Money Observer Model Portfolios

Audaxer

Hi there, I'm looking for a portfolio of funds that will give me a steady income, of medium risk and with potential for growth in capital and income over time. I came across the Money Observer Model Portfolios and was looking at the one name 'Hotel':
http://www.iii.co.uk/investing/factsheet/JD6X?utm_source=money-observer&utm_medium=mp-referral&utm_campaign=mp-hotel
This seemed to be what I was looking for, but the details don't seem to give an overall estimated yield for the fund. You invest via Interactive Investor platform for an initial fee of only £10, but it also says quarterly account fees apply, so not sure what total costs would be and whether there is an additional platform fee.

I'm interested in views as to whether this would be a good fund for income. I'm initially looking to invest my full 2016/17 ISA allowance to an income fund with a view to increasing the investment by possibly transferring in Cash ISAs.

ColdIron

Most platforms offer model portfolios such as the one in your link. Given it is targeted at the Income, Conservative and Balanced options you chose you can reasonably assume it aims to achieve them. It has a high UK weighting but that is not unusual in an income portfolio

II charge £20 per quarter, that is their platform fee. There is a large thread regarding their service, particularly timely income payments, I don't know if things have improved in that respect

dunstonh

It should be noted that it is not a fund you are looking at but a model portfolio. A rather strange one for II to offer too as it is not professionally built and comes with none of the consumer protection that a model portfolio would normally offer (or the FCA requirements in it being built). They are just mirroring a journalists opinion. Possibly a commercial arrangement between them.

The sector it is comparing itself with is not real. It is an artificial one created from a selection of funds. The benchmark may not be appropriate for the underlying assets but there isnt really enough data to go on to be sure.

What drew you to it that makes you think it is better than the alternatives?

Audaxer

dunstonh wrote: »

It should be noted that it is not a fund you are looking at but a model portfolio. A rather strange one for II to offer too as it is not professionally built and comes with none of the consumer protection that a model portfolio would normally offer (or the FCA requirements in it being built). They are just mirroring a journalists opinion. Possibly a commercial arrangement between them.

The sector it is comparing itself with is not real. It is an artificial one created from a selection of funds. The benchmark may not be appropriate for the underlying assets but there isnt really enough data to go on to be sure.

What drew you to it that makes you think it is better than the alternatives?

Thanks. I just found it after looking at the Money Observer magazine and then looking at their website. I was originally looking at HL Ready Made ISAs:
http://www.hl.co.uk/investment-services/isa/ready-made-isa/portfolio-plus
but I think you and others indicated they were a bit costly. I just want to invest in medium risk funds that provides a reasonable income and some capital growth. I'm still interested in the HL Ready-made Balanced Income fund as it seems to cover a diverse range of underlying funds and shows a yield of 3.3%, so after deduction of a 0.45% platform fee, that would be 2.85% net, although I know it isn't guaranteed. From what I've read most other medium risk income funds don't have much higher yields than that.

coyrls

dunstonh wrote: »

A rather strange one for II to offer too as it is not professionally built and comes with none of the consumer protection that a model portfolio would normally offer (or the FCA requirements in it being built). They are just mirroring a journalists opinion. Possibly a commercial arrangement between them.

Interactive Investor is privately owned by Interactive Investor plc and is not listed on any exchange.
The Group also owns Moneywise Publishing Limited, a company that publishes consumer finance titles Moneywise and Money Observer magazines and their websites:

• moneywise.co.uk
• moneyobserver.com

http://www.iii.co.uk/about-us

bigadaj

Audaxer wrote: »

Thanks. I just found it after looking at the Money Observer magazine and then looking at their website. I was originally looking at HL Ready Made ISAs:
http://www.hl.co.uk/investment-services/isa/ready-made-isa/portfolio-plus
but I think you and others indicated they were a bit costly. I just want to invest in medium risk funds that provides a reasonable income and some capital growth. I'm still interested in the HL Ready-made Balanced Income fund as it seems to cover a diverse range of underlying funds and shows a yield of 3.3%, so after deduction of a 0.45% platform fee, that would be 2.85% net, although I know it isn't guaranteed. From what I've read most other medium risk income funds don't have much higher yields than that.

There are of course fund fees as well as the platform fees, these are quoted as around 1.4%, which may be covered by capital growth, that's still a total charge of pushing 2%.

