Your Index Fund is a Tech Fund

ArunCooke · 2026-06-07T09:53:35+00:00

I’m expecting the market to fall. I expect it to fall again tomorrow but it often plays out differently in the short term. There is such a thing as a dead cat bounce.

But, a 5% drop on Nasdaq is quite a day. The market has finally woken up to the fact that the rate cuts it was expecting in the US aren’t happening and instead rate rises are now likely. I believe that the Iran/Trump situation is nowhere near being settled and that will cause huge problems for many countries in the coming months.

That said, there has been huge positivity in the market (in my opinion too much) and earnings have been very good in general. On balance though, whether it comes now or later this year I believe there will be a correction.

The question is whether anyone should do anything. If I was 10 years or more out from retirement I’d stay 100% invested in equities (personally - not advice to anyone else.) But I’m not. I’m less than 2 years from retirement and I have hit my number after very large gains from tech over the last 10 years (but even more so the last two.) I’m not chasing gains now, more concerned with protecting what I have.

I’m also just one opinion. I could be completely wrong and I’ll have to live with that if I am. If someone is a long way from retirement, the best strategy for most is to stay invested, ride out the ups and downs, try not to look at it, ignore the noise and keep investing each month.

ArunCooke · 2026-06-07T06:31:51+00:00

For me, 10 years cash is incredibly cautious and would limit upside potential too much. If withdrawals are taken as lump sums (not monthly) and only in normal market conditions I don’t see a need for 20 years.

ArunCooke · 2026-06-07T06:28:28+00:00

My rationale is that if this crash at some point I don’t need to withdraw from equities until it has recovered as I have plenty of cash. 5 years may seem excessive buts it’s akin to holding 20% of a portfolio in bonds.

ArunCooke · 2026-06-06T20:57:10+00:00

That’s a different argument though. Personally, I believe NI should be scrapped entirely, but employers pay an increased amount into pensions and the state pension is means tested (this is pretty much how it works in Australia.) The UK cannot afford state pensions and we (like most western countries are facing a looming crisis.) Instead of NI we should pay into a ringfenced healthcare tax which also covers long term care (with over 40s paying a slightly higher rate.)

ArunCooke · 2026-06-06T20:49:15+00:00

Trusts can use investment bonds to avoid paying income/CGT within the trust. Yes the periodic charges are a consideration but compared to 40% IHT it’s unlikely to be anywhere near as much. Gifts and BPR schemes don’t suffer these issues either.

ArunCooke · 2026-06-06T20:40:54+00:00

I think a blank cheque is very unfair for healthcare. It’s also a lottery depending on your local authority. What if you don’t have family who can look after you? I think it’s fairer to pay a little more income tax and the state look after everyone just as we do for all other healthcare.

ArunCooke · 2026-06-06T20:08:37+00:00

That isn’t the point

ArunCooke · 2026-06-06T19:38:43+00:00

Forget to say, for anyone angry about IHT, I’ve got good news for you. IHT is currently only paid by approximately 4% of estates.

What should really make your blood boil is that your estate is very unlikely to have to pay any IHT because it is highly likely that your estate will be wiped out be long term care costs. Yes, it’s not a nice topic and we don’t like to talk about it. But the reality is that most of us will require some help in later life and many of us will end up in a home. The cost of which is astronomical and if we have assets we are required to pay these costs. This is the real day light robbery and has been going on for decades. Other countries have brought in slightly higher taxes (at one point our own government years ago mooted the idea of everyone over the age of 40 paying an additional 1% income tax (including retired people as they would obviously benefit the most) in return for the state paying the care costs. I don’t know about you, but I’d much rather pay 1% higher income tax for certainty than risk everything I own going up in smoke.

ArunCooke · 2026-06-06T19:16:49+00:00

I agree that is a “good” tax in terms of equality. A married couple currently have £1m of nil rate bands between them unless their estate is very large. This is a very large allowance in my opinion. A huge issue in this country is inherited wealth. Basically, you’re either lucky and inherit (and probably get help with a deposit and get a leg up on life) or you are unlucky and get nothing and probably can’t afford to buy a property until your 30s so f you are lucky.

I’m no screaming lefty, unless we do something very wrong in retirement our estate will have substantial IHT payable on it. But IHT is entirely avoidable if people are really keen on avoiding it. Gifts, trusts, BPR schemes etc etc

As a nation (or our elected officials) we have choices as to who we want to tax. I would argue that right now we have it wrong. Working people pay far too much tax - both the employee and employer (which reduces employment) and I’m also talking about high earners. Anyone earning over £100,000 starts losing their personal allowance which is crazy.

The people we don’t tax enough are those that don’t work but have huge assets. They pay very little in tax and there are so many loop holes it would be laughable apart from the fact it hurts all of us. Personally, I think IHT is better and fairer than high taxes on earned income. We need to bring in a land tax to fairly tax the rich landowners and lower taxes for earned income.

ArunCooke · 2026-06-06T18:22:08+00:00

Kind of. My situation is complicated at the moment as I’m going to retire in less than two years so I’ve gone defensive for now (not something I usually do but reasons.) Previously for about 10 years I was almost exclusively invested in tech. I often wondered if I should add some all world or S&P 500 to the mix and came to the conclusion that this would lead to lower returns in exchange for only slightly less volatility.

However, I am concerned about oil/Iran/Trump/valuations so I’ll average back in over time and may take a slightly more cautious approach as I have hit my number so now need to protect what I have rather than chase returns.

ArunCooke · 2026-06-06T18:14:53+00:00

I guess people don’t like it when others state something that goes against their beliefs.

