None of this constitutes financial advice or guidance. Just my personal take, written for myself, and I don't guarantee its accuracy. Take independent financial advice for any of your own decisions.

A reader was about to start investing in index funds, and emailed to ask whether I still believe in the HSBC FTSE All-World or whether there’s a better option.

My answer: I do still stick to the HSBC FTSE All-World.

There are other options too, and there isn’t necessarily a right or wrong answer, but I will summarise them and explain why I like the HSBC:

HSBC FTSE All-World ≈ the biggest 3,000 companies in the world (90-95% of the world’s market cap), with a fee of 0.13%

There’s also the Vanguard FTSE Global All Cap which adds in the remaining 5,000 smaller companies, and has a fee of 0.23%

And Vanguard LifeStrategy which is an actively managed fund of passive funds - meaning someone is guessing on your behalf how to allocate between UK index funds, world index funds, specific sector index funds, etc. You can also have them keep some % as bonds for you within the one fund, so you don’t need 2 separate investments for stocks and bonds. It always has a much heavier UK weighting than the UK’s actual representation in the world, some people like this, some don’t. Fee is 0.22%.

It’s anyone’s guess which one will perform better or worse over a given period of time. They’re probably all OK!

This is their performance over 5 years. HSBC wins (just):

This is over 1 year - the Vanguard Global All Cap is on top:

Likewise, based on past performance, you could decide to bet on the entire US market and none of the rest of the world, using the Vanguard U.S. Equity Index Fund. It’s by far the best in the last 5 years:

BUT that doesn’t mean the US will be better than the rest of the world in the next 5, 10, etc years. A lot of people think it will do worse moving forward. I wouldn’t personally limit myself like that (plus, that’s really making two bets: that the US market will do well AND that the currency conversion will work in your favour!)

I don’t try to predict the future, so I take the one with the lowest fee, and almost the whole world, which is the HSBC.