 a train and floor. 14 00:00:55,160 --> 00:00:57,080 And that's long gone, though. 15 00:00:57,080 --> 00:01:02,480 Actually, the London Stock Exchange is just a technology company that matches people who 16 00:01:02,480 --> 00:01:06,960 want to buy stocks with people who want to sell stocks. 17 00:01:06,960 --> 00:01:09,280 Does do this at lightning speed, though. 18 00:01:09,280 --> 00:01:15,800 So when you want to buy a stock or an ETF in your SID pension at the Stock Exchange, look 19 00:01:15,800 --> 00:01:18,560 for somebody you want them to sell and they match you up. 20 00:01:18,560 --> 00:01:19,920 It's as simple as that. 21 00:01:19,920 --> 00:01:27,080 So if I was on the board of Tuoy, why would then I want to upsticks and move to the London 22 00:01:27,080 --> 00:01:30,400 Stock Exchange, the New York Stock Exchange? 23 00:01:30,400 --> 00:01:35,880 Well, one reason is that there are more people want to trade on the New York Stock Exchange, 24 00:01:35,880 --> 00:01:39,880 more buyers and actually more international buyers. 25 00:01:39,880 --> 00:01:47,120 So the more buyers there are internationally, the more people will buy Tuoy stocks, the more 26 00:01:47,120 --> 00:01:51,960 people buy stocks the higher the stock price goes, then the more valuable the company is. 27 00:01:51,960 --> 00:01:54,000 It's as simple as that, really. 28 00:01:54,000 --> 00:01:58,800 Now those that follow my channel will know that I have an uncomfortably large portion 29 00:01:58,800 --> 00:02:03,200 of my pension invested in the FUTI 250. 30 00:02:03,200 --> 00:02:08,680 And the FUTI 250 is kind of the medium-sized listed companies that are actually listed 31 00:02:08,680 --> 00:02:10,400 in London. 32 00:02:10,400 --> 00:02:16,760 If I said that being in New York means more buyers and therefore a higher price, why wouldn't 33 00:02:16,760 --> 00:02:20,640 I just put all my money into the New York Stock Exchange instead? 34 00:02:20,640 --> 00:02:26,240 Well, where that company chooses to list is not an indication of how good the company 35 00:02:26,240 --> 00:02:27,240 is. 36 00:02:27,240 --> 00:02:31,960 It's only an indication of the number of buyers that are in that marketplace. 37 00:02:31,960 --> 00:02:36,800 So the second factor, the most important factor that I think I need to consider is the relative 38 00:02:36,800 --> 00:02:40,360 price ratio of these companies. 39 00:02:40,360 --> 00:02:45,680 To do this, I actually look at the price to earnings ratio. 40 00:02:45,680 --> 00:02:50,240 So this is how much the stock costs divided by the profits that the company has made over 41 00:02:50,240 --> 00:02:51,240 the year. 42 00:02:51,240 --> 00:02:53,560 I mean, the lower, the number, the better. 43 00:02:53,560 --> 00:03:01,280 Now stocks in London have an average ratio of 16, while those in New York average out 44 00:03:01,280 --> 00:03:03,440 of just over 30. 45 00:03:03,440 --> 00:03:04,840 So you can see my dilemma here. 46 00:03:04,840 --> 00:03:10,520 New York stock listed companies have more buyers, but London companies are nearly half 47 00:03:10,520 --> 00:03:12,120 the price. 48 00:03:12,120 --> 00:03:15,040 So I'm looking for a mix, really. 49 00:03:15,040 --> 00:03:16,560 So let's go through my approach. 50 00:03:16,560 --> 00:03:22,520 I'm aiming for a global spread, investing in diverse companies worldwide. 51 00:03:22,520 --> 00:03:29,320 I mean, this global diversification is crucial to reduce reliance on any single company, 52 00:03:29,320 --> 00:03:31,560 industry or country. 53 00:03:31,560 --> 00:03:38,040 While some may argue that actually Eric just focus on the S&P 500, I believe actually that 54 00:03:38,040 --> 00:03:43,560 I should spread much more globally to still stay well diversified. 55 00:03:43,560 --> 00:03:50,200 And also across different industries, I mean, yesterday, UK and US inflation both rose above 56 00:03:50,200 --> 00:03:52,480 expectations to 3%. 57 00:03:52,480 --> 00:03:56,720 And this is generally bad for stock prices, but it's good for bank stocks. 58 00:03:56,720 --> 00:04:01,960 So if I'm invested in finance bank stocks as well as other types of stocks, I get some 59 00:04:01,960 --> 00:04:06,800 kind of protection against these things such as on unexpected high-ken inflation. 60 00:04:06,800 --> 00:04:13,360 Now, I'm using ETFs because they let you invest in many different companies with a single 61 00:04:13,360 --> 00:04:14,360 investment. 62 00:04:14,360 --> 00:04:19,400 And if chosen wisely, they can actually lower your costs as well. 63 00:04:19,400 --> 00:04:22,160 And I'm aiming obviously for a passive portfolio. 64 00:04:22,160 --> 00:04:24,880 I don't need anyone managing it on my behalf. 65 00:04:24,880 --> 00:04:28,440 So I'll be using ETFs, the foreign index covering the global market. 66 00:04:28,440 --> 00:04:31,880 But first, I need to factor in the size of the global market. 67 00:04:31,880 --> 00:04:38,120 And I'm going to use major industries like the Futschi Global All Cap Index. 68 00:04:38,120 --> 00:04:41,240 The world market is broken down into North America. 