investment account needed

dingle_3

having had a little look around and as a new investor tracker funds seem to offer a way of good long term investment combined with low costs - what do you all think?
i particulary like the look of the M&G fund - it seems to have low costs - and seems to be well respected - would you agree with this, in my experience good customer services can be very useful when you are spending your money.. what is M&G's reputation like?

dunstonh

trackers are cheap because there is little management involved.  Generally good in periods of growth but not as good in periods of decline as their is little or no downside protection.  Generally a medium risk investment.

for regular contributions and your stated investment goals and attitude to risk, trackers would be below what you have stated as what you would be looking at as far as risk goes.

cheerfulcat

Hi, Dingle,

I'm with Darryl on this one; I would recommend the Motley Fool as an excellent starting point for learning about investment. Make sure to visit the discussion boards as well as the main site.

I also agree with his advice to avoid IFAs; there may well be good ones out there but I have yet to meet one; none of the ten IFAs I have had experience of had anything other than his own interests at heart.

I would go further and say that you would do well to avoid most collective funds as well; a tracker as a core investment and some individual shares to improve your returns would serve you well. Here's an illustration of one of the reasons I don't like financial products - the commission.

http://www.intelligentmoney.com/index.cfm?fuseaction=calc.main

All IMHO, of course.

Good luck!

Cheerfulcat

payless

Whilst I agree with much that is said the link provided above does not provide correct illustrations in all circumstances

for example they claim to be able to give me £1622 commission rebate for a £10pm 25yr endowment policy !

Reaper

Well by now I'm sure you are very confused, Dingle!

You have people disagreeing on whether to use an IFA, whether to get a tracker etc etc.

That is unfortunately the nature of investments.

I try to always state the reasons behind any advice I give, and this is important. Wherever you see a recommendation (web site, newspaper, here, IFA or wherever) always check on the reasoning and be prepared to challenge it. Investments always depend on assumptions about the direction the economy will take and if they depend on something you don't believe in (eg house prices rising) then it's not the one for you.

cheerfulcat

Whilst I agree with much that is said the link provided above does not provide correct illustrations in all circumstances

for example they claim to be able to give me £1622 commission rebate  for a £10pm 25yr  endowment policy !

Hi, payless,

Yes, it is pretty horrifying when you see what effect trail commission has on the returns of financial products. I'm afraid that the figure you got is correct. Remember that the renewal commission is a percentage of the value of the investment. If you have any kind of unit trust or other product, have a look at the key features document, the one where it shows the deductions. I have one here from Skandia which shows that over the first ten years of the investment they will have charged me 15% of my original contribution in fees! 15%! The effect of this is to reduce the returns by nearly 25% :-(

Cheerfulcat

dunstonh

Hi, Dingle,

I would go further and say that you would do well to avoid most collective funds as well; a tracker as a core investment and some individual shares to improve your returns would serve you well. Here's an illustration of one of the reasons I don't like financial products - the commission.

http://www.intelligentmoney.com/index.cfm?fuseaction=calc.main

Your "suggestion" would be the reverse of the current views that are coming in from the FSA that asset allocation over a range of areas is best advice. The FSA research shows that had funds been spread over investment areas in the past, they would have performed better than having just one fund in a standard stockmarket linked fund. Having a collective ISA or OIEC spread over a range of areas/providers means you dont put all your eggs in one basket.

BTW, i must speak to the companies I deal with because comission is not even close to what that site is saying. Of course, they would want to make the figures appear higher as they want your business. e.g they show pensions as 4% and 0.5% pa. In reality its closer to 4% and no renewals or no initial and 0.4% pa. NOT BOTH.

payless

Hi, payless,

Yes, it is pretty horrifying when you see what effect trail commission has on the returns of financial products. I'm afraid that the figure you got is correct. Remember that the renewal commission is a percentage of the value of the investment. If you have any kind of unit trust or other product, have a look at the key features document, the one where it shows the deductions. I have one here from Skandia which shows that over the first ten years of the investment they will have charged me 15% of my original contribution in fees! 15%! The effect of this is to reduce the returns by nearly 25% :-(

Cheerfulcat

NO

believe me commission on this example  would be
£120 upfront and £0.25 pm for 22 yrs ( as is a % of contribution not fund value)  total £186

Their figures are incorrect , as they then state

If you join Intelligent Money we will send you cheques totalling £1,622.00

I wish

cheerfulcat

I am not an IFA, so I have no way of knowing where the commission goes; if those of you who are IFAs say that you aren't getting it then fair enough. I may not know the intricacies of how and when commission is paid, but I know that I'm paying it,and that these charges have a very deleterious effect on investment performance. As demonstrated in the Skandia key features documents, details of which I posted. The IFA who sold me that investment has trousered the equivalent of £750 an hour up front and another .5% of the value of my investment every year thereafter, for as long as I hold that investment, which is for a minimum of five years or there's a penalty; this is pretty outrageous IMHO.

DD - yes, asset allocation is important ; education even more so which is why I agreed so wholeheartedly with Darryl's recommendation of TMF.

Cheerfulcat