February 20, 2025 • 8 mins
I walk through my attempts to build the best possible SIPP Pension Portfolio.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
So I want to create essentially the cheapest and best ETF portfolio for the SID.
(00:08):
But I also want to invest in the UK for Cam.
So do those two objectives align?
Well, let's have a chat about it.
So what's been happening with the London Stock Exchange over recent years is as fascinating
to me as it is disturbing.
In last year, there's only about 80 new companies listed on the Stock Exchange.
(00:29):
And that's down massively on historic averages.
Also, big name companies like Tuoy and Flutter have actually upsticks and left London for
the New York Stock Exchange.
So how does this affect our decision on where we invest our pensions in the UK?
Well, many of us have this image of men in colourful jackets shouting at each other over
(00:54):
a train and floor.
And that's long gone, though.
Actually, the London Stock Exchange is just a technology company that matches people who
want to buy stocks with people who want to sell stocks.
Does do this at lightning speed, though.
So when you want to buy a stock or an ETF in your SID pension at the Stock Exchange, look
(01:15):
for somebody you want them to sell and they match you up.
It's as simple as that.
So if I was on the board of Tuoy, why would then I want to upsticks and move to the London
Stock Exchange, the New York Stock Exchange?
Well, one reason is that there are more people want to trade on the New York Stock Exchange,
(01:35):
more buyers and actually more international buyers.
So the more buyers there are internationally, the more people will buy Tuoy stocks, the more
people buy stocks the higher the stock price goes, then the more valuable the company is.
It's as simple as that, really.
Now those that follow my channel will know that I have an uncomfortably large portion
(01:58):
of my pension invested in the FUTI 250.
And the FUTI 250 is kind of the medium-sized listed companies that are actually listed
in London.
If I said that being in New York means more buyers and therefore a higher price, why wouldn't
I just put all my money into the New York Stock Exchange instead?
(02:20):
Well, where that company chooses to list is not an indication of how good the company
is.
It's only an indication of the number of buyers that are in that marketplace.
So the second factor, the most important factor that I think I need to consider is the relative
price ratio of these companies.
To do this, I actually look at the price to earnings ratio.
(02:45):
So this is how much the stock costs divided by the profits that the company has made over
the year.
I mean, the lower, the number, the better.
Now stocks in London have an average ratio of 16, while those in New York average out
of just over 30.
So you can see my dilemma here.
New York stock listed companies have more buyers, but London companies are nearly half
(03:10):
the price.
So I'm looking for a mix, really.
So let's go through my approach.
I'm aiming for a global spread, investing in diverse companies worldwide.
I mean, this global diversification is crucial to reduce reliance on any single company,
industry or country.
(03:31):
While some may argue that actually Eric just focus on the S&P 500, I believe actually that
I should spread much more globally to still stay well diversified.
And also across different industries, I mean, yesterday, UK and US inflation both rose above
expectations to 3%.
(03:52):
And this is generally bad for stock prices, but it's good for bank stocks.
So if I'm invested in finance bank stocks as well as other types of stocks, I get some
kind of protection against these things such as on unexpected high-ken inflation.
Now, I'm using ETFs because they let you invest in many different companies with a single
(04:13):
investment.
And if chosen wisely, they can actually lower your costs as well.
And I'm aiming obviously for a passive portfolio.
I don't need anyone managing it on my behalf.
So I'll be using ETFs, the foreign index covering the global market.
But first, I need to factor in the size of the global market.
And I'm going to use major industries like the Futschi Global All Cap Index.
(04:38):
The world market is broken down into North America.
Or a Pacific and emerging markets.
Now, especially the US have the largest share, Canada has a much smaller proportion.
So to create an ETF portfolio, I'll need to find ETFs that target these different regions,
(05:00):
combine them.
Alternatively, many ETFs already let you invest globally.
So I could have bought a Futschi World one.
But let's start with an ETF for North America.
Now, surprisingly, actually, there's very few options if you're a UK investor.
I mean, there's a Vanguard one and an Ice Shares one using either the Futschi or the
(05:22):
MSCI index.
Now, there are two different versions of the Vanguard ETF.
One that pays dividends and one that doesn't, one that reinvests.
It's important to know whether you're investing in what's called a distributor or an accumulator
an ETF.
For simplicity, I tend to go for accumulating the ETFs.
