investing in funds

ramborai1987

hi guys im considering investing in funds and ive done some research. im quite young and i would see this as a good way to gain some experience for the future. i was considering investing about 4k which isnt much but what i really wanted to know is that is it currently a good time to invest? all i know is prices have fell but have i missed the bandwagon or is it still a good chance to invest?

thanks

david78

ramborai1987 wrote: »

is it currently a good time to invest?
thanks

If I had another £4k to invest in funds I would put it in in chunks (e.g. 4 X £1000) over the next two or three months.

ramborai1987

ive chosen a few funds that ive looked at. ive tried to spread the money so i do not have too much in one area. could you guys tell me what you think, thanks.

artemis income (acc) 1k
new star uk growth class r (acc) 1k
schroder european alpha plus a (acc) 1k
invesco perp asian (acc) 500
invesco perp latin america (acc) 500



p.s my aim is growth, with a little risk 20%, probably will look for long term 7 - 10 years even more.

nrsql

I would invest maybe £50 per month per fund then stop when you considered you had enough in it.
In that way you won't be concerned about sudden dips in the funds just after you invested (unless you are expecting a fast or steady growth).

munk

This thread brings up an interesting question:

With the current economic climate being quite volatile due to the US sub-prime woes, is it better to inject new money slowly into a portfolio or just go full tilt and invest the whole lot in one go in a nicely balanced portfolio? Presuming fund investment here, not shares - I reckon if you had the nerve for it now would be the best time of all to be looking to pick up some nice undervalued assets/shares.

The merits of injecting money slowly are presumably that if the stockmarket as a whole, took a big downturn then not all of your money would be hit at once - depending of course on what you invest in.

Alternatively, investing the whole lot in one go in a decently balanced portfolio could have the beneficial effect of canceling out any negative hits in any one area - ie investing across different asset types (equities, bonds, property, cash/other), market capitalizations (large, mid, small cap funds), different geographical locations (uk, euro, us, emerging etc).

One thing I've noticed by tracking a cautious-balanced portfolio of around 10-15 funds for the last 2 months (during all the turmoil in the stockmarkets) is that the overall gain/loss of the portfolio has been quite close to zero. Hits to the equity portion have been cancelled out by the bond content and vice-versa what with people jumping from one to the other and back again.

Of course this is only my personal experience, but it's an interesting example (for me at least) of how a nicely balanced portfolio can help iron out the bumps.

If you wanted to do the same, have a look at the Bestinvest portfolio planner (free to use without buying anything!) which can help you create a balanced portfolio depending on what your attitude to risk is and how long you intend to invest for. The tool allows you to balance your holdings between all the different kinds of splits mentioned above and come up with a suitably balanced portfolio.

Have to warn though, it's pretty damn buggy sometimes (frustratingly so when you've spent 30mins working on it and it crashes - though apparently it's going to be revamped in the next month which would be good). When it works though there's nothing I've found so far that beats it (anyone know of any other similar free tools? Would love to know about them )

Once I'd got the portfolio sorted how I wanted it, I entered some dummy transaction figures for each of the funds on the morningstar portfolio tool (free sign up to use it) and watched how the investment worked out. The morningstar portfolio tool also includes an 'x-ray' feature that lets you see how your investment portfolio is spread across asset classes, geograph locations, etc which is smart.

dunstonh

With the current economic climate being quite volatile due to the US sub-prime woes, is it better to inject new money slowly into a portfolio or just go full tilt and invest the whole lot in one go in a nicely balanced portfolio? Presuming fund investment here, not shares - I reckon if you had the nerve for it now would be the best time of all to be looking to pick up some nice undervalued assets/shares.

The other side to that argument would be that the markets fell back and overreacted and had you invested around the 17th August, you would be up by about 5% now. Would delaying cause you to miss more? (remember none of us has a crystal ball and it can go down and up).

The merits of injecting money slowly are presumably that if the stockmarket as a whole, took a big downturn then not all of your money would be hit at once - depending of course on what you invest in.

That is correct, plus your monthly contributions will then be buying units cheaper. However, the negative is that if you did that at the start of a growth period, you wouldnt have your money in the markets to benefit from the growth. Only time will tell which was the best option.

One thing I've noticed by tracking a cautious-balanced portfolio of around 10-15 funds for the last 2 months (during all the turmoil in the stockmarkets) is that the overall gain/loss of the portfolio has been quite close to zero.

Correct. However, that timescale is not long enough to get a trend to what you would expect. Cautious funds tend to underperform in a period of rising interest rates. They tend to do better as interest rates are going down and are low.

ramborai1987

thanks for the replies, them tools worked. bestinvest helped me to plan a balanced portfolio which was good. i just remembered i have to fill my isa allowance so i'll use the vantage isa. Now i just have to estimate when would be the right time to buy funds. it wouldnt matter if i bought all in one go i think, im in it for the long run so hoping to see gains over time.

munk

ramborai1987 wrote: »

thanks for the replies, them tools worked. bestinvest helped me to plan a balanced portfolio which was good. i just remembered i have to fill my isa allowance so i'll use the vantage isa. Now i just have to estimate when would be the right time to buy funds. it wouldnt matter if i bought all in one go i think, im in it for the long run so hoping to see gains over time.

Nice one

I'm in the same boat, was just about to post this:

So does the same principle of pound cost averaging apply regardless of whether it's just one fund or fifteen funds - ie with a portfolio of say 15 funds and a large chunk of money to invest, is it best to start off with a minimal amount in every single fund and drip feed in slowly over 6 months or would it depend on what the underlying funds were and how market conditions would affect the various funds?

If the point of pound cost averaging is to avoid market timing issues then intuitively it wouldn't make sense to say 'ok well I have 15 funds to invest into slowly over 6 months, lets start with x y and z funds this month and invest fully in those up to their weighting, then move onto a b and c funds next month because this or that market should pick up around then'. It'd be best to invest in all the funds minimally at first and slowly introduce more over the 6 months or whatever is that right?

Like you say ramborai1987 it's tempting to think 'well I'm in it for the long run so let's just drop the whole lot down in one go' - apparently this is fine in a rising market but if the market's fluctuating or on a downturn you can lose out a bit. Guess it depends if you think spending the time drip feeding is worth the hassle for a little extra gain.

This article has a good practical example of the benefits of PCA:

http://www.fool.co.uk/news/foolseyeview/2002/fev020827c.htm

dunstonh

This article has a good practical example of the benefits of PCA:

http://www.fool.co.uk/news/foolseyev...fev020827c.htm

Thats a good example in a falling market. However, funds invested just two weeks ago on a medium risk spread are up 7.9% at opening this morning. Ok, a lot of that was down to managing to get in at the bottom of the recent drop and benefit from the recovery that followed. However, had we "phased" (another way of calling it) over the months it would have lost out on that.

So, you can see that a decision to pound cost average/phase your investment or go in all at once is not something you are going know is best until you get a few years down the road and calculate the difference between the two. Its a judgement call which will be right sometimes and wrong others and its complete luck which it will be.

munk

Ok, totally undecided now then. I'll go ahead with phasing into the investment maybe since I already set up a schedule for it.

dunstonh

If you invested £100pm for 10 years (£12,000 in total) in invesco perpetual high income you would have £25,430 (at close yesterday). If you invested £12000 10 years ago in one go in the same fund you would now have £39,576

Over 5 years :
£100pm for 5 years (£6000) = £9984
£6000 in a lump = £13,476

8 years so you would invested just before the crash :
£100pm for 8 years (9600) = 18,610
£9600 in a lump = 23,184