69 00:04:41,240 --> 00:04:43,880 Or a Pacific and emerging markets. 70 00:04:43,880 --> 00:04:52,320 Now, especially the US have the largest share, Canada has a much smaller proportion. 71 00:04:52,320 --> 00:05:00,840 So to create an ETF portfolio, I'll need to find ETFs that target these different regions, 72 00:05:00,840 --> 00:05:02,240 combine them. 73 00:05:02,240 --> 00:05:06,800 Alternatively, many ETFs already let you invest globally. 74 00:05:06,800 --> 00:05:10,040 So I could have bought a Futschi World one. 75 00:05:10,040 --> 00:05:12,920 But let's start with an ETF for North America. 76 00:05:12,920 --> 00:05:17,120 Now, surprisingly, actually, there's very few options if you're a UK investor. 77 00:05:17,120 --> 00:05:22,680 I mean, there's a Vanguard one and an Ice Shares one using either the Futschi or the 78 00:05:22,680 --> 00:05:23,680 MSCI index. 79 00:05:23,680 --> 00:05:28,280 Now, there are two different versions of the Vanguard ETF. 80 00:05:28,280 --> 00:05:31,920 One that pays dividends and one that doesn't, one that reinvests. 81 00:05:31,920 --> 00:05:36,200 It's important to know whether you're investing in what's called a distributor or an accumulator 82 00:05:36,200 --> 00:05:37,200 an ETF. 83 00:05:37,200 --> 00:05:42,400 For simplicity, I tend to go for accumulating the ETFs. 84 00:05:42,400 --> 00:05:45,920 They actually, rather than pay your dividend, they reinvest it back in so they don't have 85 00:05:45,920 --> 00:05:48,640 to keep buying shares again. 86 00:05:48,640 --> 00:05:54,360 I'm talking about my investment plans, but remember, I'm no financial advisor. 87 00:05:54,360 --> 00:05:56,440 So choose what's right for you. 88 00:05:56,440 --> 00:05:59,880 And I wouldn't exactly follow my lead. 89 00:05:59,880 --> 00:06:01,720 But North America, let's focus on Europe. 90 00:06:01,720 --> 00:06:08,360 I chose Vanguard's developed Euro ETF, which covers 500 companies and it's got a low fee 91 00:06:08,360 --> 00:06:09,360 of around 0.1%. 92 00:06:09,360 --> 00:06:15,040 I mean, some European funds exclude the UK, but that's okay for me as I have a really 93 00:06:15,040 --> 00:06:21,160 large hold in the 4250, which is made up of UK companies mainly. 94 00:06:21,160 --> 00:06:26,440 I say mainly because you don't have to be British to list in London, but most of them 95 00:06:26,440 --> 00:06:27,440 are. 96 00:06:27,440 --> 00:06:32,720 So next up, specific region and includes Japan, South Korea, Australia and Singapore. 97 00:06:32,720 --> 00:06:38,280 And I went with Vanguard, FT, the Validasia and that excludes Japan. 98 00:06:38,280 --> 00:06:43,160 I got a 0.15% fee, covers about 400 companies. 99 00:06:43,160 --> 00:06:47,760 I'm going to have to pair that with a nice shares, Japan ETF. 100 00:06:47,760 --> 00:06:51,480 And this covers about 200 Japanese countries as well. 101 00:06:51,480 --> 00:06:53,800 Next I want to cover emerging markets. 102 00:06:53,800 --> 00:06:59,120 This is a massive area, really big populations of people and lots of potential for growth 103 00:06:59,120 --> 00:07:00,120 really. 104 00:07:00,120 --> 00:07:04,680 And after having a look at different options, I went for the core, MCI, emerging market 105 00:07:04,680 --> 00:07:06,560 ETF. 106 00:07:06,560 --> 00:07:11,160 So those are the funds, how much of each of them funds do I buy? 107 00:07:11,160 --> 00:07:17,480 Well for me, the P ratio of 16 for the UK that I mentioned and 30 for the US means I'm 108 00:07:17,480 --> 00:07:19,720 going to limit my exposure to the US. 109 00:07:19,720 --> 00:07:23,640 I'm going to continue to be heavily weighted in the UK. 110 00:07:23,640 --> 00:07:28,680 So ignoring what I've got in bonds, put them to one side. 111 00:07:28,680 --> 00:07:37,440 I'm going to split my ETFs, 6% UK, 5% US, 30% of the regions and 5% emerging markets. 112 00:07:37,440 --> 00:07:42,240 So as you can see, I'm unusually weighted against the UK and over time, we'll probably 113 00:07:42,240 --> 00:07:47,680 reduce this London weight and move more into Europe and Asia and emerging markets. 114 00:07:47,680 --> 00:07:51,680 I can't really see myself though, increasing my US investments. 115 00:07:51,680 --> 00:07:56,960 I wouldn't let me sleep at night really, particularly with the current leadership over there and 116 00:07:56,960 --> 00:07:59,120 I do value my sleep. 117 00:07:59,120 --> 00:08:03,920 If all this gets too complicated for me and I run out of time, I may just sell a lot and 118 00:08:03,920 --> 00:08:05,400 put it all into a world ETF. 119 00:08:05,400 --> 00:08:11,320 At the end of the day, I do know or probably end up doing just as well with a world ETF, 120 00:08:11,320 --> 00:08:13,920 but it wouldn't be quite as interesting would it? 121 00:08:13,920 --> 00:08:19,440 So I'd love to hear what you think about my approach and if you're comfortable sharing, 122 00:08:19,440 --> 00:08:21,920 please tell me a bit about your approach. 123 00:08:21,920 --> 00:08:25,080 I mean, every day is a school day, it's what we're here for, isn't it? 124 00:08:25,080 --> 00:08:53,160 Thanks for listening and I'll see you on the next one.