Index trackers....best buy ???

ReportInvestor

EdInvestor wrote:

Anybody else interested in ITs?

How does this discount to NAV business work?

It's an art as much as a science, but I like Dunedin Enterprise where I invested in at various points when it was at a 35%-20% discount and now stands at a 5% premium .

Major factors seem to be:

a) investor sentiment towards the stock market in general
b) investor sentiment towards the Investment Trusts (which have a heavy Scottish mafia contingent).
c) investor sentiment towards the individual fund / manager
d) the perceived risk of the investment sector / country
e) the extent and cost of gearing
f) potential takeover activity or the prospects of a trust winding up

Examples:

The stock market fall of 2001-3 hit investment trusts harder because discounts widened at the same time that net assets fell (partly a confidence factor and exaggerated in some trusts by gearing).

Jupiter Primadonna used to be a star performer and went to a premium but now stands at a hefty discount since outperformance did not continue.

JPMorgan India is at a premium. Although it is a risky market it has performed well and there aren't so many easy routes into Indian growth.

Some index tracker IT discounts have widened - as tracker funds in general have gone out of fashion.

Securities Trust of Scotland's discount narrowed when Invesco/Perpetual (unsuccessfully) tried to take it over.

Don't buy ITs at launch e.g. even Neil Woodford couldn't stop Perpetual Income & Growth IT going to a discount.

EdInvestor

dunstonh wrote:

....things have moved on a bit since then.

Are you sure you don't mean things have moved "up" a bit since then?

Seriously though, colleagues tell me much of it si still current especially on hidden charges.As you know, Aidan Turner's push for the new NPSS company pension with the very low charges is a direct response to the fact that people lose a third of their pension in charges, which really makes it uneconomical for many people to save..

dunstonh

Seriously though, colleagues tell me much of it si still current especially on hidden charges.As you know, Aidan Turner's push for the new NPSS company pension with the very low charges is a direct response to the fact that people lose a third of their pension in charges, which really makes it uneconomical for many people to save..

Very low charges, lower than any other comparative scheme would result in dull lifestyle funds with lower long term returns than higher charged funds.

Not sure why you keep referring to a third of their pension as that clearly isnt the case. If someone gets 7% pa. and pays 1% in charges, that is not a third.

Using your argument,there we may as well stop all savings accounts, including deposts and cash ISAs as the charges are too high.

ReportInvestor

An unapologetic plug for index trackers from the land of free speech

For a prosperous retirement the important thing is to save more and to save a decent proportion of it in the stock market.

Don't be put off by those who make [regular saving] investment sound far too complicated, or dangerous for the "average Joe", or you may regret it.

dunstonh

An unapologetic plug for index trackers from the land of free speech

The US market has a greater range of trackers which cannot be matched in this country. The way they can deal is so much more advanced as well. It is easier over there.

Don't be put off by those who make [regular saving] investment sound far too complicated, or dangerous for the "average Joe", or you may regret it.

Those that I find most anti-stockmarket with investments are those that took the simple approach, without really understanding it who then saw the paper value of their fund go down with the crash.

Simple is not always best. However, its not that complicated either. Understand the risk and reward and how the volatility can go both ways, spread the money around and pick the funds you want.

ReportInvestor

dunstonh wrote:

Simple is not always best. However, its not that complicated either. Understand the risk and reward and how the volatility can go both ways, spread the money around and pick the funds you want.

I agree.

I don't quite agree with your assessment of those that don't understand the stock market. You can have no clue about the market and still profitably invest via a regular saver.

Although I would agree that you could still benefit from good information about when to come out.

hobbesandco

How are index trackers better in the States than here?

cheerfulcat

dunstonh wrote:

Not sure why you keep referring to a third of their pension as that clearly isnt the case. If someone gets 7% pa. and pays 1% in charges, that is not a third.

Funds are said to return 30% less than they might due to the direct and *indirect* effects of charges - the calculation involves not just the actual cost but also the opportunity cost, i.e. what the money that went in charges would have returned had it stayed in the fund.I seem to remember also that the 30% was the effect of 40 years' investment. I had a link for that somewhere but seem to have mislaid it - will post it if I can find it again.

ReportInvestor

hobbesandco wrote:

How are index trackers better in the States than here?

I think dh means that you've got more choice and can track different share types / geograhical sectors to suit your investment aims - e.g. there is a Nanotech index.

So paradoxically an IFA might be needed to construct a portfolio of index trackers :rolleyes:.

dunstonh

Yes, the US has a greater range of trackers available. In theory, you could build relatively diverse portfolios with trackers. Compare that to the limited range available as UK authorised UT/OEICs.

Funds are said to return 30% less than they might due to the direct and *indirect* effects of charges - the calculation involves not just the actual cost but also the opportunity cost, i.e. what the money that went in charges would have returned had it stayed in the fund.I seem to remember also that the 30% was the effect of 40 years' investment. I had a link for that somewhere but seem to have mislaid it - will post it if I can find it again.

I "assumed" that it was being referred to as the effect of deductions over the term. However, i recall reading the regulator is considering removing that column as it is misleading and does not reflect the real world. It is not the actual charges taken but the impact of those charges taken had they not been levied.

You dont buy any product at cost. Think how much cheaper it would be if you got wholesale pricing at Tesco?