Please help a confused 24 yr old on investing in index funds [UK ex-pat in Australia]

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plshelpmeinvest
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Joined: Tue Jun 11, 2024 2:51 am

Please help a confused 24 yr old on investing in index funds [UK ex-pat in Australia]

Post by plshelpmeinvest »

Which company/brokerage/website should I use to invest, living in Australia, as a UK citizen, aiming to invest in the US S&P 500??

I have recently become aware of index funds/ETFs and am trying to begin my investing journey. I'm aware the S&P 500 is one of the most popular funds and have been informed of some of the main recommended US brokers for this: Charles Schwab, Fidelity, Vanguard (please excuse any lack of knowledge here this is all very new).

I'm a UK citizen but am currently living in Australia and am a resident here for tax purposes. I'm not sure what my long term living situation will be country wise, and I don't know how this will impact my investing. Do I go through an Australian company or UK company? Does it actually matter if I want to invest in US stock anyway? Is that going to create big issues for me if I do eventually move back to the UK?

What websites or companies are reliable and trustworthy to go through for this? I tried to sign up for Fidelity but as I wasn't a US citizen I couldn't on their main website, and the international website has an area for UK citizens but I wasn't sure if this was suitable for me given I currently live in Australia. I was drawn to Fidelity due to their low fees etc.

Any advice would be very gratefully received, thank you in advance. :happy
tman9940
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Re: Please help a confused 24 yr old on investing in index funds

Post by tman9940 »

Look into Vanguard. I believe they have offices in Australia. Also, the SP500 is great but will only get you the 500 biggest companies in America. Nothing wrong with that, but there are more companies you would be missing out on. Since you are so young, I’d suggest getting a total stock market fund (about 500 companies compared to about 4000 last I checked). The ticker symbols I’d look into are VTSAX or the etf version VTI. Overall, just read read read. Read this forum. Read books. One of my favorites is “The Simple Path to Wealth” by JL Collins. Hope this helps!
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Re: Please help a confused 24 yr old on investing in index funds [UK ex-pat in Australia]

Post by LadyGeek »

This thread is now in the Non-US Investing forum (non-US investor). I also retitled the thread for clarity.
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Target2019
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Re: Please help a confused 24 yr old on investing in index funds

Post by Target2019 »

If you already have a brokerage account, look for US ETF's that include "500" in the fund name. IVV and SPY are mentioned below.
ETFs: One of the easiest ways to invest in the S&P 500 from Australia is through an ETF that tracks the index. An ETF is traded on the Australian Securities Exchange (ASX) , just like an individual stock. Popular options include the iShares S&P 500 ETF (IVV) and the SPDR S&P 500 ETF Trust (SPY) . https://pearler.com/explore/learn/blog/ ... -and-p-500
If you need to set up an investment account as a UK citizen in AUS, I'm not familiar with what you'd need to do. I'm sure someone else will read this and have relevant advice about that. You might look for expat forums to help, also.
Valuethinker
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Re: Please help a confused 24 yr old on investing in index funds [UK ex-pat in Australia]

Post by Valuethinker »

plshelpmeinvest wrote: Tue Jun 11, 2024 3:04 am Which company/brokerage/website should I use to invest, living in Australia, as a UK citizen, aiming to invest in the US S&P 500??

I have recently become aware of index funds/ETFs and am trying to begin my investing journey. I'm aware the S&P 500 is one of the most popular funds and have been informed of some of the main recommended US brokers for this: Charles Schwab, Fidelity, Vanguard (please excuse any lack of knowledge here this is all very new).

I'm a UK citizen but am currently living in Australia and am a resident here for tax purposes. I'm not sure what my long term living situation will be country wise, and I don't know how this will impact my investing. Do I go through an Australian company or UK company? Does it actually matter if I want to invest in US stock anyway? Is that going to create big issues for me if I do eventually move back to the UK?

What websites or companies are reliable and trustworthy to go through for this? I tried to sign up for Fidelity but as I wasn't a US citizen I couldn't on their main website, and the international website has an area for UK citizens but I wasn't sure if this was suitable for me given I currently live in Australia. I was drawn to Fidelity due to their low fees etc.

Any advice would be very gratefully received, thank you in advance. :happy
https://www.bogleheads.org/wiki/Investi ... _Australia is the best place to start.

Now S&P 500:

- that's just the US Index. About 65% of the total market capitalisation (stock market value) of the world index (Developed Markets only)

You will find many American posters here think that's all you need. From their perspective, that may not be a bad call. In finance it is known as "Home Country Bias" and it's basically always a mistake because of the loss of diversification.

Not coincidentally the US index has done better than any other index. Although if you go back to 1900, the Australian one actually outperformed it. But you'd never want to be just in Australian stocks - the ASX index is basically banks + natural resources. Almost no technology. No big industrial companies. No big pharmaceutical companies etc. It's just not diversified -- and it's only about 3% of world stock market index (there are 2 big indices out there: FTSE World and MSCI World - the name of the company that constructs them is in the name; the differences are fairly trivial).

US outperformance is particularly strong since 2008:

- the US recovered better and faster from the global financial crisis
- the internet "Magnificent 7" or whatever - Amazon, Microsoft, Meta, Alphabet, Apple + (these days) Nvidia. Now these are fantastic companies and their businesses have grown incredibly especially during the pandemic. But logic tells you they cannot keep growing like that forever, and their merits are not exactly unappreciated (Tesla was the other one. Tesla remains an amazing company, doing amazing things. But car manufacturing is a really tough market to be in, and new competitors (Chinese especially) keep emerging. So the market is not quite so excited about Tesla as it was 2-3 years ago, when we had people posting about borrowing money to invest in Tesla. Right now, something similar is going on with "Artificial Intelligence" - something very real, and important, but the stock market is getting ahead of itself.

Some of us are old enough to remember when the future of the Internet was: Cisco (briefly the world's largest company), HP, Intel, Dell, Yahoo, AOL, Ebay etc. Of those, Amazon has done well, but it took something like 13 years before the share price recrossed its 2000 high. Google and Facebook came out of nowhere. Microsoft has reinvented itself. Amazon invented AWS etc.

In other words, the Internet superstocks have driven the US market. There will be times when that will not be the case. Those 7 stocks are c 25% of the US index, so c 10% of the world index. Apple alone is capitalised at more than many of the world's stock markets.

Home Country Bias is always a grievous error for a non US-based investor (for US investors, it's an error for US investors, but not a grievous one (missing 100%-65% = 35% of something is not the same as missing 65% (if we chose not to invest in the USA)).

So what you really want is a good global equity index fund ("tracker fund" in UK speak; aka "passive investing"). Let the market figure out whether it is mining companies or tech companies that will ride the wave to the future (I would find it hard to not hold Rio Tinto & BHP - the world we are entering, the energy transition, will take a *lot* of lithium, copper and other metals. I recommend reading Ed Conways "Material World" for anyone -- he is the economics correspondent for Sky TV, and he goes through 6 key materials (including salt, sand and silicon) to discuss just how incredible the story of those materials is, and how big their future will be.

HOWEVER if you can't find a good one, with a low expense ratio, you go with what gets close. (I know investing from Canada, and from Great Britain, but not Australia).

There's nothing wrong with being up to say 20% in ASX - Australia only stocks. But you have linked your retirement portfolio to the success of the Australian economy - and thus your own career success. So above 20%, which is 6x the world weighting of Australia in the index, I would say you are starting to meaningfully increase your risk.
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