Cheapest FTSE All share Tracker

max11

SnowMan wrote: »

Haven't looked recently but amongst the lowest charging FTSE all share trackers, (I've got money in each), used to be Fidelity (0.1% amc and 0.3% TER),

I can't find that 0,1%. I can't find the FTSE and actually all UK funds by Fidelity

SnowMan

max11 wrote: »

I can't find that 0,1%. I can't find the FTSE and actually all UK funds by Fidelity

Try here

http://www.fidelity.co.uk/wealthmanager/funds/uk/oeicsandunittrusts/mbukindex.html

Minimum investment £500 it appears (you will see this if you click on Morning Star factsheet from the above link)

They are usually quite helpful if you ring them up. I transact over the phone it is very straightforward.

max11

dunstonh wrote: »

Thats not to do with the provider but the fact you are looking at index trackers.

If I'm right now, dunstohn was refferring not to L&G but to any FTSE all shares, is it correct?

I wasn't able to find less then 0,50%Annual management, while I noted that inHargreaves Lansdown and best invest there are teh same L&G products, but I have much more choice.
On the contrary I can't find funds in Chartwell., that should have less annual fees.

max11

SnowMan wrote: »

Try here

http://www.fidelity.co.uk/wealthmanager/funds/uk/oeicsandunittrusts/mbukindex.html

Minimum investment £500 it appears (you will see this if you click on Morning Star factsheet)

They are usually quite helpful if you ring them up. I transact over the phone it is very straightforward.

Thank you, I wouldn't be able to find it! Iwill save 0,20%!
I'm enjoying using the H&L research engine and, as they apply same fees, probbaly I will buy from them!
I wanted to open the account tonight, I'm too tired...hope markets won't continue to rise tomorrow!

dunstonh

If I'm right now, dunstohn was refferring not to L&G but to any FTSE all shares, is it correct?

The figures showed the L&G trackers but you would have found all the other trackers next to them give or take a few places. e.g. you could pick any FTSE100 tracker and found it in the bottom 10% of funds for performance in that period.

I wanted to open the account tonight, I'm too tired...hope markets won't continue to rise tomorrow!

Your focus on charges and trying to save 0.2% p.a. has already cost you 1.4% (at time of posting). Of course, it could have gone the other way but dont let charges be the primary driver to investing. It should be secondary (along with tax). The priority is where you want to invest.

SnowMan

With a tracker of a particular index the most important thing IS the charges. A tracker with a 1% charge will underperform a tracker in the same index with 0.3% charge by roughly 0.7% per year as they are invested in the same thing.

The difference in charges between active funds and passive funds is much higher and the effects are frightening. The affect this has on your investments is illustrated by the Times article. Charges ARE a massive issue in deciding where to invest. The trouble is that over short periods the volatility and variation of performance of funds and even the day on which you decide to invest (for lump sums) masks the difference in charges. Over long periods the effect of the higher charges comes out and is devastating. Pretty much nobody with an active fund will ever check what their funds would have been worth over this long period had they been invested in a tracker and so the reality never becomes apparent. And if a newspaper highlights the affects of charges then it is dismissed as unresearched journalism.

It is another trick of the active fund supporters to base their comparisons of active funds against trackers tracking indices with recent poor performance. If the FT100 index suddenly does well over the next 5 years they will be making their comparisons with a different index that is for sure.

I would however agree that it is better to track the FTSE all share than the FTSE100 but that is for diversification reasons.

Let’s also examine the argument that trackers never come in the top 10% of funds on a yearly basis. Imagine you had 100 managers who simply put all of their money on red on one spin of a roulette wheel and then compared their performance with a tracker. Just under 50% of these managers would massively outperform the tracker over the year and just over 50% would do much worse. But the tracker would never come in the top 10% of funds. Does that mean we should just put all our money on a roulette wheel?

And if it is possible for IFAs to predict which funds will outperform then who is investing in the underperforming funds? Someone must be. I can't see anyone holding their hands up.

There is a definite conflict of interest in IFAs who work on commission being paid commission for selling active funds or being paid no (or negligible commission) for selling tracker funds. I think anyone considering which side of the argument to place themselves on bears that in mind. Of course some IFAs may genuinely believe that active funds are better and it is possible to identify the good funds. But put yourself in their position and think would you advise on a tracker if it paid you nothing?

The purpose of this post is just to express my personal view (there are no conflicts of interest issues with me) and to put the other side of the argument for a bit of balance. In true SnowMan style I am going to melt away at this point. Good luck whatever you decide on.

dunstonh

There is a definite conflict of interest in IFAs who work on commission being paid commission for selling active funds or being paid no (or negligible commission) for selling tracker funds. I think anyone considering which side of the argument to place themselves on bears that in mind. Of course some IFAs may genuinely believe that active funds are better and it is possible to identify the good funds. But put yourself in their position and think would you advise on a tracker if it paid you nothing?

Thats a myth I'm afraid. IFAs get paid trail on trackers or managed. I'm a fee based IFA and get paid the same regardless and I prefer managed in most areas although I do use trackers from time to time in some.

Its not about one being better than the other all the time as it doesnt work that way. Its about which is best for the area of investment you are looking at.

And if it is possible for IFAs to predict which funds will outperform then who is investing in the underperforming funds? Someone must be. I can't see anyone holding their hands up.

If you take a general FTSE index tracker you know its going to be mid table for performance.

If you eliminate the passive managed funds and the bank funds and maybe the insurance company funds then you are generally left with a smaller range of funds to make a judgment call on. If you think Value or Recovery is going to be the way forward then you wont find a tracker on those so you need a managed fund. If you think large caps are going to be the best looking forward then a FTSE100 tracker would be worthwhile.

