Investment Bug

A_Flock_Of_Sheep

Out of interest how are the Fund Managers fees taken? Do they send me a bill via HL for say 1.25% of the value. I have been expecting some kind of fees for this to appear in the fees section of my account.

jem16

A_Flock_Of_Sheep wrote: »

Out of interest how are the Fund Managers fees taken? Do they send me a bill via HL for say 1.25% of the value. I have been expecting some kind of fees for this to appear in the fees section of my account.

I should imagine it's just deducted from the value, if necessary by cancelling units.

bowlhead99

A_Flock_Of_Sheep wrote: »

Out of interest how are the Fund Managers fees taken? Do they send me a bill via HL for say 1.25% of the value. I have been expecting some kind of fees for this to appear in the fees section of my account.

The funds themselves pay them out of their own assets. The total expense ratio or ongoing charges forecast includes costs of administration, legal, custody etc plus the fee the manager takes to pay his staff and make some profit. And some kickbacks to the people running the platforms. But it's the fund paying those costs, out of their its own assets or incomes. So if you see your fund unit price was 100p and it's now 98.75 a year later with absolutely no movement on the stock markets, it's down to fees paid by the fund.

Of course, they will accrue them daily rather than recogise them in lumps on the exact week thr money changes hands, otherwise the fund performance would be lumpy and you could dodge the fees by timing your buys and sells. But you don't get a separate bill for you personally to pay by yourself, the various parties just get the fund to pay them and the effect to you is you have a share in a fund which now has fewer assets.

Any explicit platorm fee levied by HL, you do pay yourself (e.g. a pound or two per fund per month, for those particular funds that don't give them enough kickbacks). Other fund platforms may charge their platform fees on a percentage basis but still outside the fund.

A_Flock_Of_Sheep

So my fund choices at the moment are clearly on the risky side of the cliff face....

In fact I might sell on the Turkey Fund tomorrow and hopefully will have been lucky enough to pocket the cash and feel a luck escape.

At least there are no dealing costs on HL

What more general less risky funds do you people here hold and recommend?

sabretoothtigger

Aberdeen Asia, LG pacific tracker. I think they are lower risk anyway

jem16 wrote: »

I should imagine it's just deducted from the value, if necessary by cancelling units.

It shows up as underperformance I think. So the capital value will appear to decline when funds are level. Its a bit more deceptive or harder to decern hence RDR

grizzly1911

A_Flock_Of_Sheep wrote: »

So my fund choices at the moment are clearly on the risky side of the cliff face....

In fact I might sell on the Turkey Fund tomorrow and hopefully will have been lucky enough to pocket the cash and feel a luck escape.

At least there are no dealing costs on HL

What more general less risky funds do you people here hold and recommend?

Not as cheap as the trackers. Can't guarantee the results, prices go up and down, etc., etc.

Newton global Higher Income
Fundsmith Equity
IP Global Equity Income

redbuzzard

A_Flock_Of_Sheep wrote: »

But all funds and shares and investments have risk. I've looked at all the vanguard ones and they all fluctuate.

Of course they do.

I'm not recommending them one way or the other, but what they are designed to give you is the relevant market returns.

If you are in for the long haul, you might also think differently about "risk".

What Trustnet calls its "risk score" is actually a measure of volatility. Equities are defined as 100. So the Vanguard LS 100% equity will have a Trustnet risk score of 100 or close to it. The LS 60% equity fund is about half that, because it contains 40% treasury bonds.

Long term, a very diversified equity portfolio like an equity index fund is arguably low risk, even though it is volatile. You are just about guaranteed the market return, and over a long enough period volatility hardly matters - and if it is a retirement fund, you can mitigate the risk of being in a dip at the selling point by phasing into cash or near cash gradually as you approach retirement.

A managed fund with a score of 100, on the other hand, is on average more likely to underperform the index than not, and could do so by a large margin. That is in my opinion riskier, in the everyday sense of the word, even though it has the same score.

So an index tracker, over long enough period, is a "risky" investment that is low risk (in my world anyway). What sort of long term investor wouldn't sign up to a guaranteed market-matching return on the equity portion of his or her portfolio, in preference to a managed fund knowing that most of those will do less well? That includes even prestigious funds like IP Income, which I hold myself.

The only reason I have some managed equity funds, mixed funds, and AR funds right now is the volatility aspect which I need to be concerned about for pension planning.

Just saying. Not advice.

A_Flock_Of_Sheep

redbuzzard wrote: »

Of course they do.

I'm not recommending them one way or the other, but what they are designed to give you is the relevant market returns.

If you are in for the long haul, you might also think differently about "risk".

What Trustnet calls its "risk score" is actually a measure of volatility. Equities are defined as 100. So the Vanguard LS 100% equity will have a Trustnet risk score of 100 or close to it. The LS 60% equity fund is about half that, because it contains 40% treasury bonds.

Long term, a very diversified equity portfolio like an equity index fund is arguably low risk, even though it is volatile. You are just about guaranteed the market return, and over a long enough period volatility hardly matters - and if it is a retirement fund, you can mitigate the risk of being in a dip at the selling point by phasing into cash or near cash gradually as you approach retirement.

A managed fund with a score of 100, on the other hand, is on average more likely to underperform the index than not, and could do so by a large margin. That is in my opinion riskier, in the everyday sense of the word, even though it has the same score.

