Is it really advisable to hold lots of UK stocks when the UK market is only a tiny proportion of global markets?

It’s a very good question. And you are right in your observations about the overweight position which Vanguard has to the UK.

The question is how deep does everyone dig? The whole point of these ‘ready-made’ solutions is that they remove the hassle or complexity for you. Making it easier to start and/or maintain a diverse portfolio.

But under the bonnet, they differ wildly. This is shown pretty clearly in the content series we run which tracks the performance of ready-made portfolios every quarter. Some – which have the same description (e.g. Cautious or Adventurous) and sound like they are very similar – will perform much better or worse than others because of the sorts of differences you articulate.

This issue troubles the UK regulator, for example, but knowing what precisely to do about it is another question. You can’t mandate commercial organisations to behave the same way or use the same descriptions/adjectives. Even collections of passive investments will have an element of active decision-making.

At the end of the day, I think Vanguard LifeStrategy is one example of these ready-made options that will help people overcome procrastination and inertia and get started. And I think it’s better to be in the markets over the long-term, with a diverse mix of investments, rather than sitting on the sidelines worrying about every detail.

You rightly observe that they have a large tactical weighting to the UK which is controversial. Of course, the US markets have done much better than their UK counterparts over recent years, so a relative overweighting to the UK will raise some eyebrows. If you’re looking for a ready-made alternative that has a lower exposure to the UK, you could look at the BlackRock My Map range for example.

If we compare similar beasts, the Vanguard LifeStrategy 80% has 79% in shares at the moment, and of these 51% are in the US and 23% in the UK. A lot. The BlackRock My Map 6 has 90% in shares at the moment, 63% in the US and 5% in the UK.

However, if you are the type of investor who has a strong opinion on how much you should have allocated to the UK markets, for example, you may want to go it alone and build your own portfolio, maybe blending a collection of Exchange-Traded Funds (ETFs) with a handful of active funds, rather than pick a ready-made option. Or if you want to be fully in shares, you could pick a large passive global fund such as the popular Fidelity Index World fund which costs 0.12% a year (cheap!) and has 72% in the US and 4% in the UK. This tracks the MSCI World Index which is currently the world’s largest 1,429 listed companies spread around 23 different countries.

So in short you are right and your question is really relevant and very astute! But over the long term, the biggest impact for most of us will come from getting on with it and investing as much as we can as early as we can. And if these simple solutions help us to do this, in the middle of our busy lives, I personally think that’s more important than worrying too much about the precise mix of what lies under the bonnet.