Investment trusts v OEICs

MX5huggy

You can buy “bits”of OEIC’s units but only whole shares in IT’s or ETF’s. So if you’re making small contributions for expensive units you end up with more cash not invested. 

ChilliBob

Aged said:

ChilliBob said:

Stamp duty is due on UK ITs, for example SMT, but not on offshore ones, eg HVPE.

It's often said that OEICs are more foolproof than ITs - does that current discount (or even premium!) represent a good deal for example?

I own both for different reasons, personally if I can get the OEIC I tend to prefer to due to no stamp duty.

Often an IT has a, similar OEIC, as highlighted on the CGT thread - Trojan X OEIC vs PNL IT. So yiu can choose what suits. Sometimes there just isn't the choice so you have to go for what you want. 

Based on what you've said here, my feeling is that it's safer for a novice investor (ie me!) to stick with OEICs. I was considering adding some 'wealth preservation' funds to my portfolio but I thought that they only came in the form of ITs.

You can get WP OEICs just fine if that's the structure you want

CG absolute return
Trojan x
Ruffer have one but the name escapes me, there's another I forget too, sorry, replying so early perhaps wasn't so wise! 

TBC15

ITs make for an incredibly cheap to operate pension.

Audaxer

Thrugelmir said:

Aged said:

Thrugelmir said:

Horses for courses. The growth and range of ETF's must be slowly eroding the market for many OEIC's. 

I haven't looked at ETFs, as they seemed to me to be a bit more complex than OEICs to buy and sell.

They are traded just like shares. Couldn't be simpler and cheaper. Hence their appeal. Though not for the unwary. The usual caveat of fully understanding of what are investing in still applies. 

I agree and I'm surprised that some platforms have ready-made portfolios which includes lots of ETFs:
AJ Bell funds | AJ Bell Youinvest
I'm assuming they are there because they are cheaper, but probably a lot of investors in these portfolios are not aware of the differences between OIECs and ETFs.

Alexland

Audaxer said:

I agree and I'm surprised that some platforms have ready-made portfolios which includes lots of ETFs:
AJ Bell funds | AJ Bell Youinvest
I'm assuming they are there because they are cheaper, but probably a lot of investors in these portfolios are not aware of the differences between OIECs and ETFs.

AJ Bell's own brand funds linked above are alright particularly on smaller amounts as they are reasonably priced and have no trade fees to buy more units. However their 'ready made portfolios' linked below should come with a 'wealth warning' as they give inexperienced investors a basket of assets each with wither own trade fees and then leave them to make their own decisions on rebalancing, contributing, and whether to change or stick with individual active investments even though they probably don't even know why they were selected in the first place. Seems very irresponsible to be leading new investors down that path.

https://www.youinvest.co.uk/investment-ideas/ready-made-portfolios (not recommended)

In terms of the original question it really depends on your investment strategy and platform on if funds, ETFs or maybe even IT are going to be suitable for your objectives. There is no right answer and people have generated adequate returns while keeping costs and volatility under control using all three structures. Everyone has to find their own path. We use each of them in various accounts, knowing the pros and cons, but most of our money is in ETFs which combined with platform fee capping keeps costs ultra low.

Aged

TBC15 said:

ITs make for an incredibly cheap to operate pension.

Why is that?

masonic

Audaxer said:

One other difference is that OIECs are covered by the FSCS up to £85k, whereas ITs are not covered. The risk however is said to be fairly low, for example if you were to lose some of your OIEC investment because of a major fraud in the fund house.

For the more commonly called upon FSCS claim (when your broker/platform goes bust with a shortfall due to an imbalance and/or administrator fees) ITs, ETFs and other listed investments are covered. It is just losses that occur within the investment instrument that are not covered.

masonic

Aged said:

TBC15 said:

ITs make for an incredibly cheap to operate pension.

Why is that?

They are treated like shares. Some providers place a cap on custody charges for holding these, whereas for OEICs they'd charge a percentage of the whole portfolio.

Notepad_Phil

masonic said:

Aged said:

TBC15 said:

ITs make for an incredibly cheap to operate pension.

Why is that?

They are treated like shares. Some providers place a cap on custody charges for holding these, whereas for OEICs they'd charge a percentage of the whole portfolio.

Though all the providers I know who do that then charge a fee for buying or selling an ETF whereas they don't charge for OEICs. So you do have to be careful in how you operate or it could suddenly end up being more expensive than you may have first thought.

masonic

Notepad_Phil said:

masonic said:

Aged said:

TBC15 said:

ITs make for an incredibly cheap to operate pension.

Why is that?

They are treated like shares. Some providers place a cap on custody charges for holding these, whereas for OEICs they'd charge a percentage of the whole portfolio.

Though all the providers I know who do that then charge a fee for buying or selling an ETF whereas they don't charge for OEICs. So you do have to be careful in how you operate or it could suddenly end up being more expensive than you may have first thought.

Yes it's necessary to look at all aspects of fees. Some providers have cheap/free regular investing services, but in general this approach is best suited to those who buy infrequently and hold for the long term.