Help On Choice Of Funds

Linton

fimonkey wrote: »

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.

Disagree on several points. Firstly I believe it is dangerous to regard the FTSE all share as safe-ish. The FTSE all share is not too different to FTSE 100 and that has dropped by about 50% twice in the past 10 years.

Secondly I believe concern at the TER is the final decision to be made when chosing funds, not the first.

Low TER funds are fine if you really want to invest in the FTSE (although personally I cant see the risks being justified by the potential return) but for the more specialist areas you need a managed fund that meets your objectives. In addition you need some evidence that the fund managers are able to do a reasonably good job. That doesnt provide a guarantee, but the reverse provides IMHO a warning.

Rollinghome

Linton wrote: »

Disagree on several points. Firstly I believe it is dangerous to regard the FTSE all share as safe-ish. The FTSE all share is not too different to FTSE 100 and that has dropped by about 50% twice in the past 10 years.

Morningstar rates the HSBC All share tracker (and similar trackers) as having 'Average Risk' but with 'Above Average Returns' over all time periods it covers. So "safe-ish" is always relative.

Sadly there are only a very few managed funds in the sector likely to get a similar rating. One reason for that is that to recover their high charges and commission payments they have to take higher risks. So if you hope to get similar returns while paying higher charges, but without higher risk, then you need to make your fund selection very carefully and have some luck on your side.

Obviously as managed funds make fund managers more profit and pay intermediaries the best commission it isn't something dwelt upon when selling the funds.

You could also disregard the findings of Financial Express/Morningstar but it's their assessment than a large proportion of advisers rely upon when selecting funds. Primarily due to charges the majority of managed funds underperform. Of course everyone, including me, likes to flatter themselves that they have a greater ability to select the better funds than others but it's a vanity that can cost.

thriftychap_2

2 funds i have invested in:

Long term - Fundsmith - i honestly believe this one cant lose, low risk and if on an accumalitive basis (10 years) onto a winner.

Medium term - Aberdeen emerging markets. - Great record and fund manager is a winner.

These are merely my opinions.

leahciM

thriftychap wrote: »

2 funds i have invested in:

Long term - Fundsmith - i honestly believe this one cant lose.

Something about this phrase makes me want to run for the hills...

Linton

Rollinghome wrote: »

.....
Morningstar rates the HSBC All share tracker (and similar trackers) as having 'Average Risk' but with 'Above Average Returns' over all time periods it covers. So "safe-ish" is always relative.
.....

Err, the morningstar ratings are not absolute, they are relative to other funds in the same category. In the case of the HSBC tracker, that's "UK Large-Cap Blend Equity".

So it may well be Average Risk and Above Average Returns in that category, but IMHO that category as a whole is both higher risk and lower return than many others and certainly cannot be considered safe. This ties in with what I claim - sector and performance are far more important than TER.

xx_Law_Grad_xx

Wow thanks everyone. I have got a lot to take in and lots of further research will be required.

I have removed a number of funds as since running them through Morningstar's X-Ray there seems to be a lot of overlap.

What other sectors should I be looking at for diversification? In terms of investing in the US I am thinking something like Schroder US Mid Caps. And maybe a cautious managed fund like CF Ruffer Total Return.

What is everyone's opinion's on Aberdeen Emerging Markets vs individual BRIC funds? Aberdeen EM seems quite restricted in comparison to individual funds, however, it would free up money to diversify elsewhere. But like I have said previously I believe emerging markets long term will do very well.

I am really confused about trackers. There is the whole index tracker vs managed fund argument and for one reason or another feel uneasy about trackers.

Bonds seemed to be all the rage in 2010 but not many people are recommending them for 2011. Would a bond investing in emerging market debt be any good? Something like Investec Emerging Markets Local Currency Debt.

Specialist

• First State Global Resources - To gain exposure to natural resources and gold.

Emerging Markets

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

• First State Indian Subcontinent - More diversification than Jupiter.

• First State Latin America - Less focus on Brazil.

• Neptune Russia & Greater Russia - £20 per month with Interactive Investor.

xrjtg wrote: »

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.

Although long term I believe agriculture funds will do particularly well I think they will take a couple of years before seeing any decent returns. The same goes for Africa. I would like to invest heavily in the future but not too sure short term.

purch wrote: »

Then don't invest in it.

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

I would like a little exposure as they could do quite well if Russia's government doesn't mess things up. The scale of corruption there is quite offputting. I think £20 per month in an interactive investor regular savers account would be a nice way to gain a small amount of exposure.

pqrdef

xx_Law_Grad_xx wrote: »

I have got a lot to take in and lots of further research will be required.

The list of stuff to research can multiply until you never get anything bought. Or it all becomes more time-consuming than it's worth.

In any case, the market's view of the prospects of anything is already priced in. Nothing is so good that the buying price isn't an issue. The difficulty with funds is to know when they're already overpriced.

xx_Law_Grad_xx wrote: »

Something like Investec Emerging Markets Local Currency Debt.

I'm never clear about the objective of managed funds in very specific sectors. Are they trying to do the best with your money, or are they just selling exposure to the sector? What does the fund manager do if he comes to feel that emerging market local currency debt isn't a good place to be at some point? Do you have to watch it like a hawk?

mr_fishbulb

Linton wrote: »

Err, the morningstar ratings are not absolute, they are relative to other funds in the same category. In the case of the HSBC tracker, that's "UK Large-Cap Blend Equity".

Also the categories are very broad.

For example I invest in the Skandia Ethical Fund which is in the Global Large-Cap Blend Equity category, although I consider it a specialist fund and higher risk than Global Large-Cap.

mr_fishbulb

xx_Law_Grad_xx wrote: »

Although long term I believe agriculture funds will do particularly well I think they will take a couple of years before seeing any decent returns. The same goes for Africa. I would like to invest heavily in the future but not too sure short term.

By that logic you are saying you think Agriculture and Africa funds will generate returns, but you don't want to buy any of them until they have gone up

If you are investing for the long term then it may be beneficial to regularly pay into something you think will pay off in the future. When making regular contributions, you get to buy units when they are "cheap" and will have hopefully accumulated a lot of units by they time they start to go up. There is always the risk that nothing will come out of these, and watch out for fees eating away at your money if the fund doesn't return anything. Also it's quite frustrating to watch a fund do nothing for years. However if you believe they will come to fruition then it can be good to get in early. For instance in my pension I pay into a Japan fund. It's only a small %, and the returns haven't been great so far, but if the Japanese economy does recover then hopefully I would have built up a large(ish) holding of that fund.

mr_fishbulb

pqrdef wrote: »

What does the fund manager do if he comes to feel that emerging market local currency debt isn't a good place to be at some point? Do you have to watch it like a hawk?

It depends what they are allowed to do by the fund's objectives. If the fund can have a certain % in cash, then they will temporarily move to that.

If it is a UCITS III fund (which the Investec one is) and the fund objective allows it, then it can use derivatives to short the market. The Investec one says it its overview "the Fund may use derivatives (including currency, interest rate and credit default swaps) and forward transactions for purposes that are limited to efficient portfolio management." I'm not sure how far that can be stretched to shorting the market, but it would give a little leeway.