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Does it matter which Index Tracker you buy?
Tom Bards
Posted: 12 February 2018 17:07:53(UTC)
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Hi all,


Thinking of buying a US index tracker and I'm just wondering if it actually matters which one you get? They are all relatively the same cost.

The only thing I can think to distinguish them is to look back at the last 5 years and find the down years and see which index tracker lost the least. From what I can see (using HL info) the Fidelity US tracker did better than the rest by a few percent the last time where all index trackers ended the year in negatives. I'm therefore thinking of going with that one.

Is there anything else to consider when deciding about Index Trackers?

Sara G
Posted: 12 February 2018 17:28:02(UTC)
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The difference between Trackers is largely due to fees and tracking error. It can be a mistake to go for the best performer if that outperformance has been caused by them not tracking the index closely enough, because they can end up underperforming the index by more than the costs of the fund. Legal & General have a good reputation and low tracking error, and the fee is reduced with HL.

In the case of US Trackers, there may also be differences according to which index they are tracking, so it may be worth comparing them over a 5-10 year period if this is the case.
4 users thanked Sara G for this post.
Tim D on 12/02/2018(UTC), Mr Helpful on 12/02/2018(UTC), c brown on 13/02/2018(UTC), Alan M on 18/02/2018(UTC)
Aminatidi
Posted: 12 February 2018 17:43:28(UTC)
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The only comment I'd make it do you know you just want a US only tracker?

Only ask as I've seen a few threads where people have read books and assumed they need a S&P type US tracker if they want to go the passive route vs. a global tracker.
John Miskelly
Posted: 12 February 2018 21:14:36(UTC)
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I've got the Vanguard US Equity Index, it's a total market tracker. I don't think the Vanguard S&P500 is available with my broker HL.
Mr Helpful
Posted: 13 February 2018 09:27:17(UTC)
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John Miskelly;57053 wrote:

I don't think the Vanguard S&P500 is available with my broker HL.


See 'VUSA'.
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Guest on 18/02/2018(UTC)
Law Man
Posted: 18 February 2018 11:13:54(UTC)
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Two extra points:

(1) if you are with HL, it charges 0.45% p.a. For holding an OEIC fund, but not for an ETF (once you hold above certain amounts of non- Funds: £44,444 in a SIPP, £10,000 in an ISA).

(2) I suggest you choose 'physical' rather than 'synthetic'. The latter carries the risk of default by the counterparts.
Stephen B.
Posted: 18 February 2018 15:31:00(UTC)
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Look at the total market cap of the tracker - generally bigger is probably better, although maybe not if it gets really big.
George C
Posted: 19 February 2018 12:07:35(UTC)
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To bring this topic back up, there seems a lot of talk on here of funds and individual shares and little on index trackers. I suspect this is because these are considered much more straightforward (and not as interesting!).

However, as a relative newbie, I'm putting together a SIPP and considering focusing almost purely on trackers.

I've read/seen a few approaches to this though, and there is a viewpoint that it's very hard to beat the market and most people better of just going with trackers full stop. Something along the lines of:

40% in global tracker (e.g. vanguard)
20% emerging
20% small cap
20% bonds

It begs the question, why bother with anything else at all (assuming you are not putting the time/research in like some people may do)? I can see some funds are well ahead of the market, but can we as investor choose these with consistency, and still be ahead after higher fees?

At the same time, there are hundreds of choices for trackers and some sensible decision making still needs to take place. The L&G tech tracker has done hugely well compared to their emerging market one for example. The Vanguard total stock market tracker crops up a lot in my research (although seemingly unavailable on HL).
Stephen B.
Posted: 19 February 2018 12:41:52(UTC)
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Part of the question is market coverage. Indices are generally weighted by market capitalisation, so if you just invest in a single index you will in practice only be investing in a fairly small number of companies, mostly in specific sectors like oil and banking which tend to be dominated by huge multinationals.

Also you may take a view that, say, Technology companies have better prospects than the market in general even if you don't feel able to pick individual companies within that.

A final point is that while trackers may be very cheap for the large mainstream indices they aren't necessarily any cheaper than managed funds for more specialist areas, and those are also the areas where active managers are most likely to add value.
1 user thanked Stephen B. for this post.
George C on 19/02/2018(UTC)
chubby bunny
Posted: 19 February 2018 12:41:55(UTC)
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George C;57523 wrote:
At the same time, there are hundreds of choices for trackers and some sensible decision making still needs to take place. The L&G tech tracker has done hugely well compared to their emerging market one for example. The Vanguard total stock market tracker crops up a lot in my research (although seemingly unavailable on HL).


I think the Vanguard Total Stock Market fund is only available in the US. Something like the Vanguard FTSE Global All Cap Index fund or Vanguard FTSE All-World ETF (VWRL) would be our equivalent, both being available on HL.
2 users thanked chubby bunny for this post.
Mickey on 19/02/2018(UTC), George C on 19/02/2018(UTC)
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