Should We Be Worried About Global Index Funds?

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I have seen a rise in articles and news publications claiming that global funds are under threat and that investors could be at risk. Today, let's look at whether this has any merit.
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00:00 - Growing concern
01:13 - How we got here
03:20 - They will fail
05:10 - Past dominance
09:00 - Equal weight
10:35 - The rest of the world
11:50 - Tech rising
This video does not represent financial advice, and I am not a financial advisor. When investing, your capital is at risk. Investments can rise and fall and you may get back less than you invested. Past performance is no guarantee of future results. Free shares can be fractional for more information see these terms.
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Опубликовано:

20 июн 2024

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Комментарии : 385

@DamienTalksMoney 2 месяца назад

For more info on what I discuss at the end please email Will@damientalksmoney.com

@gavinwelsh4534 2 месяца назад

Hi mate Great idea re providing advice to employees and employers of businesses but may I ask what makes you qualified to give this advice?

@DamienTalksMoney 2 месяца назад

@@gavinwelsh4534 Great question. The FCA's definition of guidance covers such activities (I have linked the full details below if you wish to read them). We are also partnered with financial advisors who attend in-person sessions and provide support to employees but, crucially, are not there trying to get everyone to invest in their funds. Which is the motivation of most advisors when they enter workplaces. Our focus is on education in the same way this channel is. www.fca.org.uk/publication/research/fawg-consumer-explanations-advice-guidance.pdf

@gavinwelsh4534 2 месяца назад

I’m an IFA myself, so that’s why I asked. There is a massive gap in terms of auto enrolment and employees and employers been informed

@DamienTalksMoney 2 месяца назад

@@gavinwelsh4534I thought you might be and again thank you for asking the question because it’s an important one and honestly it’s something I have pondered IFAs do amazing work; I see them as a key part of making this work. I’m not looking to replace them But I want to remove the AUM incentive and focus on education. That way, we can make sure staff get a base-level understanding of things like their pension and also provide access to IFAs for more complicated or specific advice. My main aim is to bring as many people as possible up to the level where they can confidently say they understand what their pension does and why they are in the funds they are, as well as the other basic but essentially personal finance areas that are often lacking.

@gavinwelsh4534 2 месяца назад

@@DamienTalksMoney I think the solution is for companies to pay for the IFAs time to provide such educational seminars. The problem is that smaller pots on an individual basis are not commercially viable. It’s a ticking time bomb the lack of money being saved in general.

@laz2452 2 месяца назад

The "high concentration" in the index doesn't really increase risk even if all the top companies were in the same sector. You hold the index long term, but the index doesn't hold companies long term. If some change happens in the future that means a lot of these big companies become irrelevant, then the index will start to sell them off and it will start buying the new companies that people will use instead.

@aa-lz1oc 2 месяца назад

These big companies will fail… for something else. The indexes are self regulating, the composition changes over time but they still capture the growth of any future winners. Short term we may see a big correction but in the long run the market will be larger. Stress less, invest more. Quoting Dory from Nemo: “Just keep swimming, just keep swimming”.

@bigboldbicycle 2 месяца назад

Dory is a great metaphor for passive investing. Don't need to be very smart or have a good memory, just keep swimming and you'll beat the rest of the sea life to your goal.

@__Rum-Ham__ 2 месяца назад

Nice one Damo, I was afraid you were going to give me a genuinely compelling reason to stop investing in global index ETFs. Thankfully not 😂

@DamienTalksMoney 2 месяца назад

Never going to happen mate.

@bretthasbrouck9808 2 месяца назад

What? Now I gotta finish watching

@davem.4003 2 месяца назад

@@DamienTalksMoneyNever say never! Despite the fact that I agree with you - it does seem extremely unlikely but it's always possible, for example one of the main focus areas for AI must be in trading and investing, so if someone creates a better solution, everyone will flock to it

@MrDuncl 2 месяца назад

Presumably index funds will have been selling Tesla as the stock goes down. In my experience picking promising shares and watching them rise is easy. Knowing when to reduce your holding is the difficult part. I wonder how many people with Tesla stock are now increasing their holdings saying "It will soon be back to an all time high".

