Time to change from a tracker to a managed fund?

smallfry27

In response to Filey #16

Personally I wouldn’t attempt to buy direct from the investment company. Investment firms give the brokers a discount because it saves them admin if you go through the broker. If you go direct, you’ll be paying for the extra admin, one way or other. Some brokers rebate the commission or use it to offset the overheads that they would otherwise have to charge you. Also if you bought direct, I’m not sure if it could be held as an ISA (if that matters to you).

Found this about L&G commission rates on trackers :

http://www.legalandgeneral.com/library/investments/trust-form/W12397IND.pdf

One point of view (not saying I share it) is that investment firms have to pay commission to IFAs to push the products that wouldn’t otherwise sell. So trackers have a pretty low commission, since they sell easily anyway.

Rollinghome

smallfry27 wrote: »

Personally I wouldn’t attempt to buy direct from the investment company. Investment firms give the brokers a discount because it saves them admin if you go through the broker. If you go direct, you’ll be paying for the extra admin, one way or other.

That tends to be true but not always. For example you could buy Troy Trojan Fund Class I from Hargreaves Lansdown and pay 1.5% AMC, which includes 0.5% commission for them, or buy Troy Trojan Fund Class O direct and pay just 1.0% AMC.

What you get is exactly the same apart from paying no commission and the lower charge. There are others that you can find. It's true that you don't have the convenience of a single account but certainly worthwhile for a decent-sized investment. You can just buy and sell units over the phone.

The PDF you referred to is for L&G class R funds. There are other classes that have different charges and commission rates.

HSBC had both I and R classes for their trackers until June 2009, one paying commission and one not. Since then, although they still seem to have both I and R classes, all the charges were reduced and now seem to be the same across the classes, apparently with no commission paid. It's quite likely that H-L have their own deal with HSBC as they don't charge any extra for the HSBC trackers but charge an extra 0.5% pa for other zero commission trackers such as F&C etc.

browniej

Rollinghome wrote: »

As has been pointed out to you before, the abuse of other posters, often women and newbies, tend to come from you. Some of your attacks on other posters:

Pot, kettle and black spring to mind.

It creates a terrible impression of IFAs in general and you should stop it.

It creates a terrible impression of you when you think that posting one liners out of context and one post out of context of a thread somehow backs up your claim. You should stop it as it does nothing to help the OP and anyone else interested in trackers.

It's a shame really as you made some very good points.

jamesd

Rollinghome, the problem with such claims is that a fair number of us have been around long enough to witness it all and see which of you is most often involved in unhelpful posting. That's not dunstonh.

Was cute of you to mix old posts from 2007-2009 with a sprinkling of comments about what Martin does made in early 2010, though.

Martin isn't an IFA, has a focus on reducing costs and doesn't always have the best possible choices for individual cases on the site. None of that is a surprise to Martin, for cost reduction, for the minimum required purchase, is a key objective of the site, and he's well aware that individual circumstances can cause anything he mentions to be inappropriate. He and his team still do a superb job overall given the limitations of the general site mass medium that we can refine for individuals here.

Dunstonh was correct about the performance of tracker funds and also correct about paying fees via commission, which avoids paying VAT on the fee when a product is purchased. It's a useful way of saving customers money.

jem16

jamesd wrote: »

Was cute of you to mix old posts from 2007-2009 with a sprinkling of comments about what Martin does made in early 2010, though.

Also been around long enough to find it ironic that Rollinghome's previous username of earlgrey was PPRd after a disagreement with Martin.

However I do agree with browniej - a lot of useful info posted by Rollinghome but once again spolied by his obsession over IFAs.

Linton

jimjames wrote: »

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

My point is that worrying about 1% or 0.25% charges is small beer compared with what you should be worrying about - whether to invest in the FTSE or something quite different.

To take your example of £40K over 20 years and apply to a mid performing nonFtse fund from my list..


You are talking about differences of say £12K over 20 years by focussing on TERs. I am talking about differences of £200K over 20 years by focussing on sector.

DavidHayton

Linton wrote: »

My point is that worrying about 1% or 0.25% charges is small beer compared with what you should be worrying about - whether to invest in the FTSE or something quite different.

To take your example of £40K over 20 years and apply to a mid performing nonFtse fund from my list..


You are talking about differences of say £12K over 20 years by focussing on TERs. I am talking about differences of £200K over 20 years by focussing on sector.

This is very true but surely, once you have decided on you sector, you should choose a product with a lower TER, over an otherwise identical product with a higher TER?

David

Linton

DavidHayton wrote: »

This is very true but surely, once you have decided on you sector, you should choose a product with a lower TER, over an otherwise identical product with a higher TER?

David

I would agree it's a factor if everything else is equal. And if you really wanted a FTSE100 tracker everything else would be equal.

But with the more niche funds, although several candidates may be in the same sector they can vary significantly.

For example the First State Emerging markets fund tends to focus on the Far East because that's where First State's expertise lies. Aberdeen on the other hand puts more into Latin America.

So in that example I would decide which geography I was more interested in before looking at the TER.

black_taxi_2

whats the annual charges if you buy funds/shares lump sum in isa

say £2500 a time

thx

jimjames

black_taxi wrote: »

whats the annual charges if you buy funds/shares lump sum in isa

say £2500 a time

thx

Exactly the same as if you buy monthly.

Shares may incur additional costs on some fund supermarkets though