Anyone can recommend a good ETF for a beginner? Thank you in advance.
Err… A bigger what? (20 characters)
Sorry that was meant to read as “beginner”
Well, realistically, we cannot provide any financial advice. Any investment will always carry risks, and it will be for you and your specific situation to understand, acknowledge and choose such risks.
That being said, I’m going to make some assumptions regarding what you are looking for, and expect that you would be looking for a rather general index fund, well diversified.
Those will be generally low-costs and grant you some level of risk reduction via diversification, while allowing you exposure to the general economy and average returns associated to it.
When looking at such index fund, a common starting place will be either
- the S&P500 index (500 biggest companies listed in the US)
- the equivalent index to your own country (FTSE100 in the UK for example)
- Or an All-world index, including usually some 2,000-4,000 companies listed worldwide.
The main providers of such index-tracking ETFs will be BlackRock (iShares funds) and Vanguard. Usually Vanguard is a little cheaper.
Furthermore, you may find these funds as either Distributing, or Accumulating.
A Distributing fund will occasionally pay you a dividend via the cash they receive from the underlying companies’ dividends, while an Accumulating fund will reinvest that cash within the fund itself (so no cash distribution).
The total returns (cash + capital appreciation) of both funds are exactly the same.
Finally, you may find these funds listed in different currency, namely USD, GBP, or EUR. This is for your own preference, and maybe avoid T212’s 0.15% FX fee when buying/selling, but this does not give you any protection against currency fluctuations.
If you’d wished for such FX hedging, you will need to look up for a “GBP Hedged” or “EUR Hedged” fund.
Hope this helps!
An idea is to look at the most popular ETFs and invest in those.
Here’s a link with the biggest funds listed in descending order. (Recommend just etf website to browse ETFs)
There’s plenty of options such as:
- VWRL/VWRP, all-world ETF, 0.23%
- SSAC, tracks the MSCI ACWI, a similar all-country ETF, 0.20%
- LCWL/SWLD, MSCI developed world, no emerging markets, 0.12%
- IWDG, MSCI developed world, GBP hedged, 0.30%
- VEVE, Ftse developed world, 0.12%
- PRIW, Solactive developed world, 0.05%
- SPXP, S&P 500, synthetic, 0.05%
Thank you for such detailed reply. I am from UK and have just started investing online via trading212.com. It certainly seems a minefield but I am hoping in time I figure out how to invest more efficiently and prudently. Any tips and advice would be appreciated. Many thanks.
One question regards exchange of currency. Being from UK my deposit is in GBP. How does it work when I buy and sell stocks which are of another currency? You touched upon 0.15% FX fee, can you elaborate a little more please? Thank you
If you buy, and sell a stock in a different currency that GBP, there will be a 0.15% fee applied for covering the FX conversion costs.
There is no fees for a dividend received in an other currency.
If you’re investing in a generic index fund, it may be worth the extra attention to pick one listed in GBP instead of USD or EUR; the returns expressed in your own currency will be exactly the same (*), but you won’t have to pay the 0.15% for every transaction.
(*) You may be fooled looking at the different charts of a fund in, say, USD and GBP, and notice they are different. The difference arise from the currency pair having drifted over time.
If you are to buy into a USD fund, then sell it later back to GBP, you will get the exact same returns than if you bought the GBP one instead. Basically, from your own perspective, the USD chart doesn’t represent total returns you actually get, since it ignores how the FX moved during your holding time.
Thank you for the info.
- VWRL/VWRP, all-world ETF, 0.23%
Minor correction, it’s 0.22%.