Advice on stocks & shares ISAs?

dunstonh

Can't respond to your first point - don't know enough about it!

But you did acuse advisors of not selecting it because it paid no commission.

Fund supermarkets are where all the major funds are nowadays. If you don't use a fund supermarket, you cannot really build a decent portfolio within an ISA. The M&S fund is not on the fund supermarkets. So, that is the good reason not to use the M&S fund.

I mentioned it was closed for business but it actually appears it isnt. HSBC bought M&S financial services and the last I heard was that it would filter into the HSBC funds at some point. That has yet to happen and I dont know if that was still the case. It was around 18 months ago when there was a lot of speculation over what HSBC would do.

Not picking funds with hindsight but there are two big fund houses which are always more likely to get business out of IFAs before M&S and thats Artemis and Invesco Perpetual. They have been outperforming M&S over various timescales and have been more consistent too. There are others in the top list that would be considered before M&S too.

If you take Lippers consistent return and capital preservation into account and then take the annual compound return over 1, 2 & 3 years and score them in that order (with a weighting towards consistent return and capital preservation), then M&S comes 55th out of 83 funds available over the 3 year period.

But you wouldn't argue against sticking with a performer with which you are quite happy, would you?

Being happy with what you do is important. However, I wouldn't do what you have done and I wouldnt advise my clients to either. I invest on the basis of diversification and have said that in my posts before. So I can't really agree with you.

Taking the risk profile of that fund and assuming that you would want all your money in the same risk areas (not a averaged porfolio but from funds only in that risk range) you also have corporate bonds, gilts, fixed interest, commercial property and global bonds to consider.

Had you spread the investing across those sectors and had annual automatic rebalancing, you would have grown by significantly more than you had without taking any more risk.

Nobody knows the best fund to invest in for the future or the best sector. So spread it over the sectors/funds and you stand a better chance. It also reduces the overall risk more as well. If one sector/fund has a bad year, if thats all you are in, then all your money will suffer. At least with a spread, you havent got all your eggs in one basket.

You havent done wrong. You could just have done better within your risk rating. Plus investing is all about debate. There are thousands of places to invest. No-one is right all of the time.

As I mentioned earlier on this thread or another, pick Fid Spec Sits when it launched and stick all your money in that and no other UK fund would have come close. You can't argue with people that did that. Even if it flies in the face with what I am saying. Sometimes you just get lucky.

schiff

Very interesting and pertinent reply Dunston. Thank you.

I think I had better withdraw from this discussion - I am beginning to feel out of my depth! But in my own defence re line one: having a healthily cynical attitude to anyone selling financial products (banks, insurance companies mainly but also financial advisers, though I accept obviously that they have to make a living) I have always questioned the impartiality of advice given to me against the question of 'what's in it for them'. That cynicism, I suppose, strayed into the M & S situation.

I have some experience of this area through other people who have managed funds and the only conclusion I draw from it is that I would not like to be involved in managing the capital of anyone but myself! If it went wrong, I would suffer personally and emotionally. If I am ever asked for advice about investments - and I am from time to time - I usually take the easy way out and plump for ISA's and high yielding bank/BS accounts. Mind you most people who ask are 'knocking on a bit' and I think the rule is: no involvement with the Stock Market if you haven't (necessarily!) got 5/10 years to give it a chance to turn out well.

The most interesting bit of your reply is that you are able to pick areas where the possibilities are measurably better than with some of the others. From what I read of funds that perform and others that don't, where funds that perform well for a period suddenly stop performing, where key personnel in a fund suddenly depart head-hunted by another outfit, and other factors - I am very impressed to find that - with the best IFA - you can be put in the right direction.

I have always considered it to be a bit of a lottery and I think your last few words echoes this.

Anyway I am going to stop recommending my M&S fund to anybody else and I am going to look more into the current situation with the fund. My gut feeling is that I am not too happy with HSBC's involvement but don't ask me why!

dunstonh

But in my own defence re line one: having a healthily cynical attitude to anyone selling financial products (banks, insurance companies mainly but also financial advisers, though I accept obviously that they have to make a living) I have always questioned the impartiality of advice given to me against the question of 'what's in it for them'. That cynicism, I suppose, strayed into the M & S situation.

Be cynical. There are some out there that only have their own interests at heart. Just don't assume we are all like that. However, if you do get advice again, go to an IFA and ask to see the research. Measure their ability on that and nothing else. Too often, you don't get to see the research, just the end result. Seeing the research does one of two things. It either confirms that they have put no work in or that they have looked at the options, researched thoroughly and come out with the end result. At the end of the day, I believe the most important thing is the research that leads to the result. If the research isn't up to scratch, the recommendation is likely to be flawed. If you don't see the research, how will you know?

I think I had better withdraw from this discussion - I am beginning to feel out of my depth!

No don't. Your contributions have helped this discussion. You are no different to the majority of DIY investors who perhaps don't have the time to look into investments like some of the experienced investors contributing to this forum. There are probably hundreds reading this thread looking at your posts thinking "thats how I do it". It may not be M&S but another manager but you are very typical. If anyone comes away from this thread thinking more about their own investments and what they should do, then its a good result.

flashf

schiff wrote:

Poor flashf must wonder what on earth he's started up!!

