Starting with funds

EmilyG2010

Hi guys


I've got cash savings, p2p investments and now want to take some risk and move into equities. I've selected about ten funds which have top star ratings on Trustnet and am using HL as a broker. Just wondered on strategy. I am currently doing £25/mo regular savings but think I will scrap this and just put money in when the fund looks undervalued (the minimum here is more though @ £100).



Is it advisable to come out completely when you see a large bear? Then come back in when you think the market is improving again? I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.



Thanks in advance

eskbanker

EmilyG2010 wrote: »

I've got cash savings, p2p investments and now want to take some risk and move into equities. I've selected about ten funds which have top star ratings on Trustnet and am using HL as a broker. Just wondered on strategy. I am currently doing £25/mo regular savings but think I will scrap this and just put money in when the fund looks undervalued (the minimum here is more though @ £100).

It really isn't sensible to start out buying multiple funds with tiny amounts of money, just pick one of the global multi-asset funds (Vanguard LifeStrategy, HSBC Global Strategy, L&G Multi-Index, etc) to achieve the recommended diversification and stick to that, for the first few years at least.

EmilyG2010 wrote: »

Is it advisable to come out completely when you see a large bear? Then come back in when you think the market is improving again? I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.

You've answered your own question there - the adage of 'time in the market not timing the market' is generally worth following. If you 'think it will be difficult to watch my money fall for long' then maybe investing isn't for you if you can't see the long-term picture and feel the need to tinker?

bostonerimus

EmilyG2010 wrote: »

Hi guys


I've got cash savings, p2p investments and now want to take some risk and move into equities. I've selected about ten funds which have top star ratings on Trustnet and am using HL as a broker. Just wondered on strategy. I am currently doing £25/mo regular savings but think I will scrap this and just put money in when the fund looks undervalued (the minimum here is more though @ £100).



Is it advisable to come out completely when you see a large bear? Then come back in when you think the market is improving again? I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.



Thanks in advance

First learn something about investing....google Lars Kroijer and look at his books and videos. Do you have a work place pension, that's where you should be investing in funds in the first place, then look at an ISA. I would not be looking at funds with stars or "top performers" exactly, go for a low cost multi-asset fund from someone like Vanguard, Black Rock, HSBC etc.

bowlhead99

EmilyG2010 wrote: »

. I am currently doing £25/mo regular savings but think I will scrap this and just put money in when the fund looks undervalued (the minimum here is more though @ £100).

If you have a strategy like that, how will you determine when the fund is 'undervalued' for the future prospects that it represents?

Is it advisable to come out completely when you see a large bear?

That would certainly be my approach if for example I was going caving in the North American wilderness. Certainly was painful for Leonardo DiCaprio's character in The Revenant

I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.

The obvious options there are:

- don't watch it, simply follow a plan where you pay in by direct debit or standing order and don't need to log in to manually make purchases

- learn to watch it and not be scared but instead happy as your monthly contributions buy more and more units for the same amount of cash. Also in a crash situation, periodically top up the ones that have fallen the furthest with some cash from funds that have fallen the least, to bring your portfolio back to its intended allocations - "buying low" is almost always a good thing with funds that are likely to grow over the long term

- recognise that if your personality doesn't allow you to watch something fall very far or for long without getting scared, perhaps you should be cautious in selecting funds for your portfolio. The ones that have gone strongly or smoothly up for the last three to five year period earning themselves trustnet stars in the process, will not necessarily be the ones that go up the most or exhibit the lowest volatility in other time periods. Risk that your personality tells you to sell out during a crash (and thereby miss out on the market going back up without you) is a real risk for inexperienced investors so it can be wise to err on the side of caution if you are choosing between a couple of funds.

It's not all about buying star products or whichever fund is "flavor of the month". Ten funds which all have stars might be quite correlated with each others and not give you a very diversified outlook as you face all sorts of economic conditions in different markets over time.

dunstonh

I've selected about ten funds which have top star ratings on Trustnet and am using HL as a broker.

Star ratings can be misleading. There is more to picking a fund than that.

By using 10 funds, this suggests you are building a bespoke portfolio. Which portfolio theory are you using? (or is it all a random punt)?

Just wondered on strategy.

Ok, that answers the above. Its a random punt. You choose strategy first. Then you pick funds.

I am currently doing £25/mo regular savings

In which case, why are you trying to build a bespoke portfolio?

Lets say you Japanese allocation is 3%. 3% of £25 is 75p. It is totally unrealistic and pointless to build a portfolio on a £25pm contribution.

but think I will scrap this and just put money in when the fund looks undervalued

Again, a pointless strategy as a) you wont know when it looks cheap and to repeat, its just £25.

Is it advisable to come out completely when you see a large bear?

What is a large bear? And when would you see it?

Then come back in when you think the market is improving again?

When would you think the market is improving? Is that just before the double dip or the tripple dip? Or an interim improvement over a 5 year decline?

I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.

