Fund Selection for first timer

andyroberts_2

Hello,

I have recently opened a H&L Vantage Stocks & Shares ISA and have £3600 to play with.

I am early twenties and don't plan on touching for a while - min 5 years.

Don't want to lose money but so long as a minimum it's worth about what I put in I can accept that if that is what happens.

I'd like to have some risk in there however having never done this before I'm wanting to run this past people so it's not a blind stab in the dark.

It seems H&L have a minimum investment of 1000 per fund so I'm looking at 3 funds.

I was thinking to kick start things off:
£1000 - Multi-Manager Inc&Growth Portfolio Accumulation Units.
(Opting for Accumulation than Income as want to leave it growing).

£1000 - Jupiter Financial Opportunities Income Units
(Seems to be a well talked about).

And then something like with the other £1000
Newton Global Higher Income Income
OR
New Star European Special Situations Accumulation

Like I say. I'm very new to this. I've done quite a bit of reading but still rather confused with things so would love to hear any advice/feedback/suggestions.

I want to sort of dip my toes in, see how I am doing and then get more in to it.


My plan was then to utilise the remaining £600 in shares. However I'm thinking this may not be so great if I don't have a plan and might as well stick the £600 in the multi managed one to make it 1.6k.

Look forward to the replies!

Thanks,
Andy.

cloud

You can lose money with any investment, it's always a gamble. If the stock market plunges, the losses can be considerable and quick, and you still have to pay for the fund management.

fg22

andyroberts wrote: »

Hello,
Don't want to lose money but so long as a minimum it's worth about what I put in I can accept that if that is what happens.

If you invest in shares you've got to accept the possibility of losing money. There's probably about a 30% chance that after 5 years you'll have less than you invested (and inflation will mean that its actually worth even less). You can reduce the risk by diversifying into other assets such as gilts/corporate bonds and property but whatever you choose there is still risk.

Aegis

andyroberts wrote: »

Hello,

I have recently opened a H&L Vantage Stocks & Shares ISA and have £3600 to play with.

I am early twenties and don't plan on touching for a while - min 5 years.

Don't want to lose money but so long as a minimum it's worth about what I put in I can accept that if that is what happens.

I'd like to have some risk in there however having never done this before I'm wanting to run this past people so it's not a blind stab in the dark.

It seems H&L have a minimum investment of 1000 per fund so I'm looking at 3 funds.

I was thinking to kick start things off:
£1000 - Multi-Manager Inc&Growth Portfolio Accumulation Units.
(Opting for Accumulation than Income as want to leave it growing).

Very expensive fund even for multi-managers, and one of the worst performing over the last year or so if I'm remembering the tables correctly. You might want to have a look at the Jupiter Merlin portfolios for comparison, or you might prefer to just avoid the multi-manager sector altogether due to the much higher charges.

£1000 - Jupiter Financial Opportunities Income Units
(Seems to be a well talked about).

Very high risk fund for someone wanting to limit their downside...

And then something like with the other £1000
Newton Global Higher Income Income
OR
New Star European Special Situations Accumulation

Like I say. I'm very new to this. I've done quite a bit of reading but still rather confused with things so would love to hear any advice/feedback/suggestions.

I want to sort of dip my toes in, see how I am doing and then get more in to it.


My plan was then to utilise the remaining £600 in shares. However I'm thinking this may not be so great if I don't have a plan and might as well stick the £600 in the multi managed one to make it 1.6k.

Look forward to the replies!

Thanks,
Andy.

I think your fund picks are a little haphazard to be honest. You'd be better off thinking what you want exposure to: equities/bonds, UK/global/emerging markets, etc. Once you work that out, you can find funds which fit your pattern. If you don't want to think about it, then the multi-manager option is an alternative, as someone does all the asset allocation for you, but the downside is that the Total Expense Ratio for such funds tends to be much higher than for a standard portfolio. This is especially important for someone with a cautious attitude to risk, as it limits the already lower returns that you'll face due to not wanting to take risks.

I hope you don't take this too negatively, as it's great that you want to get involved and look into this, but picking a multi-manager fund and a high risk, highly focused equity fund is probably not the way you want to start out.

My own personal starting position was to take a decent UK equity fund and a decent global equity fund, then I just added peripheral funds on as I did more research. I've since shifted my equity weighting to about 70% outside the UK because I see the global economies generally doing better than our own over the next few years, and I've split my core UK holdings into an equity income fund and a recovery fund to increase the potential returns (at a cost of higher risk). I still have no exposure at all to bonds, as I feel they're more of a safe haven for the much more cautious, but if you're concerned about downturn, then a strategic bond fund might be a good choice for your third tranche of money.

As for starting out, I would put all £3,600 into funds if you want to invest it all. Hargreaves Lansdown are pretty expensive for share dealing, and with only £600 the dealing costs will make the required return to break even so much higher.

Best of luck with your research.

p.s. just an edit to add that when I first started out I thought the multi-manager approach was a nice idea too. I asked on here and was given a similar answer, and it made me determined to find my own way. I'm doing ok at investing now

atypical

andyroberts wrote: »

It seems H&L have a minimum investment of 1000 per fund so I'm looking at 3 funds.

That's for lump-sums, if you go down the regular savings route the minimum is £50 per fund. You can 'cheat' by using the regular savings route to make a lump-sum. You just start the plan for the amount you want to put into each fund (say £500) then cancel it for subsequent months.

dunstonh

Aegis has a good response so I will keep mine short.

