investing in FUNDS - dummies guide?

windstate

anyone got a link for a dummies guide to funds? Ive been looking into them for the last couple weeks but am still pretty clueless. Not got enough of an idea to choose which ones. Dont want to pay and IFA as I feel I should be able to figure all this out myself.

Ideas for a small portfolio (made up of 3/4 funds) would be appreciated also.

Thanks

Aegis

As far as I'm aware there's no single best resource for funds. You can research the funds at Citywire and Trustnet, but the overall strategy for the investments are down to you.

What size portfolio are you looking for in terms of cash? For anything larger than £4k, 4 funds isn't really enough diversification for me.

windstate

Aegis wrote: »

As far as I'm aware there's no single best resource for funds. You can research the funds at Citywire and Trustnet, but the overall strategy for the investments are down to you.

What size portfolio are you looking for in terms of cash? For anything larger than £4k, 4 funds isn't really enough diversification for me.

Looking to invest around £2000 lump (prefer closer to £1k). Monthly looking at £100 to £200.

I looked at Hargreaves Lansdown and their minimum is £50 per month per fund I think. So with 4 funds that would be £200 per month. Cant afford any more than this at the moment.

I'm biased to funds with lower initial and annual charges (regardless of their past performance compared to similar funds in their sector/category). I feel I wont be able to pick the best fund in any sector and therefore would rather just have a mediocore/average/mid-level one and pay less charges. Last thing I want is to pick expensive funds which I think will outperform their peers which then go on to be the lowest performers. Would you agree with this approach for a new investor?

Aegis

windstate wrote: »

Looking to invest around £2000 lump (prefer closer to £1k). Monthly looking at £100 to £200.

I looked at Hargreaves Lansdown and their minimum is £50 per month per fund I think. So with 4 funds that would be £200 per month. Cant afford any more than this at the moment.

I'm biased to funds with lower initial and annual charges (regardless of their past performance compared to similar funds in their sector/category). I feel I wont be able to pick the best fund in any sector and therefore would rather just have a mediocore/average/mid-level one and pay less charges. Last thing I want is to pick expensive funds which I think will outperform their peers which then go on to be the lowest performers. Would you agree with this approach for a new investor?

As much as I personally hate them, a FTSE allshare tracker might be suitable for you. Perhaps look at Legal and General. You'll find it cheaper to go direct to them then through Hargreaves Lansdown in all likelihood.

Like I said, not my favourite form of investment but it sounds like it fits what you want: mediocre performance and low charges

artha

Aegis wrote: »

As much as I personally hate them, a FTSE allshare tracker might be suitable for you. Perhaps look at Legal and General. You'll find it cheaper to go direct to them then through Hargreaves Lansdown in all likelihood.

Like I said, not my favourite form of investment but it sounds like it fits what you want: mediocre performance and low charges

Going direct to L&G also means that you can top up (min £100) by phone just before the mid-day valuation. Usefull for the opportunist with not much cash to play with

jon3001

windstate wrote: »

anyone got a link for a dummies guide to funds?

I'd maybe start here:
http://www.investorsolutions.com/V2content/book/index.cfm#contents

It's not about funds per se. It's about building a portfolio composed of asset classes that suit your risk profile. Once you know what spread of asset classes you want - then you can go about choosing funds that fit that spread.

windstate wrote: »

I'm biased to funds with lower initial and annual charges (regardless of their past performance compared to similar funds in their sector/category).

First off - I'd never pay an initial charge. There's plenty of discount brokers around to avoid this. And if one fund still demands one - then they probably have very good competition from a similar fund that doesn't.

The hard fact is that for many asset classes (e.g. UK Smaller companies, Emerging Markets, etc.) you'll frequently have to pay a higher annual charge (circa 1.5%).

windstate wrote: »

I feel I wont be able to pick the best fund in any sector and therefore would rather just have a mediocore/average/mid-level one and pay less charges. Last thing I want is to pick expensive funds which I think will outperform their peers which then go on to be the lowest performers. Would you agree with this approach for a new investor?.

For me it's not soley about performance - I want to know how much risk they took on to get there. E.g.


Bond funds:

• What is the spread of credit ratings being invested in?
• How long do these bonds typically mature? Are they sensitive to interest rate changes?

Stock Market funds:

• Is this a concentrated portfolio of just a few stocks? Or a more diversified portfolio?
• What kind of geographic spread is there? Is it invested mainly in large or small economies? Developed or emerging?
• Is there a good industry spread?

I'll frequently pass on hot funds if they seem a bit risky. E.g. I'm looking for a broad, diversified European fund with good coverage of the major economies but 'Hot Euro fund' has just 30 stocks and they're mainly in Greece and Sweden.

If you do find an index tracker that covers your target asset class then use that as your starting point while you begin investing. For the UK you can probably do better.

For developed international markets (US, Europe, Japan, Far East/Pacific), I frequently use trackers. I'm not convinced that the managed funds show a consistent edge without taking on too much additional risk.

When you get beyond that (e.g. UK small companies, International small companies, Emerging markets for starters) you'd do well to research a managed fund.

windstate wrote: »

Ideas for a small portfolio (made up of 3/4 funds) would be appreciated also.

Maybe research funds that fit the following portfolio:

• 25% UK Corporate Bonds
• 25% UK Large Caps
• 25% UK Small Caps
• 25% International Equity (developed markets)

You'll get to see how the larger portfolio building blocks behave relative to each other while you learn about investing. Eventually you can go more fine-grained. Personally I've got maybe a couple of dozen asset classes in my sights.

Myrmidon_J

Another option - aside from the index trackers - might be to consider a managed fund. These tend to be slightly more expensive (and are sometimes much more expensive), but offer diversification across markets and asset classes.

So, if the FTSE 100 has another decade of (relatively) poor performance, you might not be so disadvantaged!