Help On Choice Of Funds

xx_Law_Grad_xx

I have a couple of thousand pounds I am looking to put into unit trusts within an ISA.

I am hoping to drip feed each of the funds with about £50 monthly. Is this even possible with the choice of funds below?

I am 23 years old and in full time employment with no financial commitments.

So far I have chosen: -

Specialist

• Blackrock Gold & General - As I believe the price of gold will continue to rise in 2011.
• First State Global Resources - To gain exposure to natural resources which again I believe will do particularly well next year.

Emerging Markets

• M&G Global Basics - Appealing to me as they invest in companies which do business with emerging markets.
• JP Morgan Emerging Markets Infrastructure - As emerging markets are looking to modernize their infrastructure.

Asia Pacific

• First State Asia Pacific - As they do not have too much exposure to China.

India

• First State Indian Subcontinent - More diversification than Jupiter.

Latin America

• First State Latin America - Less focus on Brazil.

Russia

• Neptune Russia & Greater Russia - Not too keen on investing in Russia but there is a lot of interest in it.

I know that the choices are high risk. What could I drop / add to diversify the portfolio? I would be investing long term so am open to above average risk.

Would a single emerging markets fund be a better choice than the above? Something like Aberdeen Emerging Markets or is a single fund too restrictive for all of the BRIC countries? My issue with choosing individual funds for each of the BRIC countries is that if for example Russia is doing particularly badly the fund managers cannot invest elsewhere.

Could I drop Blackrock Gold & General and just stick with FS Global Resources? My concern here is that I would miss some of the gains to be had from gold as it is has only about 23% in gold and precious metals.

Could M&G Global Basics be dropped due to all of the other emerging market funds?

Thanks.

jimjames

You have some funds that are similar to ones that I hold. However if those are the only funds you are holding then you have quite a high risk portfolio as all the funds are in similar areas. I would add in some UK based funds like the HSBC FTSE tracker to give some coverage to the UK and other developed markets.

Totton

With £2,000 it may be an idea to consider a fund-of-funds and add to it monthly for the first 12 months or so. Take a look at Jupiter Merlin Growth and M&G Managed Growth, both are excellent choices.

Where are you buying your funds? Choose a discount broker to avoid the 5% initial fee, go for Hargreaves Lansdown or one of the other firms mentioned often on this site.

A fund-of-funds will cost about 1% more per year, many will tell you that is expensive which it is, the up-side is both of the above are run by top class teams with a long history of outperformance.

Other than that, good luck with your investments. The funds you have chosen suggest you have a very high risk attitude which hopefully will serve you well long-term but too risky for me :-)

Best Wishes,
Mickey

xx_Law_Grad_xx

jimjames wrote: »

You have some funds that are similar to ones that I hold. However if those are the only funds you are holding then you have quite a high risk portfolio as all the funds are in similar areas. I would add in some UK based funds like the HSBC FTSE tracker to give some coverage to the UK and other developed markets.

Thanks. Yeah, I am definitely looking for something else less risky but what I am not sure. Was thinking a fund which invested in US companies. I am not that confident in Europe right now, what with Ireland, Spain, Portugal, Greece & Italy's economies being in a mess.

Totton wrote: »

With £2,000 it may be an idea to consider a fund-of-funds and add to it monthly for the first 12 months or so. Take a look at Jupiter Merlin Growth and M&G Managed Growth, both are excellent choices.

Where are you buying your funds? Choose a discount broker to avoid the 5% initial fee, go for Hargreaves Lansdown or one of the other firms mentioned often on this site.

A fund-of-funds will cost about 1% more per year, many will tell you that is expensive which it is, the up-side is both of the above are run by top class teams with a long history of outperformance.

Other than that, good luck with your investments. The funds you have chosen suggest you have a very high risk attitude which hopefully will serve you well long-term but too risky for me :-)

Best Wishes,
Mickey

Thanks. Both of those funds look quite appealing. I will look at them in more detail but have heard a lot of goods things about both.

I would be using HL as they are meant to be quite cost effective for investing in funds.