They actually, rather than pay your dividend, they reinvest it back in so they don't have
(05:45):
to keep buying shares again.
I'm talking about my investment plans, but remember, I'm no financial advisor.
So choose what's right for you.
And I wouldn't exactly follow my lead.
But North America, let's focus on Europe.
I chose Vanguard's developed Euro ETF, which covers 500 companies and it's got a low fee
(06:08):
of around 0.1%.
I mean, some European funds exclude the UK, but that's okay for me as I have a really
large hold in the 4250, which is made up of UK companies mainly.
I say mainly because you don't have to be British to list in London, but most of them
are.
So next up, specific region and includes Japan, South Korea, Australia and Singapore.
(06:32):
And I went with Vanguard, FT, the Validasia and that excludes Japan.
I got a 0.15% fee, covers about 400 companies.
I'm going to have to pair that with a nice shares, Japan ETF.
And this covers about 200 Japanese countries as well.
Next I want to cover emerging markets.
(06:53):
This is a massive area, really big populations of people and lots of potential for growth
really.
And after having a look at different options, I went for the core, MCI, emerging market
ETF.
So those are the funds, how much of each of them funds do I buy?
Well for me, the P ratio of 16 for the UK that I mentioned and 30 for the US means I'm
(07:17):
going to limit my exposure to the US.
I'm going to continue to be heavily weighted in the UK.
So ignoring what I've got in bonds, put them to one side.
I'm going to split my ETFs, 6% UK, 5% US, 30% of the regions and 5% emerging markets.
So as you can see, I'm unusually weighted against the UK and over time, we'll probably
(07:42):
reduce this London weight and move more into Europe and Asia and emerging markets.
I can't really see myself though, increasing my US investments.
I wouldn't let me sleep at night really, particularly with the current leadership over there and
I do value my sleep.
If all this gets too complicated for me and I run out of time, I may just sell a lot and
(08:03):
put it all into a world ETF.
At the end of the day, I do know or probably end up doing just as well with a world ETF,
but it wouldn't be quite as interesting would it?
So I'd love to hear what you think about my approach and if you're comfortable sharing,
please tell me a bit about your approach.
I mean, every day is a school day, it's what we're here for, isn't it?
(08:25):
Thanks for listening and I'll see you on the next one.
So I want to create essentially the cheapest and best ETF portfolio for the SID.
(00:08):
But I also want to invest in the UK for Cam.
So do those two objectives align?
Well, let's have a chat about it.
So what's been happening with the London Stock Exchange over recent years is as fascinating
to me as it is disturbing.
In last year, there's only about 80 new companies listed on the Stock Exchange.
(00:29):
And that's down massively on historic averages.
Also, big name companies like Tuoy and Flutter have actually upsticks and left London for
the New York Stock Exchange.
So how does this affect our decision on where we invest our pensions in the UK?
Well, many of us have this image of men in colourful jackets shouting at each other over
(00:54):
a train and floor.
And that's long gone, though.
Actually, the London Stock Exchange is just a technology company that matches people who
want to buy stocks with people who want to sell stocks.
Does do this at lightning speed, though.
So when you want to buy a stock or an ETF in your SID pension at the Stock Exchange, look
(01:15):
for somebody you want them to sell and they match you up.
It's as simple as that.
So if I was on the board of Tuoy, why would then I want to upsticks and move to the London
Stock Exchange, the New York Stock Exchange?
Well, one reason is that there are more people want to trade on the New York Stock Exchange,
(01:35):
more buyers and actually more international buyers.
So the more buyers there are internationally, the more people will buy Tuoy stocks, the more
people buy stocks the higher the stock price goes, then the more valuable the company is.
It's as simple as that, really.
Now those that follow my channel will know that I have an uncomfortably large portion
(01:58):
of my pension invested in the FUTI 250.
And the FUTI 250 is kind of the medium-sized listed companies that are actually listed
in London.
If I said that being in New York means more buyers and therefore a higher price, why wouldn't
I just put all my money into the New York Stock Exchange instead?
(02:20):
Well, where that company chooses to list is not an indication of how good the company
is.
It's only an indication of the number of buyers that are in that marketplace.
So the second factor, the most important factor that I think I need to consider is the relative
price ratio of these companies.
To do this, I actually look at the price to earnings ratio.
(02:45):
So this is how much the stock costs divided by the profits that the company has made over
the year.
