How to handle the moment you put money into a tracker fund given the markets volatility?

AlanP_2

saoliver said:

AnotherJoe said:

jim_arm_chair said:

Ive opened FTSE 100 Index Unit Trust with Vanguard. As the FTSE is so volatile at the moment, the day and even hour that my cash is converted to shares will make a big difference to what I actually get. Is there a way to manage this? 

UPDATE
Sorry, based on the replies I don't think I've been clear. I'm investing for the long term and not looking to 'play the market'. My question is just about when I first put the money in. Once it's in I plan to leave it for 5+ years. 

Why?

Simply, dont do that. terrible idea.

 

Hi, can you elaborate please on why this is a terrible thing to do?  I think a lot of people with a 5 year + plan are thinking of taking advantage of cheaper UK equities at the moment. Can you explain please?

See this post, it elaborates and outlines the reason - https://forums.moneysavingexpert.com/discussion/comment/76986942/#Comment_76986942

bargainhunter888

New to investment and shares, have plenty of time on my hands, just wondering why a tracker etf on the ftse100 is a bad idea? Looking at it from an index point of view it was well over 7,000 points but now mid 5000.
surely looking at it long term, your investment could grow by 50% and more? 

dunstonh

New to investment and shares, have plenty of time on my hands, just wondering why a tracker etf on the ftse100 is a bad idea?

Yes. it is a bad idea.  Single sector investing is bad quality investing.   Regardless of area.    You are effectively saying that you want to invest 100% into UK large cap thinking that is going to be the best area.    It won't be.  Indeed, the FTSE100 has been amongst the worst performing major indexes for the last 25 years.

It is a truly awful index to track because it has such a poor asset diversification.  It does somewhat counter that with the level of dividends that many of the FTSE100 companies pay but dividends are being cancelled all over the place.  

An ETF is an unusual choice for a new investor as well.   Most new investors stick with Unit trust/oeics due to their simplicity.  If you go into ETFs, you get no FSCS protection and you have to consider replication methods in your research.

Alexland

dunstonh said:

An ETF is an unusual choice for a new investor as well.   Most new investors stick with Unit trust/oeics due to their simplicity.  If you go into ETFs, you get no FSCS protection and you have to consider replication methods in your research.

Agree - ETF investors also need to consider the liquidity and resulting bid/ask spread costs.

bargainhunter888

Reading up on it I like to control over the exchange traded price and to know what price I can buy/sell rather than wait until the next valuation point.
in terms of replication I read physical or synthetic? If which physical offers a better representation? Only downside is the dealing fee. 

Anything else I should consider? I was going to plump for the msci etf as a result, What funds are alternatives and costs etc? Are they covered by FSCS?

Linton

ETFs are not covered by the FSCS. They are treated In the same way as individual shares.

bowlhead99

bargainhunter888 said:

 I was going to plump for the msci etf as a result, What funds are alternatives and costs etc? 

MSCI are an index provider - they calculate hundreds of daily indexes. Fund managers such as HSBC, Vanguard, BlackRock iShares etc will create index funds and ETF products that track some of the various MSCI indexes. So there will be hundreds of products available that try to track indexes which have been calculated by MSCI. The costs will be from about 0.05% to 0.60%, with some outliers. There is no one 'the MSCI etf'.

If you are looking at global equity funds, iShares have their MSCI ACWI ETF (around 0.3% expense ratio),  HSBC's MSCI World ETF is about half that cost but excludes emerging markets, Vanguard's FTSE All-world ETF does include them and has an OCF of somewhere in between (0.22%).

All those cost ratios exclude transaction costs but you might expect them to be broadly similar for that. Slightly less for the one that excludes emerging markets. But there's no rational reason to exclude emerging markets if you're trying to invest globally.

Sailtheworld

jim_arm_chair said:

Ive opened FTSE 100 Index Unit Trust with Vanguard. As the FTSE is so volatile at the moment, the day and even hour that my cash is converted to shares will make a big difference to what I actually get. Is there a way to manage this? 

UPDATE
Sorry, based on the replies I don't think I've been clear. I'm investing for the long term and not looking to 'play the market'. My question is just about when I first put the money in. Once it's in I plan to leave it for 5+ years. 

My approach is to buy as and when cash is available. The bet I'm making is that, over the long term, my investment will pay off.

Hopefully you think back to your post and laugh about how you were worried about whether the 7th or 8th April was the best time to buy or even 11am or 2pm.