So an index tracker, over long enough period, is a "risky" investment that is low risk (in my world anyway). What sort of long term investor wouldn't sign up to a guaranteed market-matching return on the equity portion of his or her portfolio, in preference to a managed fund knowing that most of those will do less well? That includes even prestigious funds like IP Income, which I hold myself.

The only reason I have some managed equity funds, mixed funds, and AR funds right now is the volatility aspect which I need to be concerned about for pension planning.

Just saying. Not advice.

My funds are not forming part of a pension or retirement fund or SIPP. I have a Final Salary pension as it is. I am seeking a better return for some of my cash that has been languishing at all time low interest rates being eroded by inflation. To have £1,200 in one month as "interest" on a sum of about £11,500 has been unheard of by me. I looking for maximum income generation not something for retirement. For me it is income that is important as I have my retirement pension sorted.

If my money in funds is on the downside its on the downside in a savings account due to paltry rates and inflation.

I have read in several paper now that cash heavy people (who rely on high interest rates to supplement their income) like myself are now turning to Equity income in absence of a good return on cash savings.

In comparison - VLS 60% against IP HI - IP HI has outperformed in growth but more importantly to me Yeild

bowlhead99

A_Flock_Of_Sheep wrote: »

I am seeking a better return for some of my cash that has been languishing at all time low interest rates being eroded by inflation. To have £1,200 in one month as "interest" on a sum of about £11,500 has been unheard of by me.

By that rationale, for your sum of £12,700 to earn interest of negative £1,200 or more in a month, which could easily happen, would also be unheard of to you, while being completely understandable to most people investing in volatile funds who also have less volatile stuff on the side. Most of us would prefer to earn £150 on the £11,500, month in month out.

I looking for maximum income generation not something for retirement. For me it is income that is important

Greed to maximise income and growth and demote the natural instinct of capital preservation was what caused people to seek out IceSave or Madoff's Ponzi scheme; neither ended well.

I have read in several paper now that cash heavy people (who rely on high interest rates to supplement their income) like myself are now turning to Equity income in absence of a good return on cash savings.

History tells us that those late to the party who wait for the world and its dog to bombard them on all sides with "why aren't you doing this, look how much money I made", often take large losses. This is not to say that equity income funds cannot have a good run or be a great long term wealth generator as compared to cash. They can and are. But once you've had 3+ years of institutions and people from all walks of life throwing their money into equity income funds to replace the paltry returns on cash and bonds - those income funds and the underlying shares to which they're exposed, become somewhat more expensive. The trick to achieving the 3-year performance which you can see on the charts, is to invest before everyone piles in.

The action of everyone piling in, has contributed to the nice looking chart on which you base your investment decision. The smart investor will recognise that everyone piling out may reverse the fortunes of the chart, and as a consequence the smart investor will have other, lower risk forms of investment within his portfolio which are not going to move in the same direction by the same magnitude or direction.

In comparison - VLS 60% against IP HI - IP HI has outperformed in growth but more importantly to me Yeild

Yield should not really matter as something more important to you, when its a fund held on a platform that has no charges to buy or sell a unit or fraction of a unit. Whether the total return is made up of the fund value going up or a cash dividend getting paid out, or a combination of the two, there is no problem accessing the returns. Clearly a regular higher yield might be seen as offering stability and value and maybe lower volatility (certainly stability and lower volatiliy compared to your Turkey fund) but it is not the only indicator.

The fact that IP High Income has gone through the roof in recent years compared to a 60/40 balanced global index of equities with 40% non-equities, is indicative of historic market conditions and does not say what would happen in a downturn/correction/pullback as we haven't seen a major one since 2008/9.

I am absolutely not saying you should buy Vanguard 60 or any other specific fund in preference to IP high income which has a decent track record across different economic conditions. But despite being held by a lot of people, it can and does lose money in poor equity markets, at a much faster rate than cash in your bank is eroded by inflation.

The fact that everyone says they hold IP income or IP high income or IP distribution, is a red herring for you trying to construct a portfolio. Are you a football fan? The official Barclays Fantasy Football League, just completed, had 2.6m entries. By the end, over 38% had Gareth Bale on their team due to the history of his performance during the season. But a) you wouldn't win the league with Gareth Bale on your team if you didn't also buy players in the 10 other positions and some substitutes , and b) if you pick him at the start of next season and he's out with injury for half of it or gets transferred to a club outside the premier league, you're going to have a bad season until you take action.

It is always easy to say "well I monitor this closely so of course I would sell that fund if it started to do badly", but the execution of such a plan is difficult to pull off, which is why people have back-up plans.

grizzly1911

As an example I previously held a ramshackle selection of funds as I was too busy to sort them out ( have now done so and these only form part of a much bigger set) also have a final salary pension.

One was an M&S 100 Tracker (5K/2000) - yes I know. The second IPHI (9K/2006). The M&S was reinvested earlier this year into a HSBC Allshare tracker (low fee).

8/06 6247 9635

12/07 6237 9733

12/09 5582 8641

12/10 6276 9655

12/11 6016 10423

12/12 6554 11292

Today 7517 13468


Up to 12/12 that was a raw return of approx 2.6% pa & 4% pa maximum.

Since then 30%pa & 40% equivalent:think: Equates to 4% & 7% for whole term.