where can i find an index fund i keep reading about?

john_kane_2

I've spent ages searching on h-l but i cant find this:

i keep reading how someone like me should be investing in index funds an buying and holding for 5+ years. i should be going for one with low fees.

but where can i invest in one of these?

on h-l i can invest in them but as an etf, so i have to pay £10 or so everytime i buy, and under the funds sections its all mutual funds with 1%-1.5% annual fees, when im looking for a simple index fund with a lower annual fee and no initial fee.

where can i invest in a simply world index fund?? (id also be investing in china via the fxi etf tracker from barclays and an all commodities etf, but i just find a dang world index fund).

many thanks if you can help.

turbobob

This one tracks the FTSE World (Ex UK) index - any good to you? http://www.h-l.co.uk/fund_research/fund_key_features/sedol/B2Q6HT3.hl

earlgrey_3

You can find tracker UTs on Trustnet: http://www.trustnet.com/ut/funds/perf.aspx?txtSearch=&btnSubmit=Search...&universe=ut&btnGo=%3CSPAN+class%3DbuttonLeft%3E%3CSPAN+class%3DbuttonRight%3EGo%3C%2FSPAN%3E%3C%2FSPAN%3E&nsUniverse=UT&sort=5&ss=0&txts=&txtss=&columns=&page=0&booIMA=0&reg1=all&sec=ind&ima=all&unit=all&type=all

H-L don't offer them all and on the lowest cost ones charge a 0.5% pa management fee within their ISAs, presumably because they don't get any commission on them.

earlgrey_3

turbobob wrote: »

This one tracks the FTSE World (Ex UK) index - any good to you? http://www.h-l.co.uk/fund_research/fund_key_features/sedol/B2Q6HT3.hl

Also seem to do the Norwich one http://www.h-l.co.uk/fund_research/security_details/sedol/0445991.hl but not the lower cost Scot Wids one.

Aegis

john_kane wrote: »

I've spent ages searching on h-l but i cant find this:

i keep reading how someone like me should be investing in index funds an buying and holding for 5+ years. i should be going for one with low fees.

but where can i invest in one of these?

on h-l i can invest in them but as an etf, so i have to pay £10 or so everytime i buy, and under the funds sections its all mutual funds with 1%-1.5% annual fees, when im looking for a simple index fund with a lower annual fee and no initial fee.

where can i invest in a simply world index fund?? (id also be investing in china via the fxi etf tracker from barclays and an all commodities etf, but i just find a dang world index fund).

many thanks if you can help.

Why are you looking for an index fund rather than a managed fund? The good managed funds as a general rule tend to be lower risk than a tracker fund in the same sector, and often outperform the trackers. Yes, they have higher charges, but though discount brokers most of the initial costs can be eliminated and the annual costs can be reduced. For the lower risk and the chance of better returns than the index, I'd seriously consider those as an alternative rather than believing a lot of the hype about how trackers are superior to managed funds all the time.

As always, do a little research and see what the real results are, then come to your own decision!

john_kane_2

thanks for all yours help.

turbobob, i am a bit wary of that as i believe it tracks the s&p500 global and then converts it into £. given the depreciating dollar over the coming years it doesnt seem good.

earlgrey, i dont really want to switch to another provider due to the hassle (for a 10 year investment not a good attitiude i know, but im hoping there is something on h-l). the norwich union one is lagging behind the global growth sector over the last few years in which case id be better off going for some global growth funds i imagine.

aegis, i do not enough time or know-how to be able to research individual fund mangers, and given the msci world index has matched the global growth sector on h-l over the last few years, id rather go for that. howeverrrr, it's base currency is in $ which i assume i want to avoid given the likelyhood of the dollar to weaken over the coming decade or two.

maybe i should just pick 10 managed global growth funds with the fund providers i have heard of and stick with that?

earlgrey_3

Aegis wrote: »

I'd seriously consider those as an alternative rather than believing a lot of the hype about how trackers are superior to managed funds all the time.

To be fair, invariably, the companies who offer tracker funds also offer higher charging and more profitable managed funds so wouldn't expect too much "hype" from them in favour of their less less profitable trackers.

Similarly the annual "trail-commission" Financial Advisers get paid as their share of the managment fee, usually around 0.5% pa, is either much lower lower or even zero for tracker funds so there won't be much enthusiasm from that quarter either. Those advisers catering for high-worth clients who charge fees rather than rely on trail commision such as Bloomsbury Financial Planning http://www.bloomsburyfp.co.uk/ tend to be more enthusiastic.

I don't think we entirely ignore the views of gurus like Warren Buffet either who says: "Those index funds that are very low-cost are investor-friendly by definition and are the best selection for most of those who wish to own equities."

I think the truth lies somewhere in between. There's no point paying top dollar to a fund manager that does nothing more than track the index and in the majority of cases doesn't even manage that. Have a tracker fund do that for you and only pay for when you want more active managment to spice it up.

Despite all the claims, it's been very noticeable how badly the old favourites of advisers run by the likes of Jupiter, Newton and New star have done in the falling markets of the last 12 months compared to the trackers and more conservative managers.

As, you say, best to do your own research and not take too much notice of the sales patter from the vested interests.

earlgrey_3

john_kane wrote: »

maybe i should just pick 10 managed global growth funds with the fund providers i have heard of and stick with that?

Possibly. I've never used a global tracker and would somehow doubt they could be operated with the efficiency of a single market tracker without additional management imput. One reason they tend to have higher charges than other trackers perhaps.

You could choose a combination of market trackers such as one covering the FTSE All-share, another the Dow, etc. then good managed funds to fill in the gaps.