The monevator website has some model portfolios you could look at, they are passive biased which often isn't great for income which might be an issue. This is the sort of thing that investment trusts are suited for and sort of invented for as well, a selection of investment trusts might be a good way of producing a combination of income and growth, with management and generally not too expensive.

What sort if sum are you looking to invest, for larger sums then an ifa might be a good option.

Audaxer

bigadaj wrote: »

There are of course fund fees as well as the platform fees, these are quoted as around 1.4%, which may be covered by capital growth, that's still a total charge of pushing 2%.

The monevator website has some model portfolios you could look at, they are passive biased which often isn't great for income which might be an issue. This is the sort of thing that investment trusts are suited for and sort of invented for as well, a selection of investment trusts might be a good way of producing a combination of income and growth, with management and generally not too expensive.

What sort if sum are you looking to invest, for larger sums then an ifa might be a good option.

I've not really looked at Investment Trusts as I wasn't sure whether they would be a good option. If they can be inside the ISA wrapper, then I would consider and will look at them.

I'm initially looking to invest this year's ISA allowance of just over £15k, then maybe further investment come April when the new £20k allowance comes in. I have also Cash ISAs not earning much which I could transfer in. So potentially I have quite a lot to invest but not in a hurry to transfer it all to S&S ISAs at once. I've always been pretty cautious, but now prepared to be a little more adventurous. I'd like a steady income with a bit of capital growth, but prepared for short term capital fluctuations.

In view of what's been said I've been put off the Money Observer portfolios, but still interested in the HL Ready-made ISAs despite the costs. I think that the ongoing annual costs of 1.34% reflect the costs of the underlying funds within the 3 HL Multi-Manager funds in the Ready-made ISA. On top of that there is 'just' the 0.45% platform charge.

I would consider one of the index trackers but I feel that with the FTSE and FT All Shares being quite high, I am not convinced it is a good time to put a lump sum in.

ColdIron

ITs are worth investigating if you are looking for income. They can provide smooth often rising dividends, and being closed ended they are particularly suited to illiquid assets such as property or some fixed income. Unlike Unit Trusts they trade as shares (because they are shares) which is handy for you if you like HL as the platform fee is capped at £45 in an ISA so your overall charges could be low. They are well established and some of them have been running for over 100 years. Check out some well known one like BNKR, CTY, EDIN, MYI and perhaps FCPT

Eco_Miser

Audaxer wrote: »

I would consider one of the index trackers but I feel that with the FTSE and FT All Shares being quite high, I am not convinced it is a good time to put a lump sum in.

There is a lot more to index trackers than the FTSE 100 and All share.

Audaxer

ColdIron wrote: »

ITs are worth investigating if you are looking for income. They can provide smooth often rising dividends, and being closed ended they are particularly suited to illiquid assets such as property or some fixed income. Unlike Unit Trusts they trade as shares (because they are shares) which is handy for you if you like HL as the platform fee is capped at £45 in an ISA so your overall charges could be low. They are well established and some of them have been running for over 100 years. Check out some well known one like BNKR, CTY, EDIN, MYI and perhaps FCPT

Thanks, I had thought it was a 0.45% platform charge without a cap, but I see now that it is only funds ISAs with HL that are not capped. So you could have £100k held in Investment Trusts or shares within an ISA and pay a £45 fee, whereas for the same amount held in funds in an ISA would cost £450. Quite a difference and something I wasn't previously aware of. I wonder why funds are so much more expensive just to keep them in an ISA wrapper?

Malthusian

Audaxer wrote: »

II would consider one of the index trackers but I feel that with the FTSE and FT All Shares being quite high, I am not convinced it is a good time to put a lump sum in.

Number of days from 1985-2012 on which the FTSE 100 was at or near (within 5% of) its peak: 3,572 (about one-third of the time)
Number of days that an investment in the FTSE 100 on one of these "peak" days would have been down five years later: 614 (less than one-fifth)

So during that period, if you sat on long-term savings and left them in cash whenever the market was at a peak, you would have been sitting on cash for one day out of three, and out of those peak days it would have been clearly the wrong decision over four times out of five.

(And note that none of the investors on those unlucky 614 days lost a penny, unless they encashed all of their investment exactly five years after making it; they just needed to wait a bit longer to see a return.)