Index Trackers

EdInvestor

Here's the info on the L&G FTSE100 index tracker fund:

Click here

The L&G All Share tracker is of course far and away the better buy.

cheerfulcat

whiteflag wrote:

Do you know the average current yield for the FTSE 100 index?

It's roughly 3.25%

whiteflag_3

cheerfulcat wrote:

It's roughly 3.25%

Thats my point. If the yield on the L & G 100 index tracker is 1% whats happened to the 1.75% assuming 0.5% has gone on charges?.

EdInvestor

You're quite right whiteflag, these fund managers will take it off wherever they can.

You may like to compare the L&G All share yield with that of the other two popular All share trackers; Fidelity ( No 13) and M&G ( No 28) on the
Trustnet list

BTW although they both claim their charges are 0.3% in fact they are 0.5% when you read the small print, the same as L&G, where the yield is noticeably higher.

carnet

whiteflag wrote:

Thats my point. If the yield on the L & G 100 index tracker is 1% whats happened to the 1.75% assuming 0.5% has gone on charges?.

The link I gave earlier

http://www.landg.com/investment/fundprice1_index.jsp

states that the current net yield on the their UK 100 Index Tracker type R (which usually designates the retail class) is 2.32 %.

hobbesandco

dunstonh wrote:

Assuming you do buy them at full cost, then the 5% is only once. It's not every year.

I know you only pay 5% the once. But what about AMCs? Can you give us an indication (approx figure) of what the charges would be (set-up costs, AMCs, exit costs, etc)? You don't have to mention which funds. I would just like an idea of some of the typical fees of the funds/sectors (whatever you want to call it) you recommend or have recommended in the past.

dunstonh wrote:

There are ample comments which correctly list the advantages. I just list the disadvantages as a balance. This doesnt make me against them.

I inferred from your previous posts (and there have been several in the past) where you seem to discourage people from investing in index trackers. Are you saying that there is a place for index trackers in an investment portfolio?

dunstonh wrote:

I'm not on the right computer to do that now but i can recall that the boom periods of the UK stockmarket had the trackers outperforming UK Equity Income funds.

So let me get this right. You can recall that in boom periods trackers outperform UK Equity Income funds?

dunstonh wrote:

I dont believe that limiting yourself to just UK equity income or just UK tracker is a sensible option. I also dont believe that switching them round all the time based on what you think may happen is a good idea either. You can over do the micromanagement of these things and each switch incurs a charge.

Very few people recommend just setting up a UK tracker or UK equity income. The key is to diversify - not too much and not too little. It's about achieving the balance which is right for each investor. You're right. It's not all about charges but you also have to admit that charges are one criteria to look at when investing.

dunstonh

I know you only pay 5% the once. But what about AMCs? Can you give us an indication (approx figure) of what the charges would be (set-up costs, AMCs, exit costs, etc)? You don't have to mention which funds. I would just like an idea of some of the typical fees of the funds/sectors (whatever you want to call it) you recommend or have recommended in the past.

Assuming full cost advice process, you would be typically looking at an initial charge of 3-5%. The annual management charge will usually be around 1.5%.

I inferred from your previous posts (and there have been several in the past) where you seem to discourage people from investing in index trackers. Are you saying that there is a place for index trackers in an investment portfolio?

I discourage people from investing 100% into an index tracker. Lots did it in the boom times before the crash are only coming close to break even now. Put all your eggs in one basket and you are asking for trouble. I also believe the FTSE100 is no longer an adequate index to follow. At least not at this time.

I have arranged 2 portfolios this week which have included a tracker as part of them. A FTSE250 tracker at that but it was still part of a very diversified portfolio.

So let me get this right. You can recall that in boom periods trackers outperform UK Equity Income funds?

You have caught me at the wrong time of the day again to get access to my fund/sector comparison software. However, yes, there are times when the FTSE100 tracker has performed better than UK Equity Income funds. Looking at a fund supermarket past performance list of their current funds, it does appear that the FTSE100 trackers are currently performing (12 month) just below UK Equity Income and FTSE all share trackers without income re-invested. But we are looking at around 1% difference between all 3 as an average. With income re-invested though, the Equity Income funds pull ahead.

The Pro FTSE100 tracker stats tend to highlight past performance against managed funds (as a whole) and not comparable managed funds within the same sector. The biggest issue with looking at past performance is that it doesnt mean anything. Monetary policy, the home economy, the global economy, globalisation of business, decline of manufacturing, wars, inflation etc all change over time. A lot of the big FTSE100 tracker gains were during periods when company mergers and privatisations were taking place. Not a situation we find ourselves in at this time.

Very few people recommend just setting up a UK tracker or UK equity income. The key is to diversify - not too much and not too little. It's about achieving the balance which is right for each investor. You're right. It's not all about charges but you also have to admit that charges are one criteria to look at when investing.

You will be surprised then of the number of people we see that have done single fund investments, whether they be trackers or managed funds. Even on here, we see it regularly when people ask about trackers and which one to invest in. The one fund solution is old fashioned, obsolete but still happens. Even with some advisors.

I have to say that I rarely get hooked up on charges when looking at these things. If I see two funds that fit the bill and its really a toss up between the two, then I will look at it.

I have the funds list of a fund supermarket here and when you look at the sectors, the difference in AMCs across the funds in each sector is 0.1% or 0.2%. I really don't see that being an issue. Especially when you cant tell what fund performance is going to end up being and the differences can be a lot more than 0.1/0.2%.

If someone wanted a portfolio of tracker funds from a range of sectors, then there is nothing wrong with that as an idea. However, there are a significant number of sectors (with regards to OEICs/UTs funds) where there isnt a tracker available. So, if they say use a tracker where available but used a managed fund where it isnt, I would say there is no problem with that. However, disregarding a sector because there isnt a tracker in that sector would not be advisable in my opinion. It certainly wouldnt have been over the last 5 or 10 year periods.

whiteflag_3

carnet wrote:

The link I gave earlier

http://www.landg.com/investment/fundprice1_index.jsp

states that the current net yield on the their UK 100 Index Tracker type R (which usually designates the retail class) is 2.32 %.

Sorry' I got the yield from the factsheet

http://www.legalandgeneral.com/factsheets/pdf/STK.pdf

oceanblue_3

EdInvestor wrote:

After I'd done that for a while I'd consider buying the underlying shares directly and just holding them long term, so I don't pay any charges at all. Info on how to do that is also at the Motley Fool site on the "High Yield Portfolio" board.

Ed, that's not right: each of the featured stockbrokers charges a minimum fee per deal, and then there is the bid and offer spread to consider.

As a result, there are charges to pay.....

EdInvestor

Ed, that's not right: each of the featured stockbrokers charges a minimum fee per deal, and then there is the bid and offer spread to consider.

As a result, there are charges to pay.....

You only pay these charges once, when you buy the shares. So if you hold them long term you don't pay any charges if there is no AMC. I believe Sippdeal does charge a minimal amount ( around 15 quid a year) to provide one of those useless but mandatory annual pension fund statements which tell you what your fund might be worth in 30 years time. But that's it.

It's entirely up to you what charges you pay.The key difference long term is that the charges are flat rate, not percentage based It's quite astonishing how much 1% mounts up to over 25 or 30 years. :eek: Check it out:

https://www.fsa.gov.uk/tables