Investment advice

The_Pixi

Hi guys,

I started a SIPP and it's coming up to a year since I began. So far I have started with these funds - 1 is in profit by 7% 2 is down and 3 is holding its value.

I wanted smaller UK smaller companies for what I hope will be the long term potential moving out of the recession.

I chose Technology because it's an industry that often has sudden breakout stars

And I wanted property because I feel that also will be a long term grower, we all need a place to live and work right?


1 Cazenove UK Smaller Companies Class B 46.6%
2 GLG Technology Equity 41.8%
3 Threadneedle UK Property Class 1 11.6%

Anyone got ideas for where I might want to go in the next year - I'm thinking that I want to keep myself spread over many areas - but what do people think of bond funds and Asia in general?

I don't have much exposure to Asia yet.

webnibbler

If the figure at the bottom of your post is up to date then £1,350 will be spread a bit thin between four funds.

You don't say how old you are but I would try to think long term for your SIPP. Gradually build up a diversified portfolio, focusing on asset allocation rather than what sector you think will do best next year (almost impossible to forecast!). Over the long term watch out for the charges of funds and consider cheaper trackers.

Just my 2pence - hope it's useful.

The_Pixi

webnibbler wrote: »

If the figure at the bottom of your post is up to date then £1,350 will be spread a bit thin between four funds.

You don't say how old you are but I would try to think long term for your SIPP. Gradually build up a diversified portfolio, focusing on asset allocation rather than what sector you think will do best next year (almost impossible to forecast!). Over the long term watch out for the charges of funds and consider cheaper trackers.

Just my 2pence - hope it's useful.

Thanks, I put £50 a month into each but I was thinking of changing one of the funds - I am thinking long term but I can't foresee the £150 going up anytime soon was was wondering if others would agree that I should put some money a month in to bonds or gilt funds?

Or a suggestion of a fund that itself has a good spread of shares within. I want to keep a balanced portfolio but I'm willing for that to be a bit of a gamble.

Edit obviously I wouldn't act on any of the suggestions but it might give me something to ponder and look at

Linton

I adopt the same policy for very long term investing: invest in those areas that you believe have long term potential for growth.

Some detailed comments:

1) Your Property fund invests in Commercial property, offices and shops, not housing. So you may or may not be right seeing residential property as a good long term investment, but that isnt the way to do it.

Commercial property values behave very differently to residential and are highly dependent on the economy and suffer from boom and bust. In the good times large numbers of new commercial buildings are constructed which lie empty in the bad times.

That isnt to say commercial property is a bad investment - it can be good, especially for income. But it may not be giving you the type of investment you are seeking.

2) I believe that Asia should form a part of any long term portfolio.

3) The type of investments you are choosing may well give good long term returns. They may not be suitable if you need the money in less than say 10 years as they do tend to be volatile and may have comparatively large short term losses. You can mitigate these to some extent by ensuring that you have a wide range of investments.

You could have some of your money going into a safer but steadier fund and steadily move more investments there as you get closer to retirement. You could also use this fund as a repository for large gains from your riskier investments and to fund re-purchase of those investments when they are cheap.

The_Pixi

Linton wrote: »

I adopt the same policy for very long term investing: invest in those areas that you believe have long term potential for growth.

Some detailed comments:

1) Your Property fund invests in Commercial property, offices and shops, not housing. So you may or may not be right seeing residential property as a good long term investment, but that isnt the way to do it.

Commercial property values behave very differently to residential and are highly dependent on the economy and suffer from boom and bust. In the good times large numbers of new commercial buildings are constructed which lie empty in the bad times.

That isnt to say commercial property is a bad investment - it can be good, especially for income. But it may not be giving you the type of investment you are seeking.

2) I believe that Asia should form a part of any long term portfolio.

3) The type of investments you are choosing may well give good long term returns. They may not be suitable if you need the money in less than say 10 years as they do tend to be volatile and may have comparatively large short term losses. You can mitigate these to some extent by ensuring that you have a wide range of investments.

You could have some of your money going into a safer but steadier fund and steadily move more investments there as you get closer to retirement. You could also use this fund as a repository for large gains from your riskier investments and to fund re-purchase of those investments when they are cheap.

Thanks for you views.

I noticed the property fund didn't have residential, as in housing, I think commercial at the moment as we were currently in a bust and I would have thought the area that would show signs of improvement first due to a better economy would be commercial I do plan to add residential - either via a fund or by buying a house:)

As I can get this money out for another 30years i am hoping that perhaps by then the commercial property will have boomed (or risen a little at least )

I think your advice about selling out some funds when they're up and depositing it to a 'safer' fund is a good idea.

In terms of Asia what funds do others hold that they think are in a position to offer a good return?

The_Pixi

Also this will sound a bit nieve but I hear about trackers but what are they? And what do they offer?

crittertog

The_Pixi wrote: »

Also this will sound a bit nieve but I hear about trackers but what are they? And what do they offer?

In essence, they're a passively-managed fund which purchases shares within an index to replicate the performance of said index*. As you're not paying a fund manager, they typically have a lower TER, but will obviously match the index at best (typically, they will offer a slightly worse return than the actual index due to tracking error, caused by dealing fees, etc).

* They may or may not actually buy all the shares in the index in the capitalisation ratio - they may buy what they consider to be a representative selection, etc

Linton

The_Pixi wrote: »

Also this will sound a bit nieve but I hear about trackers but what are they? And what do they offer?

Firstly the facts:

Tracker funds guarantee to follow an index, typically the FTSE100 but there are a wide of range of indexes that can be followed. Following an index is purely an administrative task and which leads to much lower costs and thus charges.

Now the religion:

There are those investors who believe that the reduction in charges benefits the investor more than any advantage that a manager can bring.

There are those who disagree of which I am one (at least partially). My reasons are that an index, especially the FTSE100, can be a poor investment. Having low charges cannot make it a good one. Secondly, some areas of interest such as your chosen ones of technology and small companies are not served well by trackers - either there are no meaningful indexes or the indexes perform much worse than most of the managed funds.

The counter to this second argument is a belief that this type of niche investing doesnt provide better returns than a broad index.

So you need to listen to the arguments, look at the evidence and make up your own mind on this.

grey_gym_sock

a couple of points on the "religion" ...

i'd say the main reason for investing in shares at all should be the expectation (or hope) that they will generally do well. it shouldn't be that shares will generally do badly but you'll pick a fund manager whose selections will do well despite that. the manager should be no more than the icing on the cake.

it's perfectly correct that some areas of investment don't have meaningful indices, so trackers are not always a suitable option.

gadgetmind

Linton wrote: »

There are those investors who believe that the reduction in charges benefits the investor more than any advantage that a manager can bring.

I hate the word "believe", but let's just say that I've seen copious amounts of well-researched material that supports that argument. Of course, an investor skilled in knowing when to switch from fund to fund, and with an eye for knowing which manager is about to deliver a burst of out-performance, could very well do better. However, the evidence is that the vast majority either don't try, or try yet fail.

The_Pixi

Im going to have a look and perhaps I will include a Tracker for the Asia market, as I don't have much in Asia - perhaps if that looks good in the long term I will swap it out into a managed asia fund.

My initial choice is this one but I'm going to look around a bit before I decide.

BlackRock Pacific ex Japan Equity Tracker Accumulation