Unit trust yield confusion....

EdInvestor

It is you who are wrong, DH.The UK stock exchange is stuffed with big multinational companies, which is why it is now one-third owned by international funds seeking the exposure.

Of the shares chosen in that HYP I quoted (which you would not necessarily choose now), the following have a very significant part of their business overseas:

Gallaher (LSE: GLH) 420 901 114.5 382
Scottish & Newc. (LSE: SCTN) 495 480 (3.0) 211
Royal & Sun (LSE: RSA) 393 106 (73.0) 59
Intercon. Hotels (LSE: IHG) 396 773 95.2 92
Boots (LSE: BOOT) 581 610 5.0 259
Assoc. Br. Ports (LSE: ABP) 324 565 74.4 251
Hilton (LSE: HG.) 220 356 61.8 223
Rio Tinto (LSE: RIO) 1,131 2,329 105.9 201
Anglo American (LSE: AAL) 951 1,774 86.5 221
Royal Dutch Shell (LSE: RDSB) 2,012 1,802 (10.4) 220

That's 10 out of 15 shares. Re risk, there are also additional risk reduction factors such as diversification across sectors, size ( market cap), equal weighting, low or no debt, history of rising dividend and level of divi cover included in the HYP criteria. Fifteen shares is seen as the minimum, with 20 conveying a bit more protection but there is very little increase in risk protection beyond 20 shares (you will get no additional protection from holding hundreds of shares, in fact you will get less, because many will be small cap and they are riskier, and also your yield will be reduced, so why bother?).


But the main point this thread makes is about charges IMHO.

Looking at carnet's fund switching approach investing 20k with a 16.6% average return since 1985, the outcome now would be 503,152, very nice too

But deduct annual charges of 2.6% - which would be very conservative going back this far - and it reduces the value of the portfolio by a huge 38% :eek: to a mere 313,252.

This is why it is very important to keep trading and switching to a minimum and also to avoid all charges, especially percentage-based ones.The more you've got, the more you gain with flat rate charges and the more you lose on a percentage basis.

This is why well-off people buy and hold shares (no charges once bought), not funds (charges even if you do nothing).

dunstonh

It is you who are wrong, DH.The UK stock exchange is stuffed with big multinational companies, which is why it is now one-third owned by international funds seeking the exposure.

Yes, you keep saying that but it doesnt make it right. You cannot get true international exposure unless you invest into those markets. Investing in companies that have some international business is not the same. You don't get the full international spread you get with targetted investments.

But deduct annual charges of 2.6% - which would be very conservative going back this far - and it reduces the value of the portfolio by a huge 38% :eek: to a mere 313,252.

I think you will find Carnet's performance is after charges. As is the cautios portfolio I mentioned higher up. It's about getting value for money with charges. Not avoiding them altogether. It's the bottom line that matters. That cautious portfolio was done on full charges and still came out the same as the HYP. Yet only 50% of it was in stockmarket and carried significantly less risk than the HYP. So, is it better to pay less charges, have higher risk and get the same performance?

ReportInvestor

dunstonh wrote:

A diverse portfolio utilising 10 funds across the sectors arranged on full charges/commission with only 50% invested in the stockmarket and no more than 0.6% of it invested in one company managed to perform on par with the HYP in exactly the same period.

Can you give us a link to this or outline the portfolio in more detail, dh?

dunstonh

I have a full xray and fund breakdown available in pdf format. I could email it to you so you can analyse it. (and no doubt pick it apart ) I'm not sure the board team would appreciate me posting the funds on the open forum. Plus they are not necessarily funds I would recommend now but ones that would been mainstream back in 99/00.

EdInvestor

dunstonh wrote:

I'm not sure the board team would appreciate me posting the funds on the open forum.

Such a great excuse, so often repeated, for not telling us about these alleged exceptional returns. :rolleyes:

Of course there's no point in comparing an HYP with a cautious managed portfolio which would contain other asset classes.

So why not post the equity component by itself?

dunstonh

Such a great excuse, so often repeated, for not telling us about these alleged exceptional returns. :rolleyes:

Not an excuse at all. If you chose to quote a little more of my response, you will see that I said I would email it if you wanted it.

Of course there's no point in comparing an HYP with a cautious managed portfolio which would contain other asset classes.

So why not post the equity component by itself?

So, what you are asking is if I can remove the cautious part of the portfolio and rejig it so the 75k is in the equity based side only and see how that comes out?

EdInvestor

Just tell us what the equity component was invested in and how it performed after charges.