Index trackers....best buy ???

EdInvestor

Have been fairly successful with funds, less so with shares. That's why I've specialised in the former - also find fund research far easier and more fun. Less volatility and more restful nights .

My experience has been the opposite.Unfortunately the charges ( not just the visible ones but the hidden ones as well) often eat up a major chunk of the gains with funds, I've found.

Some people do find it worrying that share prices wobble up and down, I know and thus find fund investment more 'restful'.

But maybe I could just draw your attention to a potential problem alyrpal?

Just because the shares are in a fund doesn't mean they've stopped wobbling up and down. They are still doing this, it's just that you can't see it, because they are in the fund.

Because you can't see the share activity going on in anything like real time,you have much less warning of possible problems looming. And thus much less time to react to protect yourself if/when a real problem arises.

If you are trading funds,rather than just buying and holding long term, there's a risk this could put you at a significant disadvantage IMHO.

HTH, it's just a thought.

al_yrpal

Ed

Thats where your fund manager comes in. His eyes are rotating just like Tony Benn's as he is transfixed by all those wobbling shares. And he, not me, is getting the sleepless nights. If you focus on sectors, not funds, you can lessen risks by keeping an eye out for war, pestilence, natural disasters, on the downside and commodity shortages, local booms (like in Korea now with all those flat screens), and discovery of new resources (vis Russian Gas and Oil) on the upside.

I don't mean to poo poo the possibility of risk. I realise that in the end its all a gamble. You can get a few clues by looking at the thrust of Dixons adverts, reading the business news in a serious newspaper, and generally keeping your eyes and ears open. When you get too close to balance sheets you can loose the bigger picture. ie - will The Emerging Economies of the world outstrip the UK in the next 20 years - yes, hands down. Will they be as stable as the UK - no!

My nightmares are an earthquake centred on Tokyo, a REAL outbreak of transferable bird flu in humans, an outbreak of war in Korea, or a Chinese attack on Taiwan. All your share spotting can do nothing whatsoever about these things, and neither can my fund swapping. But I try to sleep soundly.

I heed your words of caution, on the face of it you might be a better MS than me, but by paying the least, particularly if you aren't a professional, you don't always get best value. Having run my own successful business for many years I learnt that paying a fair rate for added value services was often a great investment, and its not a cost that I resent.

dunstonh

If I'm reading this correctly, that certainly doesn't sound like much of a discount !

In percentage terms was what i meant. The more money you have, the lower the % charge is.

My experience has been the opposite.Unfortunately the charges ( not just the visible ones but the hidden ones as well) often eat up a major chunk of the gains with funds, I've found.

You couldnt have done a good job at picking funds then.

tonyj100

Hi,
Looked at the Loin Trust showing a yield of 2.5% How does this compare to the likes of ING savings account, seems a little low. I'm more than willing to be educated.

Tony

EdInvestor

You couldnt have done a good job at picking funds then.

Indeed,that was back in the days when I still used IFAs.:( I never lost money, but made very little. A good IFA is well worth paying for important pension admin help IMHO, especially with a big fund, but I'm afraid I just don't rate their stockmarket investment skills.

Possibly this is because the ones I know tend to invest their own money in property.

dunstonh

but I'm afraid I just don't rate their stockmarket investment skills.

Nice of you judge all of us on your limited experience.

Also, what years are comparing performance? For example, anyone looking at last 3 years is going to see a heck of a lot of difference compared with the previous 3 years. Many people make the mistake of thinking they (or their new advisor) is doing better than the old one when in reality its due to a difference in performance of the markets.

carnet

EdInvestor wrote:

Unfortunately the charges ( not just the visible ones but the hidden ones as well) often eat up a major chunk of the gains with funds, I've found.

What other "hidden" charges not included in the TER ?

For an active fund investor typically turning over each fund once a year (and often more regularly), buying from the cheapest source who also rebates half the annual commission, funds can work out cheaper than individual shares. The typical figures were provided in a previous thread.

Buy and hold investment is another matter - but that's not what I do, in the main.

Fixing your gaze so firmly on costs seems a rather blinkered approach when assessing potential investment returns.

I would not hesitate to pay slightly more for an investment if my research indicates that it has a good chance of outperforming its peers by considerably more - and have done so, without regret, on many occasions

The phrase false economy springs readily to mind.

UK share investing is fine (do it myself) - but only as one element of a larger portfolio also containing other assets - otherwise where is your asset class and geographical diversification ?

dunstonh

It should also be noted that many funds have absorbed the difference between the TER and AMC to make them the same.

EdInvestor

Al

al_yrpal wrote:

My nightmares are an earthquake centred on Tokyo, a REAL outbreak of transferable bird flu in humans, an outbreak of war in Korea, or a Chinese attack on Taiwan. All your share spotting can do nothing whatsoever about these things, and neither can my fund swapping. But I try to sleep soundly.

What I've found is that owning a portfolio of diversified shares gives you a much better handle on the way Mr Market behaves in the face of Big Drama ( eg the terrorist bombings in London or the sort of thing you mention above).

While some members of the great mass of investors that comprise Mr Market will get nervous and sell off, thus pushing prices down, others will then spot bargains and move in to buy, pushing prices up.

Individual shares will also get impacted quite differently - eg because some companies do very well out of disasters like earthquakes due to all the reconstruction contracts and other economic growth that follows.

After this happens a few times, you get the idea and tend to see such short term falls as buying opportunities, not disasters.You don't worry

Longer term doldrums have usually got more to do with rather nebulous matters such as inflationary trends in the US economy. Wobbles of this sort affect all global markets, and just have to be waited out. :rolleyes:


Carnet

With equities I invest in a largeish ( 25-30 share) diversified portfolio of large cap UK blue chips with fairly high yields, not dissimilar to a UK equity income fund.

Many of these companies are global multinationals which give me international exposure without the currency risk which can so diminish returns when sterling does well (as it often does these days).

I rarely trade so I get all the returns,paying no charges at all effectively, either brokerage or management.

How much do you pay in charges after the rebating, can you actually find out for sure (including all hidden "bundled" type charges)?

I'd be interested to know, as it's difficult to get to the bottom of the charges matter.As soon as one lot are documented in the TER, another lot emerge from the woodwork, it seems .

Here's the latest from the FSA on yet another type of hidden charge:

FSA proposal

You'll note they don't even plan to tell retail investors like us about these charges. :mad: We wouldn't be interested, they think.

carnet

EdInvestor wrote:

With equities I invest in a largeish ( 25-30 share) diversified portfolio of large cap UK blue chips with fairly high yields, not dissimilar to a UK equity income fund.

Many of these companies are global multinationals which give me international exposure without the currency risk which can so diminish returns when sterling does well (as it often does these days).

Not exactly what I would call a diversified, well balanced portfolio .

You are still subject to the vagaries and, 85% of the time, underperformance of the one stockmarket - despite the multi-nationalism of some of the stocks.

Currency fluctuations can work either way.

Blue chips historically underperform their mid/small cap brethren.

You have all your eggs in the equivalent of one, less well diversified, albeit slightly cheaper, UK Equity Income Fund, without the benefit of an experienced manager with the professional knowledge and skills to make the buy/sell decisions - for the sake of saving perhaps just over 1% per year.