FTSE 100 and other trackers

I'm interested in buying a FTSE 100 tracker and wondered if you could recommend one. I'm looking to get a better return than locking away money in a bank.

What are the differences between a fund and an ETF? I would like the dividends reinvested so do I need an accumulation fund? What other things should I look out for?

Is putting the money in over several months the best idea?

Is the FTSE 100 expensive or cheap at the moment compared to it's usual P/E?

Do you have ideas for other trackers that might be useful? I was thinking about tracking things like the S&P100 but thought that it wouldn't be a good idea because of the exchange rate and the chance that the pound will eventually strengthen against the dollar.
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Comments

  • jimjames
    jimjames Posts: 17,532
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    Based on the questions you've asked I suspect you currently haven't invested before. If that's the case then plonking all your money into a FTSE100 tracker may not be the best idea.

    If you have a read of https://www.monevator.com then hopefully a lot of your questions will be answered and you'll get a better overview of investing.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • switch76
    switch76 Posts: 114 Forumite
    I won't be putting in all my money. I'm planning to buy and then hold for many years to smooth out the effects of volatility.
  • Linton
    Linton Posts: 17,063
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    If you dont have any other investments in my view a FTSE100 tracker is one of the worst options. It is very restricted obviously in terms of geography but more problematically in terms of the types of companies in which it invests - for example there arent any world class major IT tech companies in the FTSE100 nor major manufacturers such as car companies or ship builders. Lots of banks and oil/mining companies though. You need to be invested in as broad a spread of underlying assets as possible, go for a global tracker instead. Or look at the multiasset funds which include investments in things other than equity (shares).

    On your other questions...
    1) If you want to reinvest dividends go for an ACC fund. An ETF is a type of fund which is bought and sold like a share rather than from a fund manager. They they tend to be be far more focussed than a broad fund, so only holding one probably wouldnt be a good idea.There are a number of other key differences, I suggest you start off with a well diversified unit trust-type fund and then move into ETFs when you fully understand what they are and their advantages/disadvantages.
    2) The general best policy is to buy funds when you have the money. If you spread buying over time when you dont need to prices could get cheaper or more expensive. On average they will get more expensive over time - that's why you invest in the first place. Whilst you are waiting for the next buy point you will be missing out on dividends you would have earned had you invested earlier.
    3) If you are investing in shares or share funds you should be in it for the long term. So again I would say buy when you have the money, not when various financial statistics say its a good or bad time. The reasons are much the same as in (2).
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    edited 15 October 2016 at 12:51PM
    switch76 wrote: »
    What are the differences between a fund and an ETF? .
    An ETF is a Fund. Its an Exchange Traded Fund, which means its units are bought and sold on the stock exchange just like shares. For further info you could start here: https://en.wikipedia.org/wiki/Exchange-traded_fund
    switch76 wrote: »
    Do you have ideas for other trackers that might be useful? I was thinking about tracking things like the S&P100 but thought that it wouldn't be a good idea because of the exchange rate and the chance that the pound will eventually strengthen against the dollar
    Markets are being driven by politics like Central Bank policy and Brexit which makes them impossible to predict, especially without inside knowledge. Some of us have sold our shares and are sitting in Sterling cash, which is likely to pay off handsomely if there is a second referendum on Brexit.
    But if you don't want to take big risks, your best bet is to spread your eggs around lots of baskets. Like some in a world tracker,http://forums.moneysavingexpert.com/showthread.php?p=71443455 and some in cash. If you do that you are probably best to set a percentage in shares and a percentage in cash and stick to it. Otherwise you could find yourself swaying backwards and forwards between shares and cash according to the latest news item in the media. This is unlikely to end well.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
  • switch76
    switch76 Posts: 114 Forumite
    Linton wrote: »
    If you dont have any other investments in my view a FTSE100 tracker is one of the worst options. It is very restricted obviously in terms of geography but more problematically in terms of the types of companies in which it invests - for example there arent any world class major IT tech companies in the FTSE100 nor major manufacturers such as car companies or ship builders. Lots of banks and oil/mining companies though. You need to be invested in as broad a spread of underlying assets as possible, go for a global tracker instead. Or look at the multiasset funds which include investments in things other than equity (shares).

