Should We Be Worried About Global Index Funds?
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- Опубликовано: 28 июн 2024
- I have seen a rise in articles and news publications claiming that global funds are under threat and that investors could be at risk. Today, let's look at whether this has any merit.
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00:00 - Growing concern
01:13 - How we got here
03:20 - They will fail
05:10 - Past dominance
09:00 - Equal weight
10:35 - The rest of the world
11:50 - Tech rising
This video does not represent financial advice, and I am not a financial advisor. When investing, your capital is at risk. Investments can rise and fall and you may get back less than you invested. Past performance is no guarantee of future results. Free shares can be fractional for more information see these terms.
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For more info on what I discuss at the end please email
Will@damientalksmoney.com
Hi mate
Great idea re providing advice to employees and employers of businesses but may I ask what makes you qualified to give this advice?
@@gavinwelsh4534 Great question. The FCA's definition of guidance covers such activities (I have linked the full details below if you wish to read them). We are also partnered with financial advisors who attend in-person sessions and provide support to employees but, crucially, are not there trying to get everyone to invest in their funds. Which is the motivation of most advisors when they enter workplaces. Our focus is on education in the same way this channel is.
www.fca.org.uk/publication/research/fawg-consumer-explanations-advice-guidance.pdf
I’m an IFA myself, so that’s why I asked. There is a massive gap in terms of auto enrolment and employees and employers been informed
@@gavinwelsh4534I thought you might be and again thank you for asking the question because it’s an important one and honestly it’s something I have pondered
IFAs do amazing work; I see them as a key part of making this work. I’m not looking to replace them But I want to remove the AUM incentive and focus on education.
That way, we can make sure staff get a base-level understanding of things like their pension and also provide access to IFAs for more complicated or specific advice.
My main aim is to bring as many people as possible up to the level where they can confidently say they understand what their pension does and why they are in the funds they are, as well as the other basic but essentially personal finance areas that are often lacking.
@@DamienTalksMoney I think the solution is for companies to pay for the IFAs time to provide such educational seminars.
The problem is that smaller pots on an individual basis are not commercially viable.
It’s a ticking time bomb the lack of money being saved in general.
The "high concentration" in the index doesn't really increase risk even if all the top companies were in the same sector. You hold the index long term, but the index doesn't hold companies long term. If some change happens in the future that means a lot of these big companies become irrelevant, then the index will start to sell them off and it will start buying the new companies that people will use instead.
These big companies will fail… for something else. The indexes are self regulating, the composition changes over time but they still capture the growth of any future winners. Short term we may see a big correction but in the long run the market will be larger. Stress less, invest more. Quoting Dory from Nemo: “Just keep swimming, just keep swimming”.
Dory is a great metaphor for passive investing. Don't need to be very smart or have a good memory, just keep swimming and you'll beat the rest of the sea life to your goal.
Nice one Damo, I was afraid you were going to give me a genuinely compelling reason to stop investing in global index ETFs. Thankfully not 😂
Never going to happen mate.
What? Now I gotta finish watching
@@DamienTalksMoneyNever say never! Despite the fact that I agree with you - it does seem extremely unlikely but it's always possible, for example one of the main focus areas for AI must be in trading and investing, so if someone creates a better solution, everyone will flock to it
Presumably index funds will have been selling Tesla as the stock goes down. In my experience picking promising shares and watching them rise is easy. Knowing when to reduce your holding is the difficult part. I wonder how many people with Tesla stock are now increasing their holdings saying "It will soon be back to an all time high".
@MrDuncl " easy " . OK.
I'm almost 29 and I've just started to learn about investing. Your videos have been an amazing help! Thank you Damien!
Never too late to start!
Same here at 44, though mate. Let's go 👍🙏👊
Same. 29 myself.
When I was watching this absolute masterpiece I thought I'd have questions, but now I have only one: Why on earth do you have so many remotes Damo?!
Honestly I just walked around my house once and I found all those…
@@DamienTalksMoney So none of these live permanently in a random drawer? 🤣 That's mad! Great video man, thanks a lot!
@@TheRealMerl there was defo some random draw action
The answers here must be remotely true 😂😂😂😂
Mate. Amazing. Bang on form.
Thank you. I've been thinking about this exact issue for a while now, and I'm glad you've explained it so eloquently!
My pleasure!
"I need to get out more" crack after throwing up a "fantastic chart?" Genius. I feel you, my friend.
