Which Monthly Investment?

Zebra

I am looking to invest about £400-500 per month into an investment scheme.

I currently have investments in:
Invesco Perpetual High Income Fund
F & C Smaller Companies Investment Trust
Graphite Enterprise Investment Trust
and a few individual share holdings (mainly privatisations/flotations).

I appreciate that there is no simple answer as to where to invest, but would appreciate any advice as to what to consider, and what factors I should take into account when making my decision.

I am considering investing in a tracker fund eg F&C All Share, and would appreciate comments as to their suitability versus managed funds.

I would be looking to invest for the next 3-5 years, for capital growth over the long term.

Many thanks in advance.

dunstonh

£400pm would allow 8 funds, £500 would allow 10. Utilise as many as you can for your contribution and dont put all your eggs in one basket (i.e. all into a tracker fund following an index that may come out best performer once every 5-7 years. Indeed, probably closer to 1 in 10 years going forward).

No-one can really answer your question as there thousands of funds out there covering a range of risks. What is right for one isnt right for another.

cloud_dog

I would agree with dunstonh, look to put approx £100pm into different funds.

Based on your list of investment and the fact that you mention you already have privatisation shares I would suggest you look to funds that offer you more geographical / international diversification.

I don’t really want to give you info regarding which sectors (far east, etc) or theme’s (commodities, etc) as you need to understand your acceptance of risk before making those types of decisions.

cloud_dog

EdInvestor

Since you are already familiar with shares, you may like to expand your existing portfolio, which might be rather concentrated on financials and utility shares?

The addition of more big blue chips in different sectors such as retail, fags, food and bevvies, oil and mining etc, would lower risk and the reinvestment of the dividends is an excellent way of obtaining growth at very low cost.

The Halifax Sharebuilder account allows you to make share purchases for only 1.50 plus stamp duty, an absolute bargain. With 500 to invest each month that's very cost effective.

Note that a tracker fund will anyway be dominated by the top 20 shares in the index, a number of which you probably already hold.

EdInvestor

cloud_dog wrote:

Based on your list of investment and the fact that you mention you already have privatisation shares I would suggest you look to funds that offer you more geographical / international diversification.

It's a common error to think that the UK stockmarket is somehow "local", and that to get international exposure you need to invest in funds which buy shares listed on foreign stock exchanges (and expose yourself to currency risk).

This is quite wrong - a very large number of shares on the FTSE do much of their business overseas.

Indeed the FTSE100 has now become such a poor reflection of the UK economy that the Independent has developed a completely new index, which focusses on companies which do business mainly or only in the UK.

Indy 100 index

It is possible in Zebra's case that his existing portfolio does indeed include mostly "Indy100" type shares rather than FTSE100 ones. In which case he might only need to add in a few of the missing multinationals.

carnet

EdInvestor wrote:

It's a common error to think that the UK stockmarket is somehow "local", and that to get international exposure you need to invest in funds which buy shares listed on foreign stock exchanges (and expose yourself to currency risk).

This is quite wrong - a very large number of shares on the FTSE do much of their business overseas.

Once again, ed, it is you who are in error.

"A study by Bruno Solnik published in the Financial Analysts Journal showed that diversifying across countries generally brings you better investment results than diversifying across industries.

That is because a share’s price correlates more with the market in which it is listed than with the industry in which the company operates. Swiss stock-market trends, for instance, largely determine the price of Nestlé shares, even though more than 95 per cent of Nestlé’s cash flow is earned abroad." [Martin Spring]

EdInvestor

I don't think we can draw much of a conclusion from the behaviour of a large multinational which happens to be listed on a very small European market.

Perhaps you could provide a link to your material, though it's not really relevant to what I said.

carnet

EdInvestor wrote:

I don't think we can draw much of a conclusion from the behaviour of a large multinational which happens to be listed on a very small European market.

The UK bourse is much larger, but what is the practical difference - and how does that invalidate the findings vis a vis the UK ? You are also referring to large multi-national blue chips which happen to be domiciled here.

Perhaps you could provide a link to your material, though it's not really relevant to what I said.

The way I read it, it's entirely relevant.

http://www.moneyweek.com/file/8299/how-to-construct-a-global-investment-portfolio.html

cloud_dog

EdInvestor wrote:

It's a common error to think that the UK stockmarket is somehow "local", and that to get international exposure you need to invest in funds which buy shares listed on foreign stock exchanges (and expose yourself to currency risk).

This is quite wrong - a very large number of shares on the FTSE do much of their business overseas.

.........in your opinion.

I replying with my opinion based on if I was holding the investments the OP has stated. Although FTSE companies may derive earnings from abroad you have no real say in which areas / countries they invest in and you cannot gain from the expertise in a local area by investing small caps or large caps, or whatever (depending on the local cycle), whereas an invesmtnet manager would be able to switch investments in / out depending on the funds criteria.

I would also mention that if a company derives earning from a foreign country those earnings would also be subject to currency fluctuations / risk - so a bit of a mute point.

cloud_dog

EdInvestor

Sorry but all I said was that it was possible to obtain international exposure by investing in UK listed companies, many of which do most of their business overseas.

This is a fact.

The question of whether it is better to obtain international exposure this way or to do it via direct investment in foreign shares or in funds invested in foreign listed shares is a different matter on which I haven't expressed a view.

I will note however that much of the FTSE's excellent performance last year was down to the boom in the share prices of UK listed oil and mining companies, which are some of the largest in the world..

And what were the best performing funds? Those invested in commodities (such as oil, copper, gold etc) and country funds specialising in the Middle East and Russia, both big beneficiaries of the oil price surge.

I would also mention that if a company derives earning from a foreign country those earnings would also be subject to currency fluctuations / risk

Yes, but large companies have access to numerous instruments to hedge their foreign currency exposure, which we individuals don't have, so the risk is lower.Of course some UK companies quote their dividends in US$, so you do need to watch out for that aspect.