mutual funds, unit trusts and ETFs

Rollinghome

It's an interesting one, an Italian company apparently. Seems they only use ETFs which they describe as low cost compared to "mutual funds", which I assume is why the OP wanted clarification.

For the first £0-£10k they say they charge 0% (plus the underlying OCF for the ETFs) with no dealing fees, which sounds cheap by any standard. But then from £10k-£100k they charge 0.60%, which is very expensive, especially as ETFs could be bought from a broker such as SVS, rather than from a platform, for a flat fee of £6.75 per deal with no ongoing charge for either a trading or ISA account.

A very good feature is that they say there are neither brokerage nor other charges to close an account or transfer away (in cash only).

So if someone wants to invest a sub £10k sum, and it's suitable for them to do, it might be interesting assuming the service is up to snuff. Would need to be sure of all the charges and be prepared to move away should they move into the plus £10k band. If they are prepared to do that and are happy using ETFs alone then it could be a better option than platforms like HL that charge enormous fees to close accounts or to move away.

Vanguard are said to be preparing for a direct-to-investor offering so will be interesting to see what they come up with.

ozaz

Plus wrote: »

I think you've mixed up two things. One is how the investment is structured, and another how it operates

As a novice myself, I found this post extremely useful for clarifying my own understanding.

Only bit that went over my head was mention of derivatives. Could you explain these please?

MrLeek

ozaz wrote: »

As a novice myself, I found this post extremely useful for clarifying my own understanding.

Only bit that went over my head was mention of derivatives. Could you explain these please?

My understanding (and clever people will correct me and add more detail): having a fund that 'holds' shares is generally simple to do. Less so is a fund that 'holds' gold - as it's hard to store, needs security guards etc.... Therefore the fund could buy a contract (the derivative) that owns the gold, but it's stored in Fort Knox. Or the contract just buys the gold for a year then sells it back regardless of price. Other variations probably exist.

Same idea for oil, coffee futures and other such things. If you're investing in a thing that's hard to store or transport then derivatives become a sensible way to do it.

You can have a fund that holds shares in derivatives, but then why not just hold the shares directly? I'm sure there's good reasons why a fund manager would use derivatives - for instance trying to mitigate against currency changes.

Smarter explanations exist of course!! The Investopedia link may help

elephantrosie

edited .....

elephantrosie

badger09 wrote: »

Why MoneyFarm?

like someone posted down below.. it offers investment up to 10k without charges.

do you have other recommendations?