Investment % increases compared to Bank accounts

tresco851

Hi,

Quick question (excuse my ignorance):
When you read about a funds performance, say over the last 3 years and it says it is up by 15% is that as a total amount from the start amount?

Only because when you talk about a bank accounts fixed rate for 3 years and it is 4% this is the amount increase each year.

Is this right? And as such does it affect what total increase price you have to be looking at for a fund over 3 years in order to beat the fixed rate account?

Thanks

G_M

tresco851 wrote: »

Hi,

Quick question (excuse my ignorance):
When you read about a funds performance, say over the last 3 years and it says it is up by 15% is that as a total amount from the start amount?
Yes, but be careful that it might not exclude costs/fees - it might just be the fund's underlying performance. Read the small print.

Only because when you talk about a bank accounts fixed rate for 3 years and it is 4% this is the amount increase each year.
Yes - the 4% is (probobly) the AER (annual rate)

Is this right? And as such does it affect what total increase price you have to be looking at for a fund over 3 years in order to beat the fixed rate account?
Correct.

Thanks

And remember just because the fund went up 15% in the last 3 years that means nothing in relation to what it will do in the next 3 years!

Reaper

A bank account that adds the interest to your account on a monthly/yearly basis will benefit from compounding so after 3 years you would get a bit more than you expected.

If they say a fund has gone up by 15% over 3 years they mean exactly that, there is no compounding.

One thing to note though is dividends. Usually there are 2 versions of the fund, one pays out dividends to you, the other re-invests them (known as an Accumulation fund). Obviously the one that reinvests them will grow faster than the one that doesn't.

tresco851

Thanks both of you. I'm on to all the fees and small print so hopefully I'll know exactly what is what before anything goes ahead.