Investment strategy for novice investor

al_yrpal

moneyandmountains wrote:

I would disagree. I think you are referring to the portion of the charges that constitute the comission paid to the IFA. The fund managers charges are always going to be there. Typically, switching funds isn't too bad in a fund supermarket e.g. 0.25% in Fidelity Fundsnetwork

I am sorry you are wrong, you don't have to use a fund supermarket if you use Martins rec, and as I said with his rec switching is free I do it frequently. The usual 1.25% per annum remaining annual commisiion is there to pay the fund managers expenses.

savingforoz

Just to pick up on something Edinvestor said, ref reinvesting dividends - I assumed that this could be done automatically, if you picked that option? Is that not cost effective - is it better to take the dividends, save there until thery mount up then reinvest them?

Thanks to everyone, this has been so useful. Moneyandmountain's point is very relevant, to have a strategy already in place for what happens in a down period and I will definitely have to consider that. Looking to get things going for 2006/07 sometime this month. It will be good to feel that I have a financial strategy in place for my future, after years of being merely OK with money but not taking a proactive wealth creation stance - just being average.

noahveil

al_yrpal wrote:

I am sorry you are wrong, you don't have to use a fund supermarket if you use Martins rec, and as I said with his rec switching is free I do it frequently. The usual 1.25% per annum remaining annual commisiion is there to pay the fund managers expenses.

If you mean Chartwell, don't they just use Cofunds and FundsNetwork - which are supermarkets ?

Also, according to their website, there is a switching fee, applicable to both supermarkets, of ;


"0.25% between all funds except for funds that have no initial charge which are free"

moneyandmountains

al_yrpal wrote:

I am sorry you are wrong, you don't have to use a fund supermarket if you use Martins rec, and as I said with his rec switching is free I do it frequently. The usual 1.25% per annum remaining annual commisiion is there to pay the fund managers expenses.

I thought we talking about the fund managers expenses.

Anyhow, if you use a discount broker then regardless of whether their are any charges for switching or not, it is useful to know their policy towards momentum investing.

Some discount brokers will charge you more, if you have many funds (at once, or many changes in a year) as this needs that they need to log more comission receipts. Similarly, some fund supermarkets have policies for 'short term trading'.

Could you state how not to use a fund supermarket in this w.r.t. Martins rec. as I think I am missing something here?

Cheers

EdInvestor

Just to pick up on something Edinvestor said, ref reinvesting dividends - I assumed that this could be done automatically, if you picked that option?

Depends on the broker and whether the company offers the DRIPs facility.

Is that not cost effective

Again, charges vary, but often not.

.. is it better to take the dividends, save there until thery mount up then reinvest them?

This is what I do, but I have a large HYP, so it doesn't take too long: someone just starting out might want to get relatively biggish chunks of divi invested ASAP.It might be worth checking the very cheap Halifax Sharebuilder service for their arrangments on this.

EdInvestor

moneyandmountains wrote:

Some discount brokers will charge you more, if you have many funds (at once, or many changes in a year) as this needs that they need to log more comission receipts.

This is the kind of thing I really hate about funds. They charge you more for the work involved in charging you more.

dunstonh

EdInvestor wrote:

This is the kind of thing I really hate about funds. They charge you more for the work involved in charging you more.

Chose a provider that doesnt then.

Chrismaths

Ok. Quick guide to Unit Trusts & OEICs charges from an investment manager.

Both Unit Trusts and OEICs charge an upfront fee for investing, and an ongoing management fee. Industry standards are 5% upfront, 1.5% annual. Of this, usually 3% of the upfront is available as commission to the IFA, and the other 2% goes to the fund manager. Of the annual, 0.5% goes to the IFA as a servicing commission and 1% to the fund manager.

However, most big investment firms (and clever ones like mine) negotiate discounts from these fees with the fund manager. My firm buys 90% of funds with no upfront charge for instance, and the rest at less than 0.5% charge. Some fund companies will also pay out enhanced servicing commission (or 'trail') if you do a certain amount of business with them. So on some funds we get 0.75% trail, which we rebate to the client, leaving an annual charge of 0.75% for the fund, which isn't bad when you consider the expertise of these guys. This is how people like hargreaves lansdown pay an annual "loyalty bonus" on certain funds. Buying direct from a fund manager is perhaps the worst thing you can do, as they will charge you the full upfront (including IFA commission) and the full AMC. If you want to do it yourself, use someone like hargreaves, if you want the advice, ask questions about the discounts they get from fund companies. Sadly, the fancy new 'menu' system from the FSA completely ignores discounts, so can be more or less ignored.

HTH, Chris