Investment for Dummies

TBC15

OP said 5yrs fixed at 4.8% on a 95% mortgage.

Sounds a bit steep as Barclays are doing 3yr fixed at 2.49%.

bostonerimus

atush wrote: »

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Completely disagree with Boston here. Sometimes an actively managed funds can be a good choice, esp in niche markets.

Another rule I follow is never to buy an fund that invests in an single niche market as they are not as "efficient" as the entire market. This gives opportunities of gains, but also for losses, due to incorrect pricing.

What i do NOT avoid is investment trusts. I have been investing in them for decades and find them a good choice, and not more risky than many other funds. Some of them have 40 years + records of rising dividends, incl during years of turbulence. They can be an excellent choice.

........and also a potentially terrible choice. Gearing, premium/discount and of course active management fees are all reasons that I don't use these closed end funds.

The OP is just starting out and part of the problem for beginners is the vast number of choices they have. They are presented with a lot of things they simply don't understand so to start out it's best to ignore most of the options and just stick to either a multi-asset fund or 2 or 3 indexes.

firestone

could a tracker not be a potentially bad choice?.Not sure IT's such as Lindsell Train,City of London or Monks are going to cause me anymore sleepless nights then my tracker

TBC15

Letts be serious, Nick wouldn’t buy Lindsell Train IT. This year would have got you -8.8%.

firestone

TBC15 wrote: »

Letts be serious, Nick wouldn’t buy Lindsell Train IT. This year would have got you -8.8%.

True but the 500% over 10 years means he did not go short on mince pies at xmas:)

bostonerimus

firestone wrote: »

could a tracker not be a potentially bad choice?.Not sure IT's such as Lindsell Train,City of London or Monks are going to cause me anymore sleepless nights then my tracker

Investing comes with risks of varying degrees and types. Successful investing requires some knowledge of those risks and an appropriate response to both losses and gains. A multi-asset fund or a simple index portfolio and some rebalancing is a simple way to approach things and best suited to the beginner. Personally I put my faith in the assumption of efficient markets and their statistics rather than the ability of an active manager to beat those markets over the long term. So I sleep better at night in the warm embrace of mathematics, not an active manager trying to beat the averages.......does anyone have any qualms about Lindsell Train Ltd being such a large holding of Lindsell Train IT? That would keep me up at night. Things like that are reasons beginners should avoid ITs

firestone

bostonerimus wrote: »

Investing comes with risks of varying degrees and types. Successful investing requires some knowledge of those risks and an appropriate response to both losses and gains. A multi-asset fund or a simple index portfolio and some rebalancing is a simple way to approach things and best suited to the beginner. Personally I put my faith in the assumption of efficient markets and their statistics rather than the ability of an active manager to beat those markets over the long term. So I sleep better at night in the warm embrace of mathematics, not an active manager trying to beat the averages.

yes lots of people pay for active managers who are not proving there worth and there is no guarantee you can pick the right one.So no argument there and of course all investing comes with risk.But in saying a beginner who has no knowledge(and who really should learn before investing) will be in less of risk in a tracker when the market could drop 20% or 50% or more and we stay in a recession for a few years may come as a shock to the newbie especially if the tracker does not get back to its previous high

Audaxer

bostonerimus wrote: »

Investing comes with risks of varying degrees and types. Successful investing requires some knowledge of those risks and an appropriate response to both losses and gains. A multi-asset fund or a simple index portfolio and some rebalancing is a simple way to approach things and best suited to the beginner. Personally I put my faith in the assumption of efficient markets and their statistics rather than the ability of an active manager to beat those markets over the long term. So I sleep better at night in the warm embrace of mathematics, not an active manager trying to beat the averages.......does anyone have any qualms about Lindsell Train Ltd being such a large holding of Lindsell Train IT? That would keep me up at night. Things like that are reasons beginners should avoid ITs

I think there are good ITs for someone needing regular income, but I agree in this case for a beginner in his 20s a low cost multi asset fund is a better option.

Audaxer

firestone wrote: »

yes lots of people pay for active managers who are not proving there worth and there is no guarantee you can pick the right one.So no argument there and of course all investing comes with risk.But in saying a beginner who has no knowledge(and who really should learn before investing) will be in less of risk in a tracker when the market could drop 20% or 50% or more and we stay in a recession for a few years may come as a shock to the newbie especially if the tracker does not get back to its previous high

I think he will have less risk in a low cost multi asset fund like a VLS60 for example that is very unlikely to fall 50% in an equity crash as 40% of it contains bonds. Even if it did have a big fall if he is investing regularly for the next 30 years he will benefit from buying the fund when prices are falling as well as rising. More chance of getting it wrong with a portfolio of active funds in my opinion.

TBC15

firestone wrote: »

True but the 500% over 10 years means he did not go short on mince pies at xmas:)

That’s a lot of mince pies and the premium has come down, the only thing that really puts me of is the imaginary friend element