When to buy funds

musashi10

Hi, I,m still a novice at this.

Basically I wanted to know general tips as to when to buy funds and unit trusts.

I have identified ones I would like to invest in long term. But some of these, if I look at the trend are at their highest prices since inception.

so should I treat it as a share and hope for the price to go down?

Or just buy it anyway?

I know this may sound stupid, but I am right in thinking that I could buy a fund that beats the "market" every year, but I could still lose money every year if I bought at a high price?

This is worry. That equities are at a slightly inflated peak. So I buy fund A now say at £5. It is an excellent fund and beats the market comparator every year say for 5 years, but over that 5 years because there was an overperformance previously the actual fund price has lost me money?

Probably all sounds very stupid, but I'm just looking for some basic tips as to when to buy into one of these funds or trusts (and yes I am x-referencing with literature etc, trying too anyway!), once you have identified the ones you want.

musashi10

I know there is no exact formula for this, but basically once you like a fund,

What are the the key factors that make you buy in at that price or decide to wait?

*For Acc Funds and Unit trusts*

boglehead

I keep hearing people really praising funds... I don't think it is the right way to go unless you cannot invest more than £200 or so at the time...

The difference in trading commission is not as big anymore (some brokers now offer better deals on ETF as part of regular monthly saving plans) - and doesn't justify paying 0.45% of platform fee annually (on a £5,000 portfolio that's £22.5, £10,000 that's £45 and £50,000 that £225 - while you'd pay nothing for ETF's)

Unless you go for passive funds, the TER is also much higher (around 0.40% higher on average)... so now you're talking a 0.80-0.85% difference annually - that's £425 of fees differential annually on a portfolio of £50,000

musashi10

I think that post diverts from the question.

However, in answer to it. Myself for example currently has limited knowledge in the stock market. I have £500 to invest bi-monthly.

Now for example next month, I have a choice, do I buy £500 worth of shares in a single entity when I wouldn't have much of a clue when to sell them or which ones are the best to buy, or do I give that £500 to someone who owns a multitude of shares spreading the risk and manages them all day long, has a good track record?

At this point in time, I would like to do the latter.

Once I have learned a lot more about shares and have more to invest so I can have a diversified portfolio I would prefer to do the former.

musashi10

What I'm concerned about now is the buying price of the funds/unit trusts

Lokolo

There is nothing to be concerned about in that regard.

musashi10

Thanks. Could you explain further please? (apologies if ridiculously silly question!)

masonic

Take advantage of regular purchasing to even out the price. It's pretty hard to time the market - the best you can do is take advantage of the market dips when you see them, but if you hold on for prices to fall they might never get down to the target you set.

jimjames

musashi10 wrote: »

What I'm concerned about now is the buying price of the funds/unit trusts

The price of a unit is made up from the prices of all the shares in the fund which could be 50-100 shares.

Trying to time a purchase based on the movement of all those shares seems a little pointless. If you want to invest in the fund then do so.

If you are investing monthly anyway then you'll benefit from "pound cost averaging" anyway which means if the price drops you get more units for your money.

musashi10

Ok thanks. I thought in terms of unit t rusts this is slightly different, something about NAV to Asset value ratio and limited share issues?

jimjames

musashi10 wrote: »

Ok thanks. I thought in terms of unit t rusts this is slightly different, something about NAV to Asset value ratio and limited share issues?

I think you're getting confused.

Funds and unit trusts are the same.

Investment trusts are different and trade on the stock market in their own right - but I wouldn't worry about them at the moment. They are the ones with shares, NAV and discounts.

A unit trust or fund price is just the sum of all the investments divided by the number of units that exist.