Investment Trusts Trounce Unit Trusts

crittertog

BLB53 wrote: »

I suppose when you use one method for many years and find it works well enough, there's probably not a lot of incentive to change to something you are not as familiar with.

Indeed - as long as you are comfortable and happy with something, then it's probably the right choice for you, which is actually a pretty important point, IMHO.

Lokolo

jimjames wrote: »

My understanding is that TER doesn't (despite the name TOTAL) include all costs associated with buying and selling shares in a fund hence a fund that trades less will have lower costs all other things being equal.

No it doesn't, but it's too complicated to put it in. When fund managers buy they don't get charged an explicit amount, but rather the IB will just take a comission and add it to the cost, so the fund won't actually know what part was a charge and what the price they got for the investments.

Lokolo

darkpool wrote: »

i did read your post, but it's really just a variation of the "UTs are a brilliant investment if you don't invest in dogs" argument.

it's not much of an investment philosophy unless you have some method of excluding the dogs. i think if you had some surefire way of picking the top performing funds you'd be better employed buy shares.....

Look at the old Xcite thread, it was full of people creaming their pants saying how much the share price was going to rise, they were saying they had researched the share. Yet the share price went down from 450p to 125 pence. Like it or not, the chance of an amateur significantly outperforming the market is poor. I think in the real world the most an investor can expect is an average return....

I could argue that the best investment possible is the National Lottery, as long as you don't pick numbers that don't get drawn....

Yes I was going to make things more complex to make my point but I didn't think I needed to, I guess I do.

The BMW has 3 doors. The Ford Focus has 5 doors. Not only do you look at the performance and costs, you look at what it is YOU want. For example, you could have a UK Eq IT and a UK Eq UT, both have different objectives, you may choose the UT because you prefer those objectives.

I'm not saying people will just choose the best fund and ignore the dogs (although most probably do in reality), but you look at the individual investments that suit YOUR needs, as well as taking into consideration performance.

darkpool

Lokolo wrote: »

No it doesn't, but it's too complicated to put it in. When fund managers buy they don't get charged an explicit amount, but rather the IB will just take a comission and add it to the cost, so the fund won't actually know what part was a charge and what the price they got for the investments.

when i buy or sell shares my stockbroker charges an explicit amount. by looking at the statement i can see how much i've spent on commission and stamp duty. the only charge i can't see is the spread of the market maker. you really think UTs can't get access to that information? you think adding dealing costs to the TER is "too complicated" for a fund manager? if it's too complicated for them maybe they could get the work placement kid to do it for them?

if i was a sceptic i would think UT fund managers hid dealing costs from the mugs that buy UTs. i think we can all admit that the term Total Expense Ratio is misleading as it only includes some of the expenses of the funds.

the portfolio turnover for "threadeedle european" is 227%. so i reckon the dealing charges will be about 4% a year. On top of the TER that means charges of 5.7% a year. ouch!!!!!!!

Lokolo

darkpool wrote: »

when i buy or sell shares my stockbroker charges an explicit amount. by looking at the statement i can see how much i've spent on commission and stamp duty. the only charge i can't see is the spread of the market maker. you really think UTs can't get access to that information? you think adding dealing costs to the TER is "too complicated" for a fund manager? if it's too complicated for them maybe they could get the work placement kid to do it for them?

No I don't think, I know they can't.

The traders don't get told what it has cost them in charges, they just say they want to buy/sell at X and they get offers, the offers would include the comission. JPM won't say "OK we offer this price + we take this comission", they just say "OK we offer this price".

But yes, I agree that TER is misleading.

darkpool

Lokolo wrote: »

Yes I was going to make things more complex to make my point but I didn't think I needed to, I guess I do.

The BMW has 3 doors. The Ford Focus has 5 doors. Not only do you look at the performance and costs, you look at what it is YOU want. For example, you could have a UK Eq IT and a UK Eq UT, both have different objectives, you may choose the UT because you prefer those objectives.

I'm not saying people will just choose the best fund and ignore the dogs (although most probably do in reality), but you look at the individual investments that suit YOUR needs, as well as taking into consideration performance.

i can understand that different investments have different characteristics. however, overall ITs and UTs are generally designed to do the same thing. but there has been evidence presented that ITs on average outperform UTs and have lower charges. so why do IFAs more or less always recommend UTs over ITs?

to your analogy, they are selling a ford focus at a higher price than a new BMW 3 series.

remind me, you work as an IFA/ in the fund industry?

Lokolo

darkpool wrote: »

i can understand that different investments have different characteristics. however, overall ITs and UTs are generally designed to do the same thing. but there has been evidence presented that ITs on average outperform UTs and have lower charges. so why do IFAs more or less always recommend UTs over ITs?

to your analogy, they are selling a ford focus at a higher price than a new BMW 3 series.

remind me, you work as an IFA/ in the fund industry?

I work in the city yes, but in IT.

darkpool

Lokolo wrote: »

No I don't think, I know they can't.

The traders don't get told what it has cost them in charges, they just say they want to buy/sell at X and they get offers, the offers would include the comission. JPM won't say "OK we offer this price + we take this comission", they just say "OK we offer this price".

But yes, I agree that TER is misleading.

so a large unit trust can spend hundreds of millions a year on stamp duty and commission. yet senior management have no way to monitor these costs?

i'm just glad i have no UTs. why should anyone trust an industry that can't keep an eye on costs. it's as if they don't really care about the people who invest in UTs......

the article below is from the telegraph.

"Though stamp duty is usually associated with property purchases, it also plays a major part in the stock market.

Every time an investor buys a British share he has to pay 0.5 per cent of its value in stamp duty. Last year the Treasury made a total of £4.17 billion from share dealing."

Lokolo

darkpool wrote: »

so a large unit trust can spend hundreds of millions a year on stamp duty and commission. yet senior management have no way to monitor these costs?

i'm just glad i have no UTs. why should anyone trust an industry that can't keep an eye on costs. it's as if they don't really care about the people who invest in UTs......

the article below is from the telegraph.

"Though stamp duty is usually associated with property purchases, it also plays a major part in the stock market.

Every time an investor buys a British share he has to pay 0.5 per cent of its value in stamp duty. Last year the Treasury made a total of £4.17 billion from share dealing."

I'm not talking about things like SD, but comission that the banks charge, this will be variable entirely on the trade.

You just seem to have an axe to grind with the whole financial services industry, and its honestly pathetic. I get that not everythings perfect, and that there needs to be improvements, but on the whole, I don't think its massively that bad how you seem to see it.

darkpool

Lokolo wrote: »

I'm not talking about things like SD, but comission that the banks charge, this will be variable entirely on the trade.

You just seem to have an axe to grind with the whole financial services industry, and its honestly pathetic. I get that not everythings perfect, and that there needs to be improvements, but on the whole, I don't think its massively that bad how you seem to see it.

when i put an expenses claim in at work for a tenner it gets looked at. i just find it amazing that the senior management of fund managers don't think it worthwhile to monitor commission of billions of pounds a year. can you see that viewpoint?

i just don't think the financial services industry adds anything. they repackage investments and sell them on to punters, they don't actually add value. but they charge plenty for what they do.

i think it is bad how so many people have UTs that cost sooooo much.