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Investment Trusts Trounce Unit Trusts
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moneylover wrote: »Why suitable for 'very long term investors with a willingness to take a risk'? Because the gearing may mean the IT is volatile?
The thing that I don't like about unit trusts is that I dont know what price I am buying in at and when prices are uup and down as at present that makes me hesitate. Presumably there is no best time to put an order in?
I would guess they mean that yes - gearing potentially increases risk and volatility. But not all IT's use gearing or are 'geared' all the time. Discounts may widen as well as narrow and trusts can also trade at a premium to NAV, so discounts also increase risk and volatility whereas OEICS always trade at the value of the underlying assets (apart from the effect of charges obviously)."The happiest of people don't necessarily have the
best of everything; they just make the best
of everything that comes along their way."
-- Author Unknown --0 -
Trouble is, they are ignoring the fact that it is quite easy to get a rebate of part of the AMC on open-ended funds, by using platforms such as Alliance Trust Savings or you use an IFA who rebates. The TER assumes a full AMC, but this is at least 0.5% higher than the net TER, assuming you buy the open-ended funds in a smart way. I am a big fan of investment trusts, but I think you need to make a realistic comparison of TER's and in some cases investment trusts are not cheaper.
Yes good point, although there are still a minority of IT's where the TER is still lower even allowing for the above.
Also a lot of people will use a partial rebate platform like Hargreaves Lansdown rather than a full rebate one like Cavendish or Alliance (I guess HGL has a lot more £££ to spend on marketing!) and therefore will only get a reduction of say 0.25% instead of 0.5%. Alliance also apply dealing charges though and a fixed annual charge if held in an ISA - the % effect of this on your portfolio will obviously depend on it's size.
Also see this Which? article on the effect of trading costs on charges (which applies to both IT's and OEICS obviously):
http://www.which.co.uk/news/2011/10/millions-in-charges-being-hidden-from-investors-269798/"The happiest of people don't necessarily have the
best of everything; they just make the best
of everything that comes along their way."
-- Author Unknown --0 -
Such as City of London investment trust, which has a TER of 0.49%, which is less than many trackers charge. Or Edinburgh investment trust, whose fund manager is Neil Woodford, yet the TER is only 0.68%, compared with more than 1.0% for the Invesco Perpetual Income unit trust which is also managed by Neil Woodford. (Then again, I notice that Edinburgh is trading at a premium of more than 13% at present! So people are paying £113 for every £100 of underlying assets, when they could buy the unit trust instead and pay just £100. Are they MAD? They could just wait for the premium on the investment trust to drop and then switch over if they want to benefit from the lower TER in the long run.)competitionscafe wrote: »Yes good point, although there are still a minority of IT's where the TER is still lower even allowing for the above.koru0 -
(Then again, I notice that Edinburgh is trading at a premium of more than 13% at present! So people are paying £113 for every £100 of underlying assets, when they could buy the unit trust instead and pay just £100. Are they MAD?
Whether to buy ITs at a premium is a long-running debate. I certainly find anything greater than a few percent premium to be a no-go, and a double digit discount is also a worry!
I wish they'd all have the same approach as Personal Assets.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
gadgetmind wrote: »Whether to buy ITs at a premium is a long-running debate. I certainly find anything greater than a few percent premium to be a no-go, and a double digit discount is also a worry!
I wish they'd all have the same approach as Personal Assets.
The crazy one was Fidelity China last year, massive premium and trading around £1.20, dropped as low as 70p recently and now on a discount.Remember the saying: if it looks too good to be true it almost certainly is.0 -
gadgetmind wrote: »Whether to buy ITs at a premium is a long-running debate. I certainly find anything greater than a few percent premium to be a no-go, and a double digit discount is also a worry!
I wish they'd all have the same approach as Personal Assets.
what is Personal Assets approach?0 -
The crazy one was Fidelity China last year, massive premium and trading around £1.20, dropped as low as 70p recently and now on a discount.
An example of buying the reputation of the manager rather than on the investment fundamentals.moneylover wrote: »what is Personal Assets approach?
A very active discount control mechanism, to the extent that PNL is almost a unitised product. There are almost daily RNS releases that show new shares being issued. I would be interested to see what would happen to the share price if this was relaxed for a while - and I declare a holding in PNL, just as I have a holding in Trojan.
PNL won't go open-ended though, because it currently has the ability to gear-up when the manager (and board) deems it the right thing to do.Living for tomorrow might mean that you survive the day after.
It is always different this time. The only thing that is the same is the outcome.
Portfolios are like personalities - one that is balanced is usually preferable.
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Ark_Welder wrote: »A very active discount control mechanism, to the extent that PNL is almost a unitised product. There are almost daily RNS releases that show new shares being issued. I would be interested to see what would happen to the share price if this was relaxed for a while - and I declare a holding in PNL, just as I have a holding in Trojan.
PNL won't go open-ended though, because it currently has the ability to gear-up when the manager (and board) deems it the right thing to do.
Thank you. Is PNL expensive at the moment, or is it a reasonable time still to get in. Back in August I was not organised enough to buy anything I was still at the bottom of the learning curve. I am investing for the long term but am amazed at how expensive some investment trusts are now becasue think their money will be preserved I suppose. Thank you0 -
moneylover wrote: »Thank you. Is PNL expensive at the moment, or is it a reasonable time still to get in. Back in August I was not organised enough to buy anything I was still at the bottom of the learning curve. I am investing for the long term but am amazed at how expensive some investment trusts are now becasue think their money will be preserved I suppose. Thank you
Purely from a premium point-of-view, PNL isn't expensive because of the discount control. The only way that I can think of for someone to describe it as expensive is if they though that the asset mix was wrong for their own requirements. I can't see the share price deviating too far from NAV unless the decision is made to suspend discount control, and as said, I don't think that that is likely.
As far as August is concerned, my best suggestion is to put PNL into Trustnet's Charting Tool, add in the All-Share index and perhaps the Dow, and change the timescale to 1 year (or 12 months if on monthly). That, for me, is why PNL is part of my personal pension. No guarantees that it will continue like that, but it is an example of why periods of underperformance against an index do not bother me (although it is hardly fair to try to compare an equity index against a fund that is around 25% index-linked bonds and 13% bling).Living for tomorrow might mean that you survive the day after.
It is always different this time. The only thing that is the same is the outcome.
Portfolios are like personalities - one that is balanced is usually preferable.
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moneylover wrote: »Is PNL expensive at the moment, or is it a reasonable time still to get in.
The price you pay is the value of the underlying assets. so it depends on whether you think their combination of assets is currently wrong/expensive.
I bought a *lot* of PNL and Trojan back in April, and also a fair whack of RIT and Ruffer. The latter two have held up reasonably well, but PNL/Trojan has performed exactly the job I asked of it, which was to hold/gain value through torrid times.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0
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