Best place for approx £60k?

xyy123

jem16 wrote: »

How about comparing performance?

HSBC FTSE 100 tracker - 0.25% amc
5yrs – 29.39%

Schroeder UK Alpha Plus - 1.5%
5yrs - 65.3%

Rensburg UK Mid cap Growth Tust - 1.5%
5yrs - 98%

Scottish Widows UK All Share - 0.25%
5yrs - 33.9%

So what would you choose?

But only two of those are tracker funds - the HSBC and the Scottish Widows, hence the large disparity in performance of the others...

The only risks that are really pertinent to consider when investing in tracker funds (other than downside risk, which we've discussed) is the default risk, of the fund provider and the custodian, both of which will almost certainly have added insurance, so therefore default risk of the insurer. And with a 60k investment and current FSCS compensation limits of £48k, that would not be my immediate priority - moreso the liquidity and spread on the fund and the AMC which is usually 0.5% or less.

I use iShares personally.

jem16

xyy123 wrote: »

But only two of those are tracker funds - the HSBC and the Scottish Widows, hence the large disparity in performance of the others...

Yep 2 tracker and 2 managed. The Rensburg fund was the top placed over 5 years and the Scottish Widows the top tracker with a low amc over 5 years. So one returns 98% and the other 33.9%.

So you are saving 1.25% on management charges to lose 64.1% in performance.

Seems a bit odd to me.

EDIT - Missed a tracker that seems to have done better.

HSBC FTSE 250 Index Ret Inc - 0.25%
5ys - 49.8

Still a difference of 48.2% in performance.

Oceantwins

Well, if this is about Capital protection I suggest the following formula
for any given period that you know you dont need the money - assume
now 3 years.

Fix 53.959 Pounds for say 3.25 % which should be achievable.

Calculation

Year 1 53.959 x 3.25 % = 1753 Interest

Year 2 55.712 x 3.25 % = 1810 Interest

Year 3 57522 x 3.25 % = 1869 Interest

End of fixed interest 61.260

60.000 Starting capital less
53.959 Fixed capital at 3.25

6041 pounds available for higher risk investments i.e.
Bonds or Equities. Even if they have failed after 3 years your
initial 60.000 Pounds have survived and there is a potential for 6041
pounds to grow in sum other instrument. I would not necessarily
choose a Ftse 100 Tracker. Maybe an Dividend / high value ETF.

Above model of course only applicable strictly for CAPITAL PROTECTION.

My personal idea would not be to leave 60.000 quid on a saving account,
but that again strictly depends on your risk profile and how dependend
you may be on the cash.

... just an idea...

xyy123

jem16 wrote: »

Yep 2 tracker and 2 managed. The Rensburg fund was the top placed over 5 years and the Scottish Widows the top tracker with a low amc over 5 years. So one returns 98% and the other 33.9%.

So you are saving 1.25% on management charges to lose 64.1% in performance.

Seems a bit odd to me.

Well thats great if you know which funds are going to outperform the market over 5 year periods. But the point is at least 4/5 funds do not keep pace with the market and studies have shown that not only do funds not beat the market, but investors that use managed funds do even worse due to transaction costs in changing the funds in the name of chasing heat and active management.

Failing having a crystal ball, I personally believe passive funds are a much better option for non-sophisticated and non high net worth investors.

Aegis

xyy123 wrote: »

Well thats great if you know which funds are going to outperform the market over 5 year periods. But the point is at least 4/5 funds do not keep pace with the market and studies have shown that not only do funds not beat the market, but investors that use managed funds do even worse due to transaction costs in changing the funds in the name of chasing heat and active management.

Failing having a crystal ball, I personally believe passive funds are a much better option for non-sophisticated and non high net worth investors.

As an experiment, try this. Pick a few sectors you'd like to invest in. Then look at the 3 year, 5 year and 10 year performance of funds in those sectors. What you'll quickly find is that the bank managed funds tend to congregate at the bottom end of the table, while the investment house funds tend to do much better. Trackers will generally fall in the middle.

As such, if trackers tend to fall in the middle and bank funds go to the bottom, by eliminating bank funds from your fund choice, you have a greater than even chance of beating the market in such a sector even if you pick the remaining funds at random.

On top of that, remember that the performance figures are inclusive of all charges. By going through a discount broker you can get some of the AMC rebated each year, which will improve the performance of the managed funds even more without affecting the trackers (tracker funds don't pay enough trail commission for any rebate). As such, the investment house funds stand a very good chance of beating the index for their sector even if you don't go for the ones where the manager has a track record of beating the index year on year.