The selection looks random and high risk. Certainly not consistent with the risk profile.

To be honest, I think you need to get a head round what your risk profile is. You say you dont want a loss after 5 years but pick funds that could potentially lose 70% in a year.

Have a think about your timescale as well as time dilutes risk somewhat. You say 5 years minimum but does that mean on all the money or some of the money? Are you planning regular contributions are well?

andyroberts_2

Wow. Blimey.

Right. I think I've done so much reading up I've gotten away with myself.

I'll try and start again with your help on my risk profile firstly.

I can live with the money being roughly the same as it was in 5 years time or slightly less(15% say). I can live (but really would not be happy) if it lost say 50% in those years so I'm not wanting to take that level of risk.

5 years was just a figure that takes me to age 30 for time to re-asses things - I could quite happily keep the money in there for longer as I see this as an investment alongside my Pension but nowhere near the same scale.

The £3600 lump sum I've added in is because I was recently given a little more than that amount and I've already filled my cash ISA + have other accounts and fancy something different. (Although to point out not just for the sake of it - I'm taking this seriously).

I will be thinking about adding regular monthly (£50-100) contributions. I won't be looking to invest large sums at this moment in time for the next year.


I keep reading about the multi manager ones being not so great but in-line with my risk profile (obviously yet to be sorted!) I'm struggling to get my head around my options.


I therefore again look forward to your replies and comments as they are greatly appreciated. (Long time lurker!).

Andy.

sabretoothtigger

Regular investing seems to distribute risk better and stops mistakes being too extreme. I invested in a pacific tracker from May 08 onwards and it went down alot but because it was gradual it wasnt nearly as bad. Ive stopped it now and redistributed half of it as of this 09 autumn because prices have doubled from the low at which I bought some



This does sound like a blindfold and dartboard situation much like any retail investor. Investigating these kinds of things can be a bit boring and laborious.


I think a quick way to analyse what you are about to do is setup a virtual portfolio, I noticed HL allow people to do this.
I know morningstar also allow people to select funds and then if you look for the X-ray option this attempts to make the portfolio less opaque by stating underlying investments of those funds, where several may overlap.


Also very roughly guage the risk distribution of those assets as well as geographically
If you have views on which countries will grow best in the next 5 years this should be quite useful and easier then reading big fund brochures

inflation will mean that its actually worth even less). You can reduce the risk by diversifying into other assets such as gilts/corporate bonds and property

Shares and property are a better hedge against inflation then bonds I think

amcluesent

Some suggestions -

HSBC Infrastructure Company Limited
Canadian General Investment Ltd
JP Morgan Indian Investment Trust
Blackrock World Mining Trust
JPMorgan European Fledgling Investment Trust

Also, don't overlook the opportunity of lending on Zopa! Yields on the A* market are around 7.2% excl. bad debt and costs.

TBH I'd stay in cash for 6 months, the equity up-side is limited and by then it'll be much clearer about risks of a 'double-dip' crash and if we're in an equity bubble inflated by QE.

Rollinghome

Andy, I think the first thing you need to get clear is why you want to invest in equities.

If it's very long term for a pension or similar they make sense as over that timeframe they should, in theory, do better than keeping your money in a good bank account. But if it's just a way of saving and you are likely to need your money at a specific point then equities may not be for you. For example, do you have a house already because if not you may need your money for a deposit much sooner than you anticipate.

What you shouldn't do is over-estimate the advantage of equities over cash savings especially if you are investing via a unit trust and paying management charges of close to 2% each year. Don't assume that the recovery we've had over the last nine months is likely to be repeated and understand that quite the opposite might happen. Nor should you overestimate the advantages of a S&S ISA.

Never forget examples such as the Japanese stock market - still worth just a quarter of what is was 20 years ago: http://www.researchmag.com/Issues/2009/June-2009/Pages/Japans-Stock-Market-History-Offers-US-a-Cautionary-Tale.aspx . Japan was then the miraculous "emerging market" of it's day. 'Time magazine ran an article titled “Toward the Japanese Century,” which touted the nation’s fast growth and vast potential. “It would not be surprising,” eminent futurist Herman Kahn told Time, “if the 21st century turned out to be the Japanese century.” ' . Sound familiar?

To get a more realistic idea without the hype from the investment industry, £10 for this book could be your best investment: http://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Results/dp/0273722077/ref=pd_bxgy_b_img_b

.

Totton

andyroberts wrote: »

I was thinking to kick start things off:
£1000 - Multi-Manager Inc&Growth Portfolio Accumulation Units.
(Opting for Accumulation than Income as want to leave it growing).

£1000 - Jupiter Financial Opportunities Income Units
(Seems to be a well talked about).

And then something like with the other £1000
Newton Global Higher Income Income
OR
New Star European Special Situations Accumulation

Hi Andy,
Loads of options obviously, you could replace the HL fund with Jupiter Merlin Balanced, you don't need the Jupiter Financial Opp fund as it is already in the Multi Manager fund. Your choice of the Newton fund and the HL Inc&Gth fund suggests some caution, perhaps a desire for a little income? If so, then the Newton fund is a good choice and popular at the moment. With the £1,000 saved from the Financial Opps fund I would consider Ecclesiastical Amity International or M&G Optimal Income depending upon your risk profile.

HTH,
Mickey