index trackers

blinko

http://www.fool.co.uk/trackers/index.htm

The Facts
The Motley Fool believe that for most people...


An index tracking fund is the most suitable investment vehicle.
Saving money, on a monthly basis, into an index tracking fund, is the best form of long-term investment.
Why Invest In The Stock Market?


In 1918-2003 the UK stock market returned an average of 11% per annum, or 7% per annum if you adjust for inflation.
Since 1869, the stock market has out-performed the returns from cash in over 97% of rolling 10 year periods.
Why Invest In An Index Tracking Fund?


Research published by The WM Company in April 2004 showed that over the past 20 years, 82% of active funds failed to beat the benchmark FTSE All-Share Index.

would anyone recommend this as an option ? i was figuring the ftse index would be rising near the 5 mark in the next coming year and that after xmas would be my buy time when the bad results frm xmas sales knock some of the value off of them.

woud anyone recommed just following the ftse index and repeaing the yield on that for a couple of years ?

dunstonh

Research published by The WM Company in April 2004 showed that over the past 20 years, 82% of active funds failed to beat the benchmark FTSE All-Share Index

anyone picking a certain period can make their statistics look good.  If you pick a 10 year period, its probable that 82% of active funds did beat the benchmark FTSE all-share index.

would anyone recommend this as an option ?
woud anyone recommed just following the ftse index and repeaing the yield on that for a couple of years ?

Absolutely not.

Trackers are cheaper than managed funds but its far more sensible to pick a range of investment areas and spread the money.

I'm not going to pick up the research figures now but its something like 90% of growth is spreading the investment over the various asset classes.  5% is timing and 5% is picking the best funds.  

For example, the FTSE has only been top performing sector for only around 2 years in the last 10.   So, 1 in 5 years will be best, the rest of the time somewhere else will be better.

Also since Labour got into power, of the G7 economies, the UK has been top.  Of the G7 Stockmarkets, the UK has been bottom.   Many put this down to removal of tax advantages by Labour on many investment products such as ISAs and Pensions worth over £5billion a year and other Labour initiatives which hamper UK business.

Another consideration is the dividend income.  This tends to average around 4%pa on UK equity income funds.    If you invested £100 5 years ago on a FTSE100 tracker, you would have £78 now.   On a Equity Income tracker fund without divend income you would have £93 (sector average so not picking best fund here).  With the dividend income you would have £126.   And those figures are all after charges.

The FSA are now encouraging and possibly soon be enforcing that fund recommendations are made based on asset allocation averaged around investment risk attitude of the person.   This is not to be ignored as research does back up that even if you invested in a range of 5-10 below average investment funds across the various asset classes, this would have outperformed the best UK fund over the last 10 years.   You can apply that to US and Far East.

Personally, i have a range of above average charging funds (annual management charge that is) and have averaged nearly 15% a year over the last 5 years.    This is mostly down to spreading the money over the asset classes and annual rebalancing (rebalancing brings the percentages invested in each area back in line again so funds that have gone up have money taken out of them to put in the funds that have gone down.   aim of that is that what goes up, usually comes down and what goes down usually comes up).    Its not to do with having every one of the top 10 funds as i do not.

The days of picking one fund for your ISA, unit trust, pension or bond are over.   You would be a fool to follow the fools advice.

erb

There has been a recent discussion on trackers on the savings board started by Toska that you may find useful. See further down the board. Sorry I do not know how to provide a link to it.