What would it have made in the bank?

ANGLICANPAT

Is there a site please that could tell me what a certain amount of money would have made in an 'average savings account' over the last 11 years? (or would it only be calculated anyway using the actual base bank rate and so not give a realistic comparison?)

My OH's Legal and General UK Index Trust Pep has been running for exactly that, and has turned £6k into £7,509. Im curious what that might have made in the bank.

dunstonh

Savings rates tend to follow close to RPI. So, that is a good yardstick to use.

26/02/99 to 26/2/10

Finex Money Deposit 90 days 35.74%
RPI 33.11%
CPI 22.84%
L&G UK Index fund 30.74%
Fidelity Spec Sits 271.29% (not best performer but top fund in terms of volume bought for that year)

ANGLICANPAT

OMG Im shocked ! Im sure Ive read over the years, in various advice articles to punters like me and OH that this L&G fund is a good core one to have!

dunstonh

ANGLICANPAT wrote: »

OMG Im shocked ! Im sure Ive read over the years, in various advice articles to punters like me and OH that this L&G fund is a good core one to have!

Its cheap and its consistently mid table in the UK all companies sector. If that is what you are after then there are few better that can achieve that.

It has a limited remit and if that remit doesnt fit with where the money is being made, it will fall behind. in the 2000s the places to make money did not include the general UK stockmarket. It was more focused than that. You could predict that somewhat as the UK stockmarket typically underperforms under a Labour Government. This one has been no different. So, looking for more focused areas is often a good idea. Of course, if you pick the wrong area of focus you could do worse. Thats why I chose to list the most sold fund rather than the best performer as its easy to see with hindsight which was bast. The best seller of that period tells you what you are more likely to have been put in back then.

Rollinghome

A good discussion of index trackers here http://forums.moneysavingexpert.com/showthread.html?t=2209297&page=4 - including why commission based IFAs do their best to talk them down and generally scare investors away from them. (Clue: they generally pay them much less commission, which is why for unbiased advice it's better to avoid them and find one who works on a hourly rate.)

I don't have strong view either way, it depends on several factors but for guidance Morningstar rates the L&G tracker (like all similar trackers) as:

Legal & General UK Index Trust (R) Inc
Morningstar Rating™(Relative to Category)31/01/2010 Morningstar ReturnMorningstar RiskMorningstar Rating™
3-Years
Return: Above Average
Risk: Average
5-Years
Return: Above Average
Risk: Average
10-Years
Return: Above Average
Risk: Average
Overall
Return: Above Average
Risk: Average

Source http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?tab=2&id=F0GBR04D9X&lang=en-GB

Which isn't what commission greedy investment salesmen want you to believe. Of course any idiot can tell you 10 years after the event the ones that did done better and pretend to be a financial genius.

Return has to be related to risk and the higher the risk the higher the potential return. The point about trackers is that they are consistent and the majority of managed funds that were sold, the ones that pay IFAs all that lovely commission, would have done worse.

Linton

Rollinghome wrote: »

Return has to be related to risk and the higher the risk the higher the potential return. The point about trackers is that they are consistent and the majority of managed funds that were sold, the ones that pay IFAs all that lovely commission, would have done worse.

Trackers have not been a good place to invest during the past 11 years - the main indices now are typically some 10-20% down on their position in 1999.

A spread of higher risk (and higher charging) investments would be expected to have done much better. Mine have!

This demonstrates that investing in the right areas is much more important than looking for minimum charges and zero commision.

dunstonh

Remember that rollinghome has an anti IFA bias as well as being a nasty piece of work. Although I dont have to tell anyone here that as you can see it from his posts.

Take a look at the same fund to see what above average means and it does come in above average. Typically in the few places above the mid point consistently. So, by definition that is above average.

year, position/out of number of funds
year to date 245/285
2009 118/272
2008 103/263
2007 95/247
2006 119/226

source: Financial Express

If you look at the charts on trustnet you will see that it virtually tracks the sector average. Some periods above, some below but more often than not just above. That is what it does.