You're right schiff, when I logged on this morning I thought: what a waste of time this has been! But then a sensible dialogue seemed to spark up between you and Dunston, and that was just the sort of debate, with advice thrown in, that I was hoping for.
I'm very new to this investment game but I suddenly have a healthy inheritance to use. The moneysavingexpert website has been useful so far :money: , but, with respect, I think it's a bit of a cop-out that Martin gives very clear advice on good cash ISAs to go for, but barely mentions what to do with the rest of a £4,000 ISA allocation.
Having said that, I'm not sure anyone else has stuck their neck out and said ... go for this one .... apart from you schiff with your M & S recommendation, and you were very quickly shot down in flames!
I think my next move is to go to the fund supermarket of my bank and pick one of their ethical funds to bung my money in. Any constructive thoughts anyone?

dunstonh

I think it's a bit of a cop-out that Martin gives very clear advice on good cash ISAs to go for, but barely mentions what to do with the rest of a £4,000 ISA allocation.

Unlike cash ISAs, equity ISAs are regulated by the FSA. That means the site cannot make recommendations. That being said, Guaranteed equity bonds are regulated as well and these awful products are mentioned on the site.

Having said that, I'm not sure anyone else has stuck their neck out and said ... go for this one .... apart from you schiff with your M & S recommendation, and you were very quickly shot down in flames!

We cant recommend funds. The post would be edited/deleted and not only that, it would be foolish to recommend funds to you as we know nothing about your goals, risk, timescale and personal situation. What funds I use for myself could be totally inappropriate for you. Plus those of us regulated to give advice would be running the risk of getting into trouble with the FSA for giving advice without following the required guidelines.

Schiff wasnt shot down in flames. The investment has been alright for him. However, I was just pointing out why an IFA wouldn't have used that fund and the reasons behind it.

I think my next move is to go to the fund supermarket of my bank and pick one of their ethical funds to bung my money in. Any constructive thoughts anyone?

None of the banks operate a funds supermarket. They only sell their own range and you will pay full charges for it. The main fund supermarkets are Fidelity FundsNetwork, Cofunds, Selestia and Skandia. There are others but these four are the highest profile. They are not listed in order of any preference and are not recommendations apart from the fact you should not go to a bank.

carnet

dunstonh wrote:

The main fund supermarkets are Fidelity FundsNetwork, Cofunds, Selestia and Skandia. There are others but these four are the highest profile.

Perhaps - as far as IFA's are concerned.

However, amongst "DIY" investors in this country I would have thought Hargreaves Lansdown's own Vantage Service (which, as well as PEP's and ISA's, can also include funds held outside these wrappers and also individual shares inc. IT's - as well as SIPP's ) rates a far higher profile than either Selestia or Skandia.

And with their Initial Charge discounts and loyalty bonus (half annual commission rebates) - cheaper too, in all likelihood.

I have also found that it includes many funds (that interest me, at any rate) not offered by some other supermarkets.

dunstonh

However, amongst "DIY" investors in this country I would have thought Hargreaves Lansdown's own Vantage Service (which, as well as PEP's and ISA's, can also include funds held outside these wrappers and also individual shares inc. IT's - as well as SIPP's ) rates a far higher profile than either Selestia or Skandia.

Most business is placed through IFAs. So, when talking about the main ones, it is fair to use those as examples. Even those IFAs that have web portals tend to use either the cofunds or skandia platforms which have web plugins.

HL (who are IFAs themselves) have created their own platform which is used by their own advisors or for those going direct. I don't know the stats but I would say they are a long way from being close to the amounts being invested into the main fund supermarkets. Selestia may not have the media profile of HL but it has been winning the fund supermarket awards across the board in recent times and it is miles ahead of the others in some areas. As I said, there are others, but they are the main ones.

dunstonh

I found this report on investment trusts written 18 months ago. It may or may not be useful for some.

Investment trusts, more than most investment types, have had a difficult time over the past few years. Features that worked to the advantage of closed-ended funds in rising markets have had the reverse effect in volatile markets.

A prolonged period of poor equity returns was accompanied by a significant increase in investment discount to net asset value that exacerbated negative portfolio returns.

A special feature of investment trusts is their ability to ’gear up’ by borrowing funds at competitive rates to achieve the potential for a higher rate of return. Gearing is a double-edged sword and it becomes a serious impediment if returns are lower than the cost of borrowing.

Another unique feature was the ability of certain investment trusts to split shareholders into different groups giving each group defined but different entitlements to the returns from a common portfolio. Unfortunately falling markets revealed that certain zero-dividend preference shares were not as safe as the marketing literature suggested. It also brought to light a ’magic circle’ of mutually invested funds. Compensation issues have not been resolved and the episode has dented the image of investment trusts.

Some believe that investment trusts are increasingly an anachronism whose reason for existence is passing. They are eclipsed by open-ended investment schemes on the one hand and by hedge funds on the other. OEICs offer retail investors more transparency, additional controls and are without the uncertainty of a varying discount to net asset value. Investment trusts position as high risk-reward vehicles for institutional or sophisticated investors has been increasingly replaced by hedge funds that have far greater investment freedom and little of the regulatory burden imposed on onshore closed-ended funds. Despite these problems, the sector is still very much alive.

Shares in investment trusts are stockmarket-listed securities and as such most advisers are not authorised to recommend investment trusts directly. However, where appropriate, advisers can recommend investment trust savings schemes. Investment trust savings schemes typically accept single lump sum investments in addition to regular contributions.

So, whilst you see some singing the praises, like any product, there are negatives to consider.

whiteflag_3

dunstonh wrote:

I found this report on investment trusts written 18 months ago. It may or may not be useful for some.



So, whilst you see some singing the praises, like any product, there are negatives to consider.

At last! Now perhaps you will see my reasons for not completely endorsing some posters biased view of Investment Trusts. Flashf started what has turned out be a great thread. :T

Hopefully we have all learned something!

schiff

flashf - I've sent you a Private Message.