Noticed an uptick in editing lately in your vids. Enjoying it mate! PS love the ABBA reference
Production values on these videos have gone up quite a few notches. Great content and great presentation. 👌
Was about to say the same. Banger of a video.
You are Amazing! For 50 years I was a teacher. For 40 of them at the Institute of Education, University of London. I worked in international distance learning. You and Ramin and no doubt some other genuine FinTech RUclipsrs are changing this world for the better as 21st century educators. You are the pioneer teachers of this new wonderful, dynamic and dangerous century. There is one bit of knowledge that counts for more than all the others - to find out and learn and master something for oneself. But we all need people to offer a helping hand a mentor, a coach or guide. We all need to win in some way - Tommy needed Jimmy and vice versa - c.f. the climbing analogy. Keep going, your vision is a much needed one. How you get there will be a wild ride. But it will always be interesting. I wish I had another 50 years to help change this world some more.
Thank you mate!
Really needed to hear this
As always mate. Thank you for your insights. Well done with the charts 📈
Brilliant video. Love your well researched info! Thankyou.
This was a brilliant video and your points made were a great antithesis to the article. Thank you!
Seriously impressive video: deep and considered technical market analysis put across in a clear and down to earth manner. That’s skilled work
Top video Damo, very thoughtful with real data and clear explanations. Thank you!!
Dont usually 'like' videos, but the creative advert at the end was the cherry on the cake for me. Great video!
If you like creative adverts at the end you should look up map men.
Thank you for watching all the way to the end and then taking the time to like and leave a comment. Comments like this are the exact reason I try to get a little creative sometimes
I predict with inaccuracy, the next biggest sector will be healthcare, medical devices, medical tech, biotech, pharma, health big data, health AI.
I think you could be right here around medical devices and bio tech.
Yep, I was thinking exactly the same healthcare and biotech aided by AI will boom. But that’s the beauty of an index fund.
These players are already in the mix.
Thermo and Waters provide equipment for these industries and look where they are in the S&P 😉
But which company will benefit the most? Maybe the Apple Watch series 17 will achieve what Theranos was attempting.
Healthcare is so slow though, but when it finally gets results like novo nordisk it’s huge.
You're just trying to beat the market, betting for specific sectors.
Thank you for your rational review amongst all this noise.
Feels like everyone has an agenda and sometimes you need someone to cut through the noise to provide balance.
Very well thought out and delivered.
Thanks Damien. Honest, concise, informative, unbiased...with a dash of humour... Love it.
on form! good luck with the venture too.
Interesting video… most of my investments are in S&P 500 and global index funds.. but also I am taking a punt on Ai and next tax year on Riets also
Cracking video fella. A really great to see how your business is growing… really nice touch 👍🏻
Damien, I wish you well with developing your work further. You have an excellent way of conveying a message in a personable, light-hearted and mainstream-friendly way.
Brilliant! You are bang on, there is no tech because everything is tech!
Making fire was high tech to early man.
@@george6977 James Watt utilising that fire was extremely high tech. So much so that he has a unit of measurement named after him.
Yep blame the execs puffing up valuations
Tech should be only companies that sell software (preferably exclusively Amazon).
People hear tech, they are thinking primarily Google, Amazon, Microsoft style companies.
Hardware has completely different risks, overheads, scalability, per user cost to software.
Amazon is a cloud services company with a retail business on the side. (Look at operating profits from AWS)
Side note at end.
Tesla is not a tech stock, and comparing to other car manufacturers is blatantly absurd.
I work automotive software in uk. I am definitely an ev truer believer and have spent my working life exclusively working with EVs.
The recent gloom around index’s almost convinced me just due to the high weighting of Tesla.
So interesting thank you for sharing!
This was not boring! Fascinating and great insights.
thanks Damien, learned from that. great work
Another great vid, pitched at exactly the right level of understanding
Would love to see you do a video about how index fund bubble pop looks like and how would it play out.
Active investors make the index funds work, if for example Apple is over invested by index funds then active investors will start selling Apple that's why u can't speak of a bubble in index funds because there's still a lot of active investors who will even it out, and there probably always will be.
You’re good at what you do. Well done!
Thank you very much
Reassuring to hear. I'll keep up the passive investing because I don't have the time, energy, or knowledge to do anything else.
Absolutely fantastic video! Your mastery of oration makes these videos so enjoyable to watch!
