What is the EAFE Index?
One hears of EAFE index funds. Are these available in GB?
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878MikeGG1 postedIt is an unsuitable index for UK investors. It is the US equivalent of our Global indices (ex-UK).
To buy you would have to convert into dollars at a cost and then to sell you would have to convert back into pounds again at a cost.
They include some UK and no US stocks so you would need to rebalance your portfolio carefully.
Mike
Posted on 20 April 2011 |
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7svenski posted
EAFE stands for Europe, Australasia and Far East. It the non-North American component of the MSCI World index. It is primarily aimed at US investors who need a fund or benchmark for their non-North American equity investments. Regional weightings within the EAFE index are roughly 22% UK, 45% rest of Europe, 20% Japan, 13% Asia ex-Japan (which in this particular index constitutes only Australia, Hong Kong, Singapore and New Zealand). As such it is not hugely relevant to most non-professional UK based investors.
Posted on 21 April 2011 | Love 0 loves
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0MoneyPower100 posted
Thanks for your replies.
Instead of an EAFE fund would it be better to use one of these funds?
HSBC MSCI WORLD ETF http://www.etf.hsbc.com/etf/uk/institutional#1
Index currency is USD but trading currency is GBP – I’m not sure what effect this has for a UK citizen?
FTSE ALL-WORLD EX UK ETF http://www.etf.db.com/UK/ENG/ETF/LU0322254383/B2PDKD0/FTSE_ALL-WORLD_EX_UK_ETF.html The fund currency is GBP
I read about the EAFE index in a book called “Ten Roads to Riches” by Ken Fisher – he recommends anyone with less than $200,000 to use index funds and not individual shares. He states a 41% USA S&P 500; 47% EAFE; and 12% emerging markets.
Posted on 21 April 2011 | Love 0 loves
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878MikeGG1 posted
$200,000 is a bit on the high side and you are again looking at a US based strategy.
If you look at UK-based Global Indices which are aimed at UK residents who intend to retire in the UK, you would be looking at about 60% -70% UK All-Shares or 100 and the rest fairly equally split between North America, Rest of Europe, Japan and Asia-Pacific (ex-Japan). Add another 10% each for Emerging Markets and Commodities once you have experience.
Individual share purchases should never be made in amounts of under £1,000. In order to get closer to the expense ratios of Index funds, you would need to buy in lots of £5,000 minimum. His $200,000 is probably based on the lower expense ratios in US funds but would be the equivalent of 30 shares for safety spread at the £5,000 I mentioned. With 30 shares you get enough sector coverage and small/medium/large capitalised companies.
Stick to UK based strategies.
Mike
Posted on 21 April 2011 | Love 0 loves
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0MoneyPower100 posted
Do you think there is a best minimum amount to invest in an ETF or Index Tracker funds?
Also, regarding the fund currencies:-
at http://www.etf.hsbc.com/etf/uk/individual
a lot of the "fund currencies" of the ETFs are in USD - but also have a "trading currency" that can be in GBP. Please can you tell me what is pros and cons of this for a UK investor. The HSBC S&P 500 ETF has a TER of only 0.09% the lowest I've seen.
Regards
MoneyPower100
Posted on 24 April 2011 | Love 0 loves
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878MikeGG1 posted
If you are buying a UK-based US tracker like the S&P 500, you may be paying in sterling but they are having to convert it into dollars. However, it is only the net inflow or outflow that they actually have to transfer so that cuts down the costs. They are also dealing in large sums so get closer rates.
That applies to any overseas investment. The denomination in dollars is because it is tracking a US index which is quoted in dollars so they denominate it in dollars so you can compare how they are doing with the actual index.
So far as a minimum amount to invest is concerned, it depends on the basis of charges. If you have high upfront flat charges such as occur if you were to buy individual shares, then the purchases need to be in larger amounts. If you are buying units/shares with a fixed % fee, then the amount doesn't matter.
The strategy to overcome high charges is to restrict your investment occasions. For instance you could do a 12 month fixed rate monthly saver with a BS that gives a good rate and then use the proceeds at the end of the year to buy 1 or 2 companies. Then restart the process immediately so you have an annual purchase date. That would not be a safe investment because of the lack of spread, unless you had already established a sizeable unit fund.
Mike
Posted on 24 April 2011 | Love 0 loves
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