@johnristheanswer 2 месяца назад

@MrDuncl " easy " . OK.

@harrysahota4072 2 месяца назад

Thank you. I've been thinking about this exact issue for a while now, and I'm glad you've explained it so eloquently!

@DamienTalksMoney 2 месяца назад

My pleasure!

@brettsta72 2 месяца назад

Mate. Amazing. Bang on form.

@NightshadeGengar 2 месяца назад

I'm almost 29 and I've just started to learn about investing. Your videos have been an amazing help! Thank you Damien!

@madma11 2 месяца назад

Never too late to start!

@paulkelly6726 2 месяца назад

Same here at 44, though mate. Let's go 👍🙏👊

@sufiyan.9535 2 месяца назад

Same. 29 myself.

@TheRealMerl 2 месяца назад

When I was watching this absolute masterpiece I thought I'd have questions, but now I have only one: Why on earth do you have so many remotes Damo?!

@DamienTalksMoney 2 месяца назад

Honestly I just walked around my house once and I found all those…

@TheRealMerl 2 месяца назад

@@DamienTalksMoney So none of these live permanently in a random drawer? 🤣 That's mad! Great video man, thanks a lot!

@DamienTalksMoney 2 месяца назад

@@TheRealMerl there was defo some random draw action

@RajaseelanGaneswaran 2 месяца назад

The answers here must be remotely true 😂😂😂😂

@bjeorfffurghinson5809 2 месяца назад

Noticed an uptick in editing lately in your vids. Enjoying it mate! PS love the ABBA reference

@AshJun17 2 месяца назад

Production values on these videos have gone up quite a few notches. Great content and great presentation. 👌

@DanRobards 2 месяца назад

Was about to say the same. Banger of a video.

@chrisyates2591 2 месяца назад

You are Amazing! For 50 years I was a teacher. For 40 of them at the Institute of Education, University of London. I worked in international distance learning. You and Ramin and no doubt some other genuine FinTech RU-vidrs are changing this world for the better as 21st century educators. You are the pioneer teachers of this new wonderful, dynamic and dangerous century. There is one bit of knowledge that counts for more than all the others - to find out and learn and master something for oneself. But we all need people to offer a helping hand a mentor, a coach or guide. We all need to win in some way - Tommy needed Jimmy and vice versa - c.f. the climbing analogy. Keep going, your vision is a much needed one. How you get there will be a wild ride. But it will always be interesting. I wish I had another 50 years to help change this world some more.

@DamienTalksMoney 2 месяца назад

Thank you mate!

@FutureInvestmentsBullion 2 месяца назад

Brilliant video. Love your well researched info! Thankyou.

@tehillaobanor2540 2 месяца назад

Really needed to hear this

@infour44 2 месяца назад

on form! good luck with the venture too.

@WanderlusttheWorld 2 месяца назад

I predict with inaccuracy, the next biggest sector will be healthcare, medical devices, medical tech, biotech, pharma, health big data, health AI.

@DamienTalksMoney 2 месяца назад

I think you could be right here around medical devices and bio tech.

@user-el2dn4zz3d 2 месяца назад

Yep, I was thinking exactly the same healthcare and biotech aided by AI will boom. But that’s the beauty of an index fund. These players are already in the mix. Thermo and Waters provide equipment for these industries and look where they are in the S&P 😉

@MrDuncl 2 месяца назад

But which company will benefit the most? Maybe the Apple Watch series 17 will achieve what Theranos was attempting.

@beepboopbeepp 2 месяца назад

Healthcare is so slow though, but when it finally gets results like novo nordisk it’s huge.

@davidlguerr 2 месяца назад

You're just trying to beat the market, betting for specific sectors.

