Global Stocks in UK PP

[tbone]

Hi Guys,

Magneto raised a question about holding a fund that tracks a global stock index, rather than the local UK FTSE All Share here : http://gyroscopicinvesting.com/forum/ht ... 628#p47628  - one concern I've seen raised relating to this is the currency risk. The funds I've seen that track the FTSE All World Index are priced in USD.

Here's the data for the FTSE All World index VS the FTSE All Share - I've tried to factor in the currency fluctuations by taking the average change in the GBP/USD exchange rate over the year and adding that to the % change of the FTSE All World index.  But tbh, I don't really know what I'm doing


Year   FTSE All World    FTSE All Share    GBP/USD     FTSE All World in GPB
2002   -18.9-25.004.3-20.7
2003   34.416.608.825.4
2004   16.109.212.021.2
2005   11.718.1-00.617.5
2006   22.213.201.314.5
2007   12.702.008.610.6
2008   -41.8-32.8-07.4-40.2
2009   36.225.0-15.509.5
2010   13.210.9-01.309.6
2011   -07.3-06.703.8-02.9
  78.530.5-44.4


The difference between the unadjusted FTSE All World & FTSE All Share (UK only) is huge before currency changes are taken into account, and still decent afterwards too.

Has anyone else done similar (more thorough!) analysis? I've had a dig through and found a few posts that discuss the merits of global vs. local PP, but not much concrete data - still looking tho.

I read some views saying that HB PP is best kept as 'in-country' as possible, but some others also thinking about a 50/50 in country vs global mix.  Is there any consensus on this?  Keep it simple maybe

Many Thanks,

T.

[magneto]

While still uncertain about the best option to suit the PP, have checked own holdings built up fairly randomly over many years and find the UK stock holding to be presently 31% of stocks.

50/50 may be the safest option but we feel more comfortable at about a third.

[gizmo_rat]

I suspect the question is unanswerable. If there was any theory that could predict which country's stock market was about to over / under perform then we wouldn't be messing about with the PP in the first place.

I find the augment about diversifying across asset classes more persuasive than diversifying within. Peace of mind comes from the major diversification not the minor, during 2008 I think that my diversification within equities proved to be a distraction rather than a diversification.

Slotine: I seem to recall that gold held the UK PP up in 2008, so not sure I'd mess with it lightly.