Criteria when selecting funds

7685

This is a money saving forum and one of the aim in investing is try get the lowest fee possible (Monevator has a global tracker funds comparison list) as the funds I am considering are not on this list, I would like to ask, if there are more than one fund to choose from, aside from basing on the lowest fee, is it worth looking at the tracking error no more than 2%, ocf below 0.2%, physically replicated to reduce risk fund size >£100m) to ensure liquidity, as the funds fitting into these criteria has a fee of at least 0.03% more than the cheaper fee.

leosayer

All those criteria are valid but I think you are missing some key ones:

Which global index are you looking to track? Is it market-cap weighted or something else? Is it hedged back to GBP or not? Does it track emerging markets? Does it track small companies? How many companies does it hold? For me, the only fund that meets my preferences is Vanguard FTSE Global All-Cap which has a fee of 0.23% - maybe this was the one you were referring to. I'm happy to pay an additional (small) fee for the extra coverage.

Is the fund managed by a well-established manager?

Is it available on your chosen investment platform?

Do you need an ETF or a 'normal' fund? This can affect the platform fee you pay.

InvesterJones

Up to you really. If everything else about the fund is equal then sure - tracking an index perfectly etc. might be more important to you than a small difference in fee. Try plotting the total returns (which will account for fees) over a long period and see how the funds compare both during up times and down times.

Linton

My criterion for buying a fund is solely what it invests in. From the overall detailed allocation data for the portfolio calculated from the data provided by Morningstar for each fund I can identify any gaps or unresaonable over-allocations and modify the %s assigned to each fund or if necessary choose a new fund.

A basic rule is that each fund in the portfolio should have a small number of specific and unique objectives thus minimising overlaps between funds.

Performance is of some interest. If two apparently similar funds behave differently I may analyse the cause in terms of their composition. There must be some difference and hence one fund should be more appropriate for my needs than another. This could well be the one with poorer historic performance data.

Cost is very much a secondary consideration, though as it turns out more than half my growth portfolio is in index tracking ETFs. If a more expensive fund suited my needs better, I would choose that.

7685

https://forums.moneysavingexpert.com/discussion/comment/81970888#Comment_81970888

Appreciate your reply; it was very reassuring. I am trying to check whether my asset allocation covers all areas, as I want to balance them so some go up while others go down.This is not as large a pot as I would like, so I worry about it will align with my goal, which is £25,000 net income (in today's money) from year 3 for the next 40 years. 60% of money is in a tax wrapper, and I am thinking of putting the 40% unwrapped into ILGs but also thinking of other options eg only put 5 years cash and invest the remaining sum.

I have 12 years until my State Pension and my plan is to invest all my savings and maintain a separate 5-year 'cash' buffer (2 years in a savings account and 3 years in gilts or ST MMFs). I am a medium-risk investor and will not panic-sell. Plan 1 - there are more variations I have looked into but my criteria is to keep the fee below 0.2% (if possible) and physical replication and minimum overlaps etc. However, I would like to feel confident that this plan does aim to give the income I need.

Plan 1
Fund Name Allocation %
HSBC FTSE All-World Index C Acc or Vanguard Global All Cap 35%
L&G Global Small Cap Index C Acc 10%
HSBC Global Strategy Balanced C Acc 15%
iShares Core MSCI EM IMI UCITS ETF 10%
iShares Core MSCI Japan IMI UCITS ETF 10%
Vanguard FTSE Dev Europe ex-UK 10%
Vanguard FTSE Dev Asia Pac ex-Japan or iShares Global Infrastructure 5%
L&G All Commodities UCITS ETF 5%
Total 100%

Plan 2

Fund Name Allocation %
HSBC FTSE All-World Index (Acc) or Vanguard Global All Cap 55.00%
HSBC Global Strategy Balanced 20.00%
iShares Global Infrastructure UCITS 8.00%
HSBC MSCI Emerging Markets ETF 5.00%
L&G All Commodities (CMFP) 5.00%
Corporate Bonds / Gilt Alt 7.00%
Total 100%

Plan 3
Fund Name Allocation %
50%

HSBC Global Strategy Balanced (provides 30% equity + 20% bonds).

50%	HSBC FTSE All-World Index (provides 50% equity) or Vanguard Global All Cap

L&G All Commodities UCITS ETF 5%
Total 100%

7685

Not sure what has happened as I cannot see when my post is in edit mode - please excuse the layout.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81972033#Comment_81972033

Plan 3 for me, but don't bother with the 5% allocation, particularly as it takes you to 105%