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FTSE100/ISF are you sure you want this?
mark spurrier
Posted: 03 June 2018 10:03:33(UTC)

Joined: 17/01/2018(UTC)
Posts: 41

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This is really a post about index trackers and understanding what you are getting. It started off with a work colleague who had a pension pot invested by an IFA and asked me what I thought as my portfolio looks nothing like his. He had a 25% weighting to the FTSE100 cap weighted so I have used ISF data as a proxy as I have the numbers at hand.


Cash and/or Derivatives 2.01
Consumer Discretionary 8.31
Consumer Staples 15.5
Energy 16.41
Financials 20.64
Health Care 9.73
Industrials 8.22
Information Technology 1.12
Materials 10.72
Real Estate 0.98
Telecommunications 3.38
Utilities 2.98

Top 10 = 43% - 9 US Dollar earners 1, Euro based
Overall 27% in Oil and Miners
Half the financials are US $ based HSBC and PRU

Top 20 is 64% of the fund and contains ONE, yes ONE, UK firm ie LLOY.
My rough estimate is that UK centric - sterling cost/revenue is about 18% of the FTSE100

My views are that

FTSE100 is really a high risk play on a few global companies, commodity prices and the US Dollar.

You might as well invest in the S&P 500 + UK Mid Cap/Smalls (if you want UK exposure).

Or, just select the best 20 companies you like regardless of listing country as they are all positively correlated anyway and choose the "best" by sector

Or.invest in a collective(s) that does that for you

Don't buy ISF or similar UNLESS you have a clear view of the difference between the UK stock market and the UK economy and you understand the risks you are running
1 user thanked mark spurrier for this post.
Chris Howland on 03/06/2018(UTC)
Tom Bards
Posted: 03 June 2018 10:22:50(UTC)

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I thought it was common knowledge that a FTSE 100 tracker was not a good investment due to the high proportion of miners and other cyclicals.
mark spurrier
Posted: 03 June 2018 10:45:59(UTC)

Joined: 17/01/2018(UTC)
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Investors Chronic has ISF as top pick as an ETF for UK exposure in last weeks instalment.

Yes a decent proxy for the UK market but definitely not a good proxy for geographical risk mitigation or currency or sector......... so maybe the knowledge is not that common :)
Alan Selwood
Posted: 03 June 2018 21:53:19(UTC)

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'Or, just select the best 20 companies you like regardless of listing country as they are all positively correlated anyway and choose the "best" by sector' :

This brings you quickly into Fundsmith Equity Fund and Lindsell Train Global Equity Fund territory, if your idea of best companies is limited to megacaps.

King Lodos
Posted: 04 June 2018 00:48:28(UTC)

Joined: 05/01/2016(UTC)
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I've got two takes on this.

– One is that the FTSE 100 is not passive .. It's passive in that it runs itself, but the decision only to hold FTSE 100 stocks is active, and quite niche .. So I think the only real passive index is the FTSE or MSCI World – or US index (if you want to make the case you can't trust 'foreign' accounting practices).

– On the other hand, if markets are efficient, then the cyclical stocks are priced to give higher returns, given higher uncertainty .. So if you track the FTSE 100 long enough, everything should mean revert eventually, and you'll get about the same return as tracking anything else. (which does tend to happen .. although there'll be a wider range of potential outcomes .. the FTSE 100 could have a fantastic 10 years *if* the swing back to cyclicals and value happens .. but I'm not a big fan)
Keith Cobby
Posted: 04 June 2018 06:27:29(UTC)

Joined: 07/03/2012(UTC)
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Not a fan of the FTSE100 or trackers. If I was it would be a global fund.
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