From Bogleheads
This page recommends approaches / funds that enable a UK investor to invest using similar techniques to those outlined in The Bogleheads' Guide to Investing. The book contains sample portfolios for investors of different ages that utilize different Stock Market and Bond Mutual Funds. This page recommends equivalent funds, available in the UK, and also outlines some sample portfolios.
General Approach
The funds recommended below are low cost indexed funds. In the UK these can be either unit trusts or ETFs. A few UK based companies offer low cost indexed stock unit trusts directly to the investor. Legal and General and Fidelity are recommended for their low expense ratios (0.5 and 0.1 respectively for the UK Stock Market). Indexed Bond funds, however, are only available as ETFs. The broadest selection of bond etfs are available from iShares. In addition to the internal expense ratios, ETF purchases must be made through a broker and there is a per transaction cost. The lowest cost per trade is Halifax's Sharebuilder which, as of the date of writing, charges £1.50 per trade for scheduled regular purchases. Factsheets on ETFs traded on the London Stock Exchange are available from the Exchange. Vanguard has announced its intention to offer funds to the UK Investor, but as of yet no funds are available.
Funds
Stocks
The UK stock market is significantly smaller than the US and as such is not as diversified. For example, three companies (Shell, BP and HSBC) comprise nearly 25% of the index. As such, the UK investor should pair a FTSE indexed fund with a world indexed fund to gain appropriate diversification.
UK Stock Indexes
The following are low cost indexed funds containing UK Stocks.
| Fund
| Type
| Expense Ratio
| Description
|
| Legal & General UK Index Trust
| Unit Trust
| 0.52%
| To provide the potential for reliable growth by tracking the performance of the FTSE All-Share Index. In order to accurately track this Index, the trust’s investments will closely replicate the holdings in that Index. To gain exposure to the UK stock market, but without all the risk attached to individual stock selection To provide an income where required.
|
| Fidelity MoneyBuilder UK Index
| Unit Trust
| 0.27%
| The Fund’s investment objective is to achieve long term capital growth by closely matching the performance of the FT-SE Actuaries All-Share Index. The ACD will aim to hold securities that represent the FT-SE Actuaries All-Share Index (or, in the event of this index ceasing to be compiled, such other index as the ACD may deem appropriate). In order to manage the cash position of the portfolio, the Fund may utilise stock index futures as allowed by the regulations.
|
| iShares FTSE 100
| ETF
| 0.4% (also incurs buying and selling costs)
| The objective of the iFTSE 100 Fund is to provide you with a simple, low cost and flexible way of investing in the FTSE 100 Index. The iFTSE 100 Fund objective is to provide a total return, taking into account both capital and income, which reflects the return on the FTSE 100 index. The Investment Manager (Barclays Global Investors Limited) will normally invest in securities that mirror the FTSE 100 index.
|
World Stock Indexes
The following are low cost indexed funds containing world stocks.
| Fund
| Type
| Expense Ratio
| Description
|
| Legal & General Global 100
| Unit Trust
| 1%
| To provide the potential for reliable growth by tracking the performance of the S&P Global 100 Index, converted into pounds sterling. In order to accurately track this Index, the trust’s investments will closely replicate the holdings in that Index. To gain exposure to stock market investment, but without all the risk attached to individual stock selection.
|
| iShares MSCI World
| ETF
| 0.5% (also incurs buying and selling costs)
| The objective of the Fund is to achieve a total return that reflects the return on worlds developed equity markets as represented by the MSCI World Index.
|
Bonds
Short Term Bond Fund
There are no indexed short term bond funds denominated in pound sterling.
Intermediate Term Bond Funds
The following are indexed intermediate term bond funds denominated in pound sterling.
| Fund
| Type
| Expense Ratio
| Description
|
| iShares Pound Sterling Corporate Bond
| ETF
| 0.2% (also incurs buying and selling costs)
| The investment objective of the Fund is to provide investors with a total return, taking into account both capital and income returns, which reflects the total return of the Sterling denominated investment grade corporate bond market. The fund tracks the iBoxx Sterling Liquid Corporates Index.
|
| iShares FTSE UK All Stocks Gilt
| ETF
| 0.2% (also incurs buying and selling costs)
| iShares FTSE UK All Stocks Gilt is a fixed income fund that offers you exposure to a diversified basket of UK government bonds, across all maturities. iShares FTSE UK All Stocks Gilt can give you immediate access to liquid, sterling-denominated investment grade government bonds. This fund can enhance diversification away from equities and provide steady income at regular time periods.
|
Inflation Protected Bonds
The following is an indexed inflation protected bond fund.
| Fund
| Type
| Expense Ratio
| Description
|
| iShares £ Index Linked Gilts
| ETF
| 0.25% (also incurs buying and selling costs)
| The investment is a fixed income fund that offers exposure to a diversified basket of UK government bonds, with all maturities. It can be used to offset the inflation risk in a portfolio. The invesment provides access to the performance of Barclays UK Government Inflation-Linked Bond Index.
|
Sample Portfolios
Listed below are UK equivalents to the 8 sample portfolios outlined in 'The Bogleheads Guide to Investing'. These are appropriate for different stages in life. Additionally, the 'boglehead' book also lists what those sample portfolios look like when using Vanguard funds. Vanguard funds are not yet available in the UK, as such this page contains sample funds using iShares ETFs.
A Young Investor
A Young Investor's Asset Allocation
| Domestic Stocks
| 30%
|
| World Stocks
| 50%
|
| Intermediate Term Bonds
| 20%
|
A Young Investor Using iShares ETFs
| FTSE 100
| 30%
|
| MSCI World
| 50%
|
| FTSE UK All Stocks Gilt
| 20%
|
A Middle-Aged Investor
A Middle-Aged Investor's Asset Allocation
| Domestic Stocks
| 20%
|
| World Stocks
| 40%
|
| Intermediate Term Bonds
| 20%
|
| Inflation Protected Securities
| 20%
|
A Middle-Aged Investor Using iShares ETFs
| FTSE 100
| 20%
|
| MSCI World
| 40%
|
| FTSE UK All Stocks Gilt
| 20%
|
| £ Index Linked Gilts
| 20%
|
An Investor in Early Retirement
An Investor in Early Retirement's Asset Allocation
| Domestic Stocks
| 10%
|
| World Stocks
| 30%
|
| Intermediate Term Bonds
| 30%
|
| Inflation Protected Securities
| 30%
|
An Investor in Early Retirement Using iShares ETFs
| FTSE 100
| 10%
|
| MSCI World
| 30%
|
| FTSE UK All Stocks Gilt
| 15%
|
| Pound Sterling Corporate Bond
| 15%
|
| £ Index Linked Gilts
| 30%
|
An Investor in Late Retirement
An Investor in Late Retirement's Asset Allocation
| World Stocks
| 20%
|
| Intermediate Term Bonds
| 40%
|
| Inflation Protected Securities
| 40%
|
An Investor in Late Retirement Using iShares ETFs
| MSCI World
| 20%
|
| FTSE UK All Stocks Gilt
| 20%
|
| Pound Sterling Corporate Bond
| 20%
|
| £ Index Linked Gilts
| 40%
|
Taxes
Links
Papers
How to Cite
You can link to this page from the Bogleheads Forum by copying and pasting the following text into your forum posting:
Please see [url=http://www.bogleheads.org/wiki/UK_Investing]UK Investing[/url] on the [url=http://www.bogleheads.org/wiki/Main_Page]Bogleheads Wiki[/url].
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