    On your other questions...
    1) If you want to reinvest dividends go for an ACC fund. An ETF is a type of fund which is bought and sold like a share rather than from a fund manager. They they tend to be be far more focussed than a broad fund, so only holding one probably wouldnt be a good idea.There are a number of other key differences, I suggest you start off with a well diversified unit trust-type fund and then move into ETFs when you fully understand what they are and their advantages/disadvantages.
    2) The general best policy is to buy funds when you have the money. If you spread buying over time when you dont need to prices could get cheaper or more expensive. On average they will get more expensive over time - that's why you invest in the first place. Whilst you are waiting for the next buy point you will be missing out on dividends you would have earned had you invested earlier.
    3) If you are investing in shares or share funds you should be in it for the long term. So again I would say buy when you have the money, not when various financial statistics say its a good or bad time. The reasons are much the same as in (2).

    I have money maturing from a savings accounts. If I could have got a decent rate of interest I would have locked it away in a bank for a couple more years.

    The FTSE 100 is nearing it's high. That's why I'm thinking of putting the available money in over a few months rather than all in one go.
  • dunstonh
    dunstonh Posts: 116,038
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    I'm interested in buying a FTSE 100 tracker and wondered if you could recommend one.

    Interesting choice. The FTSE100 has been one of the consistently worst performers for over 20 years. What is it that interests you?

    Also, single sector investing is poor quality investing. So, why are you picking one sector and not diversifying?

    The asset allocation models have been lowering their UK equity content. Yet you want to go 100% into UK equity. So, why do you think professional models are wrong and you are right?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • switch76
    switch76 Posts: 114 Forumite
    Glen_Clark wrote: »
    An ETF is a Fund. Its an Exchange Traded Fund, which means its units are bought and sold on the stock exchange just like shares. For further info you could start here: https://en.wikipedia.org/wiki/Exchange-traded_fund

    Markets are being driven by politics like Central Bank policy and Brexit which makes them impossible to predict, especially without inside knowledge. Some of us have sold our shares and are sitting in Sterling cash, which is likely to pay off handsomely if there is a second referendum on Brexit.
    But if you don't want to take big risks, your best bet is to spread your eggs around lots of baskets. Like some in a world tracker,http://forums.moneysavingexpert.com/showthread.php?p=71443455 and some in cash. If you do that you are probably best to set a percentage in shares and a percentage in cash and stick to it. Otherwise you could find yourself swaying backwards and forwards between shares and cash according to the latest news item in the media. This is unlikely to end well.

    But wouldn't a world tracker have an exchange rate headwind if there is a 2nd referendum or sterling goes back to its value before the 1st vote?
  • switch76
    switch76 Posts: 114 Forumite
    dunstonh wrote: »
    Interesting choice. The FTSE100 has been one of the consistently worst performers for over 20 years. What is it that interests you?

    Also, single sector investing is poor quality investing. So, why are you picking one sector and not diversifying?

    The asset allocation models have been lowering their UK equity content. Yet you want to go 100% into UK equity. So, why do you think professional models are wrong and you are right?

    I have cash in the bank if I need to spend. I have equities of individual companies. I want an investment where there is no chance of losing all the money and a good chance of beating the return from a bank account.

    The FTSE 100 trackers seem to return about 4.5%-5% on average. I'm open to other trackers but if sterling strengthens it might wipe out most of the gains of things like world trackers.
  • Linton
    Linton Posts: 17,063
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    switch76 wrote: »
    But wouldn't a world tracker have an exchange rate headwind if there is a 2nd referendum or sterling goes back to its value before the 1st vote?

    It would but if there isnt it wont. You should be investing for very many years. During that time there will be any number of possible but ultimately unpredictable headwinds or tail winds. You cant go changing investments all the time - overall you will probably lose out. Just buy an investment and keep it. The most you need to do if you hold multiple investments is to rebalance by selling some of those that have performed very well to buy others which havent.
  • Glen_Clark
    Glen_Clark Posts: 4,397 Forumite
    switch76 wrote: »
    But wouldn't a world tracker have an exchange rate headwind if there is a 2nd referendum or sterling goes back to its value before the 1st vote?
    Share prices are in sterling. If a second referendum was called Sterling is likely to strengthen, so the share price in Sterling would fall.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
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