@7thlady 2 месяца назад

"I need to get out more" crack after throwing up a "fantastic chart?" Genius. I feel you, my friend.

@lukeh5831 2 месяца назад

So interesting thank you for sharing!

@kingstun8118 2 месяца назад

Dont usually 'like' videos, but the creative advert at the end was the cherry on the cake for me. Great video!

@sambrook3036 2 месяца назад

If you like creative adverts at the end you should look up map men.

@DamienTalksMoney 2 месяца назад

Thank you for watching all the way to the end and then taking the time to like and leave a comment. Comments like this are the exact reason I try to get a little creative sometimes

@alf_lim 2 месяца назад

As always mate. Thank you for your insights. Well done with the charts 📈

@Life_Literacy 2 месяца назад

Cracking video fella. A really great to see how your business is growing… really nice touch 👍🏻

@DC-yj5nj Месяц назад

Thank you for your rational review amongst all this noise. Feels like everyone has an agenda and sometimes you need someone to cut through the noise to provide balance. Very well thought out and delivered.

@anikaka6921 2 месяца назад

Where do you find you graphs and charts or do you make them yourself?

@Louster3456 2 месяца назад

This was a brilliant video and your points made were a great antithesis to the article. Thank you!

@peglux 2 месяца назад

Looking back historically is interesting, however one thing where there is a significant contrast is with regard to FUM flow. In more recent times, i.e. last 15 or so years, there has been a proliferation of funds allocated to indexing strategies. Now over 50% of the market I read. With this large amount of money following the same strategy, what impact (if any) is this having on price discovery, constituent liquidity and the EMH? Could this be (or is it already) problematic? I feel that this needs to be better understood. Thoughts?

@sambrook3036 2 месяца назад

Brilliant! You are bang on, there is no tech because everything is tech!

@george6977 2 месяца назад

Making fire was high tech to early man.

@MrDuncl 2 месяца назад

@@george6977 James Watt utilising that fire was extremely high tech. So much so that he has a unit of measurement named after him.

@chrissmith3587 2 месяца назад

Yep blame the execs puffing up valuations Tech should be only companies that sell software (preferably exclusively Amazon). People hear tech, they are thinking primarily Google, Amazon, Microsoft style companies. Hardware has completely different risks, overheads, scalability, per user cost to software. Amazon is a cloud services company with a retail business on the side. (Look at operating profits from AWS) Side note at end. Tesla is not a tech stock, and comparing to other car manufacturers is blatantly absurd. I work automotive software in uk. I am definitely an ev truer believer and have spent my working life exclusively working with EVs. The recent gloom around index’s almost convinced me just due to the high weighting of Tesla.

@guncolony 2 месяца назад

6:07 this is REALLY interesting! Glad that i was randomly recommended this video

@soycowdoy 2 месяца назад

Nice plug at the end

@andreask5193 2 месяца назад

Would love to see you do a video about how index fund bubble pop looks like and how would it play out.

@Marques127 2 месяца назад

Active investors make the index funds work, if for example Apple is over invested by index funds then active investors will start selling Apple that's why u can't speak of a bubble in index funds because there's still a lot of active investors who will even it out, and there probably always will be.

@garygodwin528 2 месяца назад

Top video Damo, very thoughtful with real data and clear explanations. Thank you!!

@gjbuyken 2 месяца назад

Nice analysis!

@jeroenkoppert688 2 месяца назад

thanks Damien, learned from that. great work

@John-ty3sf 2 месяца назад

Interesting video… most of my investments are in S&P 500 and global index funds.. but also I am taking a punt on Ai and next tax year on Riets also

@masoncnc 2 месяца назад

Great perspective. Watch to the end!;;!;!

@iansony4787 2 месяца назад

You’re good at what you do. Well done!

@DamienTalksMoney 2 месяца назад

Thank you very much

@juliegovier6570 2 месяца назад

Thanks Damien. Honest, concise, informative, unbiased...with a dash of humour... Love it.

