Units trusts

Andrew2010

I have a FTSE tracking unit trust and set it up with £500. I understand these are one of the best ways to make money saving. How much would you recommend paying in monthly if at all to increase the chance of the rate of growth?

Thanks.

dunstonh

I understand these are one of the best ways to make money saving.

It can be but as a FTSE all share tracker is statistically its unlikely ever to be best. It will be consistent within its sector though and that is what you look for with a tracker.

How much would you recommend paying in monthly if at all to increase the chance of the rate of growth?

The amount doesnt affect the rate of return. You should pay what you can afford or require to meet your objectives. You should also consider diversification. Especially if you are a new investor as jumping straight in at medium/high risk is a mistake many new investors make. (Although £500 doesnt give you any real scope for that and its too small to really worry about diversification unless the regular is of a higher amount).

Andrew2010

The amount would increase the /amount/ of return though if there was growth however, wouldn't it?

Also, by diversification do you mean unit trusts held by other financial ortganisations?

dunstonh

The amount would increase the /amount/ of return though if there was growth however, wouldn't it?

The same percentage applies to the growth or loss whether you have £100 in there or £1000 or £10,000. The amounts change but not the rate. You mentioned rate of growth in your post.

Also, by diversification do you mean unit trusts held by other financial ortganisations?

no. Having an L&G ftse all share tracker, an HSBC ftse all share tracker and a blackrock ftse all share tracker is not diversification. Diversification is investing across the sectors and asset classes (i.e. Far East, Europe, Emerging Markets, specialist etc for sectors and fixed interest/bonds and property for asset class).

LongTermLurker

Andrew2010 wrote: »

The amount would increase the /amount/ of return though if there was growth however, wouldn't it?

Also, by diversification do you mean unit trusts held by other financial ortganisations?

For diversification, you could look at a range of non-tracker unit trusts or bond funds. Companies like Hargreaves Lansdown allow you to invest £50 per fund on a regular basis, so if you were looking to invest, say, £250pm you could open a S&S ISA and choose 5 separate funds (UK, Europe, US, Emerging Markets/natural resources, bonds, etc) leaving the tracker as it stands.

In 10 months time, all your funds would be roughly at the same level and then you could consider being "less even" with some funds - e.g normally you wouldn't put 20% of your portfolio into emerging markets, but if you start off too low you risk not making anything worthwhile.

Buying the same type of fund from multiple providers can give diversification, even with trackers, because not all managers track equally; it's nowhere near the level of diversification you'd get by following my suggestion above, but you do have to do some research to find the right funds.

Also expect the non-trackers to cost more (charges) because the managers are actually trying to make you money, rather than just running a computer program which automatically "tracks" certain companies. I think reasonable charges are worthwhile.