Time to change from a tracker to a managed fund?

xrjtg

The very quick, oversimplified argument for index trackers: all shares are owned by investment funds; tracker funds have exactly average performance; there's no way of knowing which funds will out-perform the index; because tracker funds don't pretend to be doing anything clever, they charge you less.

I don't have any trackers, but if I could get decent trackers that exclude arms and tobacco companies, I probably would.

dunstonh

The L&G tracker fund class charging a higher rate and paying higher commission came to mind because it was you who used the figures from that fund class instead of the normal retail class fund when trying to prove how rubbish tracker funds were. Not surprisingly due to the high fees and commission the fund underperformed and wasn't typical of decent trackers. Had you forgotten?

I see you are back to misrepresenting the facts again. I have never said tracker funds are rubbish. Unlike you I prefer to be balanced in the tracker vs managed debate.

obviously for ex-salesmen type IFAs, selective manipulation of figures and misleading claims are just part of the trade.

obviously for internet trolls who are anti IFA, selective manipulation of past posts and misleading claims are just part of their posting habits.

Linton

jimjames wrote: »

I'm afraid this just isn't true. A small difference in returns will make a big difference long term so the same market being tracked by 2 funds with vastly different charges could mean a difference of several thousand in returns over a 10 year period.

Lets have some real numbers. I looked at the returns over 5 years from the data in trustnet:

UK Equity Median return 22%

FTSE100/allshare Trackers

---

Best Blackrock Allshare - return 25%
Worst Halifax FTSE100 12%

So if you are investing £100K, choosing the right tracker makes a maximum difference of -£10000 to +£3000 compared with the average UK equity fund. The best FTSE100/allshare tracker returned 3% more than an average fund.

Other sectors

---

European small companies - Median return 47%
Far East (exc Japan) 84%
US Small companies 36%
Comms/Tech 40%
Emerging Markets 67%
Commodities/energy 100%

Whereas chosing the right sector makes a difference of £78000 compared with an average UK equity fund.

Lets look at another factor - risk. UK Gilts are pretty low risk, much lower than FTSE100/allshare. the median return over 5 years is 16%. Is the extra return of 6% over 5 years for the average UK equity fund a satisfactory gain for the much higher risk?

So conclusion - decide on sector first, that is where the money is to be made. Than decide on fund. If you want to go for a tracker you wont do much better than average for that sector and you could do significantly worse, its only here where TER really matters.

Rollinghome

dunstonh wrote: »

I have never said tracker funds are rubbish. Unlike you I prefer to be balanced in the tracker vs managed debate.

Quite the reverse. Anyone who looks at your posts from a year or two back will see you using every dodgy figure you could to rubbish tracker funds that didn't pay you commission. In fact rubbishing any funds that didn't pay commission. How short your memory is.

You eventually woke up the the fact that the RDR, which you also tirelessly rubbished, will happen come 2013 and will ban commission from fund managers.

Instead of dishonestly claiming that I offer an unbalanced view of trackers why not say what it is I have said which is unbalanced? Dodgy commission based IFAs are understandably biased against funds that don't pay them commission.

Being an ex-salesman you were naturally entirely commission-based, rubbishing the whole idea of fee-based advising , then you announced you were a "new model adviser", and now you give the impression of being some sort of fee-based. Hey, come 2013 you'll be telling us you never ever were commission based and never believed in it.


A typical "balanced" dunstonh post from a while ago
http://forums.moneysavingexpert.com/showpost.php?p=4106123&postcount=8

Trackers track different indices. All the FTSE trackers (100,250 or all share for example) are all medium/high risk.

The FTSE100 and FTSE all share trackers have not performed above sector average once in the last 13 years and future potential doesnt look great. The FTSE250 has performed much better but has the highest risk out of these three examples.

People that tend to invest in trackers (within unit trusts and not ETFs) tend to be inexperienced investors who don't know better and understate the risk they are letting themselves in for and dont realise that the stockmarket isnt just one thing. They are looking for low costs rather than investment returns (the may be looking for investment returns but they arent getting it). What usually happens is a crash comes along and these people tend to pull out after the crash, lose money and swear that they will never invest in the stockmarket again.

Quote:
so why do people pick managed funds?


Because most trackers under perform the sector average over the long term. The FTSE 100 rarely makes it into the top half and the FTSE all share cannot because of what it is. The FTSE250 has done well in recent years but that is because mid cap was the place to be....

If you recommend a FTSE all share tracker you are destined to be below average performance.

If you recommend a FTSE all share tracker you are destined to be below average performance.

Tut, tut. I trust you wouldn't still make such claims.

And another:

Quote:
Can anyone recommend a tracker ISA that fits the bill?
None of them. Cant see the point of paying cheap to get average performance.

And even worse, they don't pay you commission. Still, very pleased to see that the ending of commission has mellowed your views.

