Why I (and you) should invest more in trackers

So today’s post is starting out as a much shorter quick one given the week and various other personal commitments that I have had – however I thought it worth sharing for people to laugh at me!

I’ve always been trying to pick my own stocks, from investing starting over a decade ago, and even when I was a small kid (how many 8 year olds do you know who read the FT and went through the share prices to check their fantasy portfolio?! :)) so it is something that I really enjoy. I will be honest, it is starting to get better. My first few forays were not good – I lost everything on Northern Rock (granted I didn’t put a lot in, and it was after it had already crashed so mentally I knew it was a gamble). I’ve lost money on others, but doing those was educating myself (buying a stock a mate recommends? Yup – lost money there as well) which means I got back into making sure I did more and more research before purchasing something (what, you mean a name you like isn’t just enough?!).

Think of a mistake you have read in a book, blog or heard on a podcast? Yup, I probably made it. The flip side is that I now seem to be doing quite well as I have learnt over time, and am still learning (rebalancing my portfolio in the summer of 2017 means I have lost out on an approximate 20% increase in BLT). I constantly look at the prices as they go up and down, and love seeing the dividends roll in. This could just be the bull market of course, who knows.

So why do I say I should invest more in trackers? Firstly, the volatility – of course this depends on what you are tracking, but I can’t think of much (ignoring crypto currencies!) that would contain that high a volatility. As my portfolios have grown in size, this means my individual share holdings are getting larger and larger. It got to the stage that I had to split my my approach, rebalance and get more investment trusts and trackers simply as I wasn’t comfortable with the amount of holdings of individual shares I had.

With the GTP ISA it is now pure tracker for my investments (I don’t count the cash experiment) – into VWRL on a fire and forget approach.

So with the increase in the use of trackers, what have I noticed?

Firstly, I don’t pay as much attention to them. Yes, I am buying VWRL every month and I know roughly how much it goes up and down, but nothing on a par with what I do for the individual stocks.

I don’t take it personally if the trackers go up or down – it is just doing what the market does. With the ones I choose I have the usual emotions – should I sell, did I make a bad choice, how long do I wait for etc. It doesn’t matter what I tell myself when I bought the share, the emotions are still there.

Whilst I love seeing my overall retirement savings continue to rise over time, I don’t feel any special “relationship” with the trackers. It has completely removed any emotion from it, and as such has meant I worry less and less about it, just as long as my investments trickle in. I will continue to do some form of selection but I am limiting that within my portfolio.

What do I take from this? That the best way to build the nest egg is not to try and time the market, select your shares etc. but just simply shove it into a tracker (or potentially a good Investment Trust) and forget about it.

So if you are happy to get rich slowly, and without stress or worry, setup a direct debit, buy a tracker fund/ETF and just forget about it – enjoy your life now knowing that you are also building your future.

 

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Author: fireinlondon

Fighting the high cost of living in London

4 thoughts on “Why I (and you) should invest more in trackers”

  1. I think that’s good advice. Everything I’ve read says passives are the way to go. I am tempted still (was going to buy sophos and big yellow store and would have done great out of both) and one thing I may do is add additional trackers to my Vls 100 once I get above 50k. I’m thinking the Vls small cap index (and possibly mid cap? As I don’t think it covers this? Certainly small cap I know it doesn’t) with some kind of property fund.) but then you have the added concern of how much to buy. I’m thinking 10 to 15%. that will be a few years yet though. Slow and steady

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    1. Hi FBAB,
      I will always have my self select portion of the portfolios to play with, but as they grow I will put more of the profit into trackers to keep me honest.
      It all comes down to what you want, I’ve split mine out and just need to stay true to those balances. I don’t currently have any property fund at all, but then I have a large housing exposure with the home so happy to be low. I have small and micro cap, and also FTSE250 so it all comes down to balance and diversification – you have to be happy 🙂

      I initially set my portfolio (excluding GTP) when I decided to change it that 30% would be in trackers. Never really worked out what the balance was, that came over time and now I am happy.
      Cheers

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  2. Hi FiL

    Trackers still form the bulk of my portfolio, so I’m happy with the total mount I have in ‘equities’. Like you, when I purchase them, I have no idea of the price, just buy what I can to keep my tracker portfolio in line with my chosen allocation. It’s a very easy kind of investing, I definitely spend more time mulling over my investment trusts and individual shares so it’s good to have this side of investing where I can just buy and forget!

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    1. Hi Weenie,
      Yes – I have to say I am enjoying the fire and forget approach, and especially as the portfolios have grown it makes my life a little more comfortable!
      Just like you I spend a lot of time mulling over shares and ITs so this is nice and easy!
      Cheers
      FiL

      Liked by 1 person

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