Funds, investment trusts and ETFs

yatinsardana

So here's my dilemma.. I'm with Hargreaves and I have had a very short investment career (less than a year). What I am realising is that even thought 2013 was a good year for equity in general, it's not easy for an individual investor to do really really well! It takes one or two bad investments to define your portfolio because they drag everything down.

What do you people think of investing 60-70% of your portfolio in funds/ETFs/investment trusts? That's the first question. Because I am having a look around and there are a few good options that return on average 10% a year. I'm happy with that! I mean I know it's not great but I think it's going for unrealistic returns that make you too risky. I know funds aren't as exciting as stocks .. And I love trying to find good stocks to invest in but then I think if the end result is that I'll be getting roughly the same return then why not just the easier option.

Second question - where should I invest in? On Hargreaves I'm sure you're all aware of the new pricing. ETFs and investment trusts having dealing charges of 11.95. They also have a 0.45% annual charge from HL. Funds have no dealing charges but all in all they will be around 1-1.2% including fund charges and HLs charge.
So am I right in thinking that if I want to invest a small amount regularly, funds would be better. Regular investments for investment trusts and ETFs (as far as my understanding goes) is available but for 1.50/deal. That's too much if my regular investment is little.

Are there any other factors to consider. If I wanted to do a lump sum, what would you all suggest?

Investment trusts look good to me. Very good indeed. Do they have an annual charge charged by the manager?

Lastly!! What funds or investment trusts or ETFs are you guys investing in. A great combination of safe and risky ones would be good.

kidmugsy

Many of the management companies of investment trusts offer their own share schemes. Scroll down to p44
http://www.theaic.co.uk/sites/default/files/statistics/attachment/AICStats31Dec2013.pdf

From p53 onwards you'll see the list of the management companies and the Trusts they manage.

ChesterDog

I can answer some of your questions - just with my own opinion, obviously.

If you check the performance of funds and investment trusts, you will often see better petformance from the latter in the same sector. I like to choose the sector I'm looking for first, and then look for the best performing trusts or funds in that sector and choose accordingly.

Some will avoid buying good trusts if they are at a premium to NAV, but snap up poor ones at a discount. I prefer to base a trust buying decision on its performance. This almost always means paying a premium, but that's okay if its general performance and discount/premium history shows consistency.

Although I like trusts, I only hold four, but about a dozen funds, based on the above principles. Acorn Income trust ought to be in my portfolio, but would duplicate other constituents so loses out. I have Small Companies Dividend Trust, Scottish Mortgage, Biotech Growth and Fidelity Special Values. Four distinctive, good performing trusts in a range of sectors. Worth a look.

I hold no ETFs, as I want to outperform indices.

I have around 30 individual equities (almost all are FT100) for income, and trusts and funds to cover sectors ranging from humdrum to mid-risk.

Last few days aside, my portfolio returns around 20%.

yatinsardana

Thanks for that kidmugsy.. I'll have a look at that.

Chesterdog, thanks for sharing your thoughts and investment plan!
When you say you have 4 trusts, how does it work? Do you buy and hold like stocks or do you invest regularly like funds. If only trusts were like funds and had no dealing charge so you could invest regularly. It seems like investing in lump sum would make more sense in trusts right?

ChesterDog

That's a good point.

I am retired and my portfolio provides much of my income rather than the other way around. :-)

So it has really been built with lump sums. The only adding to it that I tend to do is for the annual ISA allowance.

Glen_Clark

yatinsardana wrote: »

that return on average 10% a year.

that have returned on average 10% a year
(going by past performance is like driving by looking in your rear view mirror)

ChesterDog

Penultimate sentence in my original post should have read 'trusts and funds', not just trusts. Now corrected.

Glen_Clark

ChesterDog wrote: »

.

Last few days aside, my portfolio returns around 20%.

Losses aside, my portfolio returns about 50%

ChesterDog

I'm still expecting 20% for the year in spite of the last few days, is what I meant.

:-)

El_Selb

What are the drawbacks of Investment Trusts compared to funds?

Wilkins

yatinsardana wrote: »

ETFs and investment trusts having dealing charges of 11.95. They also have a 0.45% annual charge from HL.

The recurrent charge is only on ITs, so far.

So am I right in thinking that if I want to invest a small amount regularly, funds would be better. Regular investments for investment trusts and ETFs (as far as my understanding goes) is available but for 1.50/deal. That's too much if my regular investment is little.

Probably.

Investment trusts look good to me. Very good indeed. Do they have an annual charge charged by the manager?

ETFs and ITs both have management charges, but in my view these can to some extent be ignored, especially for ITs. It's just a business cost and you are buying a business. It would be impossible for most investors to run their own IT by purchasing the underlying assets more cheaply.