Index Tracker Funds

sabretoothtigger

The problem I have there is regular investment is good but reducing those payments as growth flattens out and taking money out even should be an option imo

Do you invest in income or accumulation as I think income is best for gradually reducing the fund size for later reinvestment. Obviously buying units at the top of the market is not ideal compared to now

http://en.wikipedia.org/wiki/Value_investing


L&G operate a cash fund that can be switched into?

jon3001

sabretoothtigger wrote: »

The problem I have there is regular investment is good but reducing those payments as growth flattens out and taking money out even should be an option imo

There are techniques other the 'Dollar Cost Averaging'.

Value Averaging involves reducing payments when an asset's growth is above trend (and can even involve taking money out). When growth is below trend/falling, more money is put in.


Michael Edleson wrote a book about it.

sabretoothtigger wrote: »

L&G operate a cash fund that can be switched into?

Probably can't be used within an ISA though.

jon3001

sabretoothtigger wrote: »

Here you go:
http://www.h-l.co.uk/funds/security_details/sedol/0103653

11% of the all share is in banks, 7% alone in hsbc

Between the Royal Dutch Shell A & B shares there's 8.44% in Shell. Also 7.67% in BP. So two stocks (the oil giants) are allocated at over 16%.

For anyone wanting good diversification it's easy to make a case against the FTSE All Share as just 3 stocks (BP, Shell, HSBC) make up nearly a quarter of the value.

sabretoothtigger

jon3001 wrote: »

There are techniques other the 'Dollar Cost Averaging'.

Value Averaging involves reducing payments when an asset's growth is above trend (and can even involve taking money out). When growth is below trend/falling, more money is put in.


Michael Edleson wrote a book about it.

Excellent, yea that was what I really meant to refer to. I dont know about calculating it exactly (the principle is probably the same as the link I gave) but paying into a fund forever (or longer then needed) is not the best outcome of regular investment imo

For anyone wanting good diversification it's easy to make a case against the FTSE All Share as just 3 stocks (BP, Shell, HSBC) make up nearly a quarter of the value.

Yea pretty surprising. 672 holdings but just half of one percent makes up a quarter of the growth and loss. I wonder how much effect all the little tiddlers really make


On other hand how well would a tracker that invested equally in all shares really do, probably terribly?

http://www.valueaverager.com/

jon3001

Aegis wrote: »

As a general rue, trackers appear in the middle of the performance table in the long run for a given sector, while bank managed funds appear towards the bottom and good quality investment house managed funds appear towards the top. Obviously there's quite a variance in the spread of both sets of managed funds to the extent that they sometimes overlap, but as a general rule of thumb if you exclude bank-managed funds from the performance tables, the total returns are likely to be better for a managed fund than a tracker within that index regardless of the investment period you select.

As for why I say this, it's because I did a bit of research on trackers and managed funds before I started to invest my cash. I looked at performance tables over 3, 5 and 10 year periods to ensure that the funds I picked weren't just one-off lucky picks, and also ensured that I was happy with the mandate that the manager had for stock selection. Once I was happy enough, I commited.

I don't have a single tracker fund in my portfolio right now.

Interesting. Did you do this process just for the UK or international markets too.

I've recently revamped my portfolio after some research. As I've said elsewhere in this thread it's easy to make a case that the FTSE All Share isn't that diversified. So there's more scope for a manager to make better risk-adjusted returns. I've recently ditched UK trackers in favour of funds like Invesco Perpertual Income and M&G Recovery.

However I still ended up using trackers for developed international markets: USA, Europe, Asia Pacific and Japan.

Historical performance wasn't my sole criteria. I wanted well diversified funds so screened funds on criteria such as:

• Number of holdings. Academic research suggests that at least 60 are required to remove the unsystematic diversifiable risk [source: A Random Walk Down Wall Street]. I wanted to avoid concentrated portfolios.
• Over-exposure to emerging markets (e.g. China, Eastern Europe) - I have a separate allocation to emerging markets.
• Seemingly speculative country allocations (e.g. A Europe fund with very high weightings to small economies such as Switzerland and Norway).
• Company size bias should be towards large-cap - I have separate allocations to US Small Company stocks etc.

After removing funds I felt to be too risky it was hard to see many managed funds beating the trackers by meaningful amounts over sustained periods with the exception of perhaps Asia-Pacific. Outperformance was sometimes due to an exceptional one-off year; not something I could really rely on going forward. Selecting the tracker was playing the odds in terms of risk and performance.

Much of this research was done before the big drops a few months back so it's possible the bear market conditions will temporarily favour managed funds in the league tables.

Even without doing this you can still find trackers in the top quartile:
Japan: L&G, HSBC trackers @ 6/44 and 7/44

Masomnia

I have my eye on the M & G Recovery fund too, seems ideal given the conditions at the moment. Shall have to see!

sabretoothtigger

Meant to say earlier but the l&g global index didnt do so bad this year, a defensive investment?
it seems they are showing year end summaries allready

purch

Here you go:
http://www.h-l.co.uk/funds/security_.../sedol/0103653

11% of the all share is in banks, 7% alone in hsbc

As usual Dampier gives an incisive, in-depth, well thought out analysis :eek:

Banking turmoil and fears of a global recession have made this a poor year for the UK stock market

Gee Thanks Dampwit !!!! :T

purch

It seems that a number of managed funds are tracking the index at the moment out of fear

Which isn't necessarily an argument for using trackers, (although it would be a good one) rather an argument to make sure you research your Funds and Managers in greater detail than many do.

Aegis

jon3001 wrote: »

Interesting. Did you do this process just for the UK or international markets too.

For the sectors I wanted to invest in: UK Equity Income, UK Equity and Bond, Global Equity, Commodities & Natural Resources, China, Latin America and Russia. Of course, my research did take place over a year ago for most of these, and I have encountered a few problems with some of the funds, but they're doing well against their various indices still.

I've recently revamped my portfolio after some research. As I've said elsewhere in this thread it's easy to make a case that the FTSE All Share isn't that diversified. So there's more scope for a manager to make better risk-adjusted returns. I've recently ditched UK trackers in favour of funds like Invesco Perpertual Income and M&G Recovery.

I'm a firm believer that Neil Woodford knows what he's doing with his Income and High Income funds. I'm not currently in any recovery/special situation funds because I think now is a very dangerous time to be looking into that particular area, but when confidence starts returning to the economy I may take a look and see if there's anything I like.

However I still ended up using trackers for developed international markets: USA, Europe, Asia Pacific and Japan.

I allow the Invesco Perpetual High income fund and my Latin America fund to give me the minimal exposure to the USA that I want in my portfolio. I don't much like their prospects at the moment, and would prefer to keep my exposure indirect. From what I've heard, trackers do very well when it comes to the US for some reason, so if I was looking to get involved in the Dow or the Nasdaq, I'd probably be considering a tracker.

I don't currently have sole exposure to Europe or Japan, but have less direct exposure in my other funds, which suits me fine. My China exposure comes from a couple of managed funds which are still beating their index, though not by much right now!