Funds - the more risky type - Advice pls.

psychy

Hi all,

I currently have £3,600 left to put into my S&S ISA. Never done this before but been using my cashISA allowance every year.

Now, i'm 27 and risk profile is something along the lines of total/absolute return. Looking to put around £10k over this and next financial year to max out my ISA allowance - split into around 5-6 funds.

So far, i have gathered that HL is a good place to buy such funds.

Looking to invest in China, India, Australia and prob S.America. Prob large cap equities.

What should i look for in the funds, besides the usual management fees, upfront fees etc? What should i be considering with regards to how to choose the best Fund Manager/Portfolio?

Any advice most welcome.

Many thanks!

dunstonh

Now, i'm 27 and risk profile is something along the lines of total/absolute return.

What do you mean by that as there is no such risk profile. Some of those funds give the impression of lower risk whilst others are distinctly higher risk.

Looking to invest in China, India, Australia and prob S.America. Prob large cap equities.

Assuming you mean you are cautious by referring to absolute return, the regions you have listed here are typically at the higher end of the risk scale.

What should i look for in the funds, besides the usual management fees, upfront fees etc?

Risk and reward comes first. You need to understand the risks (for the downside) and the potential (for the upside). Only when you get that should you move onto charges.

psychy

Oops, seems like I used the wrong terminology! Apologies.

What i meant was that i'm looking for something risky and thus with a higher potential return. I'm not looking for anything cautious which is why i am focusing on those regions.

Hope that explains myself a little more clearly. Many thanks!

Linton

psychy wrote: »

Hi all,

I currently have £3,600 left to put into my S&S ISA. Never done this before but been using my cashISA allowance every year.

Now, i'm 27 and risk profile is something along the lines of total/absolute return. Looking to put around £10k over this and next financial year to max out my ISA allowance - split into around 5-6 funds.

So far, i have gathered that HL is a good place to buy such funds.

Looking to invest in China, India, Australia and prob S.America. Prob large cap equities.

What should i look for in the funds, besides the usual management fees, upfront fees etc? What should i be considering with regards to how to choose the best Fund Manager/Portfolio?

Any advice most welcome.

Many thanks!

For your first steps into this area I would suggest the following....

1) Dont be too specific - eg chose a general Far East fund (excluding Japan) rather than specifically China.

2) Look on Trustnet for funds of a reasonable size from a manager with some obvious expertise (eg with a good range of funds) in the area that have a consistent track record over a reasonable time period.

3) Investing in the far east is easy - lots of funds. India and Australia are more difficult. There are several South American funds, but my feeling is that at the moment the sector is comparatively small and therefore possibly riskier. You may want to look at a general Emerging Market fund first - there are a handful of well-regarded large funds that have done very well in recent years.

4) As Dunstonh as said, dont be too concerned at charges. Fund Supermarkets in general will discount most of the initial charge and the differences in ongoing charges are minimal compared with the differences in fund performance. The important things are firstly the sector and secondly the fund pedigree.

5) Think long term and be prepared for a bumpy ride, though perhaps not more bumpy than supposedly safer sectors in the past few years.

psychy

Thanks Linton for the advice. Yes, I will look into a Far East and an Emerging Market one too.
Charges, im not concerned about, as you have stated, most will discount them anyway.

Just wanted to know what else i should consider in choosing a fund, besides sector and pedigree. It feels like more often than not, it's kinda like a punt of sorts. Worth doing some analysis on the Sharpe, Beta ratios etc etc?

Linton

psychy wrote: »

Thanks Linton for the advice. Yes, I will look into a Far East and an Emerging Market one too.
Charges, im not concerned about, as you have stated, most will discount them anyway.

Just wanted to know what else i should consider in choosing a fund, besides sector and pedigree. It feels like more often than not, it's kinda like a punt of sorts. Worth doing some analysis on the Sharpe, Beta ratios etc etc?

You are in this for the long term - 5 years plus, so I dont really see any point in looking at statistical ratios. AIUI these are more concerned with sort term volatility.

The risks are not the Gaussian type, but rather those of shifts in the world economy. So I believe these riskier investments should form a relatively small proportion of your portfolio and you should plan to rebalance on a regular though infrequent basis.

StevieJ

In the Asia EM area you may wish to look at First State I gather they are reasonably conservative in a high risk area, they are also Aussie so at least Asia is in their own back yard.

Rollinghome

Linton wrote: »

4) As Dunstonh as said, dont be too concerned at charges.

Anyone who thinks that charges just don't matter, especially in the low return environment that may lie ahead, should use the 'Trail commisson' and 'How Much' calculators here: http://www.candidmoney.com/intro/calculators.aspx

(The site belongs to Justin Modray who is frequently a source for investment articles in the FT etc.)



.

Linton

Rollinghome wrote: »

Anyone who thinks that charges just don't matter, especially in the low return environment that may lie ahead, should use the 'Trail commisson' and 'How Much' calculators here: http://www.candidmoney.com/intro/calculators.aspx

(The site belongs to Justin Modray who is frequently a source for investment articles in the FT etc.)

.

You are still axe grinding! Lets look at some facts from Trustnet

In the Asia Pac (excluding Japan) sector which is one of the sectors we are talking about:

Best fund over 5 years:

---

First State Greater China - % growth:183% Initial charge 4% AMC 1.75%

Worst fund over 5 years

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Lloyd George Asia Pac - % growth 63.1% Initial charge 3.5% AMC 1.5%

You I take it, of the two, recommend the Lloyd George fund!

Of course you may find a tracker in this area. Trustnet matches the FS fund against the MSCI Golden Dragon Index which managed 73% return over 5 years.
Perhaps the charges would only have been 0.5% - even better!?!

Of course funds would do better if there weren't any charges. Everything I buy would be cheaper if I didnt have to pay for the management and profits of the companies manufacturing the goods. But since I do it's pretty irrelevent.

Your may have a point if we were talking about UK FTSE trackers where one is much the same as another, but in the high risk sectors the investor is dependent on the skills of the fund manager. A poor one can seriously damage your wealth, certainly more than a 1-2% a year.

dunstonh

Adding to Linton's figures, over that same 5 year period

Asia Pacific Ex Japan sector average = 118.80%
HSBC Pacific index tracker= 93.35%
L&G Pacific index tracker = 100.59%

The trackers in that sector are not even keeping up with sector average.

DiggerUK

phsycy,
You make no mention of gold portfolios, paper gold in ETF's, or mining companies. Huge area to overlook.
Considering the track record of all things close to gold, along with the ammount of funny money inflating currencies, I would advise these areas as amongst the safest plays for S&S ISA's.

Best of fortune.