I started a fresh fund portfolio this week, albeit one spread across a Hargreaves Lansdown ISA and a general Vanguard account. In the former I’ve bought three HSBC tracker funds – European Index, Pacific Index & Japan Index. The first aims to track the FTSE Developed Europe ex-UK Index. It’s a cap-weighted index, so large-cap European blue chips make up a big chunk of the holdings. Swiss giants Nestle, Roche and Novartis make up around 10% of the fund’s assets between them at time of publication.
Next up, the HSBC Pacific Index. This one tracks the FTSE World Asia Pacific ex-Japan Index. Or put another way, blue chip stocks based in Australia, South Korea, Taiwan and Hong Kong make up most of its assets. Korean giant Samsung currently represents something like 5% of the fund’s total assets. Aussie bank stocks also dominate the top ten list of holdings. The Japan Index pretty much speaks for itself – it tracks the FTSE Japan Index. Toyota, Honda, Softbank and Sony make up around 10% of the assets in that one.
Now, all three of those funds are held via accumulation units. In a tax-sheltered ISA it makes no administrative difference either way. Obviously it would be a pain to work out the income tax due on reinvested dividends in an accumulation fund held outside of a tax-advantaged account.
On that note, the two Vanguard funds. Firstly, the Developed World Ex-UK Equity Index Fund. It’s a global equity fund, albeit one dominated by US-listed stocks for obvious reasons. US equities currently account for around 60% of the fund’s assets, with tech giants Alphabet, Apple, Microsoft, Facebook and Amazon taking up over 10% between them. In fact Nestle is the only non-US stock to make the list of top ten holdings.
The final one is Vanguard’s Emerging Markets Stock Index Fund. Again, this one probably doesn’t need to much by way of introduction but its benchmark is the MSCI Emerging Markets Index. Chinese names obviously dominate the top ten – Alibaba and Tencent make up 10% of assets between them. According to Vanguard the fund only trades at around 13x earnings which strikes me as pretty cheap. Both of those funds distribute their income (easier to manage in terms of tax reporting).
At the moment, the portfolio is tiny. With the exception of the Vanguard Developed World Ex-UK Fund, each one started with an initial £100 investment. In the case of the former, I’ve started with a £200 initial investment. There was also an extra £150 or so in left-over cash spread over the two accounts. Total starting value is therefore around the £750 mark including cash.
The current rate of monthly contributions is set at £25 per fund, plus an additional £50 per month to be set aside as cash on hand. There are no dealing charges or commission for funds in Hargreaves Lansdown or Vanguard accounts so investing small amounts is perfectly feasible. I’ve done this deliberately to show that anybody can start saving, no matter if you can only put a small amount aside each month. I will post quarterly updates starting from 2Q20.