Funds suggestions

dunstonh

9 of those funds have appeared in my recommendations, the other 2 wouldnt be out of place even though I havent used them. 5 of the funds are in my own portfolio.

whambamboo

carnet wrote:

Whilst none of them are, in any way, dog funds, only one makes it into my current portfolios.

This is either because there are, IMHO, better funds in the respective sectors - or the sector itself is not, on a macro level, one I would presently consider investing into.

Do you have any more specific comments about anything aspect of this?

EdInvestor

Almost half of the money is in high risk choices and another quarter is medium-high.

Does that accord with your assessment of your risk profile?

whambamboo

EdInvestor wrote:

OK here are some thoughts for a 20k portfolio, long term growth, medium risk profile with some racy bits: choices based on consistent outperformance over 10 years.No foreign country or regional funds to reduce impact of high charges, currency risk and emerging market political risk.Plenty of foreign exposure in the other funds.Fewer funds, to make it quick and easy to monitor them reasonably regularly.

From higher risk down:

JPM Natural Resources 2.5k

Merrill Lynch UK Smaller cos 2.5k

Invesco Perpetual High Income 5k

F&C Stewardship Income*5k

Norwich Union property (bricks and mortar, lower risk)2.5k

Aberdeen property (property shares, higher risk) 2.5k


*This fund is billed as an ethical fund, but is really a fairly mainstream equity income fund minus the unethical bits (eg fags). It fits nicely with the IP Equity income fund and between the two of them you have very good exposure to solid blue chip income earning shares for the long term.For some rreason it doesn't seem to be mentioned on Citywire.

Thanks for the suggestions. I will probably go a lot higher risk than that. I am saving at least 5k per month, so I have no problem taking risks, as I'm extremely secure financially.

The only issue is of course that while higher risk should lead to higher return, there's obviously some debate to be had about whether the undoubted higher risk you accept leads to higher returns. I guess many emerging market funds have underperformed relative to the UK. Though ultimately in the long term it does seem logical that growth potential in say India or China would be higher than the UK.

I think the volatility is probably ok for me given my relatively high risk tolerance (i.e. i'm getting sufficient compensation in the form of higher expected returns), and also with a fairly diverse spread of markets, the potential downside should not be too painful at al.

EdInvestor

while higher risk should lead to higher return, there's obviously some debate to be had about whether the undoubted higher risk you accept leads to higher returns. I guess many emerging market funds have underperformed relative to the UK. Though ultimately in the long term it does seem logical that growth potential in say India or China would be higher than the UK.

One problem is that over the long term dividends play an important role in growth and you tend to get no yield in foreign markets, plus much higher hidden charges and the other risks.

At the same time, you have major global multinationals listed in the Uk who will give you the foreign exposure you want - eg the oil and mining cos, a number of the banks,companies like Unilever (major player in India) and the pharmas.

Because of our Empire background many big UK companies have much experience internationally and are big players in these emerging markets, so you don't actually need to invest in the (usually much flakier) local cos to get exposure to the country's growth.The exception might be Latin America.

whambamboo

EdInvestor wrote:

One problem is that over the long term dividends play an important role in growth and you tend to get no yield in foreign markets, plus much higher hidden charges and the other risks.

what do you mean about hidden charges? the total expense ratio is the same on the chinese and latin american funds I listed as on the neil woodford straightforward uk equity funds.

dunstonh

There isnt any hidden charges. Just monitor the TER.

When choosing investment funds there is no one perfect way of getting the right funds. It is a matter of opinion. Even the most experienced investors/advisers will pick some that will not perform as expected. This is why you spread it around.

EdInvestor

Carnet

You are right the divi situation is improving elsewhere a bit.But it's still way below what you can get in the UK for blue chip shares.

DH

There are indeed hidden charges.Check out the Pension Commission report for the details.

The TER does not include dealing charges, stamp duty or the bid/offer spread, which together add 1% or more to the AMC,depending on portfolio turnover .The AMC for any decent fund is usually 1.5%, so with foreign funds you are normally talking 3% charges in total.

That's why it's absolutely essential to get high overall returns, otherwise you're taking extra risk for a bog standard 7% or so if you're lucky.

whambamboo

EdInvestor wrote:

The TER does not include dealing charges, stamp duty or the bid/offer spread, which together add 1% or more to the AMC,depending on portfolio turnover .The AMC for any decent fund is usually 1.5%, so with foreign funds you are normally talking 3% charges in total.

Just to clarify, the TER doesn't include the cost of share trading by the fund manager?

This page suggests it does:
http://www.investopedia.com/terms/t/ter.asp

Surely they wouldn't call it a *total* expense ratio otherwise?

And why should foreign funds have higher *total* costs if the TERs are the same (as they seem to be from looking at Gartmore China vs Invesco Perpetual High Income).

The obvious cost not included is the bid/offer spread. Are OEICs cheaper because they don't have one?

EdInvestor

You need to look at what they call "implicit costs".

Explained here, from page 14

It's a disgrace that the FSA does not require these costs to be disclosed IMHO.But when you realise that the ones they do disclose eat up 20-30% of people's savings, you can see why they prefer to keep the rest of the charges quiet.

Once you understand the combined impact of the implicit and explicit charges, the case for holding shares directly and cutting trading to a minimum suddenly becomes quite compelling.