investments

dunstonh

Unbiased has gone very commercial now. Its more of a lead genration site. I prefer this one: http://www.thepfs.org/yourmoney/find-an-adviser/ (although it is not commercial, it is still not perfect).

moneyfoolish

Flobberchops wrote: »

I'm just an amateur but £70k is an awful lot to be holding in cash.

I don't know how you can say that if somebody is older and cautious when you can invest over £100k in current accounts earning between 3% and 5% (or even higher with regular savings).

Linton

Having looked up the PruFund Cautious Fund....

It has provided a steady return for the past 5 years averaging around 6.5% so the Advisors estimate seems reasonable. Note that published fund returns are after fund charges. It is 70% invested in fixed interest and is highly globally diversified. So I would not see just having this one fund as high risk, rather less risk than just having a VLS fund.

The £50K FSCS limit is really irrelevent as the situations it covers (fraud, extreme negligence) are so unlikely in this sort of investment that they are not worth considering - eg is the Pru really just a front for a massive global scam.

It is an investment bond product and so has some tax advantages. Also it wont require ongoing management.

So all in all in my view the advisor's proposal is not unreasonable given the OPs requirements.

dunstonh

I have clients that have old recommendations in the Prufund (the various versions). Despite the product being rather old fashioned in the eyes of some, it has done exactly as desired year in, year out and I have never found any reason for those people to come out of them. if its not broke, don't fix it.

So, whilst modern options may be more fancy and fashionable, this old thing has consistently done what most of its investors want it to do.

Thrugelmir

Linton wrote: »

It has provided a steady return for the past 5 years averaging around 6.5% so the Advisors estimate seems reasonable. Note that published fund returns are after fund charges.

That's considerably less than the over 8% gross that's been suggested. Past 2 years the trend has been downwards.

jem16

Thrugelmir wrote: »

That's considerably less than the over 8% gross that's been suggested.

OP said 6.7% after charges and Linton is saying 6.5% after charges - that's not considerably less.

Linton

Thrugelmir wrote: »

That's considerably less than the over 8% gross that's been suggested. Past 2 years the trend has been downwards.

The OP states 6.7% return after 1.35% product charges. Trustnet says that the fund has returned an average 6.7% since it was launched about 6 1/2 years ago and quotes a figure of 1.45% charge currently. Charges do vary over time. So it doesnt seem to me that the advisor was misleading the OP.

The return has dropped over the past 2 years. What will it do in the next two years? How is your crystal ball? The history shows that the fund is pretty stable, from a quick look the return graph is a straight line. Exactly what I assume the OP would have been looking for in declaring himself to being very cautious.

So it looks like straightfoward sensible advice.

dunstonh

Trustnet says that the fund has returned an average 6.7% since it was launched about 6 1/2 years ago

It should be noted that there are earlier versions but the return is in the ballpark on those too. Some versions had the option of guarantees. The older the version, the less there was a direct cost of that guarantee. The newer the version, the greater the cost the guarantee became and it also became optional at some point.

TheTracker

Linton wrote: »

The return has dropped over the past 2 years. What will it do in the next two years? How is your crystal ball? The history shows that the fund is pretty stable, from a quick look the return graph is a straight line. Exactly what I assume the OP would have been looking for in declaring himself to being very cautious.

A straight line is basically what it is selling - the fund uses smoothing to keep up a constant return which it can apply to fallow years. We all have different definitions of cautious. I consider myself a cautious investor and in my definition I want to know exactly what's happening, not pay for an instrument to disguise (OK, lessen the impact of) volatility. So since it is selling a straight line I'd be a little concerned that returns have dropped. Yet others will have a very different definition of cautious.

The issue with these funds is the black box smoothing and the hidden cost of providing that smoothing/insurance/hedging. It is difficult to argue it doesn't cost. One way of handling that volatility isn't to pay for it, but to educate oneself about it and the lack of long term impact. Still others will do the reverse and buy the guarantees that dunstonh mentions, which I see can cost an additional 0.8% pa.

Linton

TheTracker wrote: »

A straight line is basically what it is selling - the fund uses smoothing to keep up a constant return which it can apply to fallow years. We all have different definitions of cautious. I consider myself a cautious investor and in my definition I want to know exactly what's happening, not pay for an instrument to disguise (OK, lessen the impact of) volatility. So since it is selling a straight line I'd be a little concerned that returns have dropped. Yet others will have a very different definition of cautious.

The issue with these funds is the black box smoothing and the hidden cost of providing that smoothing/insurance/hedging. It is difficult to argue it doesn't cost. One way of handling that volatility isn't to pay for it, but to educate oneself about it and the lack of long term impact. Still others will do the reverse and buy the guarantees that dunstonh mentions, which I see can cost an additional 0.8% pa.

Yes following further research I came up with the same understanding. The smoothing does help someone cautious through ignorance or lack of investment experience. If that leads them to invest instead of relying on the much smaller return from a bank account then the extra charge is surely worth it. But as you say increased understanding could remove the need for this possibly expensive help.

However even for the experienced investor the near certainty of next year's return could be very valuable. It seems to me that a fund of this type could form a useful part of one's investment strategy approaching a major expenditure. Certainly safer than an absolute return or bond fund and a better return than cash.