Maths and investments

Linton

Sorry, I agree with Mathusian on 8.2% - typo.

pkpk

Is an Index Fund the same a Growth Fund?

Linton

pkpk wrote: »

Is an Index Fund the same as a Growth Fund?

No. An Index fund tracks a broad index and therefore include a wide range of shares in companies of all types in quantities proportional to the company size on the stock market. A growth fund is less precisely defined but generally the fund manager will choose the set of companies that he believes, rightly or wrongly, will provide good long term growth. In general the higher the growth the more volatile the returns.


In some cases "Growth" may just be a rather nice sounding marketing-approved name. With an Index fund you know exactly what you are getting, choosing a growth fund requires more homework.

Albermarle

PS, by way of comparison, the Trustnet AFI representive "index" funds, over the last 10 years, have returned

Cautious - 5.6%pa
Balanced - 6.6%pa
Aggressive - 7.6%pa

That's interesting , I would have expected larger differences . Not for any scientific reason though.

Malthusian

MK62 wrote: »

Well, the regular saver calculator on this site says it's around 6.67%.......that is, saving £50pm for 10 years and ending up with £8451.

Ah, that explains it. If total contributions are £5,700 the OP hasn't saved £50pm for 10 years; his first contribution was around May 2010, assuming an unbroken history of 50 per month. The figure of 6.67% is for someone who saved a total of £6,000 over exactly 10 years.

Malthusian

pkpk wrote: »

Interestingly it seems dispute banks having a bad name for funds (as I understand it) I seem to have managed to not shoot myself in the foot.

If banks have a bad name it's because their funds are expensive and nothing to write home about. Not because they manage to screw up the simple task of investing in a standard multi-asset split and not losing all the investors' money.

This is certainly the case for the NatWest Managed Growth Fund which has a total annual charge of 1.53%; extortionate for a non-advised solution when you can get 0.2-0.3% for predominantly passive multi-asset funds.

Virtually nobody buys bank funds like this unless they have had a sales pitch from their bank. (HSBC are an exception as they have good index funds.)

pkpk

Malthusian wrote: »

Ah, that explains it. If total contributions are £5,700 the OP hasn't saved £50pm for 10 years; his first contribution was around May 2010, assuming an unbroken history of 50 per month. The figure of 6.67% is for someone who saved a total of £6,000 over exactly 10 years.

Exactly right. First payment was May 2010.

pkpk

So do Index Funds keep the same funds constantly and growth funds change as the fund manager sees fit?

Linton wrote: »

No. An Index fund tracks a broad index and therefore include a wide range of shares in companies of all types in quantities proportional to the company size on the stock market. A growth fund is less precisely defined but generally the fund manager will choose the set of companies that he believes, rightly or wrongly, will provide good long term growth. In general the higher the growth the more volatile the returns.


In some cases "Growth" may just be a rather nice sounding marketing-approved name. With an Index fund you know exactly what you are getting, choosing a growth fund requires more homework.

pkpk

[QUOTE=_Virtually_nobody_buys_bank_funds_like_this_unless_they_have_had_a_sales_pitch_from_their_bank._(HSBC_are_an_exception_as_they_have_good_index_funds.)[/QUOTE]

Yep that was me! Now looking for something similar but with lower fees. Will have a look at HSBC. Thank you.

MK62

Linton wrote: »

Sorry, I agree with Mathusian on 8.2% - typo.

Can I ask why you only calculated the return over 9.5 years (or 114 months)?

The OP said he started the investment 10 years ago........