FTSE100 Tracker Recommendations

Lokolo

I bet none of theme were run by L&G. Get the table out Dunston!

Also it says "Very few of the managers will be heard of"... well that just basically means

a) They're ****
b) They're inexperienced

so no wonder they didn't do very well?

I am sure there are more (by a lot) than 175 fund managers...

Its like taking the bottom 10 football teams of League 2, looking at the stats and saying "90% of League 2 are crap"......

dunstonh

Research published by reuters and commissioned by S&P, who dont sell trackers or managed funds, on 23/5/02 fund that funds with higher annual management charges reap beter returns in volatile markets than those with lower AMCs. I pulled out that one to match your 2002 date from the financial promotion by Virgin.

In a study across a number of investment sectors over the past five years, S&P found that people who were willing to invest in funds with the highest AMCs were more likely to get better returns.
In the UK all companies sector, investors with £1,000 in a fund with an AMC of 0.49 per cent or less received an average return of £1,233 while investors paying 1.5 per cent or above received an average of £1,384.
In the Japanese sector, investors paying an AMC of 0.49 per cent or less received an average return of just £870 compared with £1,044 for those paying at least 1.5 per cent.
But although the story remained the same across many other sectors - including North America and Europe (excluding UK) - returns varied much less with AMCs in the bands between 0.49 per cent and 1.49 per cent and in some cases investors would have benefited from a lower AMC. In the North American sector, investors paying an AMC between 1 per cent and 1.24 per cent saw an average return of £1,434 but those paying between 0.5 per cent and 0.74 per cent received £1,472.
However, in all cases, the most expensive bands of between 1.25 per cent and 1.5 per cent or above substantially outperformed funds with AMCs of 0.49 per cent or lower.
Skandia investment brand manager Phil Morse says: "I think the performance of the more expensive funds just goes to show why investors are generally happy to pay higher AMCs, especially in volatile markets which require a stockpicking approach."

And here are the performance stats copied from a recent thread:

I have put the percentile in brackets. Sector average is mid table so would be 50. If a fund is (1) that makes it top. If it is (100) it makes it bottom. I have also topped it off with the 10 year cumulative figures.

[php]Year Sector Average L&G 100 L&G all share

1996 16.62 13.75 (73) 15.15 (60)
1997 18.29 26.99 (13) 22.01 (46)
1998 9.78 15.22 (23) 13.13 (35)
1999 26.07 17.30 (89) 23.18 (54)
2000 -4.58 -9.78 (89) -5.73 (53)
2001 -14.67 -15.41 (68) -13.17 (38)
2002 -23.55 -23.88 (58) -22.97 (42)
2003 22.66 15.32 (96) 19.99 (57)
2004 12.65 8.69 (85) 11.88 (48)
2005 21.23 17.94 (83) 21.11 (43)
2006 17.46 12.39 (89) 16.42 (53)
2007 1.62 4.83 (34) 4.45 (37)
10 year cumulative
5.55% 3.18% (94) 5.68% (46)

[/php]

So, we can see from those figures supplied by Financial Express that neither the FTSE100 or FTSE index trackers from L&G have managed to enter the top 10% of funds at any point since 1996. The L&G 100 did come close in 1997 by hitting 13% but over 10 years but spent most of the time at the bottom end. It had a cumulative return that put it ranked at 94%. You would have had a harder job picking a managed fund that fell into the bottom 6%. Also, the all share can be seen to be more consistent at the mid table range as you would expect.

So Britney_s, how do you explain that the FTSE100 tracker has been in the bottom 6% of funds over 10 years cumulatively and hardly outside the bottom 20% in each individual year. Also, look at the FTSE all share tracker. Its mid table consistently which is where you would expect it to be.

Note. Virgin money until recently only sold tracker funds. They have now entered the managed funds arena. I wonder why they were looking to promote trackers. Motley Fool sell trackers. I wonder why they promote trackers as well.....

Basically, the correct statement is that trackers will outperform most, if not all of the funds with the same investment objective. So, your passive managed funds are easily beaten. However, the lack of downside protection can work against tracker funds in bad times but for them in good. Also, trackers are effectively stock picking depending on the index you choose to track. So, the fact it is a tracker or a managed fund has little to do with its performance. Its the sector or area of the market that is doing well that has the greater impact on the return.

Also, a lot of the tracker myth comes from the US market where there are tax differences and its a lot harder for a managed fund to beat a tracker. The UK market is different.

dunstonh

It can make good sense to use a tracker fund as an additional part of your pension provision - even as an alternative to a personal pension

Thats a bit like saying shall I drive to work in the car or the petrol. How can a tracker be an alternative to a personal pension?

