Stephen Walters
Choosing for young people, and for anyone cautiously disposed.
These two charts by Google show worldwide interest is fading not only in Covid but also Ukraine.
In no position to judge anyone for their interests; I’m presently attempting to shape a long-term view.
To the impact and consequences of climate change I add those of Covid and war in Europe. I read of tangled supply-chains and de-globalisation; shifting alliances between West / East and North / South; inflation and impending recession; accelerating polarity between poverty and wealth; politicians looking to their own self-preservation, reputation and advancement; insanely low interest rates and fear to grasp the nettle.
My brain’s not big enough to accommodate the intricacies and nuances of all these factors. Looking for a simple approach, I’m considering two questions I find not easy to answer: what investment to recommend for people:
Under the age of sixteen? [typically not more than £5k, and rarely more than £10k]
Who find thematic investment more volatile than is comfortable for their disposition?
In both cases, my motive is to identify a strategy and a fund for people who’ve little capacity to monitor their investments. For them I want something competent - no nasty surprises - over a five-year period or longer. I would like the fund to pay an income for those who want that. I’m opting to invest in equities rather than real estate or fixed interest (eg government bonds) because I see both those asset classes as more complex than suits the young or cautious clients.
I’m accepting we could easily opt for my old and very reliable friend, Prudential PruFund Growth. I’ve been recommending it for years, with ne’er a complaint. I’d like to identify an ETF as an alternative, because I think over five years or longer it could perform better than Pru’s aspiration of 4.7% per year after charges.
Using the excellent resource JustETF, I’ve settled upon two ESG options: World and UK. I accept not everyone shares my commitment to ESG principles. No moral or ethical superiority do I claim, but I do believe ESG is a major impetus for successful investment from now on.
In each case I’ve begun with an open field of candidates. I've filtered out funds not yet a year old; smaller than £50 million, or larger than £1 billion; less than full-replication of the index they track; annual charges greater than double the cheapest.
From 24 World funds, I’m left with a shortlist of two, and from a list of seven UK runners also two remain.
Now comparing volatility and performance over the longest period of the funds' existence together, and over the two years of pandemic, and three months of war; I have arrived at a conclusion for each.
For UK, a tie between UBS’ UKSR and XTrackers’ XASX. Both track the MSCI UK ESG index, so no surprise they’re in close connection; both paying a dividend of 2.6%. Pressed to choose one, I’d pick the UBS fund because it’s 4x larger - more popular - and therefore likely more tradable.
For World; between VanEck’s TSGB and UBS’ SRIW, I’d choose the former because it’s twice the size, and presently pays a dividend of 1.9% compared to 1.3%. The VanEck fund has an unusual approach I find attractive; it invests an ‘equal weight’ to all 250+ holdings. They track different indices, and the overlap is only about one-third; so some people might find space for both funds.