Fund newbie needs help...

OGM

I've been sorting through my finances and accounts with help from MSE, which has been great, but now I'm a little bit confused so I thought I'd come here for some help. When I was younger I had some money invested for me, and now control over that investment has been transferred to me, but I don't quite understand it.

From the paperwork I have, I've got 673.290 units held in the Scottish Widows Investment Partnership European Fund Cl A, which as far as I can tell is this. In July last year this was worth just over £4k, but I don't have anything more recent than that - how can I find out how much it is worth now? The chart doesn't seem very helpful...

The other question is, what should I do with this? I could just leave it there and hope it grows, but I feel it would be more sensible to understand how the fund works, when it changes (preferably I'd like to be able to track performance online), and maybe even invest the money in something else that I have a bit more of a grasp of! Any advice or links to more information would be great.

dunstonh

Unit Price at close last night was 8.014. That gives you a value of £5395.74.

The unit prices last year would have given you a value of £4k.

The other question is, what should I do with this?

Thats up to you.

I could just leave it there and hope it grows

Not a very good way to invest though.

but I feel it would be more sensible to understand how the fund works

Spot on.

and maybe even invest the money in something else that I have a bit more of a grasp of!

What do you have more grasp of?

Remember you dont need to understand the in's and outs of something to utilise it. We drive cars but most of us here havent a clue how the engine works. Yet we still drive.

If this is your only investment, then you really need to be tweaking it. Single fund investing is old hat and will give you lower returns over the long run. Typically, if it is your only investment, then 5 funds could be used to spread it around a bit.

jamesd

According to the current prices the units are selling for 8.0140 pounds each. 673.290 times 8.0140 = 5395.75 as the value at 8AM this morning.

The fund literature gives the SEDOL code as 3214682 and a Google search turns up online reporting from Trustnet, FT.com and Hargreaves Lansdown.

Looking at the chart on Trustnet it performs just below the European managed fund average, suggesting that it is a tracker fund likely to deliver average performance compared to European funds of this type. Click on the IMA sector link for Europe excluding UK, click on the 3y Perf heading and you'll see that it is ranked 27th out of 99 funds.

If you aren't planning to use your cash ISA allowance I'd do a stock transfer into a fund supermarket like Hargreaves Lansdown Vantage ISA as the first move. That will take 5395 of your 7000 of stocks and shares ISA allowance this year. Fund supermarkets reduce buying and selling costs and typically discount the annual management charge, by 0.2% in the case of Hargreaves Lansdown. They are usually the best way to buy, sell and hold funds.

Using only a single fund isn't really a great idea so the next step would be to decide how much risk you'll accept and select a range of funds - at least five with 5,000+ available - to achieve the best results with that level of risk. You're currently accepting something around a 30-40% drop risk, which is fair enough for long term with quite good growth prospects. What percentage drop would you accept in one year during the course of long term growth? Are you planning to leave the money there indefinitely, if not, when do you think that you might want to use it?

For a general suggestion you might select a European property fund that holds real property, not property shares, a UK equity income fund, a European fund (like this one) and a global growth fund. That leaves one more fund and that could be corporate bonds, UK equities, emerging European markets or emerging markets, in increasing risk order, selected to get the average risk where you want it to be. I'd go with European emerging markets to get reasonably close to your current risk level. There are other ways to do it, this is just one example.

OGM

Thanks for the advice. As I expected it seems that I am a little out of my depth here. Unfortunately I've already opened a cash ISA, so I've only got £4k allowance to play with. Presumably I just sell that much of my current fund, the money gets transferred to an account of my choice and I can than reinvest through an ISA with Hargreaves Lansdown?

Further questions: what do you mean by 30-40% drop risk? That there is a possibility of losing 30-40% of the investment if I just do nothing? I think I would be more comfortable with something like 10-20%, since I'm just starting out and not yet very confident about all this! If there are any books or websites you can recommend that explain things slowly and carefully, that'd be much appreciated. Cheers.

jamesd

You can transfer funds of that value directly to Hargreaves Lansdown's fund account (different from their ISA) without selling first. Then you can transfer from the fund account to the ISA the portion you want to put in the ISA. SWIP doesn't charge for a stock transfer like this so you only gain by the rebate of some of the annual charge that Hargreaves Lansdown will pay if you continue to hold this fund. If you're going to switch you could as well switch via cash except that you're out of the market during the switch time and the market is rising, so a stock switch looks best.

Look at the Trustnet chart and you can see that around July 2002 there is a drop of close to 40% in the value of this fund and it took about two years to get back to the previous value. This is pretty much the normally expected level of up and down movement for general stocks and shares funds. Of course, now it's up to 80% higher than it was at the start... which is better than average because we've been in a rising market. This sort of variation is why people write that you should only use investments like this if you're looking at a five year time period: you might need five years to recover after a big drop.

To reduce the downside risk you might look at a UK or European property fund that holds real property, not property shares, a UK equity income fund, a corporate bond fund and a UK absolute return fund. Absolute return funds can go down but they invest in a way which makes substantial drops unlikely. Not guaranteed.

In this set the equity income fund is the one which will probably go up and down most. It's the sort of mix someone who is retired might want to use, while someone relatively young would normally go for higher risk because they have lots of time to allow the market to recover after a drop and also tend to be regularly adding new money, benefiting from the lower prices during the down times.

Browntrout_2

Hi there OGM,

I would advise some research, and recommend Fundology: The Secrets of Successful Fund Investing by John Chatfield-Roberts of Jupiter to everyone.

It will point you towards to actively managed funds with slightly higher charges but there seems to be justification in the performance history. Most funds fail to beat the index ergo everyone buys index funds...

I bought the book online and sold it again on ebay.

It changed my outlook entirely.

Don't rush into anything though, as earlier poster says you can transfer out of SWIP into H L by filling in form H L will provide you, they do everything else, then you can track it online at H L website.