Long term I think there is a lot of money to be made from the emerging markets. It is a shame that funds who have invested in Africa and agriculture have not performed particularly well as they seem to be tipped as the next hot things.

jimjames

xx_Law_Grad_xx wrote: »

Thanks. Yeah, I am definitely looking for something else less risky but what I am not sure. Was thinking a fund which invested in US companies. I am not that confident in Europe right now, what with Ireland, Spain, Portugal, Greece & Italy's economies being in a mess.
.

With developed markets supposedly more efficient trackers are often a good bet as managers don't beat the index long term. There are very few recommended funds in the US so I use the HSBC US tracker.

Linton

xx_Law_Grad_xx wrote: »

... Was thinking a fund which invested in US companies. ....

I like technology funds for this purpose. They are mainly US-invested yet are in keeping with your higher risk approach.

I agree that your choice of funds is insufficiently diversified. With the more volatile funds it can be useful to have a non-correlated sector to switch into when your main funds have done unusually well and to pay for further purchases when the higher risk funds are doing badly.

Previously I have used gilt/bond funds for this purpose but am now experimenting with an absolute return fund.

mr_fishbulb

xx_Law_Grad_xx wrote: »

Specialist

• Blackrock Gold & General - As I believe the price of gold will continue to rise in 2011.
• First State Global Resources - To gain exposure to natural resources which again I believe will do particularly well next year.

Those two overlap a lot. The First State one is 23.9% Gold and precious metals, but it also gives diversification into other stuff that comes out of the ground (base metals, energy, etc).

To free up some money to diversify your portfolio (as others have suggested) I'd say only invest in one of the BlackRock or First State funds. If you strongly believe gold will be the best natural resources performance-wise then go for the BlackRock one, otherwise go for the First State to get exposure to a wider range of natural resources.

Also bear in mind that the M&G Global Basics has some exposure to natural resources too.

xrjtg

xx_Law_Grad_xx wrote: »

I am hoping to drip feed each of the funds with about £50 monthly. Is this even possible with the choice of funds below?

HL will accept regular investment instructions from £50 per fund per month, and you can change the selection of funds as often as you like if you don't have enough £50s to go round. They certainly offer most of the funds you've listed, but you can easily check them all.

Perhaps I could throw out agriculture (CF Eclectica and Sarasin Agrisar both invest in agricultural machinery and chemicals) as something you don't appear to have listed. Food could face just as much as increased demand as metals as large parts of the world grow richer.

maradonash

Your fund choices are very similar to my own. I am 31 and still take a more risky approach to investments.

I personally would not include an Absolute Return fund as they have yet to really prove their worth, particuarly with their high management fees and outperformance fees. I may be more willing to consider them in a couple of years time.

In a rising market, i would instead maybe consider a cautious managed fund such as; Invesco Perpetual Distribution to add balance to your portfolio. The HL wealth 150 list is a useful resource to finding such funds.

Although i do have about 40% of my investments in emerging markets, i am personally wary that a bubble is being created. Inevitably, these markets will become overvalued and will fall off the cliff. However, that may not be for a long time to come and there could still be sizeable returns to be had in the meantime.

I would agree with the other post about considering a UK fund. There is a good pool of talented domestic investors at the moment. The smaller companies sector will provide greater risk/return than those that are more targeted to the FTSE100 based funds.

fimonkey

To add my two penneth worth, and to also say I am an incredibly novice investor, I would recommend FTSE all share tracker funds which have low TER's to give you a bit more of a 'safe-erish' haven than emerging markets. When I was doing my research it was between Legal and General and HSBC as they followed the FTSE all share price the best.

I agree that EM's are a bubble and need to be looked at carefully. The EM funds I previously looked at had quite high TER's and I couldn't find a 'tracker' fund until L&G recently launched their EM tracker. Reasonably diverse including the BRIC countries, though Russia not in its top 10 countries and perhaps a bit too much in China if you beleive the hype. There are no performance stats for this fund and I'd love to know what others think about it.

I've chosen to drip feed just £50pm into this fund as a bit of a gamble, its £50 pm I can afford to loose - I will regularly cream off the profits so I don't feel as though I've lost it all if it does come tumbling down.

purch

Not too keen on investing in Russia but there is a lot of interest in it

Then don't invest in it.

You don't want to be 2nd guessing yourself in the future.