What funds to add to my portfolio?

Energize

I have £500 in a l&g ftse all share tracker and £500 in a l&g pacific index tracker, ofc I know that trackers can't outperform the market so I'm looking for advice on what fund/s to invest in that can outperform the market. I have another £1,000 to invest.

Myrmidon_J

Energize wrote: »

... so I'm looking for advice on what fund/s to invest in that can outperform the market. I have another £1,000 to invest.

Which market do you wish to outperform?

Of course, there are very few funds that consistently outperform "the market" (or their benchmark / sector average, etc.), in any case.

Energize

Sorry, I meant the uk market in general, the ftse all share tracker that I have now.

Myrmidon_J

Energize wrote: »

Sorry, I meant the uk market in general, the ftse all share tracker that I have now.

Please note that the following does not represent "advice" - only my "informed" (??) opinions.

As I said, it is extremely difficult to consistently outperform the market - as dynamics and investment conditions change, manager styles go in and out of favour, and performance can rise or fall accordingly.

For example, Neil Woodford (manager of the Invesco Perpetual Income fund) wouldn't touch banks with a barge pole for many years - thus, he sacrificed significant "growth" in this sector... But recently, he has been proved "right" (at least, in some sense) and his fund was positioned relatively well in the current crisis.

Fidelity Special Situations,
Invesco Perpetual Income,
M&G Recovery,
Newton Income,

All of the above have (fairly) consistently "outperformed" the market over the long-term. (Past performance is no guarantee of future performance, etc. )

To truly diversify your investment portfolio, you should gain exposure to several funds across the same market - to guard against the risk of one fund tanking due to a poor call.

I'd recommend that you seek alternative viewpoints and consider professional advice before investing.

Energize

What's the best way to invest in these funds, considering that I already have a stocks and shares ISA with legal and general, can I open an additional stocks and shares isa with another company in april and invest into that?

wombat42_2

Marlborough ETF Commodity fund - puts you in a completely different asset class, commodities not equities. The fund irons out volatility.
http://www.h-l.co.uk/funds/security_details/sedol/B195JD8

Commodities are likely to rocket in the next few years.

wombat42_2

Energize wrote: »

What's the best way to invest in these funds, considering that I already have a stocks and shares ISA with legal and general, can I open an additional stocks and shares isa with another company in april and invest into that?

Yes you can do as you suggest.

But theoretically you could also move your existing ISAs to a fund supermarket like Hargreaves and Landsdowne ans still select L& G funds or switch to something else

jg-ms

Energize wrote: »

I have £500 in a l&g ftse all share tracker and £500 in a l&g pacific index tracker, ofc I know that trackers can't outperform the market so I'm looking for advice on what fund/s to invest in that can outperform the market. I have another £1,000 to invest.

Nobody actually knows what's going to outperform the market (if they did they'd probably have to shoot you if they told you ). Knowing which funds beat the (or an) index in the past is a totally different problem to knowing which fund may in the future - and with thousands of isa funds available you have a lot of scope to pick the wrong ones. And in aggregate investors cannot beat the market...so it's a tricky question to get a reliable answer for.
(see "The Grand Illusion" - Economist Mar 5th 2009, or http://www.nytimes.com/2009/02/22/your-money/stocks-and-bonds/22stra.html?em for some refs to back up my assertions)

If you have your rough balance between cash and investments sorted, and you want to diversify from where you are there's probably a few approaches. Personally I would suggest you still use indexes or pick some indexed sectors, and watched out for the initial and management charges of any funds you choose... So examples would be:

- get some different asset classes (e.g. bonds/index-linked bonds/property/commodities).

- Consider what split between stock/bonds/property/commodities/other assets you want to go for - a split of 40% uk stock, 30% global stock, 15-20% bonds, 5-10% property has been used in the past as a model portfolio, but you can find much research and discussion on what split is suitable for whom, what finer grained allocations would change, and indeed whether such a model really does achieve the aims of diversification and reduced risk that its supposed to.

- get a wider spread of geography since you've already taken a bet on asia. (e.g. avivia investors international tracking index - that will get you US/Europe/Japan at a low price and is ex-UK),

- focus on smaller companies (e.g. aberforth, artemis, schroder, standard life have uk funds focussed on this all with various peoples recommendations that they're the one...none are cheap trackers but they're not too expensive, i think the aberforth one is less than 1%. Alternative would be the HSBC FTSE-250 tracker),

- focus on a couple of likely looking sectors - given you already have L&G you could go for their healthcare index fund

- Finally read the articles on this site on S&S ISA's to find good recommendations for brokers/fund networks through which you could buy and reduce the charges.

P.S I'm not a financial advisor ! So this purely my opinion.

Energize

jg-ms wrote: »

(see "The Grand Illusion" - Economist Mar 5th 2009, or http://www.nytimes.com/2009/02/22/your-money/stocks-and-bonds/22stra.html?em for some refs to back up my assertions)

"Specifically, he assumed that long-term capital gains were subject to a 15 percent federal tax and a 6.85 percent state tax; short-term capital gains and dividends were taxed at a combined federal and state rate of nearly 42 percent. The index fund’s average after-expense return was 8.5 percent a year, versus 8 percent for the actively managed fund and 7.7 percent for the hedge fund."

Surely that would affect the results of the study in a way that doesn't apply to the Uk's tax free ISA's?

Aegis

Energize wrote: »

"Specifically, he assumed that long-term capital gains were subject to a 15 percent federal tax and a 6.85 percent state tax; short-term capital gains and dividends were taxed at a combined federal and state rate of nearly 42 percent. The index fund’s average after-expense return was 8.5 percent a year, versus 8 percent for the actively managed fund and 7.7 percent for the hedge fund."

Surely that would affect the results of the study in a way that doesn't apply to the Uk's tax free ISA's?

And therein lies the problem of using US data to influence any decision making process for UK investments: it's a totally different tax situation over there.

jg-ms

Aegis wrote: »

And therein lies the problem of using US data to influence any decision making process for UK investments: it's a totally different tax situation over there.

true, and there's also some tremendous assumptions on the relative growth rates in that article. However the underlying message is still relevant - beware of charges - when long-term economic and equity growth rates are in the 2.5-10% range and you can lose e.g. 5% upfront buying direct, and 1.5%+ annually in charges from managed funds then it's a significant issue for investors. And be cautious of believing people/fund managers who say that they can outperform the market - in aggregate they can't, so who do you believe ? Here's a more uk focussed reference from the review of john kay's book - http://www.ft.com/cms/s/2/4bf99cdc-e35b-11dd-a5cf-0000779fd2ac.html.