Advice on Index tracker

johncolescarr

I am new to investing and I want to invest a sum of £500 as a long term investment, 5 to 10 years. I have been reading around the subject and it seems that index trackers seem to be the easiest and wisest entrance into investing.

I am particularly interested in the pacific tracker offered by legal and general. Can anybody offer advice to a newcommer!

Reaper

lol - your reading hasn't included this forum. Many on here are skeptical of trackers and the L&G one in particular. See this thread and dunsonh's figures in particular.

They are easy and charges are not excessive, but even so you might want to consider active funds too.

EDIT: Just noticed you say "pacific" tracker rather than UK, but even so my preference would be an active fund that picks which countries/companies to include in the mix rather than simply selecting them by formula.

Lokolo

Indeed, to be fair it does depend on the investor. If you reallly don't know what you are doing and don't plan to learn yourself then a tracker will do for you. However if you want to learn more and research then an active fund would be more appropirate.

wriggly

Given that many managed funds have NOT avoided the drop in the sharemarket, I think the L&G index funds are fine for a £500 investment.

Ensure you use your stocks & shares ISA allowance if you are eligible.

Register with Quidco and you can get £85 cashback from L&G for opening their ISA.

The £500 minimum lump sum can be split between multiple funds. For really broad diversification consider allocating £100 to each of the UK (All-share), Europe, US, Japan and Pacific funds.

sh856531

Given that many managed funds have NOT avoided the drop in the sharemarket

It's not really an issue of whether they avoided a drop - just as important is whether they dropped less than the index.

For example, if the FTSE drops 40% and a managed fund only drops 10%, then the managed fund has just saved you 30% of your investment when compared to the all share index

Best Regards

S

dunstonh

It's not really an issue of whether they avoided a drop - just as important is whether they dropped less than the index

And also if the risk profiles of the tracker or managed fund match. A fund that has gone down more could have a higher risk profile that could see it go up more.

johncolescarr

Reaper wrote: »

lol - your reading hasn't included this forum. Many on here are skeptical of trackers and the L&G one in particular. See this thread and dunsonh's figures in particular.

They are easy and charges are not excessive, but even so you might want to consider active funds too.

EDIT: Just noticed you say "pacific" tracker rather than UK, but even so my preference would be an active fund that picks which countries/companies to include in the mix rather than simply selecting them by formula.

Your quite right, I havent been keeping up to date with this forum, but I intend to. I have been reading the Fool website, i was a bit concerned about managed funds because of the admin costs on my modest investment and Fool also quotes that for a longterm investment (5-10years) 9/10 actively managed funds under perform their respective indices. However, i dont know where they get their facts from. i will look into actively managed funds.
Thanks

John

johncolescarr

Lokolo wrote: »

Indeed, to be fair it does depend on the investor. If you reallly don't know what you are doing and don't plan to learn yourself then a tracker will do for you. However if you want to learn more and research then an active fund would be more appropirate.

I certianly dont know what I am doing! I make sure I am up to speed with major economic news but don't spend a lot of time looking at specific companies in detail. This was my reasoning for choosing a tracker for my first investment. As I become more aware by reading and research into investing, I may want to risk more of my cash by choosing my own investments.

thanks for the advice

John

johncolescarr

wriggly wrote: »

Given that many managed funds have NOT avoided the drop in the sharemarket, I think the L&G index funds are fine for a £500 investment.

Ensure you use your stocks & shares ISA allowance if you are eligible.

Register with Quidco and you can get £85 cashback from L&G for opening their ISA.

The £500 minimum lump sum can be split between multiple funds. For really broad diversification consider allocating £100 to each of the UK (All-share), Europe, US, Japan and Pacific funds.

Thanks for the great advice! If I choose to invest I will certainly use my ISA allowance and get the cash back if I choose L&G. I was looking for a higher risk investment by considering their Pacific fund, my reasoning was based on the expected growth in China and India. Is my assumption that a pacific fund is a higher risk investment than Western developed markets correct?

Thanks

John

Reaper

johncolescarr wrote: »

I was looking for a higher risk investment by considering their Pacific fund, my reasoning was based on the expected growth in China and India.

O dear. Wrong fund for you then. It invests as follows:

33.3% Australia
21.63% Hong Kong
20.58% Korea
15.02% Taiwan
7.48% Singapore
...
0.59% China
Nothing in India at all.

You really need to read the fact sheets for anything you are thinking of investing with. For starters click here for list of L&G index tracking ISA funds. Click on the one you want for details of where it invests.

dunstonh

i was a bit concerned about managed funds because of the admin costs on my modest investment

Costs are percentage based so it makes no difference if its large or small.

and Fool also quotes that for a longterm investment (5-10years) 9/10 actively managed funds under perform their respective indices.

Thats been proven a number of times to be wrong though.