I mean, the lower, the number, the better.
Now stocks in London have an average ratio of 16, while those in New York average out
of just over 30.
So you can see my dilemma here.
New York stock listed companies have more buyers, but London companies are nearly half
(03:10):
the price.
So I'm looking for a mix, really.
So let's go through my approach.
I'm aiming for a global spread, investing in diverse companies worldwide.
I mean, this global diversification is crucial to reduce reliance on any single company,
industry or country.
(03:31):
While some may argue that actually Eric just focus on the S&P 500, I believe actually that
I should spread much more globally to still stay well diversified.
And also across different industries, I mean, yesterday, UK and US inflation both rose above
expectations to 3%.
(03:52):
And this is generally bad for stock prices, but it's good for bank stocks.
So if I'm invested in finance bank stocks as well as other types of stocks, I get some
kind of protection against these things such as on unexpected high-ken inflation.
Now, I'm using ETFs because they let you invest in many different companies with a single
(04:13):
investment.
And if chosen wisely, they can actually lower your costs as well.
And I'm aiming obviously for a passive portfolio.
I don't need anyone managing it on my behalf.
So I'll be using ETFs, the foreign index covering the global market.
But first, I need to factor in the size of the global market.
And I'm going to use major industries like the Futschi Global All Cap Index.
(04:38):
The world market is broken down into North America.
Or a Pacific and emerging markets.
Now, especially the US have the largest share, Canada has a much smaller proportion.
So to create an ETF portfolio, I'll need to find ETFs that target these different regions,
(05:00):
combine them.
Alternatively, many ETFs already let you invest globally.
So I could have bought a Futschi World one.
But let's start with an ETF for North America.
Now, surprisingly, actually, there's very few options if you're a UK investor.
I mean, there's a Vanguard one and an Ice Shares one using either the Futschi or the
(05:22):
MSCI index.
Now, there are two different versions of the Vanguard ETF.
One that pays dividends and one that doesn't, one that reinvests.
It's important to know whether you're investing in what's called a distributor or an accumulator
an ETF.
For simplicity, I tend to go for accumulating the ETFs.
They actually, rather than pay your dividend, they reinvest it back in so they don't have
(05:45):
to keep buying shares again.
I'm talking about my investment plans, but remember, I'm no financial advisor.
So choose what's right for you.
And I wouldn't exactly follow my lead.
But North America, let's focus on Europe.
I chose Vanguard's developed Euro ETF, which covers 500 companies and it's got a low fee
(06:08):
of around 0.1%.
I mean, some European funds exclude the UK, but that's okay for me as I have a really
large hold in the 4250, which is made up of UK companies mainly.
I say mainly because you don't have to be British to list in London, but most of them
are.
So next up, specific region and includes Japan, South Korea, Australia and Singapore.
(06:32):
And I went with Vanguard, FT, the Validasia and that excludes Japan.
I got a 0.15% fee, covers about 400 companies.
I'm going to have to pair that with a nice shares, Japan ETF.
And this covers about 200 Japanese countries as well.
Next I want to cover emerging markets.
(06:53):
This is a massive area, really big populations of people and lots of potential for growth
really.
And after having a look at different options, I went for the core, MCI, emerging market
ETF.
So those are the funds, how much of each of them funds do I buy?
Well for me, the P ratio of 16 for the UK that I mentioned and 30 for the US means I'm
(07:17):
going to limit my exposure to the US.
I'm going to continue to be heavily weighted in the UK.
So ignoring what I've got in bonds, put them to one side.
I'm going to split my ETFs, 6% UK, 5% US, 30% of the regions and 5% emerging markets.
So as you can see, I'm unusually weighted against the UK and over time, we'll probably
(07:42):
reduce this London weight and move more into Europe and Asia and emerging markets.
I can't really see myself though, increasing my US investments.
I wouldn't let me sleep at night really, particularly with the current leadership over there and
I do value my sleep.
If all this gets too complicated for me and I run out of time, I may just sell a lot and
(08:03):
put it all into a world ETF.
At the end of the day, I do know or probably end up doing just as well with a world ETF,
but it wouldn't be quite as interesting would it?
So I'd love to hear what you think about my approach and if you're comfortable sharing,
please tell me a bit about your approach.
I mean, every day is a school day, it's what we're here for, isn't it?
(08:25):
Thanks for listening and I'll see you on the next one.
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