Aegis

SnowMan wrote: »

With a tracker of a particular index the most important thing IS the charges. A tracker with a 1% charge will underperform a tracker in the same index with 0.3% charge by roughly 0.7% per year as they are invested in the same thing.

I certainly don't disagree with you here. If you are paying a manager to essentially sit on his !!! and add nothing to the fund that a half decent computer programme could do for cheaper, then a tracker is preferable.

The difference in charges between active funds and passive funds is much higher and the effects are frightening. The affect this has on your investments is illustrated by the Times article. Charges ARE a massive issue in deciding where to invest. The trouble is that over short periods the volatility and variation of performance of funds and even the day on which you decide to invest (for lump sums) masks the difference in charges. Over long periods the effect of the higher charges comes out and is devastating. Pretty much nobody with an active fund will ever check what their funds would have been worth over this long period had they been invested in a tracker and so the reality never becomes apparent. And if a newspaper highlights the affects of charges then it is dismissed as unresearched journalism.

As I keep asking people, would you rather have 5% growth per year with a charge of 0.5% or growth of 10% per year with a charge of 1%?

People who pick trackers are effectively doing the former: they are sacrificing increased likelihood of higher returns because they want to save money on the charges. Effectively this loses money over most periods in sectors where the good managers regularly outperform the index.

No-one's arguing that charges are important, but they are (and should be) secondary to the overall return performance. If you get better returns from managed funds after all charges are accounted for, then does it matter what the difference in charges amounts to?

It is another trick of the active fund supporters to base their comparisons of active funds against trackers tracking indices with recent poor performance. If the FT100 index suddenly does well over the next 5 years they will be making their comparisons with a different index that is for sure.

I always measure the performance compared with the closest available tracker. As do most people. I don't know who you're levelling this accusation towards, to be honest. If anything it's probably the fault of the markets for having so few indices to compare managed funds to. If we're looking for non-sector-specific UK investments, then the FTSE100, 250 and AllShare are pretty much the only applicable indices to compare the performance of managed funds to, and if you take the good managed funds they beat all of these indices pretty much every year. The UK is a bad market for trackers.

I would however agree that it is better to track the FTSE all share than the FTSE100 but that is for diversification reasons.

I'd agree, but remember that trackers buy in proportion to market capitalisation, so even an AllShare tracker is going to be dominated by those biggest companies in the index, and in the UK those are lacking in diversity from an industry sector perspective.

Let’s also examine the argument that trackers never come in the top 10% of funds on a yearly basis. Imagine you had 100 managers who simply put all of their money on red on one spin of a roulette wheel and then compared their performance with a tracker. Just under 50% of these managers would massively outperform the tracker over the year and just over 50% would do much worse. But the tracker would never come in the top 10% of funds. Does that mean we should just put all our money on a roulette wheel?

Absolutely not, but this is an awful analogy. If the best managers regularly beat the index, it is absurd to suggest that they do so based solely on chance, as the roulette analogy would imply. There's usually fairly well-established performance pecking order between types of funds, and such order simply would not arise out of random chance alone.

And if it is possible for IFAs to predict which funds will outperform then who is investing in the underperforming funds? Someone must be. I can't see anyone holding their hands up.

Tied advisers put their clients' money into the funds they represent. Not too difficult to find the investors when you know who they're going through.

There is a definite conflict of interest in IFAs who work on commission being paid commission for selling active funds or being paid no (or negligible commission) for selling tracker funds. I think anyone considering which side of the argument to place themselves on bears that in mind. Of course some IFAs may genuinely believe that active funds are better and it is possible to identify the good funds. But put yourself in their position and think would you advise on a tracker if it paid you nothing?

Most fee-based advisers I've spoken to also recommend managed funds over trackers. Commission bias isn't a particularly valid argument here, especially when you consider how much business IFAs send to NS&I, which pays no commission at all for its cash accounts.

The purpose of this post is just to express my personal view (there are no conflicts of interest issues with me) and to put the other side of the argument for a bit of balance. In true SnowMan style I am going to melt away at this point. Good luck whatever you decide on.

Hopefully you'll come back and defend your position again, as there's really not much point in posting if you don't intend to back up your statements...

max11

dunstonh wrote: »

Your focus on charges and trying to save 0.2% p.a. has already cost you 1.4% (at time of posting). Of course, it could have gone the other way but dont let charges be the primary driver to investing. It should be secondary (along with tax). The priority is where you want to invest.

You're definitely right. I knew I would haved lost money (nealry 3%!yohoo!) but I was also trying to understand better the system (charts, performance, funds,etc.) and in which indexes to spread my £3,600.

Are there any exit fee in h-l and /or chartwell for index tracker and/or other funds?

SnowMan

Aegis wrote: »

As I keep asking people, would you rather have 5% growth per year with a charge of 0.5% or growth of 10% per year with a charge of 1%?

I am certainly not getting into a long debate about this. So this really is my last post.

But the obvious flaw to your arguments is that you are able to choose a managed fund that will achieve 10% per annum in a market where the index is going up at 5%. You have supplied no evidence to back this up, and I have never seen anyone else produce credible evidence to back this up. But I have seen plenty of flawed arguments trying to back up something like your claim usually on the basis of past performance figures.

The question you should be asking yourself should be “would you rather have a fund that has 5% growth with a charge of 0.3%, or 5% growth with a charge of 1% or more? And if you do the sum of the consequences over long periods, that is where you start losing big money.

I realise you will never change your view on this. But my objective is to warn others to think about this and come to their own conclusions either way.

And don’t forget us with the tracker funds rely on the active fund believers. If trackers became more popular then the market would become less perfect because there would be less research about and there might then be a real chance to consistently beat the index. So I should be saying thank you so much for spreading the message that active funds are better than trackers.