Ok then - How do I choose a S&S ISA!

jamesd

Do look at other multi-manager funds. The multi-manager does have to select the best funds and others may do a better job or the same job at lower cost.

stphnstevey

Yeah, I thought the management would depend on the fund manager(s). In a way this leads to almost as much choice as picking your funds yourself.

I also remember reading the Motley Fool's guide which the general gist suggests that with so many Fund Managers all looking to outperform the average and competing against each other, not ALL Fund Managers can and some under and some over perform.

A novice investor is just as likely to outperform the market average as a Fund Manager. However, the extra charges due to the Managed fund will cause the fund to grow at a slower rate to someone picking their own funds

But do other managed funds offer the same discounts on annual and initial charges?

plonkee

Fidelity also offer discounts on annual and initial charges, I can't promise that they're the same discounts though.

jamesd

stphnstevey wrote: »

A novice investor is just as likely to outperform the market average as a Fund Manager. However, the extra charges due to the Managed fund will cause the fund to grow at a slower rate to someone picking their own funds

Looks as though you've been paying to much attention to the Motley Fool, which is strongly opposed to managed funds and uses misleading wording as one of its tools.

A novice just needs to look for the fund managers who have outperformed the average in the past. Even one year's outperformance substantially improves the chance of subsequent outperformance and the difference between the best and average is far more than any difference in fees. See Should I invest some money in an equity fund, where I checked to see how easy and effective just one year's results can be in picking above average performers.

Here are the ranks for the top global growth multimanager funds from 2003 through 2006:

Neptune MM: 1 2 6 105 New manager and owner
M&G 22 8 19 30
Halifax 13 7 14 25
Jupiter 7 4 10 7

Dropping the restriction to multimanager funds, here's how the top 10 in 2003 results did for 2003 through 2006:

Neptune MM: 1 2 6 105
Invesco: 2 14 63 14
First State: 3 101 2 173 New manager 8/06
SJP Recovery: 4 50 39 34
GAM Global: 5 68 64 24
M&G Basics: 6 1 5 16
Jupiter: 7 4 10 7
M&G Int: 8 5 61 46
New Star: 9 72 3 133
Neptune Global A: 10 9 1 5

More variation here but picking based on just one year's record seems to have significantly improved the chance of outperforming the middle-ranked fund in later years. With around 200 funds in the sector this looks like a viable method of identifying likely outperformance. The multimanager funds which didn't change manger all provided protection from changes in underlying funds' performance.

Simply check to see whether the same applies in the sector of interest to you. If it does, check for manager changes then pick those who have a record of doing best. You can do that with multimanger funds or by picking yourself - up to you to decide whether you want the multimanager to watch for changes or prefer to do it yourself.

stphnstevey

Thanks for your post James. I have noticed you've made some valuable contributions on other threads.

I have to say though, I do believe in the Motley Fool's logical argument - but I leave that for another thread!

However, the main benefit I see in managed funds is that some of the management is done by someone else, saving me a great deal of time.

I am happy to pay this additional management fee and maybe, as you suggest, it 'may' lead to higher returns

dunstonh

\i have to say though, I do believe in the Motley Fool's logical argument

There is little logic to it. It's spin and use of smoke and mirrors.

It also ramps up the positives and ignores the negatives. There are times a tracker is right but too many people go for the tracker for the wrong reasons and have usually ended up disappointed when they were hit with a 40% drop in the 00s crash and a slow recovery thereafter. The underestimated the volatility and risk they were taking. However, that is another issue.

The Mail ran a table back in the late 90s that put corporate bond funds in the same league table as tech funds to highlight how much better tech funds were. Different risks and totally different investment aims and goals and shouldnt be compared together and we all know what happened to tech funds.

When you compare FTSE trackers against funds in the UK All companies sector, FTSE100 trackers havent performed above sector average in over 13 years and FTSE all share trackers tend to come in mid table.

If you have a passive managed UK growth fund that uses a computer to buy funds in the FTSE 100 then its far more likely to underperform a FTSE100 tracker over the long term. That is where the argument for trackers is positive. However, you dont see that clarification on MF.

stphnstevey

You have quite an edge on me, due to playing on the stockmarket longer. However, I can understand a logical arguement just as well as you.

I was hoping this thread wouldn't steer to just discussing this point, but I started it, so I can only thank myself.

I know you won't like this and probaly argue the matter, but it's hard to think you have an unbiased view on managed funds as a financial adviser. However, you have shared your experience in depth on these forums, so lets just agree to disagree on this particular point.

jamesd

stphnstevey, just look a the performance of the best funds and decide for yourself whether you think you can pick the top quarter ones with reasonable reliability.

If you can, you end up defeating the Motley fool argument, which relies on the reasoning that because average and below average funds exist, you will buy them. I've never looked at a selection of funds in a sector where their argument appeared valid - history always proved to be a useful (but not perfect) predictor of relative fund performance, after removing funds due to manager changes. I expect that you will end up observing the same thing - if you don't, please do let me know where you find a case where it's wrong, because that will be interesting.

stphnstevey

Might actually be doing that experiment!

I am toying with how to invest in the H+L Vantage ISA - pick the funds myself or use one of their managed funds

dunstonh

know you won't like this and probaly argue the matter, but it's hard to think you have an unbiased view on managed funds as a financial adviser. However, you have shared your experience in depth on these forums, so lets just agree to disagree on this particular point.

Why would I have a biased view on managed vs trackers? I get paid exactly the same with each if you are inferring that I would let commission persuade me otherwise. I get paid nothing for posting on here.

However, the stats are available online free of charge if you wish to look them up. The UK all companies sector is where you need to look and just you check out any of the FTSE100 or FTSE all share trackers and see how they compare.