Good or bad?

frivolous_fay

bristolleedsfan wrote: »

:cheesy: .......... :cheesy:

I try not to be idiotic when it comes to money but I admit I spent my time queuing in Abbey today thinking this offer over... and had to double check on a calculator later to confirm my suspicions When it comes to maths I don't seem to think very logically... hehe.

Aegis

frivolous_fay wrote: »

I try not to be idiotic when it comes to money but I admit I spent my time queuing in Abbey today thinking this offer over... and had to double check on a calculator later to confirm my suspicions When it comes to maths I don't seem to think very logically... hehe.

At least you know that you need to spend more time thinking about the numbers before coming to a conclusion. Very important to know stuff like that about yourself!

I assume you decided that it wasn't worth playing with?

dunstonh

Rubbish product and a cash cow to the provider.

True - but MCs on unit trusts, at now at between 2-3%, are also starting to look a bit ridiculous....esp when most underperform the market.

Most do not underperform the market. That is a myth. Look up FTSE all share trackers and see where they sit in relation to the UK all companies sector. To save you looking, you will find them sitting right in the middle. So, half above, half below. By the time you eliminate passive trackers, you will find the odds are much better at being above average than below average.

Plus 2-3% is wrong. TERs are typically 0.1-0.25% above the annual management charge. Its only on more specialist funds where you find the TER rises (typically emerging markets, asia and property).

no wonder financial adisers are keen to promote (what with trailer commission et al)

Wrong. Firstly, there is no commission for attaching a caravan to the back of the car. The term is trail commission and it is paid on trackers as well as managed funds. The problem is that tracker funds are generally destined for mid table performance. If you want average, then fair enough but I don't and most other advisers dont. Plus, trackers are not present in enough areas to be utilised in a diverse portfolio.

frivolous_fay

Aegis wrote: »

At least you know that you need to spend more time thinking about the numbers before coming to a conclusion. Very important to know stuff like that about yourself!

I assume you decided that it wasn't worth playing with?

Yeah, when I twigged that '6%' meant '6% overall' and obviously far poorer than '6% p/a' which is quite achievable in just a savings account... I could see it was pretty dire.

Then I worked out that even 6% p/a was only slightly less than 50% over 6 years would be... so even the best case scenario wasn't especially tempting for that amount of risk.

nrsql

dunstonh wrote: »

Most do not underperform the market. That is a myth. Look up FTSE all share trackers and see where they sit in relation to the UK all companies sector. To save you looking, you will find them sitting right in the middle. So, half above, half below.

A fairly common statement and possibly misleading. As usual you would need to look at the underlying data and how it was collected.

dunstonh wrote: »

By the time you eliminate passive trackers, you will find the odds are much better at being above average than below average.

Even if true it depends on your attitude/definition of risk. With a tracker the above guarantees you a return. The other funds have a risk of a poorly performing fund as well as a better one.

dunstonh wrote: »

Plus, trackers are not present in enough areas to be utilised in a diverse portfolio.

Ummm - if the portfolio is diverse I'm sure there would be areas where a tracker would be useful. Sounds a bit like a suggestion that they shouldn't be used at all because they aren't available for everything required. No fund manager covers everything - doesn't mean you wouldn't use those fund managers for anything.

As to the product in question - depends what you think the matket is going to do.
If you think it might double or halve over the period then you might consider it as part of a portfolio - it would give you 6% or 50% compared to 100% or -50% (haven't looked at the t's & c's).
I could see a lot of people going for this sort of thing if it was available for Northern Rock shares when they tumbled.
Point is - don't dismiss things out of hand just bacause something else looks like it could do better - reduced risk comes at a price and not everyone has the same requirements.

When comparing with a deposit account you need to consider what you think the interest rates will do over the period too.

Not saying I think this is a good product though - I think it's fairly terrible. It could have a part to play in investment if someone dodn't think there were better ways of achieving the same end.

Old_Slaphead

dunstonh wrote: »

Most do not underperform the market. That is a myth. Look up FTSE all share trackers and see where they sit in relation to the UK all companies sector. To save you looking, you will find them sitting right in the middle.

Citywire performance tables, evidence doesn't support that.

Using L&G trackers' performance as a guide over a 5 year period

UK All Share 105/245
USA 13/59
Japan 12/49
Pacific 20/53
Europe 40/82

On the basis of this data 37% have outperformed L&G tracker which themselves have underperformed their indices.

dunstonh

That data is not consistent with Financial Express.

Over 5 years, sector average was 108.79%
L&G Index tracker was 106.00%
F&C all share tracker 108.89%
Fidelity Moneybuilder UK index 108.11%
Virgin Money Index tracking 106.99%

Best in sector was 281.21% worst was 47.81%

10 year performance was exactly the same in positions with L&G 8 funds under the sector average (F&C were one above sector average as they were with 5 years).

Over 1 year and 3 years they are slightly above sector average. That is no surprise as trackers tend to do better in periods of sustained growth but do worse in corrections and crashes due to the lack of downside protection (which works in their favour going up but against them going down).