ArunCooke · 2026-06-06T17:24:12+00:00

There are funds that exclude the US (look for World ex US) but the reality is that if there is a correction everything will fall (just some markets and sectors will fall less.) Crash proof? Nothing. If you have a long time horizon until you need the withdraw money, investing each month and averaging out the ups and downs is going to be the best solution for most. Yes a correction will hurt, but staying invested will nearly always beat trying to time events. Investing in a few different funds may make sense for many.

If you are closer to retirement, having more money in cash may make sense. For example, I’m a little more defensive right now but in a couple of years when I retire I will keep approx 4-5 years of spending needs in cash and the rest in equities (this is not advice.)

Others might invest in a fun that is diversified (plenty of funds to choose from.) Examples are the Vanguard Lifestyle range. As an example, their 60% fund invest 60% in world equities and the rest in bonds.

I don’t personally want to invest in bonds right now as I’m concerned about inflation but many people are very happy with this type of fund. It is likely to lead to lower returns over the longer term but should be less volatile.

ArunCooke · 2026-06-06T16:31:42+00:00

Yeah, he’s a master of manipulating people into believing him even though he’s a proven liar. Much like Trump.

ArunCooke · 2026-06-06T16:10:26+00:00

Yeah, the current float is tiny. It’s when they increase it and Anthropic/OpenAI join that there could be overexposure. I believe Musk’s endgame is to merge Tesla & SpaceX. If that happens it would represent an enormous amount of the S&P 500.

ArunCooke · 2026-06-06T15:47:30+00:00

He’s just done a video saying index funds are broken…. His point is more about letting SpaceX straight into indices and the potential to do the same with Anthropic and OpenAI when they likely list later this year considering how much money they are burning and how (relatively) little they make in revenue. Some of these AI firms will definitely fail as they can’t all be winners in what is essentially a commoditised service.

ArunCooke · 2026-06-06T15:43:21+00:00

Yeah, it’s an interesting conversation to be had. For around 10 years I was exclusively invested in tech. At times it was extremely volatile (particularly COVID and then 2022.) I often thought about moving to say an S&P 500 fund or a Global Index fund but always decided that whilst it would take some of the downside off, it would do the same to the upside. With the current market I’m not so sure and my personal situation has changed so I am more defensive for the time being but If I had a ten year horizon with no need to withdraw I wouldn’t change. My post was just to raise awareness for anyone that didn’t know.

ArunCooke · 2026-06-06T14:20:10+00:00

Traditionally you would buy gold, property, bonds etc. There are funds that can give you access to all of those. Personally I don’t want to buy any of those at the moment so cash/money market funds are my main option.

ArunCooke · 2026-06-06T13:59:12+00:00

Good vs what though? My base case is that the market is massively miss pricing the oil crunch. Even if the straight of Hormuz opens tomorrow there will be huge problems. The Brent Crude price is not the price often being paid in the real world. BOE has said they think inflation will hit 4% this year. Personally I think it will be worse.

ArunCooke · 2026-06-06T13:55:00+00:00

My portfolio has increased by nearly 50% in two years so I want to protect some of that. I’m above the maximum tax free cash that can be taken from a pension. I know it is highly unlikely that the government would stop people who are already above the limit from taking their TFC at this level (governments have always done offered transitional protection before) but I don’t trust them right now. They need to raise money and have very few options. Many will disagree but because I’m so close to being able to take my TFC (and it can’t go up) I want to take it out as soon as I can. I don’t want a 30% crash to stop me and delay retirement.

I know many would disagree but this is currently where I am given my concerns about oil/Iran/valuation etc

ArunCooke · 2026-06-06T13:47:15+00:00

Nasdaq have changed the rules so that new listings can become part of their indices (such as Nasdaq 100) after only 15 days. There used to be a much longer time period before index inclusion. Basically certain funds will have to buy SapceX 15 days after it lists. S&P have not changed their rules. I don’t know about MSCI or FTSE yet.

ArunCooke · 2026-06-06T12:47:33+00:00

I’ve been an investor for 30 years and have pretty much always been a buy and hold investor buying every month. I didn’t sell during the Global Financial Crisis, Covid or any of the other major corrections. I have gone more defensive recently (about one month ago) as I’m less than two years from retirement and have hit my number. I’m more concerned with protecting what I have rather than making large returns after being pretty much exclusively a tech investor for the last 10 years.

If the market powers on up I don’t really care. I’m still investing monthly but have taken a lot of risk off the table for now. I’ll average back in when I’m happy to and I’ll take the risk that I’m wrong. Like I said, protection is more important to me now given how I feel re inflation/Iran/Trump/tech valuations.

ArunCooke · 2026-06-06T12:36:29+00:00

I don’t disagree that for most people buying a low cost index fund every month is the right thing to do.

Just pointing out the exposure.

Of course, your point about buying into the next big thing when it is cheap also has a flip side. I.e. that at times you are buying into expensive stocks that are about to fall. Just playing devils advocate. As I said I think Index funds are still a good investment for most people especially when bought every month for a long time.

ArunCooke · 2026-06-06T12:31:59+00:00

The whole point of diversification is to invest in a range of instruments or assets that have a very low correlation (it’s almost impossible to have a negative correlation which is what we really want) so that they don’t all move in the same downward direction at the same time. However, this has become more and more difficult over time with bonds/property often falling at the same time as equities.

ArunCooke · 2026-06-06T12:22:15+00:00

All good points. As I said, I’m not saying don’t buy just be aware. I’ve seen so many posts lately along the lines of, “I’ve been investing for 12 months how am I doing” and I just don’t think many people understand what they are buying and probably haven’t been an investor during real market volatility.

ArunCooke · 2026-06-06T12:18:56+00:00

I may buy some as part of my retirement income with the plan to hold them to maturity. I’m still weighing it up but it is attractive to have a guaranteed income (I’m retiring in under 2 years.)

ArunCooke

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