How to invest on a (weeny) budget

srcandas

Gadget and Atush very interesting and many thanks. My debt funds, including the high risk emerging market ones all have a mixture of corporate, government and other bits. At the mo all doing ok but I'll keep a close eye.

Personally I think the Pacific ring, Brazil and India will be the place to be but I can't decide when to switch from debt to equity; which means I'll do half and half of course I still see civil unrest being an issue in Europe. My wife is Spanish and with many of the family unemployed and dole only paid for a short time I see it as inevitable. Starve or fight. I know what I would do. And I imagine that will not be good for business unless you're into police riot gear!

atush

My son was in Almeria for a few days in Nov and saw beggars on the street- Spanish not North african! Was a shock to me as I have been in Spain for a number of years.

srcandas

atush wrote: »

My son was in Almeria for a few days in Nov and saw beggars on the street- Spanish not North african! Was a shock to me as I have been in Spain for a number of years.

atush there were always beggars but as you say now they are decent Spanish family men and women. But in the next 12 months thousands will find their dole (paro) stopped and will be asked to fall back on the traditional spanish family. Problem is there are whole families with no hope of work living off granny's pension already. In my extensive family over half adults between 20 and 60 are unemployed. And the joke is of course that they must work longer to get their pensions.

And with 22.9% unemployed and massive in bred corruption I see no way out without some type of revolution - hopefully not a bloody one.

Of course Greece is one stage on with babies being abandoned at the doors of orphanages and churches :mad:

I was going to retire to Spain but my Spanish wife has become rather attached to little old England - I wonder why?

:beer:

ruperts

Why would active funds and ITs be ruled out just because the amount invested is low? The charges for those are percentages so the amount invested is irrelevant, unless you plan to sell soon which of course you don't. The argument for keeping a low TER is fine but I don't see why that is any more applicable to budget investors than it is to people investing tens of thousands.

Lokolo

ruperts wrote: »

Why would active funds and ITs be ruled out just because the amount invested is low? The charges for those are percentages so the amount invested is irrelevant, unless you plan to sell soon which of course you don't. The argument for keeping a low TER is fine but I don't see why that is any more applicable to budget investors than it is to people investing tens of thousands.

It does say in the article in the first sentence "remaining true to the principles of passive investing" (which I missed out when I first read it and replied on here), which doesn't really go with the title of "How to invest on a tiny budget".

I think the article needs to be re-written to either have a different title, or different content.

Investing on a small budget doesn't mean you can rule out shares. Doesn't mean you can rule out ETFs or Active Funds. If the article is about passive investing then say in the title, it's nothing really to do with investing on a weeny budget.

gadgetmind

ruperts wrote: »

Why would active funds and ITs be ruled out just because the amount invested is low?

Because the performance of active funds is very erratic; they have good years, and they have bad years, star managers one year are kicked out under a cloud shortly afterwards. Some investors try to correct for this by using "recentism" to pick the manager with "hot hands", but studies have shown this rarely works. Others instead buy a wide range of active funds, which delivers a high-fee closet tracker.

Someone on a small budget can't afford to buy a range of funds, and probably doesn't have the skill (aka "luck") to pick the right fund, and would probably react badly to anything that under-performed the stock market that was most visible to them.

A low-fee FTSE tracker is a good choice IMO. Yes, more diversity would be better, but £50pcm will only split so many ways.

gadgetmind

atush wrote: »

My son was in Almeria for a few days in Nov and saw beggars on the street- Spanish not North african! Was a shock to me as I have been in Spain for a number of years.

We're hiring a lot of people from Spain and Greece but (oddly) not many from Ireland, Portugal, or Italy.

The bright will always get jobs, but might have to be flexible regards location!

gadgetmind

Lokolo wrote: »

Investing on a small budget doesn't mean you can rule out shares. Doesn't mean you can rule out ETFs or Active Funds.

Dealing fees can kill you but some of the £1.50 regular investment plans are worthwhile. However, buying individual shares is not for the novice, ETFs can be complex, and funds risk you picking a dog rather than a star.

Lokolo

gadgetmind wrote: »

Because the performance of active funds is very erratic; they have good years, and they have bad years, star managers one year are kicked out under a cloud shortly afterwards. Some investors try to correct for this by using "recentism" to pick the manager with "hot hands", but studies have shown this rarely works. Others instead buy a wide range of active funds, which delivers a high-fee closet tracker.

Someone on a small budget can't afford to buy a range of funds, and probably doesn't have the skill (aka "luck") to pick the right fund, and would probably react badly to anything that under-performed the stock market that was most visible to them.

A low-fee FTSE tracker is a good choice IMO. Yes, more diversity would be better, but £50pcm will only split so many ways.

The 2 are completely uncorrelated. Someone without a large amount of capital is completely able to pick out funds if they have the skills and knowledge.

This knowledge to pick funds has nothing to do with whether someone has a small, or large amount of money to invest.

gadgetmind wrote: »

Dealing fees can kill you but some of the £1.50 regular investment plans are worthwhile. However, buying individual shares is not for the novice, ETFs can be complex, and funds risk you picking a dog rather than a star.

But these have nothing to do with cost! These are knowledge based criteria. You are effectively saying that those who have little to invest are too thick to create a portfolio based on anything but trackers.

The reason I mentioned shares was because when you are new to investment, you think shares - most people who are new will most probably never heard of funds or ETFs, and some people may think "ooo I like the idea of owning shares in Vodafone", and this gives them the opportunity to do so.

ruperts

gadgetmind wrote: »

Because the performance of active funds is very erratic; they have good years, and they have bad years, star managers one year are kicked out under a cloud shortly afterwards. .

Bad performance doesn't affect smaller investors any more than it affects bigger investors though. The percentage lost remains the same. I can see avoiding riskier funds this as an argument for people who wish to remain defensive but why the assumption that people investing small sums must be defensive?

gadgetmind wrote: »

Someone on a small budget can't afford to buy a range of funds, and probably doesn't have the skill (aka "luck") to pick the right fund, and would probably react badly to anything that under-performed the stock market that was most visible to them.

A low-fee FTSE tracker is a good choice IMO. Yes, more diversity would be better, but £50pcm will only split so many ways.

How many funds are required for a good level of diversification? Five? Why not split your £50pcm five ways and pay £20 into five funds over each two month period? That's easily affordable diversification.