FIRE

Sarenco said:
Equity indexes use a company’s market capitalisation to decide how much weight its shares will have in the index.
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That depends on the index.

Sarenco said:
By definition, an index cannot be overweight any particular company or sector.
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The S&P500 Equal Weight Index invests 0.2% in the top 500 companies in the US. The top 10 stocks make up 2% of the index.

Is that more or less diversified than the regular S&P500 where the top 10 stocks make up 35% of the index?
 
Yes, equal weighted indexes do exist but the indexes we are discussing here (MSCI World, S&P500, FTSE100, etc) are all market cap weighted.
 
Sarenco said:
But if you overweight or underweight any particular security, country or sector relative to the market, you are actually creating a less diversified portfolio.
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If I invest in S&P500 Equal Weight then based on market cap I will be underweight in the tech sector. But how am I less diversified? I have all the same stocks but I'm less exposed to individual large companies like Apple, Nvidia, etc.
 
Will global warming and over consumption put a damper on stock and bonds and blindside people thinking of retiring early who are expecting stocks and bonds and pension pots to keep increasing until the depart this world,

Global warming and over consumption have no borders or sectors there is a good chance action will not be taken in time so as not to affect stocks and bonds and then the handbrake will be applied all of a sudden,

Wealth created trough labor/work will have a higher value/ reward than all other types of wealth,
 
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@Corola

Ultimately the whole point of diversifying a portfolio is to increase risk-adjusted returns.

Over the 10 years to 31 March 2025, the S&P500 Equal Weight index produced a materially lower return than the S&P500 and it did so with materially greater volatility.

So, inferior risk-adjusted returns.
 
And over the previous 10 years it didn't.

Cap-weight has outperformed equal-weight so much in recent years precisely because it's become so concentrated in the Magnificent 7 who have been so magnificent.
 
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The msci world had 44.8% US stocks in 2011, 57.8% in 2021 and in 2025 75% US I believe. Is this the first big test of these global ETFs and funds as they all have large US and tech exposure. In 2008 crash ETFs were still small in terms of investment so wouldn't have had much effect on the overall market. In 2020 covid they were large but the crash was short lived and the theme of US tech being predominant was actually reinforced by covid so the ETFs were in tune with all that . However now it is the US itself and tech stocks in particular that are suddenly out of favour and getting sold off, so what happens when the ETFs have to reflect the market weights of the stocks aswell then they are also selling US stocks into a falling market to buy other stocks that are now rising. Is there a danger that they are also reinforcing the sell off of US tech?
 
@Corola

Over the full life of the S&P500 Equal Weighted Index, from launch in January 2003 to date, it has (modestly) underperformed the S&P500.

But more importantly, the Equal Weighted Index has displayed greater standard deviation than the S&P500 over that time period.

So, over the full life of the S&P500 Equal Weighted index it has not produced a greater risk-adjusted return than the S&P500.
 
@joe sod

You seem to have a fundamental misunderstanding of the mechanics of how index funds work.

The fund manager doesn’t have to sell anything to reflect the closing price of a security in the fund’s NAV.
 
Higher risk-adjusted return isn't the only measure of diversification. Over that period S&P500 also has higher return and lower standard deviation than MSCI World/ACWI. That doesn't mean global equities are less diversified than US equities.

Correlation and concentration are important too. You don't want lots of your portfolio going down at the same time, which is more likely if you're highly exposed to one country or sector, like US tech.
 
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joe sod said:
Are you sure about that a quick google shows it has 47% of its stock portfolio in just 3 companies, Apple , American Express and Bank of America
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Stock portfolio is only one part of the BH pie. Owned/controlled businesses and cash/equivalents are the others. And besides, Apple sell their products and services worldwide.
 
