Investing a Poor Performing Fund

Van_Dammes_Mullet

I wish to invest in a couple of funds -- a regular payment of £50-100 per month. I'm looking at two of the following HSBC funds -- European Index, American Index, Japan Index or FTSE 100 -- the regular investment would be for at least the next 7-8 years, risk is not a concern.

My question is all four of these funds/regions have suffered in recent years -- over the next decade they should recover, is now the best time to buy whilst the prices are low.

dunstonh

the regular investment would be for at least the next 7-8 years, risk is not a concern.

it should be a concern as that period is very short for a regular. It means the bulk of the money will be invested for less than is ideal for investing.

With your contribution level and short timescale, it really doesnt matter where you invest in the scheme of things. If you were to project a regular for 8 years you would find difference of 1-2-3% or whatever really do not have much of an impact on the final value. As the amount is small, time is short and you are paying monthly you may as well just go with the cheapest option.

Linton

Van_Dammes_Mullet wrote: »

I wish to invest in a couple of funds -- a regular payment of £50-100 per month. I'm looking at two of the following HSBC funds -- European Index, American Index, Japan Index or FTSE 100 -- the regular investment would be for at least the next 7-8 years, risk is not a concern.

My question is all four of these funds/regions have suffered in recent years -- over the next decade they should recover, is now the best time to buy whilst the prices are low.

Are they low? Possibly, but perhaps they will go lower, who knows.

With investing you need to be in for sufficient time to ensure that long term growth trends outweigh the inevitable collapses. 3-4 years average investment is too short. After all 4 years ago the FTSE100 was about where it is now and look what happened in the meantime!

If your time frame really is what you say and you dont want to manage multiple funds yourself perhaps you could look at a balanced or cautious managed fund where the fund manager attempts to flatten the volatility at the cost of some possible return.

pqrdef

The Footsie at 5900+ doesn't look cheap to me.

But if "risk is not a concern", why are you looking at trackers? Index trackers by nature are the low-risk low-return end of the equity business.

Old_Slaphead

pqrdef wrote: »

Index trackers by nature are the low-risk low-return end of the equity business.

You reckon?

I would have thought by their very name they are much closer to average risk, average return.

Linton

Old_Slaphead wrote: »

You reckon?

I would have thought by their very name they are much closer to average risk, average return.

Or going by the past 10 years high risk and lowish return, the FTSE ones anyway.

pqrdef

Old_Slaphead wrote: »

I would have thought by their very name they are much closer to average risk, average return.

There are winners and losers. Returns can be positive or negative. The arithmetical average is around zero.

The index stays closest to zero and gives you the least chance of ending up a long way from zero. So yes this is average, in a sense.

But then, a travelling salesman's average velocity is zero during a hard day on the motorway, because he ends up back where he started and therefore covers zero net distance.

dunstonh

The Footsie at 5900+ doesn't look cheap to me.

A lot of the data out there does indicate the markets are low on historic basis. That doesnt mean a boom is due but on paper there are positives for potential. Problem is that you dont know when (or if) that will turn into profits.

The OPs timescale is a nightmare waiting to happen.

Index trackers by nature are the low-risk low-return end of the equity business.

They are not. They tend to be close or at benchmark risk for their sector. You will find funds above and below in risk. If you compare sector risk with other sectors then risk can increase. i.e. Japan being higher risk than UK.

jimjames

pqrdef wrote: »

The Footsie at 5900+ doesn't look cheap to me.
.

In 1999 it was nearly 7000 with a P/E around 30, now it is 5900 with a P/E of around 10.

Definitely looks cheap to me especially when FTSE yield is so much more than most other asset classes.

Van_Dammes_Mullet

Thank you all for your responses,

I take it from the above a better time scale for my regular investment would be in the region of 15-20 years. For such a small regular investment, are the types of funds i'm looking at (low TER) the best option?

Linton

Van_Dammes_Mullet wrote: »

Thank you all for your responses,

I take it from the above a better time scale for my regular investment would be in the region of 15-20 years. For such a small regular investment, are the types of funds i'm looking at (low TER) the best option?

15-20 years is a good timeframe to bear in mind. Then you shouldnt panic when the stock market next crashes by 30-50% as it undoubtedly will. You will be confident that there is plenty of time for prices to recover.

I believe the best option is to first decide your strategy - what is your objective and to achieve that objective in what sectors, in what proportions, do you wish to invest. Then you can determine which funds or direct investments best meet your needs. In some cases they will be low TER, in other cases they may well not.

In the case of small investments where it may not be worth the effort of managing multiple funds you could look at funds where the fund manager allocates resources over multiple sectors. Typical names are "multi manager", "balanced", "cautious". They will have higher fees but may meet your objectives better than putting everything in a FTSE tracker.