Shares or Funds - food for thought

al_yrpal

There is an interesting article in todays Times Money section which sets out the arguments about whether its best to invest in shares or funds, with the private investor in mind. This is food for thought for anyone new to the world of investment. http://business.timesonline.co.uk/article/0,,8214-1889804,00.html

I go for funds. Shares are fun when one picks correctly, but too dodgy by half for long term investment (however Warren Buffet does it successfully though )

tomstickland

None of these "share clubs" that people set up for fun ever seem to make a decent return. I think I'd going to put most of my investment money into funds and maybe use a small amount to play with shares.

deemy2004

Funds ?

Investment trusts - YES ?

The Three I recommended back at the start of 2005 have given an average return of about 35% - cannot complain !

Investment trusts !!! for the LONG-TERM

Stock picks... if you buy the right stock in the right sector then you can make enough to offset losing stocks but averaging it your unlikely to beat a portfolio of good investment trusts over the long-term

EdInvestor

Trouble with funds is you lose such a lot of the gains in charges.Investment trusts are cheaper but if you want to get the full benefit you need to hold the shares directly.

deemy2004

EdInvestor wrote:

Trouble with funds is you lose such a lot of the gains in charges.Investment trusts are cheaper but if you want to get the full benefit you need to hold the shares directly.

The problem is volatility... look at vodafone . one minute its 150 next its 130 !

Look at SPW - One minute its £5.80 next its £5.30 !

I used to be a stocks only man - But after Marconi bit me on the !!!!!! I have steadily been moving over to investment trusts which now account for more than half of my portfolio from zero about 2 years ago.

oceanblue_3

deemy2004 wrote:

The problem is volatility... look at vodafone . one minute its 150 next its 130 !

Look at SPW - One minute its £5.80 next its £5.30 !

I used to be a stocks only man - But after Marconi bit me on the !!!!!! I have steadily been moving over to investment trusts which now account for more than half of my portfolio from zero about 2 years ago.

I've got a feeling you're right, deemy.

I've been researching (and investing in) IT's for almost twelve months: their combination of stock and fund characteristics is very useful. The main problem, however, is their phenomenal volatility: even when you get your bet right, the journey is extremely bumpy!

If used in a SIPP, for example, I think their real advantage is in the pre-retirement phase: anything this volatile post-retirement would be too distracting....

cheerfulcat

But volatility is a *good* thing - you just have to be prepared for it...

I think that both individually held shares and collective funds have their place in a portfolio. Funds/ITs allow you to invest in sectors and areas which are difficult to cover with individual shares, while shares can add risk - don't forget, risk is not a *bad* thing, just something to be aware of. Greater risk = chance of greater reward.

carnet

oceanblue wrote:

The main problem, however, is their phenomenal volatility

...and their discounts (and sometimes premiums) to NAV - although the continual narrowing/widening of these can work in your favour - if you know how to do it .

A case might be made here for investing in a UT/OEIC specialising in IT's, managed by an expert in the field, who is able to play the discount game.

deemy2004

All I want is year on year gains where the the index or stock outperforms the indices.

The problem with stocks is that they can go out of fashion !
Quite quickly infact !

Now when your a laid back investor who does not look at the portfolio everyday you may not realise that its time to dump the stock until its too late ! Whereas a good investment trust that is well managed can smooth out any market ruffles, and in some cases virtually negate their impact !

al_yrpal

The higher risk stuff you have got, the more attention it needs. You also have to look at what is causing a glitch (like the recent oil price hike) and make a decision. It's just like poker, its a gamble, but how much of a gamble is what you have to assess.

The reason I'm a laid back investor is that I put in the time whatever I was doing - it pays off.

If you want a no risk investment with year on year gains get some National Savings Certificates!

deemy2004

al_yrpal wrote:

If you want a no risk investment with year on year gains get some National Savings Certificates!

The risk there is inflation

Get some index linked goverment stock... I mean - these critters are up 25% in two years !!!

Offcourse it can't continue...