Investment Conundrum

Malthusian

[quote=[Deleted User];75739055]Surely given time, both scenarios have an equal potential for a 100 times growth. [/QUOTE]

That's exactly what I said. Equally low potential.

Why do you say both are unlikely?

Because only a very small percentage of businesses will grow by 100 times over the kind of timeframe most investors are thinking of. Most businesses that are small enough to have room for 100x growth have a high chance of going bust.

As the price goes up, the less units you're able to buy, so therefore the less scope for profit in future years.

How many units you own is a completely arbitrary figure. It means nothing and has no effect on anything. The company can change the number of units you own at a stroke via a stock split, but the total amount you have invested will remain exactly the same.

Sir_Robin

I try to think in terms of pies as I’m hungry.
If we got a £10 pie and cut it into 4 slices(units)
And I buy 2 slices I have 50% of the pie.
If the pie is then cut into 8 slices and my share becomes 4 slices. I still own same amount but now theres more slices to sell and they are cheaper.

So the pie can be divided into as many slices as you want and sold.

What happens when the price of the pie goes up? The value of the slices go up equally.

quirkydeptless

Sir_Robin wrote: »

What happens when the price of the pie goes up? The value of the slices go up equally.

Reaper

I think you are over complicating the issue by thinking about units. What you really mean is if I buy when the fund is at a low price am I likely to make make more profit than when it is at a high price? The obvious answer is yes.

BUT knowing what is a "high" and "low" price is almost impossible. You might decide to buy into a fund because it is half the price it was last month and you expect the price to return to "normal". However that might not happen. Perhaps their biggest investments went bust, or the star fund manager left.

Likewise just because a fund has gone up in price does not necessarily mean it is no longer good value for money. They might have invested in the next Apple/Google and be set for growth for decades.

Alz1986

[quote=[Deleted User];75739027]Great - this is interesting. Can you please explain the concept of
'share split' Do you mean that if I have 100 shares at £1/share, the unit trust can split these into 200 shares at 50p/share[/QUOTE]

Yes. BG Edinburgh Worldwide Investment Trust did this a few months ago to meet the challenges posed by retail investors, the NAV has increased by about 20% since.

And it's the reason I avoid the Vanguard funds because most of their fund's per share is £200+ making it difficult if you wanted to drip feed or set up regular plans. Vanguard appears to be the default go to place but with a bit of research, I don't think Vanguard funds are particularly brilliant.

coyrls

Alz1986 wrote: »

And it's the reason I avoid the Vanguard funds because most of their fund's per share is £200+ making it difficult if you wanted to drip feed or set up regular plans. Vanguard appears to be the default go to place but with a bit of research, I don't think Vanguard funds are particularly brilliant.

That makes no sense, you are not restricted to buying whole units with OEICs or unit trusts; shares and investment trusts are restricted to whole shares.

bowlhead99

Alz1986 wrote: »

.

And it's the reason I avoid the Vanguard funds because most of their fund's per share is £200+ making it difficult if you wanted to drip feed or set up regular plans. Vanguard appears to be the default go to place but with a bit of research, I don't think Vanguard funds are particularly brilliant.

With their open ended funds you can hold fractional units so there's no issue buying or selling £111 of assets at £200 per share: it's just 0.555 shares. Not like buying an investment trust such as Personal Assets Trust where £406 really does mean £406 with no fractional share functionality. So maybe your 'bit of research' is flawed

They are not the cheapest for every type of tracker but their tracking error is decent and operating costs generally low. They are bound to come up in a list of 'go to' index fund providers as they pretty much the biggest in the business.

If you were meaning ETFs rather than open ended funds then you would be buying whole units of shares. But for example their FTSE 250 ETF is £32 , emerging markets £45 and FTSE All-World £66 ; not too dissimilar from using BlackRock's iShares products where MSCI World is £46 or World Size Factor is £26. They are in the "few tens of pounds" range rather than "few hundred pounds".

ColdIron

Alz1986 wrote: »

And it's the reason I avoid the Vanguard funds because most of their fund's per share is £200+ making it difficult if you wanted to drip feed or set up regular plans. Vanguard appears to be the default go to place but with a bit of research, I don't think Vanguard funds are particularly brilliant.

You appear to be confusing funds and ETFs. The forum favourite, LifeStrategy, is a unit trust (or OEIC). The high unit price is irrelevant as you can buy fractions of units, for as little as £25 with some platforms. Ideal for drip feeding

They also offer EFTs which, since they are traded on an exchange, are indeed shares and you must buy whole shares. However a quick look at Vanguard Investor shows the highest share price is £66 ish for the FTSE All-World UCITS ETF with several available for £20 ish. A long way from £200 and hardly a barrier to entry

A bit of research wouldn't go amiss eh?

Thrugelmir

Alz1986 wrote: »

And it's the reason I avoid the Vanguard funds because most of their fund's per share is £200+

That'll be a marketing strategy to give the appearance of excellence. As with share prices nothing better than a historically rising value to give an illusion of wealth creation.

Alz1986

Sorry, it wouldnt apply to funds. But the point is with Vanguard, many of their shares prices whether ETF or Trust are running high.

On the bit about research, UBS' S&P 500 tracker appears to have returned more than Vanguard's, though it probably should be same.