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MSCI World Index alternatives to VHVG/VEVE

Index tracking funds and ETFs
tgboswell
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MSCI World Index alternatives to VHVG/VEVE

#431783

Postby tgboswell » August 1st, 2021, 12:27 am

I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.

torata
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Re: MSCI World Index alternatives to VHVG/VEVE

#431793

Postby torata » August 1st, 2021, 8:25 am

tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.


A lazy answer here. In theory, any tracker that tracks that index will (try to) cover all the stocks in the index. However smaller funds/ETFs may not be able to, so may use limited replication or possible some kind of synthetic replication.
So your question should really be which has lowest tracking error.
However, I think a better question is: which has the lowest fee? - because that's a drag I have choice over, and maybe another is: and is big enough that it won't get shut down?).

As itsallaguess replied in a different thread, justETF is a useful resource. (Sorry, I tend not to use funds)

What's the reason you don't like the FTSE developed index?

torata

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Re: MSCI World Index alternatives to VHVG/VEVE

#431797

Postby AWOL » August 1st, 2021, 8:38 am

Just buy SWDA

1nvest
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Re: MSCI World Index alternatives to VHVG/VEVE

#431832

Postby 1nvest » August 1st, 2021, 11:54 am

Jack Bogle once said (paraphrasing) that average investors gave up 60% of the rewards through costs/fees/taxes. Take on 100% of the risk, for less than 40% of the rewards. The basic example he cited was a average 50 year investment lifetime, 8% market average, 6% investors average after fees/costs/taxes/hidden costs ...etc. 8% compounded for 50 years = 47 gain factor, 6% compounded for 50 years = 18 gain factor.

Whilst many funds seem to have low fees such as 0.2% for SWDA, and even lend shares (add in additional counter party risk factors), and seem to track or even better their benchmark index, you need to factor in that the benchmark is often quoted net ... such as US stocks being net of 30% US dividend withholding taxation. When based in Ireland, as per the UK the Irish/US tax treaty reduces that withholding tax to 15%, so the fund might relatively outperform the benchmark by 15% of the dividend value/yield. In practice however 2% dividends even with 15% withholding taxation = 0.3%. Add on 0.2% fund fees = 0.5%. Better than the 2% difference between 8% and 6% that Jack Bogle used as a example, but still a broad 80% of the rewards outcome for 100% of the risk.

Less of a issue when stocks do well, but in some decades stocks might falter, yielding nothing or worse, maybe -5% annualised. When overheads are 0.5% and you're also drawing a 4% SWR income/whatever and stocks lose -5%/year ... for a decade, then a stock portfolio could see it dragged down to just 27% of the inflation adjusted start date value at the end of the decade long period (less than 15% after drawing the 11th years income at the start of the year).

A broader index comprised of thousands of stocks all around the world may seem to reduce risk on one front, but can induce other risks in its place. With globalisation having seemingly past its peak I wouldn't be surprised if that even intensified, i.e. average global withholding taxes might increase from around 20% average to perhaps 30% average and/or other hidden costs/fees. As might domestic tax risks increase given largescale debt levels. Or some other form of 'tax' ...

http://warrenbuffettoninvestment.com/ho ... -investor/

The arithmetic makes it plain that inflation is a far more devastating tax than anything that has been enacted by our legislatures. The inflation tax has a fantastic ability to simply consume capital. It makes no difference to a widow with her savings in a 5% passbook account whether she pays 100% income tax on her interest income during a period of zero inflation, or pays no income taxes during years of 5% inflation. Either way, she is “taxed” in a manner that leaves her no real income whatsoever. Any money she spends comes right out of capital. She would find outrageous a 120% income tax, but doesn’t seem to notice that 6% inflation is the economic equivalent.


Some single stocks have economies larger than entire countries and when they also have a global presence they might internally manage the taxation/currency factors in a appropriate manner. By the time you hold ten stocks concentration risk is diluted down to 10% levels; At 25 stocks concentration risk is down to comparable levels as SWDA that holds over 4% exposure to a single stock. Even at 10% however the risk is relatively acceptable, after all entire broadly diversified portfolios can decline 10% or more within a single week.

