realistic rates of return

dunstonh

So far this year... (after charges)

First State Asia Pacific leaders up 20.25%
First State Greater China up 24.14%
Neptune Russia & Greater Russia up 13.51%
Fidelity India Focus up 19.18%

Japan is down but what a good opportunity to consider a buy.

This is not stellar stuff.Why bother taking the risk?

Double the performance of the FTSE100 would be one reason. Exposure to markets and industries which have little or no representation within the FTSE100 would be another. You seem to forget that Britannia doesn't rule the waves any more. There is a whole wide world out there which doesnt necessarily use London for any transactions.

Risk is balanced against the portfolio you hold. Put 100% into one of those funds vs 100% into FTSE100 and its higher risk. Have a small percentage in those funds in a spread of funds across the sectors and the risk reduces and can even be lower than the FTSE100.

EdInvestor

If you put your money into very risky emerging markets will you be happy at a 20% return when you can get a 27% return by investing in a well known UK equity income fund with a very long track record?

I can understand an advisor recommending a bit of this and a bit of that - after all it's back protection, you can't then be accused of failing to spot that wizard new market in Uzbekistan, the star of the year :rolleyes:

Ian_W

Come on Ed, I understand the need for point scoring between you and dunstonh [tradition on these boards] but read what he said correctly:

So far this year ...

According to Trustnet the best performing UK Equity Income Fund YTD [F&C Income and Growth] is up 10.8% and the unnamed but well known one with a very long track record is in 17th spot with 7.1%!

That is if my guess that it's Invesco Perpetual High Income is correct.

jamesd

EdInvestor, I expect that the rates of return for the last year showing sector average first then best in sector will explain why people can usefully look outside the UK. UK Equity Income was ranked 12 out of 29 sectors on both sector average and best in sector performance.

Rank Sector				Avg	Best
1  Asia Pacific excluding Japan		46.9	81.8
2  Global Emerging Markets		42.6	64.3
3  European Smaller Companies		39.3	56.8
4  UK Smaller Companies			31	46.7
5  Europe excluding UK			28.4	44.1
6  Europe including UK			26.5	34
7  Asia Pacific including Japan		24.4	32.3
8  Technology & Telecommunications	23.9	45.6
9  UK All Companies			21.7	58.5
10  Global Growth			19.9	49.6
11  Active Managed			19.3	36.8
12  UK Equity Income			18.8	29.7
13  North American Smaller Companies	16.3	23.1
14  Balanced Managed			15.7	33.4
15  Specialist				15.6	65.4
16  Personal Pensions			13.9	52.5
17  UK Equity & Bond Income		13.4	22
18  North America			13.1	21.7
19  Protected/Guaranteed		9.2	14.7
20  Cautious Managed			9	17.2
21  UK Zeros				6.6	17.8
22  Money Market			3.5	4.8
23  UK Other Bond			3.3	8.1
24  UK Index Linked Gilts		0.9	3.2
25  UK Corporate Bond			-1.5	2.7
26  UK Gilts				-1.6	1.2
27  Global Bonds			-1.8	12.9
28  Japan				-2.1	8.8
29  Japanese Smaller Companies		-12.1	19.6

I don't buy funds that I expect to be just average and I don't stick to just the UK. Nor should someone else who is interested in good long term growth and risk spreading. I currently hold 12 funds across 8 of those sectors.

jamesd

EdInvestor wrote: »

They are not insignificant believe me. They double the cost of your investment - over 25 or 30 years this will eat up half of your returns :mad: http://www.pensionscommission.org.uk/publications/2004/annrep/chapters/ch6.pdf Click to page 14 for full details of these hidden charges.

I recommend that people do as you suggest and read the report, particularly the 15th and 17th pages, which estimate that the implicit charges were 0.5% and the total reduction in yield from both implicit and explicit charges below 1.1% in 2002 for pension funds.

The figures on the 19th page show that the real annual rates of return (after inflation) on UK equities were 5.5% since 1899 and 10.5 since 1977.

Total charges of 1.1% from a before charges return of 10.5% amount to about a 10.4% reduction in returns, not half of them. Even going with UK gilts those returned 6.9% and 1.1% from that is a 16% reduction, still not close to half.