@TomsPersonalFinance 2 месяца назад

Great video, Damien. Production and editing is among the best on RU-vid 👏

@stevecornell5596 2 месяца назад

Seriously impressive video: deep and considered technical market analysis put across in a clear and down to earth manner. That’s skilled work

@jacc88888 2 месяца назад

This was not boring! Fascinating and great insights.

@darrenorr3816 28 дней назад

Another great vid, pitched at exactly the right level of understanding

@ashtonmasher 2 месяца назад

Great summary and analysis. 👍

@davejones6891 2 месяца назад

Thanks Damo. Informative as ever!

@Gr0nal 2 месяца назад

Reassuring to hear. I'll keep up the passive investing because I don't have the time, energy, or knowledge to do anything else.

@murrayleach3456 2 месяца назад

Very informative and well presented - thank you.

@jacobworsoe 2 месяца назад

Excellent video! Following the analogy with having only one tractor - is it a problem to only have ETF's from one ETF provider? What happens if that provider goes out of business? Is all your money then lost?

@adrianl5899 2 месяца назад

Damien, I wish you well with developing your work further. You have an excellent way of conveying a message in a personable, light-hearted and mainstream-friendly way.

@Waddywoos360 2 месяца назад

Thanks for this video Damien, I had been wondering about this recently. Can sleep easier about my pension now!

@jaybee6382 2 месяца назад

Look up capitalization weighting. Makes a big difference.

@henrypawson513 2 месяца назад

Quality content as always! Been subbed since less than 10k , keep it up Damo!

@sl0w_racer 2 месяца назад

"Nothing but bloody adverts" 😅 that made my day

@chrissmith3587 2 месяца назад

Just as a note Amazon isn’t really a retail company It’s the dominant cloud service provider, providing the structural support for vast sections of the modern internet. Who also has a big retailer attached. AWS has been responsible for a disproportionately high percentage of Amazon operating profit.

@ttrjw 2 месяца назад

Diversification is a lot better in mid cap indices e.g. S and P 400, FTSE250

@NimbleJesus 2 месяца назад

Absolutely fantastic video! Your mastery of oration makes these videos so enjoyable to watch!

@_crow8887 2 месяца назад

Massive credit for coming up with the farmer story

@davidandhelen4657 2 месяца назад

You are wise beyond your years Grasshopper.

@Optrogaming 2 месяца назад

Hi, i dont know if youve mentioned this but, once a company loses its dominance in the market. it will leave an index fund and be replaced by the next best thing. hence top 500 top 100 top 30 etc. ergo. it'll always be the biggest best performing companies you own. love your vids correct me if I'm wrong

@davem.4003 2 месяца назад

Index funds are fundamentally dollar (pound) cost averaging - they must invest as an individual stock is rising and they sell (take profit) as it falls, reinvesting in another growing stock. It's a virtuous circle driven by rebalancing the portfolio. In effect, the same thing applies whether the fund is market-cap weighted, or equal-weighted.

@lunarossa94 2 месяца назад

My concern is less with the concentration of these companies in the indices but rather their overvaluation. Large cap growth is a sucker’s bet. I wouldn’t invest in these large tech companies as “stock picks” so I don’t want them to dominate my index portfolio. I personally tilt slightly towards value factor funds (especially at historically high valuations).

@ianseward9928 2 месяца назад

So lifestrategy and l and g index are too uk , all of the global trackers are 65% US , so where do you go

@andrewlaitt9586 2 месяца назад

Great work Mr. J

@woody00011 2 месяца назад

Props for one of few adverts that can certainly be described as entertaining.

@stuartthursfield4333 2 месяца назад

Doesn’t bad performing stocks get removed from index funds and replaced with more favourable stocks?

@hachimaru295 2 месяца назад

yep just like everton , forrest and eventually man city down they go

@coderider3022 2 месяца назад

S&P have built in rules to ensure they are profitable but I don’t think ftse have the equivalent??

