investing in funds

EdInvestor

Pound cost averaging sounds good but it's basically a ploy to encourage risk averse people to invest.

It doesn't compensate for failing to be in the market at all.

The way to make big losses and fail to get the money back in the long term is to invest everything in a very narrow sector with a very high price to earnings ratio, eg tech shares in 1999.

Absolute copybook, you couldn't make it up.

Single country funds can also have very high risks if held on their own.

If investing in a portfolio mainly invested in big blue chip companies with decent yields spread across a range of sectors, i would put all the money in now.

Equity income funds have historically done better than equity growth funds, as the latter don't usually have the benefit of dividend income. Long term returns in the market going back 100 years show they are based on economic growth plus inflation plus the market dividend yield.If you don't get the divi, you lose out on (usually) about a third of the return.

munk

Pound cost averaging sounds good but it's basically a ploy to encourage risk averse people to invest.

The issue I've got at the moment is the money is definitely being invested but the adviser suggested to invest it slowly over 6 months rather than in one chunk right now to even out any market downturns over that time. Still sounds like a pure gamble to me as to whether it works out or not because of course if the markets increase then we've lost out by not investing all at once to start with.

Perhaps there's merit in the idea of pound cost averaging what with the general consensus seeming to be that markets will be turbulent for the next couple of months - at least until we know exactly who's affected by the sub-prime issue. Probably won't be much in it though in my thoroughly uneducated opinion, sluggish performance generally for next couple months followed by a rally before xmas?

ramborai1987

so should it be better to do income rather than accumalated on equity funds? im really looking for growth over a number of years but if your making more on income compared to accumalated should i just do income and re-invest the divi?

also if i re-invest the divi will this still be considered as tax free via the vantage isa? thanks

jamesd

munk, I agree with the adviser. Though if you do want to do a lump sum, you could do a 50:50 split of lump sum and monthly.

ramborai1987, you missed the point. EdInvestor is writing about funds in the UK equity income sector. That's completely unrelated to whether you purchase the income or accumulation version of the fund. If you want to take income now, buy the income version, if you want to leave it to grow, buy the accumulation version. For example, you'd buy either Invesco Perpetual Income Income version or Invescop Perpetual Income Accumulation version. Both Invesco Perpetual Income, just differing in what's done with the income: inc pays it out (and you could reinvest yourself), acc automatically reinvests it.

Reinvesting the income will be tax free unless you''ve told HL to pay it to you as income. If you've done that, when they pay it to your bank account it leaves the ISA wrapper and counts as part of the current year allowance if you invest it. You can instead choose to have it stay in your ISA account or automatically reinvested once the amount reaches fifty Pounds.