Starting with funds

Prism

EmilyG2010 wrote: »

I think I understand yield is different in an income fund. But equities give higher annual return generally with greater risk do they not? I mean you get dividends plus asset appreciation? My P2P return about 4% pa

The general assumption is that you get about 6-7% per year over the long term if you reinvest dividends.

bowlhead99

EmilyG2010 wrote: »

The general consensus here seems to be to stick with a respectable multi asset fund. But I always thought diversification was paramount.

Diversification is important, which is why multi asset funds are recommended because you put your money into one place and they handle diversifying the exposure across multiple asset classes (the clue is in the name ). Far more sensible than putting 75p of your £25pm into Japanese small cap and trying to create a diversified result yourself. Now clearly if you're talking about putting in a few hundred thousand your 3% allocation to some specific area of your portfolio might be £10k and then you could use more bespoke building blocks to customise the profile of returns to the specific model you're following (or have made up as you go along)

Even though a multi asset fund is diversified in its assets, would there not be a large institutional risk here for eg?

Mixed asset funds may directly hold the underlying assets which drive the returns or may split the money up and invest portions of it into existing specialist funds offered by other parts of the same institutional group.
Or, they may split the money up and put some of it with a third party fund manager (s).

If you are investing very large sums with one party then yes there can be some risk of an issue with that particular institution (though there is FSCS protection which can come into play if there's a collapse caused by fraud etc). However, at the amount you were talking about (£25 pm or even £100pm) there is no "large" institutional risk. As the amounts are not large.

I would intend to fill up my ISA once I understand funds a bit more, so I would be putting in quite a lot more than £25 a month in in the future.

If you had £50-100k then you would get different advice from what you would get when you say you have £25pm and are trying to get the hang of funds and taking about timing the market.

If you were investing at that level and seemed to be a newbie you might be recommended a couple of mixed asset funds instead of just one, to reduce the 'institution risk' you mentioned earlier but not overcomplicate things for your simple DIY investment. Whereas if you were au fait with all the concepts and had been around the block a bit in terms of understanding the volatility of different components of the portfolio (which is much more visible when you have a portfolio with ten moving parts instead of just one portfolio fund), people might start talking to you about building something more bespoke.

At the level you're talking about (filling an ISA allowance) is admittedly rather more than £25pm but £20k isn't really enough to *need* anything more than an off-the-shelf multi asset solution in a single find.

For example, say you put 2.5% of your £20k (£500) in some great specialist fund and it delivers on average 1% a year more than the average of everything else you've got. That's an extra fiver a year, which over five years is £25 and not worth spending a few hours of your precious time in research to identify it. However, once you have 100k, a 5% component of your portfolio is £5000 and it's worth taking an interest in how each of those £5000s is being deployed.

aroominyork

Guys, I think Emily is having fun and you are being sucked in. I appreciate the well informed usual suspects are on this thread but Emily just doesn't ring true. It's all a bit financially bi-polar.

DairyQueen

aroominyork wrote: »

Guys, I think Emily is having fun and you are being sucked in. I appreciate the well informed usual suspects are on this thread but Emily just doesn't ring true. It's all a bit financially bi-polar.

Hmmm... yes, possibly. Or Emily has been accessing websites and cribbing a few ideas and sentences here-and-there in an attempt to sound investment-savvy in response to the well-informed.

The original post rings true for a novice. The terminology used fits with the OP's eyebrow-raising suggestion of a £25pm investment spread across 10 funds. I especially like the 'bear' reference

Emily: if you are a novice then just say so. People here won't judge you negatively.

Fatbritabroad

bostonerimus wrote: »

I was thinking that too, but as the interest on the P2P wasn't mentioned I ignored it, but if it's in junk bond territory the P2P might be riskier than the equities.

Id say p2p is always more risky than equities. Imo even ratesetter has a bigger chance of going to zero than my vanguard fund

EmilyG2010

I am a novice DairyQueen. Thanks for your post. I have read financial press for a number of years but held back from equity investments until now, (worried about losing capital).

AnotherJoe

EmilyG2010 wrote: »

I am a novice DairyQueen. Thanks for your post. I have read financial press for a number of years but held back from equity investments until now, (worried about losing capital).

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.

This just doesn't match. Are there two people posting from your username?

EmilyG2010

AnotherJoe wrote: »

This just doesn't match. Are there two people posting from your username?

How doesn't it? I now have a large amount in cash and p2p. With a small percentage of my capital I now want to take a large (but informed) risk. Previously I had other financial priorities, now I can afford to lose some money if necessary. And my P2P makes about 5% so it makes sense to target much higher returns though equities which I consider riskier since my p2p have provision funds which should protect against most losses.

AnotherJoe

Taking a large risk (now its "large" :eek: ) means you will see decreases in capital at some points.


It goes with the territory.


and doesn't match with

it will be difficult to watch my money fall for long

firestone

I also assume you are not a complete novice as you say you already have LTGE which has given high returns but with what some would say has a higher risk due to its concentrated holdings.So assume you have invested before & done some reading at that time and made a decision.So If you don't think a multi asset fund or tracker is enough possible high risk/return for you why not look at other managed global funds which would also save you the effort of trying to pick the regions/sectors.