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I retired at 62 I used up most of my savings outside of my pension pot instead of drawing pension straight away, my reasoning was I would have savings again outside of my pension from the 20% tax free I will be drawing down when using pension pot to take out an ARF,

One thing still in the back of my mind is the Last Pension levy when the government raided pension funds, the took out nearly as much as i was putting in each year the fact the raided a % of my total pension pot which had taken a plunged at that time in real terms the % was even higher again,

seeing there was little or no outcry at the time I expect the same again if the need arises,
 
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bkenn14 said:
One thing still in the back of my mind is the Last Pension levy when the government raided pension funds, the took out nearly as much as i was putting in each year the fact the raided a % of my total pension pot which had taken a plunged at that time in real terms the % was even higher again,

seeing there was little or no outcry at the time I expect the same again if the need arises,
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Agreed. That was a particularly nasty way of raising money by the Government of the time. I still get annoyed when I think about it, both as someone who works in the pensions business and as someone who had my own pension fund raided.
  • Levy was not just taken from investment gains, but also from the main capital. So it was similar in principal to the Government deciding to take a few bob out of your current account and not just DIRT tax.
  • The larger your fund; the more you got hit. So from a Government perspective, it would be very easy to dismiss those who complained as "fat cats" grumbling about a mere 0.15% of their "huge" pension funds being levied.
  • It did damage to the Government's aim of encouraging more people to fund for their own retirement. "We'll give you tax relief on contributions and tax-free investment growth but then we can decide to take a chunk of your fund if we decide that we need the money."
  • The one that irritated me most at the time - then Minister Michael Noonan promising to end the pension levy on a given date. And he did. And replaced it in the very same Budget speech with a "different" tax on pension funds that operated in exactly the same way as the pension levy. And then having the gall to claim that he had kept his promise to end the pension levy. Such cynical politicking.
Right - time to stop ranting and eat some chocolate...
 
Don't forget that this pension theft was supported by the Labour party under the leadership of Joan Burton.

They pretend to be a workers party, but have never expressed any regrets about their part in this attack on Irish workers.

All money removed from pension funds should be returned with the lost investment performance added.
 
What gets me most about the pension levy was the government propeganda from the likes of Michael Noonan that he was going after the fat cat pension fund managers and not the individual pension investors. I'm taxing the pension providers who have been pulling a fast one of the public for many years (this is true !). In reality the providers paid nothing of the tax but it came fully from the funds of the indiviual pension investors. Not only did he rob me blind - he insulted my intelligence.
 
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LDFerguson said:
Agreed. That was a particularly nasty way of raising money by the Government of the time. I still get annoyed when I think about it, both as someone who works in the pensions business and as someone who had my own pension fund raided.
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As someone knowledgeable like yourself, Can you tell us how the pension funds deal with the current sell off and large exposure to US tech and dollar, how quickly do they start re balancing their funds and would they be selling them down now? I suppose the young guys in the pension fund industry have no experience of this sort of revaluation of global stock markets, money flowing from US back to Europe and rest of world essentially
 
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Hi Joe
I have no Idea how pension funds operate, only what I seen all around me when it looked like there was going to be a crash in 2008,
lots of people working trough there advisors were already moving stocks and shares around into cash, and safe havens not just pension funds everything appeared to be all ready overloaded by the time the general public with pension pots got in on the act,
most found out when it was too late the market had crashed and for want of a better word had bottomed out before funds actually got transferred,
In the pension scheme I was in people who worked closely with the company advising and running our scheme there advice for the most part was the market would be down by the time funds got moved,

I know it was not the question you asked,

But I do not consider it timing the market if people moved there pension pot into cash in good time before Trump Tariffs were announced once the moved them back out of cash again straight away once the markets crashed,

The question I would like to know how long it takes between the time your pension advisor orders your pension pot to be moved lets say into cash and the actual time it takes your fund to actually be in cash,
again how long to reverse out of cash again,

I expect It will take longer when there is uncertainty in the market,

In the last crash I did not move my pension pot left it as is was people closer to the advice who decided to move to cash lost out because it took a lot longer than they expected to move to cash and reverse out of cash again,

Some people when alerted by there pension advisor of an expected downturn in the market instruction there advisor to move pension fund to cash felt it took a lot longer when there was uncertainty in the marker I haven't an idea if it is true or false, But it would be nice to know what people in the Industry think,

Again if there is uncertainty in the market will it take longer to reverse the changes once markets have dropped,
 
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