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[jem16]

Originally Posted by xyy123

I disagree. Equity markets go up 8 out of every 10 years roughly. FTSE 100 tracker pays roughly 3% yield which alone is better than cash and is the least risky equity investment (a global/foreign tracker has potential currency fluctuation added in).

3% yield but the chance of capital loss which is not likely to happen with cash (which yes can have inflation risk but choose an account which keeps ahead)

Of course, the longer you hold equities for, the less risky it is and a year is not a long time. I was merely sharing my opinion that I do not think there is much significant downside to come over the next year so equities could be a viable option although there is obviously more risk with that timeframe.

It could be but could equally not be - it's a gamble. The OP might not be happy with this gamble.

Plus putting £60k into one fund increases the risk.

Clearly you're referring to risk to capital but there are other risks, such as risk of not achieving investment objectives.

Yes I was referring to capital risk. You only have to read the majority of posts on this forum who are complaining that their S&S ISA or pension has lost money to realise that most people are concerned about capital risk.

[xyy123]

Originally Posted by jem16

How about comparing performance?

HSBC FTSE 100 tracker - 0.25% amc
5yrs – 29.39%

Schroeder UK Alpha Plus - 1.5%
5yrs - 65.3%

Rensburg UK Mid cap Growth Tust - 1.5%
5yrs - 98%

Scottish Widows UK All Share - 0.25%
5yrs - 33.9%

So what would you choose?

But only two of those are tracker funds - the HSBC and the Scottish Widows, hence the large disparity in performance of the others...

The only risks that are really pertinent to consider when investing in tracker funds (other than downside risk, which we've discussed) is the default risk, of the fund provider and the custodian, both of which will almost certainly have added insurance, so therefore default risk of the insurer. And with a 60k investment and current FSCS compensation limits of £48k, that would not be my immediate priority - moreso the liquidity and spread on the fund and the AMC which is usually 0.5% or less.

I use iShares personally.

[jem16]

Originally Posted by xyy123

But only two of those are tracker funds - the HSBC and the Scottish Widows, hence the large disparity in performance of the others...

Yep 2 tracker and 2 managed. The Rensburg fund was the top placed over 5 years and the Scottish Widows the top tracker with a low amc over 5 years. So one returns 98% and the other 33.9%.

So you are saving 1.25% on management charges to lose 64.1% in performance.

Seems a bit odd to me.

EDIT - Missed a tracker that seems to have done better.

HSBC FTSE 250 Index Ret Inc - 0.25%
5ys - 49.8

Still a difference of 48.2% in performance.

[Oceantwins]

Well, if this is about Capital protection I suggest the following formula
for any given period that you know you dont need the money - assume
now 3 years.

Fix 53.959 Pounds for say 3.25 % which should be achievable.

Calculation

Year 1 53.959 x 3.25 % = 1753 Interest

Year 2 55.712 x 3.25 % = 1810 Interest

Year 3 57522 x 3.25 % = 1869 Interest

End of fixed interest 61.260

60.000 Starting capital less
53.959 Fixed capital at 3.25

6041 pounds available for higher risk investments i.e.
Bonds or Equities. Even if they have failed after 3 years your
initial 60.000 Pounds have survived and there is a potential for 6041
pounds to grow in sum other instrument. I would not necessarily
choose a Ftse 100 Tracker. Maybe an Dividend / high value ETF.

Above model of course only applicable strictly for CAPITAL PROTECTION.

My personal idea would not be to leave 60.000 quid on a saving account,
but that again strictly depends on your risk profile and how dependend
you may be on the cash.

... just an idea...

[xyy123]

Originally Posted by jem16

Yep 2 tracker and 2 managed. The Rensburg fund was the top placed over 5 years and the Scottish Widows the top tracker with a low amc over 5 years. So one returns 98% and the other 33.9%.

So you are saving 1.25% on management charges to lose 64.1% in performance.

Seems a bit odd to me.

Well thats great if you know which funds are going to outperform the market over 5 year periods. But the point is at least 4/5 funds do not keep pace with the market and studies have shown that not only do funds not beat the market, but investors that use managed funds do even worse due to transaction costs in changing the funds in the name of chasing heat and active management.

Failing having a crystal ball, I personally believe passive funds are a much better option for non-sophisticated and non high net worth investors.

[Aegis]

Originally Posted by xyy123

Well thats great if you know which funds are going to outperform the market over 5 year periods. But the point is at least 4/5 funds do not keep pace with the market and studies have shown that not only do funds not beat the market, but investors that use managed funds do even worse due to transaction costs in changing the funds in the name of chasing heat and active management.

Failing having a crystal ball, I personally believe passive funds are a much better option for non-sophisticated and non high net worth investors.

As an experiment, try this. Pick a few sectors you'd like to invest in. Then look at the 3 year, 5 year and 10 year performance of funds in those sectors. What you'll quickly find is that the bank managed funds tend to congregate at the bottom end of the table, while the investment house funds tend to do much better. Trackers will generally fall in the middle.

As such, if trackers tend to fall in the middle and bank funds go to the bottom, by eliminating bank funds from your fund choice, you have a greater than even chance of beating the market in such a sector even if you pick the remaining funds at random.

On top of that, remember that the performance figures are inclusive of all charges. By going through a discount broker you can get some of the AMC rebated each year, which will improve the performance of the managed funds even more without affecting the trackers (tracker funds don't pay enough trail commission for any rebate). As such, the investment house funds stand a very good chance of beating the index for their sector even if you don't go for the ones where the manager has a track record of beating the index year on year.

Modern investors shouldn't have significant transaction costs for switching funds. It's very rare to find a fund that isn't completely discounted these days.

[Oceantwins]

You are going off topic

The OP was asking where to put 60 -k and not if passive or active
funds are better or worse.

oceantwins

[Aegis]

Originally Posted by Oceantwins

You are going off topic

The OP was asking where to put 60 -k and not if passive or active
funds are better or worse.

oceantwins

It's hardly off topic. Active or passive is a major strategic concern for anyone looking to put their money into stocks and shares. In any case, the OP hasn't posted in this thread for over a week now, so it's perfectly fair to have a little more detailed discussion around the pertinent issues in his absence.

Of course it may all be a moot point when they come back and say what exactly they're looking for, as they might have no desire to invest at all, but if we stopped all discussion when the OP left their threads, there would be a lot less information around here.

[fg22]

Originally Posted by Aegis

As such, if trackers tend to fall in the middle and bank funds go to the bottom, by eliminating bank funds from your fund choice, you have a greater than even chance of beating the market in such a sector even if you pick the remaining funds at random.

Unfortunately the analysis is not as simple as that.

You will also have survivorship bias whereby funds which perform badly will close or merge and are no longer included in the tables (eg New Star). The remaining active managed funds therefore appear to have done better.

Fees for trackers have fallen (and I think fees for others have probably risen) this will not be reflected in past data.

Each sector should be considered on an individual basis. I use trackers in some sectors which I consider relatively efficient but not in others.

Modern investors shouldn't have significant transaction costs for switching funds. It's very rare to find a fund that isn't completely discounted these days.

Unit Trusts/OEICs are not the only type of fund; others will have costs.