£50-£100/month to invest....

bashdem

Hi All

I'm looking to invest between £50 and £100 per month and wondered what peoples' preferred investment would be.

I was looking towards an index tracker as I really cant be bothered with managing anything myself. I also believe an actively manged fund would not really outperform an index tracker by enough (if at all) to justify the extra charges associated with them.

I will be looking at this as a long term investment and will hopefully not be making any withdrawals.

I was thinking of a FTSE250 tracker as this is a little safer compared to the FTSE100 if one of the big players were to go belly up.

I'd obviously like to see as bigger return as possible but seeing as the investment is not a huge amount then the risk associated should reflect this.

As recommeded I had a look at the tracker offerings by Fidelity as I heard they had very low charges - well, they do quote charges of 0.1% but then they also quote a Total Expense Ratio of 0.3% - the difference being????

Any suggestions people? Am I looking at the wrong thing altogether.

One last thing, whatever I chose, seeing as the investment would be less than £3k a year how would I go about wrapping this in some kind of ISA

Thanks in advance

dunstonh

I was thinking of a FTSE250 tracker as this is a little safer compared to the FTSE100 if one of the big players were to go belly up.

Actually, the FTSE100 tracker is slightly lower risk than than the 250 but not much in it.

I'd obviously like to see as bigger return as possible but seeing as the investment is not a huge amount then the risk associated should reflect this.

The comment doesnt fit in with the two indexes you have mentioned.

Any suggestions people? Am I looking at the wrong thing altogether.

A couple of other threads on the go at present you should read which have a very good mix of comments from the regulars. Your questions are almost exactly the same as covered in the other threads.

black-saturn

How about a mini ISA? Then you can withdraw easily from it also if you ever needed to.

bashdem

Any links dunstonh?

I did see some threads with people talking about similar things but they all seemed to have differing amounts to invest and over different terms. People seemed to be saying it all depends on risk/investment/period - so I posted specific for myself.

I'm not sure what you mean with regards to "The comment doesnt fit in with the two indexes you have mentioned." Are you saying I should be looking at a different type of investment for the risk I am prepared to take?

Seeing as this is going to be a long term investment 10-15 years+ I guess I can take a bigger risk that for shorter term investments.

Sorry for being ignorant but could you explain why the 100 is less of a risk than the 250?

Cheers

bashdem

black-saturn wrote:

How about a mini ISA? Then you can withdraw easily from it also if you ever needed to.

You mean a stocks/shares mini-isa? I gather I can put in £4k into one of these as well as £3k into a cash mini-isa? Am I right?

Again, apologies for the ignorance but how do I incorporate a fund and an ISA? Do I take the fund to someone who can provide an ISA? Do I take it out with the same provider?

Cheers

dunstonh

I did see some threads with people talking about similar things but they all seemed to have differing amounts to invest and over different terms. People seemed to be saying it all depends on risk/investment/period - so I posted specific for myself.

The amounts are different and risk is different but the principle is the same. Understanding why volatile something may be and how it is likely to react in different circumstances can really help you work out what your own risk rating is.

I'm not sure what you mean with regards to "The comment doesnt fit in with the two indexes you have mentioned." Are you saying I should be looking at a different type of investment for the risk I am prepared to take?

If you looked at a simple scale of 1-10 to reflect risk, you are looking at risk 6/7 for a 100 tracker and 7 for a 250 tracker. Whether higher or lower is appropriate to you, only you know at this stage. Although you yourself may not know yet as you are still researching.

I am not a big fan of single fund solutions when investing money. Even on small amounts like £50-£100pm. You end up putting all your money into just one sector. There are some very good fund of funds which are single funds but then invest into other funds. This can give small investors the opportunity to have a diverse portfolio containing the major investment funds across a range of sectors and let the fund manager decide which funds should be in the "fund of funds".

Seeing as this is going to be a long term investment 10-15 years+ I guess I can take a bigger risk that for shorter term investments.

Risk does get less the longer you can leave it. Also the pound cost averaging of a monthly contribution can reduce that risk further. This is the effect of buying units every month as the price fluctuates so you average out those ups and downs over the long term. It reduces the potential for growth a bit but also reduces the degree of losses. This can mean you could take a slightly higher risk than you would perhaps on a single lump sum.

Sorry for being ignorant but could you explain why the 100 is less of a risk than the 250?

Bigger market capitalization. Less likely to go under than the next 250 companies. Indeed, you can now get European funds with less risk than a 250 tracker.

Dont apologise for not knowing. You are starting out and the best thing you are doing is learning about it first.

Any links dunstonh?

http://forums.moneysavingexpert.com/showthread.html?t=169842 - slightly different but does cover sector allocation and some examples of different performances between the sectors.

http://forums.moneysavingexpert.com/showthread.html?t=169874 - a few comments on trackers.

There are some older ones which you could do a search on which I recall have some excellent comments on the tracker vs managed debate. Maybe a search on "tracker" and "managed" limited to Investments section could yield a few responses worth following.

Quarantz

Indextrackers are not necessarily a good instrument. E.g. Company A drops 10% and company B rises 10%, they both have the same weight in the index. The index will not move, but a well managed fund could have picked the right company and get the rising %. A good spread with the major stocks (most weight in index) might be performing as well as the tracker, but for relatively less money. Getting some good advise from a financial planner in your country before deciding what to do might be something to think about.

EdInvestor

bashdem wrote:

I was looking towards an index tracker as I really cant be bothered with managing anything myself.

Such a pity so many people think like this.They're just asking to be ripped off.What can you say?

Nobody looks after your money like you do.

dunstonh

EdInvestor wrote:

Such a pity so many people think like this.They're just asking to be ripped off.What can you say?

Nobody looks after your money like you do.

Ok, where are the trackers in property, fixed interest, global specialist, equity income, smaller cos/opps etc? If you limit yourself to just trackers because you want to save 0.5% a year, then you miss out on potential for in excess of that 0.5%.

Sometimes you have to spend that money to get more back.

cheerfulcat

Ok, where are the trackers in property, fixed interest, global specialist, equity income, smaller cos/opps etc? If you limit yourself to just trackers because you want to save 0.5% a year, then you miss out on potential for in excess of that 0.5%.

They do exist, as it happens. In any case, I think that what Ed was lamenting was this comment

I really cant be bothered with managing anything myself.

Quite a common attitude and why not? Many people do find making money very tedious, I really don't know why but then I don't understand why many people don't like gardening, either.

bashdem, I don't see anything wrong with your idea. The Legal & General tracker is generally thought to be the cheapest, though. There are also ETFs which are trackers in the shape of shares rather than unit trusts; I prefer them because they are continually priced throughout the day ( UTs are priced once a day ).

Debt_Free_Chick

bashdem wrote:

Again, apologies for the ignorance but how do I incorporate a fund and an ISA? Do I take the fund to someone who can provide an ISA? Do I take it out with the same provider?

Cheers

Just to answer this point, choose your fund and then buy that fund within an ISA - just tell the investment manager/broker that you want an ISA and you want that ISA to be invested in the xyz fund.

The ISA is just the tax wrapper - you can invest in just about every fund on the market (OK, some exceptions) either inside or outside an ISA.