@DamienTalksMoney 2 месяца назад

🤣🤣🤣🤣

@RobinHood-us7sg 2 месяца назад

@@hachimaru295Forest and they won’t be going down #miraclemen ⭐️⭐️

@michaelsharman7176 2 месяца назад

The whole point of investing in the S&P 500 is that it’s the biggest and best 500 companies. The better performing companies ( and sectors ) will replace the less successful. Relax and keep in investing in the S&P 500 …. Given America is currently most of the global market. And most of the S&P 500 companies get large profits from the global market. It may change BUT it’s not going to happen anytime fast

@aqasanu1992 2 месяца назад

Keep doing what you're doing 😊

@blaupunkt1619 2 месяца назад

Simply amazing content, based on lots of data and research. Awesome work - really! Loved to watch it. Cheers from Brazil

@Ragnotzo 2 месяца назад

Which global index fund do you use, and on which platform?

@adrianhazzard6665 2 месяца назад

I'm not sure but assuming it's FTSE global all cap

@thepropertysurgeon 2 месяца назад

Thanks Damo. Really interesting re: tech monopolising the retail space. Its something we could have probably predicted. But isn't a investment fund fluid- as in - if one sector liquidates, the fund automatically deversifies into the next big 7?

@getreal7964 Месяц назад

Great content Damo, very well researched and presented.

@DamienTalksMoney Месяц назад

Thank you!

@JamieJam-ks2wn 2 месяца назад

Is Invesco FTSE all world still your play?

@michaelbuckmaster00 2 месяца назад

I never miss a new bit of Damo content… because he never misses. 👏🏻

@doty6621 Месяц назад

Cant see the link to Sacha's video

@MrHotrod79 2 месяца назад

Excellent content as ever, thank you!

@JakubStanley 2 месяца назад

Top video, eloquently explained and very informative

@DamienTalksMoney 2 месяца назад

Thank you!

@gavinb7761 2 месяца назад

Yet another banging vid from you Damo 👍🏻👍🏻👍🏻

@reavsie1 2 месяца назад

The voice of reason, but without the sarcasm and swearing - needs more Sasha.

@elephantandcastle838 2 месяца назад

According to an article in the Times today, 17 companies in the FTSE 100 have increased their dividend each year for the last 10 years. If you would have invested 10 years ago, you would have got a total return of 281%. According to my calcs this represents an annualised return of 14.3% per year.

@mrmoneymakingmadness9755 2 месяца назад

Great Video. Agree that there is an overreliance on the biggest stocks in the US. Thanks for the history lesson!

@CrappyProducts 2 месяца назад

The main point is that our investments are constantly changing, so the index is changing depending on how companies are doing so even if some of these businesses will go bust, they'll be replaced, so that's fine

@RoxStar_eth 2 месяца назад

Loving the new format mate really well produced keep up the great work, smashing it!

@jamiefarrell4425 2 месяца назад

Great idea about going out to companies giving advice about personal finances. Hope it takes off!

@Anonymous-cx1lr 2 месяца назад

Have you looked into Commercial fusion? The impact on funds globally will definitely be something. The cost/price of all goods will go to near-zero.

@MrDuncl 2 месяца назад

It would actually benefit companies like Tesla unless someone like BYD comes up with a built in Mr Fusion on their vehicle. Further up the thread someone else has mentioned healthcare. I don't see how Commercial Fusion would have any effect on that and the companies involved.

@michaeldawson6309 2 месяца назад

Top info as always.

@IbadassI 2 месяца назад

That was good! It makes sense.

@stphkp889 2 месяца назад

I have to say: bravo! Very well done. Your interviews with Ramen are also very good content.

@kevinu.k.7042 2 месяца назад

Great stuff Damien - Thanks.

