Exchange Traded Funds - Recommendations?

timothee

Hi all,

I've been looking at investing in Exchange Traded Funds lately. I've read the basic guides on the internet. In addition to the original index-tracker funds, I understand that there are a number of alternative versions going around (e.g. 'shorting' indexes to benefit from losses, 'leveraged' versions which double your returns/losses).

Since I want to restrict my level of risk, I am interested in an ETF which roughly tracks the value of a well-known index. I have yet to decide which one, but I'm 70% sure I'll go with one of the FTSEs as I don't want to expose myself to exchange rate fluctuations.

Can anyone offer any suggestions as to names of funds/managers that might be worth looking at?

As to the practicalities of making the investment, my understanding is that I should arrange purchase of shares via a stockbroker. Can anyone recommend a stockbroker which has relatively low rates of commission? I'd be investing a sum greater than £10k, if that helps.

Many thanks in advance.

Sceptic001

I hope you get a reply, as I am in a similar position. I have looked at the Barclays iShares FTSE 100 and FTSE 250 ETFs but would like to compare them with other providers but I cannot find a comparison website that compares ETFs in the same way that other funds can be compared.

FYI there is an MSE article on the cheapest way to buy and sell shares here: http://www.moneysavingexpert.com/savings/cheap-online-sharedealing

gt94sss2

timothee wrote: »

Can anyone offer any suggestions as to names of funds/managers that might be worth looking at?

HSBC have just launched a range of ETFs which I think undercut the other UK providers.

Otherwise, ETFs are also available from:

iShares
Lyxor
Deutsche Bank

Vanguard - a big US company - has also launched some ETFs for UK customers recently

Regards
Sunil

sabretoothtigger

Leveraged and short etf are not investing, they are for traders to buy and sell each day

Unit trust could be better then an etf if you are being conservative, see trustnet.com

I'm 70% sure I'll go with one of the FTSEs

FTSE indexs cover markets all over the world. If you mean the uk then I prefer the 250 mid cap as an index for growth. xmcx is an etf for that

Every taxpayer has some shares in some ftse100 banks already so theres less need to duplicate that exposure

If you get a pacific tracker then you'd have exposure to five or so currencies which is a more balanced position then just one investment in one place.

This forum has other threads on etf if you search or try hl to browse their etf index


The best known indexes are also the worst performing. Its a very common thought that less risk is best but unfortunately its not well rewarded and as I have been invested in the uk index for most of this decade I think I'm qualified enough to say I think now is one of the best times to look further afield.

In terms of currency the pound is being printed in greater numbers by boe, the danger of it becoming more valued long term while you send money abroad is fairly low imo. I also recommend you layer your investments if at all unsure or worried on short term movements, so regular investment rather then lump sums should give piece of mind

If you do buy etf then sharebuilder would allow for lower commision costs otherwise unit trusts can be cheaper as they do some cheap trackers if you prefer this




http://www.telegraph.co.uk/finance/markets/questor/6179041/Vietnam-is-a-clever-way-to-play-Asia.html

timothee

Thanks all for comments - very interesting.

Yes sorry when I said one of the FTSEs I just meant FTSE250 or FTSE100 - I anticipate that FTSE250 gives greater potential for growth or losses.

As to whether to invest abroad, my understanding (happy to be corrected) is that the pound is currently valued at a historically low level. Not necessarily the same as undervalued of course, but my £s buy fewer euro, yen or dollar-denominated shares than say 5 years ago. My worry is that if I get lucky and the index that I invest in appreciates in value, I end up losing any gains because of an appreciation in the value of the pound. Of course it could go the other way and no one in this forum or elsewhere would be able to authoritatively tell me whether the pound is over/under valued. However, it's a risk that I don't necessarily wish to expose myself to.

On your comment, I don't understand when you say "Every taxpayer has some shares in some ftse100 banks already"? The UK government owns x% of several banks but I don't see how this equates to every UK taxpayer having a stake in these banks?

Thanks for recommendations re unit trusts - my only objection to these is the potentially high fees... it rather grates that fund managers (who, let's be frank, are hardly rocket scientists) take a cut for taking punts with our money...

koru

timothee wrote: »

As to whether to invest abroad, my understanding (happy to be corrected) is that the pound is currently valued at a historically low level. Not necessarily the same as undervalued of course, but my £s buy fewer euro, yen or dollar-denominated shares than say 5 years ago. My worry is that if I get lucky and the index that I invest in appreciates in value, I end up losing any gains because of an appreciation in the value of the pound. Of course it could go the other way and no one in this forum or elsewhere would be able to authoritatively tell me whether the pound is over/under valued. However, it's a risk that I don't necessarily wish to expose myself to.

That's been worrying me, too. The pound has lost 20-30% against some currencies, so if it swings back again at some point this would wipe out 20-30% of the value of a fund invested overseas. However, I think the UK economy is in for a long period of slow growth, so the £ could be low for a long time and other stock markets could be outstripping UK shares. On balance, I think I am going to put a big chunk of my money into overseas funds, especially Asia.

timothee wrote: »

On your comment, I don't understand when you say "Every taxpayer has some shares in some ftse100 banks already"? The UK government owns x% of several banks but I don't see how this equates to every UK taxpayer having a stake in these banks?

I agree. I don't think the govt are going to hand over a share in any dividends or gains on sale of these banks. With a bit of luck they will use dividends and gains to meet some expenditure that would otherwise have been funded by taxes, so we all benefit indirectly from paying a bit less tax than we otherwise would.

timothee wrote: »

Thanks for recommendations re unit trusts - my only objection to these is the potentially high fees... it rather grates that fund managers (who, let's be frank, are hardly rocket scientists) take a cut for taking punts with our money...

If you want a tracker, there are several that are unit trusts and have very low fees. HSBC and Vanguard's trackers that are unit trusts have fees that are as low as, or even lower than, trackers that are ETFs. (If you buy them through the right place, eg, Alliance Trust or Hargreaves Lansdown or a fee-based IFA.)

halight

Hi,
iv got a few of the ishares ETFs
Thay have done wuite well for me.
I buy them through the motley fool share builder account. £1.50 per trade. you can only buy on certan days of the month. well worth a look.

sabretoothtigger

As to whether to invest abroad, my understanding (happy to be corrected) is that the pound is currently valued at a historically low level.

Historically I'd say the current value is closer to the average. 2 pounds to a dollar was a high value I think though I liked it as much as any consumer I wouldnt call it normal exactly

We might as well take advantage of what appears to be true going forward which is a weaker pound and a favour to the opposite of uk consumer activity

Some discussion here
http://www.telegraph.co.uk/finance/economics/6220524/Weak-sterling-will-deliver-UK-surplus.html