Old school used to be to buy 10 or so stocks, buy and hold, never sell and where many didn't even bother with any rebalancing. The financial sector, the worlds largest/richest sector however have swayed many into believing they need their products and in return for selling those products even with the 80% or so of the rewards that investors might be attributed, that still leaves that sector with a share of the risk-free 20% remainder - that facilitates owning expensive properties and paying high wages.

hiriskpaul
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Re: MSCI World Index alternatives to VHVG/VEVE

#431886

Postby hiriskpaul » August 1st, 2021, 4:44 pm

1nvest wrote:Old school used to be to buy 10 or so stocks, buy and hold, never sell and where many didn't even bother with any rebalancing. The financial sector, the worlds largest/richest sector however have swayed many into believing they need their products and in return for selling those products even with the 80% or so of the rewards that investors might be attributed, that still leaves that sector with a share of the risk-free 20% remainder - that facilitates owning expensive properties and paying high wages.

Old school was wrong for 2 main reasons.

Reason 1, the return distribution of stocks is heavily skewed, with a small minority of stocks accounting for the majority of stock market returns (median return much less than mean). With that distribution, the fewer stocks in the portfolio, the more likely it is that the portfolio will underperform the market.

Reason 2, small portfolios (on average) have higher unsystematic risk than large portfolios. There is no expected return from unsystematic risk (for the obvious reason that it can be easily diversified away), so instead of taking on unsystematic risk, a portfolio with equivalent risk could be built using the market portfolio and modest gearing. By swapping unsystematic risk with systematic risk in that way would lead to higher expected returns.

As for taxes, I have no reason not to believe the Laffer curve does not operate with investment returns. Tax investment returns more and investors will demand a higher return in compensation. On the flip side, tax less and asset prices will rise to reflect the increased net returns.

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Re: MSCI World Index alternatives to VHVG/VEVE

#431889

Postby BobbyD » August 1st, 2021, 5:04 pm

tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.


Fidelity Index World Fund P Accumulation tracks follows targets the MSCI index. Ongoing charge 0.12%

https://www.morningstar.co.uk/uk/funds/ ... F00000SRPN

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Re: MSCI World Index alternatives to VHVG/VEVE

#431935

Postby 1nvest » August 2nd, 2021, 1:30 am

hiriskpaul wrote:
1nvest wrote:Old school used to be to buy 10 or so stocks, buy and hold, never sell and where many didn't even bother with any rebalancing. The financial sector, the worlds largest/richest sector however have swayed many into believing they need their products and in return for selling those products even with the 80% or so of the rewards that investors might be attributed, that still leaves that sector with a share of the risk-free 20% remainder - that facilitates owning expensive properties and paying high wages.

Old school was wrong for 2 main reasons.

Reason 1, the return distribution of stocks is heavily skewed, with a small minority of stocks accounting for the majority of stock market returns (median return much less than mean).

But its fractal. Hold 1000 stocks and one might gain 1000% (10 bagger) that you'd otherwise likely would have missed, but for simplicity assuming equally capital weighted you have a smaller amount invested in each stock. £1000 total invested in 1000 shares, one stock with £1 invested in it returns £10. 100 stocks each with £10 invested in each might see one double. All else being equal and unchanged both cases come out £10 up and where 99% of the 100 stocks (or 99.9% of the 1000 stocks) lagged the broad average.

Reason 2, small portfolios (on average) have higher unsystematic risk than large portfolios.

Unsystematic risk is considerably diluted even down at 30 stocks. The larger the number of stocks so more are inclined to hit problems. Again where it all tends to average out.

Even total market funds typically don't hold everything, and can see differences between one total market fund and another.

Jack Bogles 'ultimate' portfolio was the concept of buying the 50 largest S&P500 stocks and never trading thereafter. William Bernstein likens stocks to soap, the more you handle it the smaller it becomes. Seemingly small cost as presented by those that make their money selling financial products/services combined with more hidden costs can compound to massive amounts due to over-handling/changes. There are funds that have bought and held as-is 30 stocks for approaching a century and where the total returns compare relatively closely to the major stock index over the same period.

As for taxes..

