UK Index Trust

Deemy

emerging markets i.e. eastern europe / russia

Metals & Mining, including uranium mining.

Far east i.e. india, thailand, south korea

Oil productions and services

What else ?

Yeh theres south america, brazil etc... all perking up.

Theyve all done well during 2005, and into 2006 thus far, so on that basis expect some of a breather. So Long-term investments, as expect immediate term volatility

I think going forward the Banks / Utilities look interesting.

EdInvestor

TheShadow wrote:

If trackers are a risky way of investing in equities what are safer more effective ways as i have currently got all my shares in trackers of some kind or other.

The trouble with tranckers is that they are a "boom and bust" product - it's in their nature, they go up and down with the market. When the market does well, trackers do well.When it tanks, they do too.

I prefer something that has a "defensive" strategy in place during downturns but still does well when the market is on an uptick. Equity Income funds fill the bill - take a look at their performance over 5 years in particular, see how they have weathered the crash Pretty well all the funds have done well.

Equity Income funds list

Compare trackers over 5 years ( and if you looked a few months ago,most of them would have still been underwater )

Tracker funds list

It's very important to remember when investing in any managed fund (as opposed to a tracker) to go through a discount IFA or broker who will rebate charges, eg Cavendish, Hargreaves Lansdown, Bestinvest, Squaregain, Hoodless Brennan etc.

Many of these non-tracker funds have a 5% initial charge up front and a 1.5% annual charge.As DH point out, the annual charge doesn't necessarily matter if the fund is performing really well, but frankly the 5% charge is a real killer.

Make sure you don't pay it.

cheerfulcat

marrioa wrote:

I have details of an index tracking range. One of the funds is the UK Index Trust which has no initial fees and0.5% annual management charge. The minimum investment is £50 and there are no withdrawal fees. There are transaction expenses which are not specified in £ or %. It also mentions something called a Portfolio Turnover Rate of 2% - haven't a clue what that means, even though I've read the paragraph several times!!! The effect of deductions after 10 years @ £50 a month is £230. if you have accumulation units.
Does this sound like a reasonable investment?

Hi, marrioa,

That sounds reasonable from the charges angle; you need to keep an eye on the tracking error as well, though. You could also consider Exchange Traded Funds or ETFs; their main advantage over standard unit trusts is that they are priced throughout the day, so that you can deal at any time and know the price you are paying/receiving. ( unit trusts are priced once a day ). They can also be cheaper though this is not always the case.

The portfolio turnover rate describes the amount of trading done within a portfolio over a year. There's a very good explanation here. The lower the turnover rate the better; having said that, I would expect the rate to be fairly low in a tracker, simply because the indices don't change that often.

I would suggest that tracking the FTSE All-Share or, even better, the FTSE 100 and the 250 separately, would give a more balanced exposure than a FTSE 100 fund ( in case that's what you are looking at ). I would also consider something like a global tracker ( there is a global ETF ) for a small portion of your portfolio, for the sake of diversification.

HTH

Cheerfulcat

Edit: Ed, the point of trackers is that you use them for regular investment, not one lump sum at the start. Used in this way, the downwards movements provide an opportunity to buy more shares/units when they are cheap. Someone investing regularly in a tracker over the last five years would in fact have done rather well.

EdInvestor

TheShadow wrote:

I am now looking to move away from L&G and hopefully find a company that will allow me to buy shares or funds inside the isa wrapper.. But if that's not possible just straight shares or funds.

If you want to start experimenting with shares, the Halifax Sharebuilder account is the place to go - it charges only 1.50 a deal for buying shares, which is very cheap indeed [No personal experience, but reports seem positive and the charges are easily the lowest around.]


One strategy that might appeal to someone who has started with trackers - and would also remove quite a lot of tracker risk - is to go down the list of the 30 top FTSE100 companies (which is where most of your money goes in a tractor) and pick one from each sector.

eg One bank, one telecom company, one oil company, one mining com pany etc. If you use as a basis the one that pays the highest dividend yield, that will help you as a beginner, because more money will go into your cash account, meaning you can buy more shares.

This approach removes one of the biggest tracker risk problems - that too much money goes into oil and mining companies and banks, because they make up a large chunk of the index (The oil price boom last year is a major reason the trackers did well).

Iy you diversify the type of company and invest the same amount into each share, you will get rid of a lot of the risk.

This link lists the companies in order of size and tells you the yield:

https://www.fundies.info

EdInvestor

cheerfulcat wrote:

Edit: Ed, the point of trackers is that you use them for regular investment, not one lump sum at the start. Used in this way, the downwards movements provide an opportunity to buy more shares/units when they are cheap.

Hi CC,

This might suggest a rather more intense level of investment management and monitoring than is implied in "pound cost averaging".

I used the lump sum example because that was the one available on the website.

cheerfulcat

EdInvestor wrote:

Hi CC,

This might suggest a rather more intense level of investment management and monitoring than is implied in "pound cost averaging".

I used the lump sum example because that was the one available on the website.

Eh? What's intense about a monthly DD into a fund? And the lump sum example may have been convenient but it is seriously misleading.

marrioa

Thanks to everyone who replied to my tracker query.

As well as researching the tracker option, I'm also looking into unit trusts with a discount broker.

My research so far suggests that, with my attitude to risk @ about 4, I would be wise to invest my money as follows

50% UK core: 30% Corporate bonds: 15% Europe: and 5% US

I am trying really really hard to find out as much as I can about the relevant funds from each of these areas, but how can I judge which to choose when I am not taking any notice of past performance and all the funds sound positively glowing?

What eg. is the difference between Invesco Perpetual Income fund and Invesco Perpetual High Income fund

I've been sending off for information from different funds and brokers. The trouble is, I can't seem to be able to compare like for like because there is so much information to look at.

Sorry for being so slow. I will make my own decision, but not before I'm as near to 100% happy with it - if you know what I mean.
In the meantime - :A

EdInvestor

marrioa wrote:

What eg. is the difference between Invesco Perpetual Income fund and Invesco Perpetual High Income fund

Not much.They are both good - indeed they are both excellent, some people would say they are the best funds in the UK

What a good start, marrioa, I should just keep going, whatever you're doing you seem to be arriving at the correct answer

BTW, at the moment the bond markets are in a terrible mess all over the world, and nobody, not even the experts, seems to know what wull happen next.

May i suggest that you leave bonds to one side at the moment and instead invest a portion of that money earmarked for bonds into commercial property funds? They have the same risk level as bonds ( when bonds are behaving normally.)In my book that means they are presently lower risk, as the bond market is in such a state of hysteria.

There are many good property funds to choose from.

dunstonh

The idea is to buy a balanced portfolio appropriate to your risk. Without lower risk asset classes like fixed interest, corp bonds, global bonds and comm property, the portfolio would go towards the higher risk end.

Remember that when things go down, it is the low risk areas that continue to make the money. Put too much into one area and you handicap growth, put too much into the other and you increase the volatility of your portfolio.

Also remember that income is the current fashion and there are already signs that it swinging towards growth again.

marrioa

Thanks for your advice carnet. I will do more reading up about different sectors in Uk and/or expanding to bring in Far East/emerging markets.

This is all quite exciting when it's theoretical - wonder if I'll feel the same when I get round to investing for real?
:j -I hope!!!