Looking back historically is interesting, however one thing where there is a significant contrast is with regard to FUM flow. In more recent times, i.e. last 15 or so years, there has been a proliferation of funds allocated to indexing strategies. Now over 50% of the market I read. With this large amount of money following the same strategy, what impact (if any) is this having on price discovery, constituent liquidity and the EMH? Could this be (or is it already) problematic? I feel that this needs to be better understood. Thoughts?
Thanks for this video Damien, I had been wondering about this recently. Can sleep easier about my pension now!
Great summary and analysis. 👍
Where do you find you graphs and charts or do you make them yourself?
Thanks Damo. Informative as ever!
Nice plug at the end
Great perspective.
Watch to the end!;;!;!
Great video, Damien. Production and editing is among the best on RUclips 👏
Very informative and well presented - thank you.
6:07 this is REALLY interesting! Glad that i was randomly recommended this video
Great Video. Agree that there is an overreliance on the biggest stocks in the US. Thanks for the history lesson!
Nice analysis!
Quality content as always! Been subbed since less than 10k , keep it up Damo!
I never miss a new bit of Damo content… because he never misses. 👏🏻
Look up capitalization weighting. Makes a big difference.
Loving the new format mate really well produced keep up the great work, smashing it!
Diversification is a lot better in mid cap indices e.g. S and P 400, FTSE250
Which global index fund do you use, and on which platform?
I'm not sure but assuming it's FTSE global all cap
Great stuff. Legal and General Global 100 Fund does the job for me.
Great content Damo, very well researched and presented.
Thank you!
Top video, eloquently explained and very informative
Thank you!
Simply amazing content, based on lots of data and research. Awesome work - really! Loved to watch it. Cheers from Brazil
Concise and thought provoking wrt my investing habit. Great video thank you
What a roller coaster video! (Excellent and insightful as always). Almost changed my strategy mid way, but brought it back to the ground at the conclusion. Slow, consistent, and steady is the way and trust the process. There are no crystal balls in this game.
Never change the process! Sorry I took you on a roller coaster ride 🤣
@DamienTalksMoney Don't apologise, its grounding and a reminder. It's Bank Holiday tomorrow. A few drinks and a weak mind. Appreciate everything you're doing. Keep knocking it out of the park pal.
The saddest thing about being self employed is I forget the bank holidays and don’t have the joy of them anymore
Excellent content as ever, thank you!
Massive credit for coming up with the farmer story
Great idea about going out to companies giving advice about personal finances. Hope it takes off!
Another amazing video, each one better than the next. First class.
Keep doing what you're doing 😊
Interesting and informative, as always! Thanks, Damien :)
That was good! It makes sense.
Thanks Damo. Really interesting re: tech monopolising the retail space. Its something we could have probably predicted. But isn't a investment fund fluid- as in - if one sector liquidates, the fund automatically deversifies into the next big 7?
Props for one of few adverts that can certainly be described as entertaining.
You are wise beyond your years Grasshopper.
I have to say: bravo! Very well done. Your interviews with Ramen are also very good content.
Great work Mr. J
Is Invesco FTSE all world still your play?
The voice of reason, but without the sarcasm and swearing - needs more Sasha.
Just as a note Amazon isn’t really a retail company
It’s the dominant cloud service provider, providing the structural support for vast sections of the modern internet. Who also has a big retailer attached.
AWS has been responsible for a disproportionately high percentage of Amazon operating profit.
Excellent Will, I think that is a great move to bring a "Money Saving Expert"-esque down-to-earth approach to finances to staff, absent of FA product mindsets. Really hope it works out. Mid-sized UK companies without the fancy HR compensation deals could be a good target.
Excellent video! Following the analogy with having only one tractor - is it a problem to only have ETF's from one ETF provider? What happens if that provider goes out of business? Is all your money then lost?
Doesn’t bad performing stocks get removed from index funds and replaced with more favourable stocks?
yep just like everton , forrest and eventually man city down they go
S&P have built in rules to ensure they are profitable but I don’t think ftse have the equivalent??