The reason is that with a pension, much of the first few years' contributions will be wiped out by hefty front-loaded charges.

I dont know where you have been for the last 10 years but its not the UK. The vast majority of pensions sold since 1998 are mono charged with no initial charges. Although initial charge plans (multi-charge) are coming back and can actually work out cheaper than mono charge.

A traditional unit trust or Oeic might charge you 5% up front and then 1.5% of the fund's value each year.

The initial charge thing doesnt really apply nowadays as most unit trusts/oeics are available with no initial charges with only the cost of advice being the factor. From 2012, there will be no initial charges as the cost of advice will be shown apart and trackers and managed funds will be identical. The AMC is an issue but that is a personal one and depends on whether you want a tracker following an index or a more niche area.

the low charges on your tracker fund will leave you with more of a nest egg for the future.

Again, you are not comparing like for like.

I dont know if what you posted was copied and pasted but assuming it was, there are so many flaws in there that it cannot be considered reliable.

dunstonh

britney, how about answering questions put to you rather than posting snippets taken out of context.

e.g. in that last batch you mentioned Buffet, who does promote trackers yet he himself invests in value. A case of do as I say not do as I do. or Sandler who has measured the markets in a short timescale which favoured trackers and not volatile markets that favour managed.

Posting everything you have is all very well and fine but until you explain how the FTSE100 tracker has managed to finish nearly bottom over the last 10 years with mostly managed funds ahead of it, then snippets of information dont mean a thing. You need to understand the pros and cons and make an informed choice. At the moment there is no indication you understand what you are pasting. Comparing tax wrappers with an investment fund for example.

dunstonh

britney, I bet you never even heard of Warren Buffett before you started your google searches earlier. You do realise he is talking about the US market and not the UK.

It may have passed you by but this is a discussion forum. Not a copy and paste snippets from google website and ignore all the evidence that show the other side.

To be honest, you have posted a lot of rubbish which has a lot of errors and inconsistencies and have chosen to ignore any discussion points. Hopefully, those reading the thread will not be as small minded as you and make an attempt to understand the pros and cons before making their decisions and not be swayed by someone who doesnt understand what they are posting.

waltzer

Madam, how like you this play?

The lady doth protest too much, methinks.

jamesd

britney_s wrote: »

Hi Chloeredshaw-Warren Buffet,the legendary investor has spoken in favour of trackers.So you definitely are on the right track !

You can see what Mr. Buffett (note the correct spelling) was really writing about if you read his 1996 letter to shareholders:

"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

Should you choose, however, to construct your own portfolio, there are a few thoughts worth remembering. Intelligent investing is not complex, though that is far from saying that it is easy. What an investor needs is the ability to correctly evaluate selected businesses. Note that word "selected": You don't have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital."

I suggest you read the rest. What he was saying is that you should either stick to buying shares you understand or should buy funds.

In other writings he's suggested that picking managed funds that will outperform also takes work and that those who are lazy should stick to tracker funds so they don't get it wrong.

And that's where trackers fit: they are the choice for people who don't want to pay attention and don't want to have someone else do the picking for them (and who also don't want to pick a decent person to do the picking...).

Even for someone who wants a tracker, the FTSE 100 is a pretty poor choice. At least pick the FTSE All-Share.

Lest you think that I simply dislike trackers, at the moment more than half of the money in my pension that is invested in shares is invested in low-cost tracker funds, mostly non-UK.

n209385

And again...in answer to Chloe's question:

Scottish Widows FTSE 100 tracker has a 0.5% management fee

SW UK Tracker B Inc

cheers

Julian

Aegis

dunstonh wrote: »

It wouldnt be so bad but she hasnt got a clue what she is posting.

I would suggest at this point that it could well be because "she" is actually a wannabe spam bot. It looks like it homed in on a question and decided to start spamming trackers.

Well, it's either that or someone totally clueless as to how discussion forums are supposed to go.

Whichever, it's reported as spam.

jamesd

Aegis, yes, the complete lack of dialog with others is interesting. If not a bot, maybe just paid promotion or acceptance on faith rather than reasoned understanding. That "The awful truth about fund managers" post is particularly odd, since she advocates trackers but that post points out that there are managers who have a track record of outperforming them. Then she doesn't seem to make the connection that you can go and buy their funds instead of sticking with the trackers that they outperform.