What funds are you in, and why?

Lokolo

rictus123 wrote: »

£50 a month, sorry im not being cheeky or cocky but iv been lead to believe no point getting involved in shares unless talking thousands? How much do you think id need to get involved and get some shares under my belt?

It's a fund, not individual shares.

rictus123

Are you involved in any funds lokolo?

Blah99

rictus123 wrote: »

About bendixs post, im very keen on getting into shares,the markets changing and researching them really intrests me i just dont know where to start and what sites to use?

Buy a book called The Naked Trader 2 by Robbie Burns. That will help you get started and show you what you need to learn about (as in, the book will raise more questions than it answers, but it will give you a foundation to begin learning). After that you'll start being able to make sense of weeklies like Investor's Chronicle, and you'll pick up other books that are relevant and interesting to you.

rictus123 wrote: »

£50 a month, sorry im not being cheeky or cocky but iv been lead to believe no point getting involved in shares unless talking thousands? How much do you think id need to get involved and get some shares under my belt?

Funds and shares are 2 different things. Buying a share is directly buying a stake in the company. When the company share price moves, your profit and loss moves with it.

Buying a fund is (usually) like buying into a basket of shares managed by a "professional". Your £50 in the fund will equate to (for example) £1 of every share the fund invests in. For example, if a fund holds BP, Serco and National Grid shares in its portfolio, and you invest £3 into the fund, it's the same as buying £1 of shares in each of the 3.

Where this makes a difference is in economies of scale, fees and diversification.

If you want to invest in a share directly you need to buy at least £2000 of shares, and ideally more. I've posted on why this is before, but essentially the larger your purchase, the smaller percentage move is needed to make a profit, and the smaller percentage are your costs.

But buying into one company doesn't represent good diversification. You need to spread your risk around, so that you get exposure to different sectors/markets. For example, you might put all your money into Scottish and Southern Electricity (SSE), which may then get hit with a regulatory fine. If all your investment is in SSE, and the share price drops 30%, you've lost 30% of your money.

However it is relatively rare for all sectors to make a loss, so you might want to buy into SSE and also into financials, say Barclays. That way you have exposure to 2 sectors that have a low beta. But, of course, both could drop. So ideally you need to diversify into between 10 and 20 companies across different sectors.

You see where this is going. A minimum £2000 in 10 companies is £20k straight out of the gate, and that still doesn't buy you proper diversification.

Whereas because a fund is diversified, and you are buying units of the fund, the diversification is done for you. You can achieve proper diversification with just a few £thousand into a couple of funds, and a monthly drip feed of £50/month.

You still need to watch out for fees etc, but if you don't have the knowledge or capital to trade shares directly, funds are a good choice.

Note: this is massively simplified, and also I don't do it this way - I don't really diversify my direct equity holdings, but then I'm nuts. Total, utter nuts. Or I have a plan. One of the 2 anyway

rictus123

Reading that i think i should get the naked trader and get myself armed with a much info as i can before i get involved as that could be a while off if you are talking £3k tied up just to get in. I was thinking £1000 invested with a £50 drip into it, maybe just stick to the saving just now?

Blah99

rictus123 wrote: »

Reading that i think i should get the naked trader and get myself armed with a much info as i can before i get involved as that could be a while off if you are talking £3k tied up just to get in. I was thinking £1000 invested with a £50 drip into it, maybe just stick to the saving just now?

£1000 invested and a £50 drip into a fund is fine if that's what's affordable for you. Remember that you're tying this money up, so don't strap yourself for it.

Pick the fund carefully.

rictus123

Worst and best case scenario for that blah? Looking at my options theres not much i can find on what to do with my money.

stormyrider

In my earlier days of investing I started with £35pm and then £50pm into various funds. There is a benefit known as pound-cost averaging which basically means you do well drip feeding into funds as you buy more units when the price is lower. Looking back at my investments, ithas often tbeen these regular savings plans that have been the least stressful and most financially rewarding of all.

I am not qualified to give advice but when friends ask about starting out in the stockmarket I always suggest funds over direct share ownership and regular saving over lump sum investment (if both options are applicable). Drip feeding £50 a month into a very low cost tracker fund (c.f. Fidelity Index funds or L&G Index funds, and probably several others too).

Quidco also used to offer (may still do) some cashback if you open up an L&G ISA through them in which you can then save £50 per month into one of their funds.

cardsharps

Personally I wouldn't invest in any fund as the charges (5%+ initial charge and then the 1.5% annual management charge) are an absolute rip-off. The effect these charges have on your investment over a long period of time are heinous. I stick to the UK market and buy individual shares and so only pay a one-off 0.5% stamp duty charge.

Lokolo

cardsharps wrote: »

Personally I wouldn't invest in any fund as the charges (5%+ initial charge and then the 1.5% annual management charge) are an absolute rip-off. The effect these charges have on your investment over a long period of time are heinous. I stick to the UK market and buy individual shares and so only pay a one-off 0.5% stamp duty charge.

Most funds have a 0-2% initial fee with only a 1.25% AMC. You are obviously looking in the wrong places.

turbobob

You can buy nearly all unit trust/OEIC funds without paying an initial charge by buying through a discount broker. The annual charges vary from around 0.25% (for the cheapest tracker funds) upwards.. There is no stamp duty on these funds.

Exchange Traded Funds also do not attract stamp duty and have low management charges, you do however have to pay dealing costs as per shares.