SIPP question

[BenValue]

I have now sold about a quarter of the shares in my SIPP. Originally I wanted to invest in 4 high yield shares. However I have now had a change of mind and about this I am looking for total return rather than high yield shares.

On that basis I am thinking of investing everything in accordance with Warren Buffet’s advice to his executors when investing in the future for his widow :-

“My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”
Buffett recommended using Vanguard’s S&P 500 index fund.
While this strategy is straightforward and doesn't require constant monitoring or active trading, Buffett expressed a significant amount of confidence in it.
“I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions or individuals — who employ high-fee managers,” he said.

[kempiejon]

I quite like the buffet approach but the S&P500 index fund is making a decision that USA will be the best global market to be in. Well it might be. There is the option of a global index fund, around 50% of that will be in the USA anyhow, then 10% in government bonds, yeah maybe will you be rebalancing?
I like to have a cash float, emergency fund and feeder account I use gilts, some commercial bonds and premium bonds. It is an absolute amount rather than a set percentage, I know it's not as much as 10% but it might in a few months as I accumulate cash before I pay myself later this year.

[xxd09]

Buffet’s advice for this particular portfolio was for his wife after his death who not only going to be very wealthy but also had no interest in investing
This hands off -fire and forget - portfolio would preserve her wealth without too much input from her
Specific advice for a specific investor with special needs -not really applicable to most ordinary investors
He did however advise that most amateur investors should just use a total stockmarket index fund only for the equity side of their portfolios
xxd09

[BenValue]

Hi Lemon Quarter

Thank you for your message.
I am attracted by the expense ratio of this Vanguard investment which is 0.03%. Unfortunately I can’t seem to buy this American investment through my SIPP provider (Barclays Wealth). Is there a similar UK based investment with the 0.03%. I would be happy to consider the global index fund you mention rather than Buffet’s suggestion.
I am not sure about the 10% portion in cash/bonds as this would be a new world for me as I have always been totally invested in shares.

Hi Lemon Slice

Thank you for your message.
I have been investing for 40 years. It has been a lot of fun but I don’t think my results would have outperformed a total index tracker fund. I therefore think that I would fall into the category of an amateur investor who is better off with a tracker fund.

[xxd09]

As a general rule the US is the cheapest place to invest.UK is not bad but Europe is more expensive
Presumably this is due to more regulatory procedures etc etc
Another factor in the success of the US and its stockmarket!
xxd09

[EthicsGradient]

The things to consider about Buffett's advice is
(a) he was talking for someone living in the USA, so any "home bias" means having more than the 60% or so that it makes up of global stock markets in the USA; since USA companies are very often multinational in their sales (or their importing), an American may feel you get enough global exposure from that. Someone living in the UK or Spain might not.
(b) He still has a public face to maintain; he might have felt saying "stick it all in a global fund" would leave him charged by certain quarters in the USA with being unpatriotic.

https://monevator.com/low-cost-index-trackers/ has a good list they update often of the cheapest trackers.

There are ETFs on the London Stock Exchange (they're normally Ireland-domiciled, which shouldn't be any problem in Spain, I suppose) that have about 0.03% charges for the S&P 500 or a very similar index, such as SPDR S&P 500 UCITS ETF (SPX5 is denominated in pounds; SPY5 in dollars).

For a developed world fund, they list Amundi Prime Global ETF (PRWU) with total cost of ownership of 0.07% which is the fee paid to the manager of 0.04%, plus "transaction costs" of 0.03% - these are reported each year for a fund, and for some it can be under 0.01%. These are not necessarily predictable, and opinion differs on whether they should be taken into account.

An all-world index that include emerging markets will have a higher cost - 0.15% or more. A way to achieve that at a lower cost is to buy an emerging markets fund in the appropriate proportion (something like 10%) and a developed world market for the 90% - but if you do want proper balance, make sure that both funds agree on which countries are developed (I didn't, and have ended up with Korea in both my developed world fund and emerging markets fund, so I'm overweight on Korea).