Filey

Unlike the Santander Financial Adviser person who didn't know what Tracker funds were when we asked about them, the Nationwide Adviser did. Oops I should have said Senior Financial adviser. Looking at their list of funds available I saw that the L and G Tracker fund (which they now seem to have withdrawn), had an N next to it. Looking on the L and G site I noticed that the N funds had higher charges than the non N funds. I assume that the N is for Nationwide and the higher charge is NWs commission.

Is that right?

And in that case the advice sometimes given to buy funds from a discount fund supermarket rather than direct from say L and G doesn't apply when buying tracker funds, only to managed funds.

Is that right? Buy tracker funds direct from L and G or HSBC or whoever.

dunstonh

You eventually woke up the the fact that the RDR, which you also tirelessly rubbished, will happen come 2013 and will ban commission from fund managers.

I have not tirelessly rubbished it. I have posted balance opinions on it on which some things are good and some things are bad. This is just typical of your anti IFA posts where you take comments made and twist them to suit what you are saying.

Being an ex-salesman you were naturally entirely commission-based, rubbishing the whole idea of fee-based advising , then you announced you were a "new model adviser", and now you give the impression of being some sort of fee-based. Hey, come 2013 you'll be telling us you never ever were commission based and never believed in it.

You are making things up again.

And even worse, they don't pay you commission. Still, very pleased to see that the ending of commission has mellowed your views.

Seeing as I am fee based, commission doesnt matter. Plus, I dont earn commission on what people do on these boards. If there is a pot of money there waiting for me, please point me in the direction of it.

In the meantime please do not make false accusations and take snippets out of posts which are not in context with the subjects being discussed. Your dishonesty and anti IFA bias do not help people on these boards. I really feel sorry for the other posters who make threads to discuss things but only find that you destroy their discussions with your personal attacks and misinformation and downright lies. You did this before and the board banned you. Maybe they should consider banning you again but then you only come back with a new username and start all over again.

Rollinghome

dunstonh wrote: »

Seeing as I am fee based, commission doesnt matter.

Ah, so you're fee-based now are you. Care to outline your fee-structure or is it just catch as catch can?

Anyone who wants to see what you were saying about trackers a short while ago, and about why commission based was the best way, only needs to do a quick search of your posts.

The problem is dunston, is that what people want from an IFA above all else is honesty. All your bluster that you learnt in those sales jobs might sound good to you but others, expecially anyone with a few bob to invest, will see straight through it. It creates a terrible image, not only for yourself, but for all IFAs, including the decent ones.

jimjames

Filey wrote: »

And in that case the advice sometimes given to buy funds from a discount fund supermarket rather than direct from say L and G doesn't apply when buying tracker funds, only to managed funds.

Is that right? Buy tracker funds direct from L and G or HSBC or whoever.

It still tends to be cheaper to buy from a fund supermarket but the other advantage is that you can easily transfer between funds as you want but going direct you are restricted to that companies funds.

jimjames

Linton wrote: »

Lets have some real numbers.

My quote was based on your premise that a difference in charges for the same product doesn't make much if any difference to returns.

Assuming exactly the same fund performance (which trackers should have) a difference between 0.25% and 1% pa charges may seem tiny but can compound significantly.

By my calculations an investment of £40,000 growing at a modest 4.5% per year will be return £12000 LESS after 20 years with 1% charges compared to 0.25% annual charge. With a growth rate of 7.5% the difference between 0.25% & 1% charges is a staggering £21000 over 20 years.

To me that is quite a significant difference and something worth doing for pretty much zero effort. As Motley Fool website says, small differences in charges matter a lot.

EDIT - I've re-read your post and I think it proves my point even more. Black Rock has much lower charges than the Halifax tracker and shows far better performance; the underlying index will perform the same hence paying more for the same product makes no sense.

http://www.candidmoney.com/articles/article171.aspx

Rollinghome

Filey wrote: »

Unlike the Santander Financial Adviser person who didn't know what Tracker funds were when we asked about them, the Nationwide Adviser did. Oops I should have said Senior Financial adviser. Looking at their list of funds available I saw that the L and G Tracker fund (which they now seem to have withdrawn), had an N next to it. Looking on the L and G site I noticed that the N funds had higher charges than the non N funds. I assume that the N is for Nationwide and the higher charge is NWs commission.

Is that right?

And in that case the advice sometimes given to buy funds from a discount fund supermarket rather than direct from say L and G doesn't apply when buying tracker funds, only to managed funds.

Is that right? Buy tracker funds direct from L and G or HSBC or whoever.

A lot of funds are available either as a version that charges a higher AMC and pays IFAs commission and another that has a lower charge but doesn't pay commission.

The trouble is that, in order not to undercut the advisers, very often you won't be able to get the class with the lower charge. Sometimes you can so check them out. It makes a lot of difference to long-term returns.

You can get both the L&G and HSBC tracker from H-L at the same cost as going direct. In most cases, IFAs working on commission won't want to sell them if they can avoid them.

Now that the FSA are to ban commission by 2013 there are a lot of ex-salesmen out there calling themselves "fee-based". Anyone who uses them should make sure they really are fee-based, not just switch selling, and that all trail commissions are rebated to them.