For very low management costs you could also look at global Investment Trusts. Many have total managment costs of well below 0.5% pa and can be bought at a discount to asset value. The managers have more flexibility than UT managers and may include equities, bonds and property holdings within a single fund. Unit trusts often invest their money in ITs. For global investment check out trusts like Foreign and Colonial, Scottish Mortgage etc. Details from the Assoc of Investment Companies http://www.theaic.co.uk/.

Aegis

earlgrey wrote: »

To be fair, invariably, the companies who offer tracker funds also offer higher charging and more profitable managed funds so wouldn't expect too much "hype" from them in favour of their less less profitable trackers.

It's not so much the marketing hype I'm referring to, but rather the various articles making woefully inaccurate claims like "75% of managed funds fail to beat their index, therefore trackers are better".

Similarly the annual "trail-commission" Financial Advisers get paid as their share of the managment fee, usually around 0.5% pa, is either much lower lower or even zero for tracker funds so there won't be much enthusiasm from that quarter either. Those advisers who charge fees rather than rely on trail commision such as Bloomsbury Financial Planning http://www.bloomsburyfp.co.uk/ tend to be more enthusiastic.

I'm not one of those people who thinks that trackers have no place in anyone's portfolio. However, I tend to go with the facts available to me, and for me, trackers just don't perform as well as the fund managers I've picked to look after bits of my money. As such, that's what I go with, and I always suggest that others do at least some research into the difference so that they know why they're making the decision they are.

I don't think we entirely ignore the views of gurus like Warren Buffet either who says: "Those index funds that are very low-cost are investor-friendly by definition and are the best selection for most of those who wish to own equities."

From what I've gathered, fund managers in the states genuinely do have difficulty outperforming their indices. I can't explain why it's different here, but the best managers seem to constantly outperform the markets.

I think the truth lies somewhere in between. There's no point paying top dollar to a fund manager that does nothing more than track the index and in the majority of cases deoesn't even manage that.

I would absolutely agree were this the way it was. But it isn't. Over here we have the high-priced retail bank funds which rarely outperform their indices, and then we have the investment banks which employ top-quality fund managers and generally outperform their markets on a regular basis.

Have a tracker fund do that for you and only pay for when you want more active managment to spice it up.

To me the active management has two purposes. The first is to try and beat the index, which happens more often than a lot of people realise, and the second is to provide downside protection that index funds just can't offer because they're essentially blind and dumb.

Despite all the claims, it's been very noticeable how badly the old favourites of advisers run by the likes of Jupiter, Newton and New star have done in the falling markets of the last 12 months compared to the trackers and more conservative managers.

I only have a single fund by one of those providers in my own selection, and yes, it's not doing fantastically. Still down about 7 or 8% from when I invested in about August, but given the two market crashes in that time and the fact that the FTSE is still down about 9% since that maximum, I'm reasonably happy with the overall performance. Obviously I'd prefer to outperform the index by more than that, but I'll take a slight gain over an underperformance any day!

As, you say, best to do your own research and not take too much notice of the sales patter from the vested interests.

Absolutely 100% agree with that. Independent data is much better than marketing material, and there's a lot of free information about both sides of this issue available here and on other sites all over the web.

earlgrey_3

Aegis wrote: »

From what I've gathered, fund managers in the states genuinely do have difficulty outperforming their indices. I can't explain why it's different here, but the best managers seem to constantly outperform the markets.

Though not according to Patricia C. Dunn, former CEO, Barclays Global Advisors they don't: "Investment managers sell for the price of a Picasso what routinely turns out to be paint-by-number sofa art."

I think it is very important for investors to look at costs and realise how high they are and how they affect their return.

You may be very lucky to get a return of 8% over a period with inflation reducing that to nearer 4% in reality. To then split that return 50-50 with the fund manager when it's your money and you take all the risk is a little lop-sided. If he loses you money he still takes his cut from your capital.

It's made even worse when managers are rewarded for taking risks with our money but without suficient downside for them if they get it wrong. The most recent example was Adam Applegarth of Northern Rock.

For the investor regardless of the apparent performance it can be hard to judge the risk until it all goes wrong. For any fund manager to beat the index they have to take a position.

I think we'd agree that what we'd both like to see is less of the sales patter when it's a serious business for many people.

dunstonh

I don't think we entirely ignore the views of gurus like Warren Buffet either who says: "Those index funds that are very low-cost are investor-friendly by definition and are the best selection for most of those who wish to own equities."

Yet buffet himself invests for value and there are managed funds which have that same aim.

Similarly the annual "trail-commission" Financial Advisers get paid as their share of the managment fee, usually around 0.5% pa, is either much lower lower or even zero for tracker funds so there won't be much enthusiasm from that quarter either. Those advisers catering for high-worth clients who charge fees rather than rely on trail commision such as Bloomsbury Financial Planning http://www.bloomsburyfp.co.uk/ tend to be more enthusiastic.

trail tends to be 0.35%-0.5% for trackers. Fixed interest funds and property funds often pay less than trackers yet you never see comments about advisers not using those as they pay less trail.

I think the truth lies somewhere in between. There's no point paying top dollar to a fund manager that does nothing more than track the index and in the majority of cases doesn't even manage that. Have a tracker fund do that for you and only pay for when you want more active managment to spice it up.

Thats exactly the thing. Where a tracker is available that fits the need then it should be considered. I think a good area is your generic UK growth funds. However, where you want to diversify by utilising areas like Hidden Value, Equity income etc then the tracker options (within unit trust) are virtually zero.

The biggest issue with trackers is the fact that newbie investors seem to miss the level of risk they are taking and tend to focus on lowest charges rather than going for investment potential. They seem more concerned about saving 0.1% p.a. and dont care about the investment return potential. Friday's FTSE AS moved by over 1% in a day. So, the charges need to be placed in context.