@sethhavens1574 2 месяца назад

Hey damo, thanks for another cracking vid, as usual! I have a question though, slightly confused, maybe I’m being thick! So, isn’t the entire point of a cap weighted index that it tracks whatever is representative of the market? i.e. If magnificent 7 or whoever drops out of the index, what’s the problem because the ETF will just redistribute to the next big players? So you always have the top - whether they are over dominant or short lived or whatever doesn’t matter, right? p.s. Beat of luck with the consulting biz! I personally think your down to earth style is a huge winner, I’ve certainly learned loads from you (and Sasha) 👍🕺💪👌

@simonjonesptchester 2 месяца назад

Interesting and informative, as always! Thanks, Damien :)

@dreamypuma 2 месяца назад

What a roller coaster video! (Excellent and insightful as always). Almost changed my strategy mid way, but brought it back to the ground at the conclusion. Slow, consistent, and steady is the way and trust the process. There are no crystal balls in this game.

@DamienTalksMoney 2 месяца назад

Never change the process! Sorry I took you on a roller coaster ride 🤣

@dreamypuma 2 месяца назад

@DamienTalksMoney Don't apologise, its grounding and a reminder. It's Bank Holiday tomorrow. A few drinks and a weak mind. Appreciate everything you're doing. Keep knocking it out of the park pal.

@DamienTalksMoney 2 месяца назад

The saddest thing about being self employed is I forget the bank holidays and don’t have the joy of them anymore

@ksmiffy91 2 месяца назад

Cracking outro!

@tobias2461 2 месяца назад

4:10 you can't use this information for anything as you don't know why the firms from earlier isn't anymore, if a firm is merging or being bought, it doesn't lose its value.

@kdudu 2 месяца назад

Hi Damo, what if we need different sector separation and qualification of businesses? Lumping everything into tech might not be the right thing to do maybe a bit outdated.

@MrDuncl 2 месяца назад

Regarding companies leaving the indexes I wonder how many disappear because they split into others or get bought by them. I'm thinking of conglomerates like Rockwell who made everything from the Space Shuttle to calculators. A current example which people will have heard of is HP. Split into at least four different companies (HP, Agilent, Keysight, and DXC).

@petert834 2 месяца назад

I think the issue for these big tech stocks is that they will (or already have) become so big that they cannot grow at the same rate as they had before. Also that a lot of that future growth is already in the price. They might still make tremendous amounts of money going forward, but the share price might grow slower than the rest of the market. Your end point about tech now being in everything...I do wonder if there is a paradigm shift because the source of that "tech" to power all the innovation is being dominated by a few companies, and since they have so much money it's hard to see that changing much because they can simply buy upstarts or copy and outcompete them with all their innate advantages (like Microsoft usually does). For example, there are only a handful of companies that make processors but there will be a gigantic need for more processors to power the kinds of future tech that will be incorporated widely. Same with data centers. We'll likely see the same with AI. A handful of companies will provide most/all of these, and unless they get broken up it's hard to see any way that they won't continue to be dominant.

@Motley365 2 месяца назад

Thanks buddy as always

@DamienTalksMoney 2 месяца назад

You are always welcome mate

@edchonam4906 2 месяца назад

Concise and thought provoking wrt my investing habit. Great video thank you

@sl0w_racer 2 месяца назад

The thing about global index funds, is they are not global. If people can accept that risk of less diversification, then all is well. The thing is though there are tech specific index funds that well outperform pretty much all global index funds. Another thing to think about.

@mlguy8376 2 месяца назад

Don't know much about index funds, but is there not a promotion/demotion of companies and rebalance that take place to ensure that the index performs?

@Me-ll4ig 2 месяца назад

Another amazing video, each one better than the next. First class.

@johnristheanswer 2 месяца назад

Great stuff. Legal and General Global 100 Fund does the job for me.

@ChrisBoehmvideos 2 месяца назад

Loved that ending 😂

@Nobumblegumforyou 2 месяца назад

Youre missing one key data point. Historic P/E ratios. Benchmarked sp500 had a historic average of 15 and china around 12. Right now sp500 is around 27. Which market is overvalued and undervalued? The one which is an outlier from its averages.