Historically the bowler hat brigade was a era when market makers might have levied 10% or wider spreads and stock brokers charged north of £100 fees, and where investors didn't have the tax efficient choice we have nowadays. Could very well be such costs were reflected into rewards and historic measures of 'average' index gains/losses are nowhere near the mark of what average private investors might have achieved after costs and taxes. 9% average gains reduced to 5% and relative to 4% inflation sees suggested 5% historic 'average' real gains decline to 1% actual real gains. History is littered with failures, those who would have been better off had they just used cash deposits. Often where emotional behaviour also added to the costs, bought high/capitulated low, to never to invest in stocks again.

When on the gold standard broadly there was 0% inflation. Money and gold were the same and gold was/is finite. Volatility was evident but tended to cluster, periods of spikes in inflation and deflation in around equal measure. Bond investing dominated, as in effect buying Treasury bonds was paramount to the state paying you for it to securely store your gold. Bonds + interest bought back more gold, the interest paid was in effect a real rate of return (and was generous).

Stocks arose out of sharing/spreading risk. Sending a ship off eastward and if it came back loaded the rewards were great, but often was lost or had its goods stolen away. Nowadays there's enough private money around to buy up all of the good-stuff (stocks), for those that don't meet/exceed the mark - well they're openly offered to the public. Primarily much of public stock gains arise out of new-stuff, where the best of those does provide good gains but when they cross the mark are often taken private. The public based holdings rewards even with the new stuff included are such that they're broadly little different to just buying/holding a bunch of public listed stocks.

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Re: MSCI World Index alternatives to VHVG/VEVE

#431966

Postby GeoffF100 » August 2nd, 2021, 9:24 am

tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.

VHVG is the US dollar denominated version of VEVE. It tracks the FTSE Developed World index, which contains many more stocks than the MSCI World Index. It goes down to a much smaller market capitalisation. If you want to track the emerging markets too, you can add a market weight of VEVE or its US dollar denominated equivalent. At extra cost, you can just use VWRL or its US dollar denominated equivalent.

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Re: MSCI World Index alternatives to VHVG/VEVE

#431975

Postby richfool » August 2nd, 2021, 10:18 am

GeoffF100 wrote:
tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.

VHVG is the US dollar denominated version of VEVE. It tracks the FTSE Developed World index, which contains many more stocks than the MSCI World Index. It goes down to a much smaller market capitalisation. If you want to track the emerging markets too, you can add a market weight of VEVE or its US dollar denominated equivalent. At extra cost, you can just use VWRL or its US dollar denominated equivalent.

Sorry, could you clarify (the bolded part) please, - did you mean VEVE includes the EM? I had assumed VEVE embraced developed markets, but excluded EM's.

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Re: MSCI World Index alternatives to VHVG/VEVE

#431978

Postby GeoffF100 » August 2nd, 2021, 10:27 am

richfool wrote:
GeoffF100 wrote:
tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.

VHVG is the US dollar denominated version of VEVE. It tracks the FTSE Developed World index, which contains many more stocks than the MSCI World Index. It goes down to a much smaller market capitalisation. If you want to track the emerging markets too, you can add a market weight of VEVE or its US dollar denominated equivalent. At extra cost, you can just use VWRL or its US dollar denominated equivalent.

Sorry, could you clarify (the bolded part) please, - did you mean VEVE includes the EM? I had assumed VEVE embraced developed markets, but excluded EM's.

Sorry, that was typo. VFEM tracks the EM's, not VEVE. VWRL = 0.9* VEVE + 0.1*VFEM roughly. You can find the exact weight for VFEM from the percentages in the US for VWRL and VEVE. You can check that the match is close for all the markets with a spreadsheet.

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Re: MSCI World Index alternatives to VHVG/VEVE

#431998

Postby murraypaul » August 2nd, 2021, 11:25 am

tgboswell wrote:I am looking for the most diverse and comprehensive Developed World tracker funds/ETFs that track the MSCI World Index (a broad global equity index that represents large and mid-cap equity performance across all 23 developed markets countries).

I have considered VHVG (Vanguard FTSE Developed World UCITS ETF), however, I'm not keen on this ETF because it tracks the FTSE Developed Index.


