Help picking funds

dunstonh

agal wrote:

I am used to paying a fixed annual management charge rather than a percentage therefore six funds would imply six annual management charges

That is a very unusual way of doing things.

A charge is normally a fixed amount in a period or a percentage of the amount invested. It would be impossible to build a portfolio if your charges multiplied for every different holding you have. It wouldnt be logical either.

agal

dunstonh wrote:

That is a very unusual way of doing things.

A charge is normally a fixed amount in a period or a percentage of the amount invested. It would be impossible to build a portfolio if your charges multiplied for every different holding you have. It wouldnt be logical either.

I don't think it's unusual in the IT sector. I hold an ISA with F&C which charges £60 + VAT per annum. Obviously the larger the ISA becomes the smaller the annual management becomes as a percentage. Similarly my wife has an ISA with Murray Income (Aberdeen Asset Managers) which charges an annual management fee of £24 + VAT.
If I was to open a an ISA each year with a new company the annual management fees would indeed begin to mount up.

EdInvestor

paulgilroy31 wrote:

just out of intrest would you say its better at the moment to invest in sli or sl ord and what would you look at to help you choose .(this is not aloaded question)

SLI is an offshore commercial property investment trust run by Standard Life.

SL is the epic for Standard Life Assurance Company plc.

They're not comparable.

EdInvestor

You do usually pay an annual percentage fee with an IT, as with a UT, but the IT fee is usually lower (1% vs 1.5%) - and you do have to pay the dealing fee as well.But for long term buy and hold investors with biggish funds the IT arrangment will be cheaper.Those starting out may be better with UTs.

This is the outstanding advantage of hoilding shares directly of course: once you've bought them there is nothing more to pay at all if you don't trade.If you hold in an account with no annual fee, it's easy to keep your charges at a negligible level (eg.0.1%)l

Chrismaths

But Ed, if you are holding an IT in an ISA, there will usually be a fee for the wrapper. This has to be factored in - meaning that it depends on the amount of money you are investing. It's usually cheaper for small amounts to invest in an open-ended collective (such as a unit trust or OEIC), than an investment trust, but then with larger amounts it becomes cheaper to use an equivalent IT.

EdInvestor

Yes.I said:

for long term buy and hold investors with biggish funds the IT arrangment will be cheaper.Those starting out may be better with UTs.

:rolleyes:

We agree.

cheerfulcat

jamesd wrote:

They are just another way of holding what are effectively funds. The content of the fund varies as it does for other types of fund and their risk depends on what they are invested in.

There is additional risk with ITs in that they can borrow to invest

Chrismaths wrote:

But Ed, if you are holding an IT in an ISA, there will usually be a fee for the wrapper. This has to be factored in - meaning that it depends on the amount of money you are investing. It's usually cheaper for small amounts to invest in an open-ended collective (such as a unit trust or OEIC), than an investment trust, but then with larger amounts it becomes cheaper to use an equivalent IT.

Not necessarily. Alliance Trust, for one, offers an ISA wrapper with no charge. IT's TERs are lower as well, and they generally allow smaller monthly purchases than UTs. On the whole, I would have said that ITs are more suitable than UTs for small amounts.

Chrismaths

There is additional risk with ITs in that they can borrow to invest

And also as it is a closed ended vehicle, there is the added risk of trading at a discount/premium.

Not necessarily. Alliance Trust, for one, offers an ISA wrapper with no charge. IT's TERs are lower as well, and they generally allow smaller monthly purchases than UTs. On the whole, I would have said that ITs are more suitable than UTs for small amounts.

I didn't know about Alliance Trust's ISA - We have our own so I don't follow other ISAs.

However looking at the charges - a regular investment incurs a dealing fee of £7.50+0.2% (if not in Alliance trust's own IT). Unit trusts will usually accept a minimum of £50 per month - a £50 monthly investment in this ISA costs £7.60, which is over 15%! Even if you were silly enough to pay a full initial charge on a UT, you'd still be better off.

Most will also accept a one-off investment of £1000, and the dealing fee on that amount would be 0.95% with Alliance - so that is more realistic, and a lower ongoing AMC will eventually pay for that. However, if you want income, there's a £2.50 charge per income withdrawal (so if you take income 6 monthly on £1000 yielding 4%, that's 12.5% of your income, knocking the effective yield down to 3.5%), and if you want to withdraw money from the ISA, there's a £10 charge, and a minimum withdrawal of £100. If you need to sell an investment to raise funds, there's a £15+0.2% charge.

There may be no annual wrapper charge, but that doesn't make it cheap for small investments.

Remember, I have no incentive to recommend one vehicle over another - I get paid the same. I do use investment trusts, but I would be very unlikely to use them for small investments (not that I have many of those!). They are almost always better off in open ended collectives.

cheerfulcat

Chrismaths wrote:

However looking at the charges - a regular investment incurs a dealing fee of £7.50+0.2% (if not in Alliance trust's own IT). Unit trusts will usually accept a minimum of £50 per month - a £50 monthly investment in this ISA costs £7.60, which is over 15%! Even if you were silly enough to pay a full initial charge on a UT, you'd still be better off.

A regular investment in Alliance Trust costs £2.50 and no commission.

However, if you want income, there's a £2.50 charge per income withdrawal (so if you take income 6 monthly on £1000 yielding 4%, that's 12.5% of your income, knocking the effective yield down to 3.5%)

Are you seriously suggesting that someone with £1000 invested would take an income from it? In any case, the charge for an automatic withdrawal is £1, not £2.50.

Liz_the_Whizz

sillychuckie

Been following the thread with interest as I have just done by £4k ISA for 2006/7 with HL.

I have a "balanced" risk profile, so know I should keep away from the risky stuff.

But I haven't gone for any UK Corporate Bond funds at this point in time as performance looks so poor over the last 12 months, presumably as a result of interest rate rises (eg Citywire shows AEGON Sterling Corporate Bond return only 1.2% over last year, and 0% over last 3 months).

And given predictions of more rate increases to follow in 2007, I felt my safe money was better off at 4.5% net in the high street for the timebeing.

The Equity and Bond sector and Other UK Bond seem to be doing better, presumably because they can diversify a bit more, and Artemis High Income is one of my choices.

As pretty much a beginner, I'm finding this fund stuff pretty interesting, and enjoyable for now.

Ask me again after the next crash