Modern investors shouldn't have significant transaction costs for switching funds. It's very rare to find a fund that isn't completely discounted these days.

Oceantwins

You are going off topic

The OP was asking where to put 60 -k and not if passive or active
funds are better or worse.

oceantwins

Aegis

Oceantwins wrote: »

You are going off topic

The OP was asking where to put 60 -k and not if passive or active
funds are better or worse.

oceantwins

It's hardly off topic. Active or passive is a major strategic concern for anyone looking to put their money into stocks and shares. In any case, the OP hasn't posted in this thread for over a week now, so it's perfectly fair to have a little more detailed discussion around the pertinent issues in his absence.

Of course it may all be a moot point when they come back and say what exactly they're looking for, as they might have no desire to invest at all, but if we stopped all discussion when the OP left their threads, there would be a lot less information around here.

fg22

Aegis wrote: »

As such, if trackers tend to fall in the middle and bank funds go to the bottom, by eliminating bank funds from your fund choice, you have a greater than even chance of beating the market in such a sector even if you pick the remaining funds at random.

Unfortunately the analysis is not as simple as that.

You will also have survivorship bias whereby funds which perform badly will close or merge and are no longer included in the tables (eg New Star). The remaining active managed funds therefore appear to have done better.

Fees for trackers have fallen (and I think fees for others have probably risen) this will not be reflected in past data.

Each sector should be considered on an individual basis. I use trackers in some sectors which I consider relatively efficient but not in others.

Modern investors shouldn't have significant transaction costs for switching funds. It's very rare to find a fund that isn't completely discounted these days.

Unit Trusts/OEICs are not the only type of fund; others will have costs.

theartfullodger

Stick £20k in Zopa (Not to everyone's liking, there are risks - as there are with everything ): I am getting about 8-9% spread over 200+ mini-loans and have had no bad debts

Rollinghome

jem16 wrote: »

Bottom quartile of UK All Companies.

So which are the tracker funds that you say have "spent most of the last 14/15 years in the bottom quartile for performance" (other than the long time dead old time funds that used to charge high fees order to pay the full trail commission to IFAs)?

Competitive trackers today charge 0.5% or less. Most pay no front end commission to advisers and only half the usual trail commission or less - which of course is why some dodgier IFAs who work on commission like to trot out the misleading stats you've been given.

You'd get a more balanced view of tracker funds, including the pros and cons, from a fee-only IFA such as http://www.bloomsburyfp.co.uk/investment/beliefs.php. Fortunately the new FSA rules to deal with the problems of commission bias from IFAs will arrive in 2011. Until then you'll need to be circumspect with the sales patter from the less honest commission only IFAs still out there.

jem16 wrote: »

How about comparing performance?

HSBC FTSE 100 tracker - 0.25% amc 5yrs – 29.39%
Schroeder UK Alpha Plus - 1.5% 5yrs - 65.3%
Rensburg UK Mid cap Growth Tust - 1.5% 5yrs - 98%
Scottish Widows UK All Share - 0.25% 5yrs - 33.9%
Managed funds in the sector all showing substantial losses after 5 years.

So what would you choose?

Well done, so five years after the event you now know which would have been the best funds to have chosen five years ago! But what if instead you'd picked:

Gartmore UK Focus DOWN -15.1%
New Star UK Growth DOWN -15.6%
Sovereign Ethical DOWN -19.3%
Managed funds in the sector all showing substantial losses after 5 years.

Meanwhile all the low cost trackers are up about 30%-35% for FTSE 100/All-share trackers or 45% for FTSE250 trackers, and in the top half as you'd expect.

What you'll also notice from the Trustnet is that one third of the funds listed in the UK All share sector didn't exist 5 years ago. That's because all the worst performing managed funds are killed off and buried and funds with new names are started to replace them.

So would you like to tell us which fund will be at the top in five years time? I couldn't but I do know the funds at the bottom will be managed funds as always. And that is the point you seen to find hard to grasp. Low cost trackers funds will never be the very best performers but what they will do is consistently out-perform the majority of managed funds and so will never be at the bottom of the pile. Avoiding the risk of picking a really bad managed fund is an approach that will suit many investors.

Trackers will certainly not suit everyone as is sometimes pretended but what we should be seeing here is objective information, not the trotting out of sales patter from some of the dodgier commission based advisers out there desperate to maximise their commission. I have no axe to grind, no vested interest, don't even have any tracker funds, but don't like to see the facts manipulated for the propaganda purposes of a few dodgy commission hungry IFAs.