Of course any idiot can tell you 10 years after the event the ones that did done better and pretend to be a financial genius.

But you are the idiot that didnt read the post correctly. I made a point of not picking the best performing fund(s). I specifically showed the one that was the most recommended for that period. Those recommending it 10 years ago didnt have that benefit of hindsight.

The point about trackers is that they are consistent and the majority of managed funds that were sold, the ones that pay IFAs all that lovely commission, would have done worse.

I was quite clear that the tracker was consistently mid table. However, the most sold fund of 1999 by IFAs was the one that turned in nearly 10 times more after charges than the cheap one.

Stompa

ANGLICANPAT wrote: »

...and has turned £6k into £7,509.

Which equates to around 2.06% pa.

ANGLICANPAT

2.06% !! How depressing . We only really started investing in equities 11 years ago, so it hasnt really been that favourable experience ,despite having an ISA pick our funds in the early years. Thank goodness one he recommended was Invesco Perpetual High Income , but generally he interpreted our ' fairly cautious' approach, as keeping everything within the UK so we've next to nothing in emerging stuff. Ive been looking at Anthony Boltons China Fund, but it seems everyone is piling into it , and isnt the word on the experts street 'dont invest with the herd once its stampeding? On the other hand , they could all be right . so its hard advice to interpret.

Rollinghome

dunstonh wrote: »

Remember that rollinghome has an anti IFA bias as well as being a nasty piece of work.

Please don't resort to abuse. You of course are IFA dependent on selling funds for the investment companies on commission and it's quite understandable why you would want to talk down investments that pay you less commission and talk up those that pay you most.

(Link explaining why the FSA intends to ban IFAs being paid commission by investment product providers by 2013 to deal with the problem of biased advice: http://www.fsa.gov.uk/Pages/About/What/rdr/index.shtml)

Fact: the majority of managed funds sold by advisers under-perform their index (and charge substantially higher fees than trackers in order to pay advisers commssion). Only a tiny number will out-perform consistently.

Tracker funds consistently give above average returns for average risk. By using a riskier fund strategy investors may do better, or may not. That's the gamble and their choice. For reference from Morningstar the industry authority on funds:

Fidelity Special Situations
Morningstar Rating™(Relative to Category)31/01/2010 Morningstar ReturnMorningstar RiskMorningstar Rating™
3-Year
Return: Above Average
Risk: Above Average
5-Year
Return: High
Risk: Above Average
10-Year
Return: High
Risk High
Overall
Return: High
Risk: Above Average
Category : UK Large-Cap Value Equity

Source http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?tab=2&id=F0GBR04S23&lang=en-GB

The important bit for investors is that it shows how the risk and return will be variable and not consistent. On one fund it may pay off while on another it may not so some managed funds will have high risk but low returns over the period they invest - that's why they call it risk. It's for the investor to judge how much risk they're content with in return for the possibility of higher returns.

Whether you want high, low or medium risk, the commission-based adviser will naturally want to steer clients away from any funds that charge low managment fees and so don't pay good commission. www.moneyweek.com/personal-finance/need-unbiased-advice-youll-be-lucky.aspx

dunstonh

Please don't resort to abuse.

Follow your own advice.

You of course are IFA dependent on selling funds for the investment companies on commission and it's quite understandable why you would want to talk down investments that pay you less commission and talk up those that pay you most.

I'm fee based. So, none of what you say there is true.

Fact: the majority of managed funds sold by advisers under-perform their index

Evidence please.

Tracker funds consistently give above average returns for average risk.

Thats an error you expect from an inexperienced investor. Risk has nothing to do with it being managed or tracker. However, its a common error for those that only read articles but don't understand them.

We only really started investing in equities 11 years ago, so it hasn't really been that favourable experience ,despite having an ISA pick our funds in the early years.

Remember that this has been one of the worst 10 year periods for the UK stockmarket in general. You never know what you are going to get but "historically" the good decades outnumber the bad ones significantly.