🤣🤣🤣🤣
@@hachimaru295Forest and they won’t be going down
#miraclemen
⭐️⭐️
The whole point of investing in the S&P 500 is that it’s the biggest and best 500 companies. The better performing companies ( and sectors ) will replace the less successful. Relax and keep in investing in the S&P 500 …. Given America is currently most of the global market. And most of the S&P 500 companies get large profits from the global market. It may change BUT it’s not going to happen anytime fast
My concern is less with the concentration of these companies in the indices but rather their overvaluation. Large cap growth is a sucker’s bet. I wouldn’t invest in these large tech companies as “stock picks” so I don’t want them to dominate my index portfolio. I personally tilt slightly towards value factor funds (especially at historically high valuations).
Great video mate. I’d seen similar articles too and was feeling slightly concerned so this has really helped. Good luck with the new business venture
Yet another banging vid from you Damo 👍🏻👍🏻👍🏻
The main point is that our investments are constantly changing, so the index is changing depending on how companies are doing so even if some of these businesses will go bust, they'll be replaced, so that's fine
Another brilliant video and supports my choice to bail out of managed funds and into index. Even now some of my so called "managed" funds performance are beyond pathetic, and yet certain well known institutions would have you believe they are where you should put your money. The evidence does not and cannot provide any sane rational for that assertion!
Incredibly high quality video as always
Thank you
Very good.
Hey damo, thanks for another cracking vid, as usual! I have a question though, slightly confused, maybe I’m being thick!
So, isn’t the entire point of a cap weighted index that it tracks whatever is representative of the market? i.e. If magnificent 7 or whoever drops out of the index, what’s the problem because the ETF will just redistribute to the next big players? So you always have the top - whether they are over dominant or short lived or whatever doesn’t matter, right?
p.s. Beat of luck with the consulting biz! I personally think your down to earth style is a huge winner, I’ve certainly learned loads from you (and Sasha) 👍🕺💪👌
Thanks buddy as always
You are always welcome mate
Great stuff Damien - Thanks.
Hi, i dont know if youve mentioned this but, once a company loses its dominance in the market. it will leave an index fund and be replaced by the next best thing. hence top 500 top 100 top 30 etc. ergo. it'll always be the biggest best performing companies you own. love your vids correct me if I'm wrong
Index funds are fundamentally dollar (pound) cost averaging - they must invest as an individual stock is rising and they sell (take profit) as it falls, reinvesting in another growing stock. It's a virtuous circle driven by rebalancing the portfolio. In effect, the same thing applies whether the fund is market-cap weighted, or equal-weighted.
I’d like to hear your opinion on the Buffett indicator and how big am impact the mag 7 is having on that compared to the rest of the market as it’s currently in a strongly overvalued position, almost double in fact…
According to an article in the Times today, 17 companies in the FTSE 100 have increased their dividend each year for the last 10 years. If you would have invested 10 years ago, you would have got a total return of 281%. According to my calcs this represents an annualised return of 14.3% per year.
Great video as usual. I hope companies use your support. I have just started to invest and am using different platforms for different reasons. The Lifetime Investment ISA is my biggest concern. These videos are giving me more knowledge.
@Damian, Thoughts on GGRG
"Nothing but bloody adverts" 😅 that made my day
I do try to invest in the S&P using an equal weighting fund to avoid this issue.
I think the issue for these big tech stocks is that they will (or already have) become so big that they cannot grow at the same rate as they had before. Also that a lot of that future growth is already in the price. They might still make tremendous amounts of money going forward, but the share price might grow slower than the rest of the market.
Your end point about tech now being in everything...I do wonder if there is a paradigm shift because the source of that "tech" to power all the innovation is being dominated by a few companies, and since they have so much money it's hard to see that changing much because they can simply buy upstarts or copy and outcompete them with all their innate advantages (like Microsoft usually does). For example, there are only a handful of companies that make processors but there will be a gigantic need for more processors to power the kinds of future tech that will be incorporated widely. Same with data centers. We'll likely see the same with AI. A handful of companies will provide most/all of these, and unless they get broken up it's hard to see any way that they won't continue to be dominant.
Your best content yet, Damo.
Have you looked into Commercial fusion? The impact on funds globally will definitely be something. The cost/price of all goods will go to near-zero.
It would actually benefit companies like Tesla unless someone like BYD comes up with a built in Mr Fusion on their vehicle.
Further up the thread someone else has mentioned healthcare. I don't see how Commercial Fusion would have any effect on that and the companies involved.
Thank you sir 🫡
You are welcome
Cant see the link to Sacha's video
Hi Damo, what if we need different sector separation and qualification of businesses? Lumping everything into tech might not be the right thing to do maybe a bit outdated.