The iShares versions are:
IShares MSCI World Ucits ETF USD (Dist) - https://www.investments.halifax.co.uk/e ... 62Q58/RX67
IShares III iShrs Core MSCI World ETF USD (Acc) - https://www.investments.halifax.co.uk/e ... 5Y983/GPI6

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Re: MSCI World Index alternatives to VHVG/VEVE

#432043

Postby hiriskpaul » August 2nd, 2021, 3:04 pm

1nvest wrote:
hiriskpaul wrote:
1nvest wrote:Old school used to be to buy 10 or so stocks, buy and hold, never sell and where many didn't even bother with any rebalancing. The financial sector, the worlds largest/richest sector however have swayed many into believing they need their products and in return for selling those products even with the 80% or so of the rewards that investors might be attributed, that still leaves that sector with a share of the risk-free 20% remainder - that facilitates owning expensive properties and paying high wages.

Old school was wrong for 2 main reasons.

Reason 1, the return distribution of stocks is heavily skewed, with a small minority of stocks accounting for the majority of stock market returns (median return much less than mean).

But its fractal. Hold 1000 stocks and one might gain 1000% (10 bagger) that you'd otherwise likely would have missed, but for simplicity assuming equally capital weighted you have a smaller amount invested in each stock. £1000 total invested in 1000 shares, one stock with £1 invested in it returns £10. 100 stocks each with £10 invested in each might see one double. All else being equal and unchanged both cases come out £10 up and where 99% of the 100 stocks (or 99.9% of the 1000 stocks) lagged the broad average.

Reason 2, small portfolios (on average) have higher unsystematic risk than large portfolios.

Unsystematic risk is considerably diluted even down at 30 stocks. The larger the number of stocks so more are inclined to hit problems. Again where it all tends to average out.

Even total market funds typically don't hold everything, and can see differences between one total market fund and another.

Jack Bogles 'ultimate' portfolio was the concept of buying the 50 largest S&P500 stocks and never trading thereafter. William Bernstein likens stocks to soap, the more you handle it the smaller it becomes. Seemingly small cost as presented by those that make their money selling financial products/services combined with more hidden costs can compound to massive amounts due to over-handling/changes. There are funds that have bought and held as-is 30 stocks for approaching a century and where the total returns compare relatively closely to the major stock index over the same period.

As for taxes..

Historically the bowler hat brigade was a era when market makers might have levied 10% or wider spreads and stock brokers charged north of £100 fees, and where investors didn't have the tax efficient choice we have nowadays. Could very well be such costs were reflected into rewards and historic measures of 'average' index gains/losses are nowhere near the mark of what average private investors might have achieved after costs and taxes. 9% average gains reduced to 5% and relative to 4% inflation sees suggested 5% historic 'average' real gains decline to 1% actual real gains. History is littered with failures, those who would have been better off had they just used cash deposits. Often where emotional behaviour also added to the costs, bought high/capitulated low, to never to invest in stocks again.

When on the gold standard broadly there was 0% inflation. Money and gold were the same and gold was/is finite. Volatility was evident but tended to cluster, periods of spikes in inflation and deflation in around equal measure. Bond investing dominated, as in effect buying Treasury bonds was paramount to the state paying you for it to securely store your gold. Bonds + interest bought back more gold, the interest paid was in effect a real rate of return (and was generous).

Stocks arose out of sharing/spreading risk. Sending a ship off eastward and if it came back loaded the rewards were great, but often was lost or had its goods stolen away. Nowadays there's enough private money around to buy up all of the good-stuff (stocks), for those that don't meet/exceed the mark - well they're openly offered to the public. Primarily much of public stock gains arise out of new-stuff, where the best of those does provide good gains but when they cross the mark are often taken private. The public based holdings rewards even with the new stuff included are such that they're broadly little different to just buying/holding a bunch of public listed stocks.

I suggest you read this article by Bernstein "The 15-Stock Diversification Myth" http://www.efficientfrontier.com/ef/900/15st.htm

Also, think about a market with 10 stocks, all with equal market value initially. 9 double in price, 1 is a 10 bagger. You decide to go for a portfolio of 3 different stocks. There are C(10,3) = 120 portfolios of 3 distinct stocks that can be formed, but only C(9,2) = 36 of them will contain the 10 bagger. These 36 stocks will outperform the market, 84 (70% of portfolios) will underperform. That's the problem you get with taking a small sample of stocks from a population when only a small proportion of stocks outperform.


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