The Lemon Fool

Hi,

I'm looking for thoughts on the relative attractiveness of these 3, both in a long term sense and just now.

Currently most of my passive investments are in the FTSE 100 index and I'm thinking this is a convenient point to shift some into the 250 and/or Stoxx 50. What do people here think?

SA

FTSE100 vs FTSE250 is a bet on the outcome of Brexit. FTSE100 is more globally diverse with less revenue and profit dependent upon how well the UK economy fairs. If you think UK medium sized companies will ultimately do well from Brexit then move money from FTSE100 to FTSE250. If you think things need to get worse before they get better then wait and watch the FTSE250 tank vs FTSE100 and try to time your entry - best of luck with timing the market however triggering Article 50 is clearly a big milestone.

Any move into Euro Stoxx50 is a bet on the longevity of the European Union and the Euro. Off the back of the recent Italian referendum and the impending French presidential elections in April/May, I'd personally wait to see the outcome of the German federal elections in October before attempting to try to call this one. A lot will depend upon the level of cyberwarfare conducted behind the scenes as to the degree to which votes can be swung. There is one particular ex-superpower which would benefit significantly from a disrupted European Union and we've seen their ability recently to project power beyond their borders using unconventional means. An investment in Gazprom may be safer than one in Euro Stoxx50 during 2017.

Sorry, my crystal ball is getting a bit cloudy now. Split your FTSE100 investment in 3 and put a third in FTSE100, FTSE250 and Euro Stoxx50 then go to sleep for 5 years. Workout what the right answer was at some point down the line. Better to be one third right than completely wrong.

Degsy

Degsy67 wrote:Any move into Euro Stoxx50 is a bet on the longevity of the European Union and the Euro.
Degsy

With respect Degsy67 I disagree. Looking down the list of members many are companies like industrials, luxury goods firms and diversified utilities whose revenue and profit base extends well beyond the Eurozone. Just as the FTSE100 has done very nicely out of the drop in the quid, you could see plenty of those companies doing well by a drop in the value of the Euro. Engie's Australian power stations or Unilever's Asian sales are likely to be unaffected by the future of the Eurozone.

https://en.wikipedia.org/wiki/Euro_Stoxx_50#Composition

Frankly, if the Eurozone and EU fall apart then I can't imagine too many stock markets doing well in the ensuing chaos as 28 countries try to re-establish areas of governance some have handed over to the EU and its predecessors for 50 years or more. Certainly Brexit isn't going to insulate Britain from it's nearest neighbours and biggest trading partner disintegrating politically.

Honest question - Why would anyone want to track the FTSE 100 index when it has gone nowhere since 1999? Apart from paying dividends what would tracking have achieved?

The only situation where you might have done well is if you were investing into your tracker on a regular basis. Pound cost averaging, essentially.

The situation is better with the Total Return version of the index, but I find that the interesting comparison is with HIX, the FTSE350 High Yield Index. Probably best plotted on a graph, but this year the HIX has increased by 18.84%, compared with 14.43% for UKX. Last year was less good, with HIX falling by 10.05%, compared with 4.93% fall in UKX.

I have never seen the attraction of trackers.

TJH

FredBloggs wrote:Honest question - Why would anyone want to track the FTSE 100 index when it has gone nowhere since 1999? Apart from paying dividends what would tracking have achieved?

Aha, so you knew in 1999 that (capital value wise) it would go nowhere for the next 17 years. Great. Can you tell us where it'll go over the next 17 years, please?

FredBloggs wrote:Honest question - Why would anyone want to track the FTSE 100 index when it has gone nowhere since 1999? Apart from paying dividends what would tracking have achieved?

Much of the (strong) outperformance of the FTSE 250 has come from re-rating. I would be inclined to overweight FTSE 100 companies going forwards precisely because of the relative performance of the two indices over the past 17 years. Also because of the continuing uncertainty around Brexit and the implications for UK firms.

Such a weighting could be nicely achieved with a FTSE all-share tracker.

BofE

FredBloggs wrote:

mc2fool wrote:

FredBloggs wrote:Honest question - Why would anyone want to track the FTSE 100 index when it has gone nowhere since 1999? Apart from paying dividends what would tracking have achieved?

Aha, so you knew in 1999 that (capital value wise) it would go nowhere for the next 17 years. Great. Can you tell us where it'll go over the next 17 years, please?

Where did I say that? Neither you, I, nor anyone else has the faintest idea what any index is going to do in 17 days, never mind 17 years.

Yes. Exactly. But you were implying that the performance of the FTSE 100 since 1999 has relevance to wanting to track it going forward (or not).

So, the answer to your original question is that past performance isn't a predictor. (Sorry that the irony in my previous reply didn't come through).

At the beginning of the past 17 years the "rear view mirror" would have been showing a rosy picture, but the market went nowhere. The rear view mirror may not be as misleading this time, but it is telling us nothing about the future.