In which case, reduce your investment risk to a level you can tolerate. Rather than try and do things you are not experienced or knowledgeable enough to be doing (and if you ever become experienced or knowledgeable enough you will then know why you shouldnt be doing what you are proposing).

Stick to a multi-asset fund within your risk tolerance.

EmilyG2010

thanks so much everyone. Much appreciated.



I have chosen based on geographical locations and small company funds and large company funds. For eg Japanese large and mid cap equities, Japanese smaller companies, American small and large, European, UK, India... I wanted to take a fairly large amount of risk as I already have so much in cash. With respect, when I looked at the funds you suggested, they looked a bit boring - returning about 5% on average. I would like to target 10% with my funds at least.


I am determining when the fund looks undervalued by looking at the chart and determining if it is above or below its trend line.


And by large bear (lol at the caving/Leonardo comment!), I mean when the market is predicted to fall for some substantial period (i.e. 6 months plus)

ColdIron

EmilyG2010 wrote: »

I've selected about ten funds which have top star ratings on Trustnet and am using HL as a broker. Just wondered on strategy.

Not very good, sorry but you did ask. 10 funds on tiny amounts of money is complete overkill. I'd echo the comments above regarding using a single professionally managed multi asset fund fund, not only will it increase your chance of a better outcome it will likely be cheaper into the bargain. These are fire and forget funds and could stand you in good stead until you have several multiples of a 5 figure sum

I am currently doing £25/mo regular savings but think I will scrap this and just put money in when the fund looks undervalued

How will you know? The value of the fund is the sum of its parts, maybe a fifty to a few hundred companies each, and you'll be up against armies of fund managers and their researchers. Time in the market and all that good stuff

I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long.

'They' are right. If you think you are likely to sell after a fall it might be worth reassessing the suitability of investments for you

Is it advisable to come out completely when you see a large bear?

Usual advice is to make yourself look as large as possible, make lots of noise and back away slowly. Do not climb a tree

Wassa123

If you want the easy average market returns, open an account with Vanguard and put it in Life Strategy 100, a fund of the top indexes. That buys you a teeny weeny bit of every large global company. Because there are so many you get the average of all the ups and downs. This is the "put it in and forget about it and look a few times a year" fund.


Alternatively, if you want to pick your funds in an attempt to beat the market, you have to put your faith in private fund managers who spend their life working with the market and going to company shareholder meetings and they pick a smaller selection of companies who they think will do better than the average. I think the most popular global fund on HL is Lindsell Train Global Equity who seem pretty good at it. LS100 has returned 78% over the last 5 years while LTGE has returned 157%.

People will adamantly say only a few fund managers beat the market and if they do it wont be consistent. Woodford for example was one of the top guys for a while but he's had a pretty bad year and his CF Woodford fund is -10.96% this year alone where even LS100 is up 8.75%, while LTGE is up 18.96%. Investors have lost confidence in him and all his funds and shares are down.

If you can manage it and keep on top of things and look at results every month or so and rebalance, active fund manager investment could be better in the long run, otherwise stick to index funds.

dunstonh

I mean when the market is predicted to fall for some substantial period (i.e. 6 months plus)

Markets are predicted to fall every year. So, who are you using for your predictions?

Market drops can be quick down and quick up. They can also decline slowly over multiple years. just compare both the credit crunch and the dot.com period. Both fell by very similar amounts. One did it over a week, then a delay of a few months that looked like a recovery but another quick drop. The other did it much slower over multiple years as a cascade of events occurred.

And which markets are you going to be monitoring? After all, sticking with your 75 pence in Japan, when Japan suffered the nuclear incident, it took a larger decline than other markets.

Are you going to be monitoring all the markets to see if you should sell your 75p or not?

EmilyG2010

Thanks Dunstonh.



A lot of brokers and fund managers give predictions for the year at the start of it. For example a lot are saying America looks very overvalued at the moment. My personal opinion is that it has a bit further to go. I will monitor professional financial viewpoints and financial news streams and base my decisions on those. If I thought a global recession was on the cards, I may decide to get out of everything. I'm not concerned with short term fluctuations.



Wassa I have the LTGE fund. It's given me excellent returns since I bought in. But this is an example of something I think looks very overvalued at the moment - it is trending way above its average and I am tempted to stop my direct debit into it.

eskbanker

EmilyG2010 wrote: »

With respect, when I looked at the funds you suggested, they looked a bit boring - returning about 5% on average. I would like to target 10% with my funds at least.

Also with respect, you need to understand that higher rewards are only achievable with higher risk and that potentially higher upside also means potentially higher downside, i.e. any funds with the potential to increase by 10% versus others at 5% will also have the potential to drop by a substantially higher amount too.

This is all fine and good for seasoned investors who are entirely comfortable with the principles of risk management and how it applies to their personal tolerance, but I'd have to question the suitability of this high-risk high-reward approach for someone who's apparently prepared to try to time the market based on "I know they advise leave alone for a number of years but I think it will be difficult to watch my money fall for long"....