Fund of Funds- can I get them cheap?

spanner200

Any one know of a broker which provides a decent discount for Fund of Funds and which will also allow minimum DD investments of £150 per month into an ISA wrapper?

I liked the look of HSBC emerging growth fund but 5% inital fee seems expensive, although I guess fund of funds tend to be a bit dearer. As I only have a small amount to invest every month, I figured a fund of funds was the best way to diversify...

any thoughts?

al_yrpal

https://www.chartwell-investment.co.uk will rebate the intitial commission and 0.25% of annual commission. However no broker has any influence over the financial terms which are set by the fund. The best plan is to get the application form for the chosen fund and have a look at that. If its a £500 initial investment, save it, then start the ISA and continue your monthly payments as normal.

noahveil

Most online discount brokers have regular monthly payment facilities into funds within an ISA wrapper ie Cofunds, HL Vantage etc.

Minimum usually £50 per month per fund - including FoF.

BTW, never heard of "HSBC Emerging Growth" Do you mean HSBC Global Growth FoF ?

If so, its track record hasn't been great since launch. Many better FoF around IMO.

spanner200

thanks noahveil, I thought that was the case so have now been considering M&G's Managed growth fund- although still trying to determine what I'm supposed to be looking for when reading the facts sheets!

allanhamer

FoF do usually carry more charges than a stand alone fund, unless the FoF manager gets good renewal rates from the funds that the FoF invests in. In effect its a fund invested in other collective investment schemes, investment trusts or OEICs. While you do of course get further spread of risk it does sometimes come at a cost.
The front end fee on the FoF product is no different in essence than any other single fund scheme. When a FoF buys in to another scheme you would expect that they get in at NAV without any initial charge or at creation price. All depends on what agreements the FoF manager has in place with the groups that it's FoF's is investing in I suppose.
Obviously if they are getting in at above NAV or creation then you as a shareholder/unitholder are having your investment performance further diluted on top of the annual charge

If you can understand all that, then your a better man than I am hehe.

Like I said before, you pay for the further spread of risk in effect. Obviously depends on what the risk level is on the FoF your going in to in the first place. Just make sure to do your reading up before you dive in.

Regards

Allan

al_yrpal

allanhamer wrote:

FoF do usually carry more charges than a stand alone fund

These charges are peanuts compared to 30%+ gains. But as you can guess you do have to keep in touch with the investment closely. For the last three years global funds have been a great investment, and long term they are probably good too. Don't invest what you can't afford to loose.

allanhamer

al_yrpal wrote:

Don't invest what you can't afford to loose.

Sound advice there

Gains such as you quote aren't just available to FoF products though. For instance, you find normal unit trusts and oeics that are not FoF products that equally invest in a wide or similar geographic areas and markets as FoF products.

As I pointed out what you are getting with a FoF is a wider spread of investments which should in theory create less risk although at the same time you are open to how each underlying fund performs. What you are also getting with a FoF product is the combined experience of a number of managers albeit that ultimately your FoF manager is going to be the one deciding where your monies going to be going

Allan

spanner200

Thanks Allan, I hadn't even considered how NAV would affect the overral charges the the dilution of my investment! I appreciate the FoF's would be more expensive, but I think the ability to access a diverse portfolio is an attractive one for a newbie like me who isn't able to make large lump sums to many single investments! Been reading another thread just posted and it seems that HL many not necessarily be the best in terms of charges so the research continues!

allanhamer

As a side note you should be able to see the actual charge situation for a FoF's by looking at its Simplified Prospectus or Key Features document. The TER (Total Expense Ratio) will take in to account the underlying charges on the funds within the FoF and will also take in to account any renewal commission that the FoF receives. Looking at the TER will give a fair indication of what sort of charges you are looking at on any money you invest. You could then compare each product providers FoF product along with any past performance and make a decision on which product is best for you.

Remember though that past performance is not a guide to future performance and you may not get back what you originally invest!

Its always worth checking with past performance that the same fund manager and his team is still with the Fund you choose. Chances are if the team and the fund manager has changed then past performance can mean didly squat!.

If a product has a good manager and a good team backing that manager up, chances are that if he/she has consistently been a good performer that he has a good chance of continuing that good performance, markets permitting!!.

ITS NOT GUARANTEED of course as everyone makes mistakes now and again, they are only human after all.

Remember also that constant reviewing of your investments is a must. Sometimes its better to cut your losses if you feel things are going pear shaped.

All the above is my own opinion and is not investment advice. I am not a Financial adviser and you should make your own decisions. I do work in the industry but am by no means an expert

Remember that if your going for advice make sure you know whether that adviser is tied to their own product range or are whole of market. Whole of market advice is usually better in my experience. You usually find a majority of the high street products are pants compared with other less well known names out there, in my experience.

Regards

Allan

spanner200

Thanks for that Allan, I think I will probably make a decision about which fund to choose over the next coming weeks, once I've decided which broker can give me the best deals- I was originally thinking of HL as they allow monthly DD investments although searching on the forum suggests that there may be more out there with more competitive charges, such as Best Invest, though haven't ascertained yet if they too will allow monthly DD...