FTSE tracker

InvestInPoker

Ryan you should become a politician from the proceeds of your investing.

Kendall80

Is it a film?

coastline

Porcupine wrote: »

Would not a(f)Ford?

Neil-y got it..;)

Kendall80

Ryan_Futuristics wrote: »

1 word, 2 parts

1st part



2nd part

Vanguard Lifestrategy 100?

JohnRo

Kendall80 wrote: »

Vanguard Lifestrategy 100?

One of those rare laugh out loud moments for me, ty.

EdGasket

Try iShares CUKX FTSE tracker; annual fee 0.09% I believe; must be the cheapest one out there. Its in their 'core' series of funds.

RetiredInThailand

EdGasket wrote: »

Try iShares CUKX FTSE tracker; annual fee 0.09% I believe; must be the cheapest one out there. Its in their 'core' series of funds.

I own CUKX and it isn't bad.

But the trick is to buy it through a broker who doesnt charge a yearly percentage on your holdings as this could eat up 0.3%, in return for which the broker does nothing at all.

ChesterDog

I was looking for a 'dent' in the Capri.

:-)

bowlhead99

xyz123 wrote: »

He wants to invest either ftse 100 or 250. He has inherited about £5k and has low risk appetite (high enough to invest in share market but not enough to invest in individual shares).

Low risk appetite, to most people, does not mean investing in something that can drop 50% in value over the course of a year. I mean sure, an index fund probably won't drop to zero over the course of a year like an individual share could, but an investment in either of these indexes is hardly low risk (e.g. compared to cash -which would only lose a couple of percent to inflation).

The FTSE 100 is quite a concentrated set of shares whose constituents come from relatively few sectors. For example big oil, pharmaceutical, financial services companies. So if something changes in those markets the index moves considerably.

The FTSE 250 still has bias to certain sectors but has a broader range of companies and is more diversified across a bigger number of companies. The biggest company in the index is worth about £4bn and the smallest is worth about £0.5bn, so the largest holding in the fund will be about 8x the size of the smallest one. Whereas in the FTSE 100, the largest company is worth 110-120bn and the smallest about 4bn; so the largest holding is 30x the smallest.

So, FTSE 250 is a better index, if a spread across lots of companies is what he's looking for, for his 'low risk' appetite. However, because many of the ones in the 100 are big global giants and the ones in the next 250 are not, the ones in the 250 generally have a smaller proportion of their income being from overseas operations.

This means he would have more of his wealth tied to the fortunes of the UK economy and pound sterling, than if he was investing in the 100. Also, the fact that the companies are smaller means they are more likely to grow in the good times and lose in the bad times, than the big elephants in the 100 that just keep plodding along.

So the 250 is a more volatile index and can go up and down more violently in the good and bad times. If he (or you) are only looking at the charts for the last 5 years or so you will only really see the good times and not the 50% drops. It's misleading to think that the 100 or the 250 are 'low risk appetite' investments. As Dunstonh suggested above, they are only designed to mirror the performance of one particular part of the world's economy and not designed to be used on their own. If he will only consider investing in those two indexes, he should invest a bit into both of them rather than picking one or the other. If he prefers low risk, low reward he should have most of it in the 100 rather than the 250. They will both generally move in the same direction at the same time though.

However what he should really do IMHO is invest in something which is more global, as UK is less than 10% of the world's investible stock market. FTSE and others offer indexes from all over the place - e.g. Europe, All World (ex-UK) etc etc. He could buy a few. Or, as it is a headache trying to hold a portfolio of lots of different funds and keep them balanced, he should buy a fund that holds a portfolio of different assets from around the world.

Still, it's his money. Which raises the question why is it you doing the asking and not him? If he, or you, does not know much about investments then one of you should do some research before he piles all his spare 5k into one fund.

There are lots of funds around that track those indexes and you should find the annual fee from the fund manager to be less than a quarter of a percent per year (some may be less than a tenth of a percent, for the 100). Then you pay a fund platform provider or stockbroker to give you access to the market; again, this should cost no more than about a quarter of a percent per year.

So overall you will be paying no more than half a percent (£25 on £5000) for fund platform and fund manager and might get it quite a lot lower. You could also get it quite a lot higher if you pick a platform with a high flat fee or percentage charge, and the most expensive tracker fund you can find. Avoid Virgin for example at 1%.

But half a percent all in, or less is quite easy to find and is only £25 a year. It is probably not worth investing half your weekend to try to find it for £10 instead. But while it is admirable trying to ask around for the most accurately-tracking fund, or cheapest fund, or the cheapest provider, to save a tenner here or there, it is not going to change the overall outcome particularly significantly.

Whereas if you put all the £5k in a high risk fund like FTSE100 and it becomes worth only £3.5k after 4-5 years, when you could have instead bought a more balanced fund or set of funds that might have been worth £4.5k after the same time period, you've blown £1k (or should I say, he has blown £1k). That is a rather more significant cost than a tenner here or there, and is worth investing much more time in reading some investment websites or books. No point going overboard and spending weeks and weeks considering every option under the sun, because £1k here or there is not lifechanging, but certainly more important than £10 here or there.

So, buying an investment is not really about where to buy it but what to buy. And I don't mean a Vanguard vs Blackrock iShares version of the exact same thing, but what actual asset classes (shares vs bonds) and what geographies (uk listed vs Europe, US, Asia, Emerging Markets, or all of them) and what type of companies (passive index vs active manager choices).

If he fancies the 'eggs all in one basket' approach of buying a single UK tracker, good luck, it is probably how many people started building their portfolio of investments. Most of them who now have a portfolio of investments would say that with hindsight they should have invested more broadly at the start, unless they have been lucky in which case they might not realise the risk they were taking that happened to turn out OK.

Looking to invest for 4-5 years as he has other savings for any urgent requirements.

Originally you said he wants to invest for the long term, but now maybe it is just 4 years. You / he needs to realise that 4 years is not a long time in the world of investments. It is maybe 4%-5% of his entire life, and is shorter than the typical economic cycle (where we have a recession, stock market crash, recovery, growth, boom times and back down again.

So, that makes it doubly important that he doesn't just go out and buy the first cheap UK tracker he can find (or that you can find for him).

Would appreciate any other suggestions on what to invest if people are ok to share their expertise or knowledge .

If it were me I would buy a multi-asset fund that invests in shares and bonds and other stuff from all around the world.

For only £5k the exact mix is not as important as if it was a £50k or £500k retirement pot. But if you are being a good samaritan and going out to ask for investment ideas, you will probably get some of the blame if you just give him the cheapest FTSE 250 tracker you can find and it crashes down in value, even though you were only following his (naive) instructions to only look at those two absolute simplest types of specialist tracker.

So it would be better to show him this thread so that he knows what he is getting into, how much he might easily lose in the first 4 years if he doesn't want to wait another 5-10 afterwards for it to recover and grow, and realises why putting all his spare money in one specialist fund is not sensible.

Ryan_Futuristics

Absolutely - one of the safest (in terms of protecting capital) and in the long-term most lucrative ways to invest is often to pick a very diversified and well managed global fund

One of my favourites is



2nd word, 2 parts