Investment Confusion

rangers_fc

Im not going to mention sums as it seems recently any mention of monetary value puts people of replying. So I have a good holding in my current account and saving account that I can dip into as I require. Now I need something to do with my bukshee cash. I am willing to take a longer term view and invest for over 5 years. Although the stock market is currently flying high I would consider shares however how do you pick a investment trust or unit trust that looks good value for your pound? I currently have a mini cash ISA for this financial year thus reducing my options what products do the knowledgable people out there think would be worth considering for a lump sum or a monthly investment opportunity.I have specifically not mentioned amonuts however if I give some options this may benificial to the disccusion.
£100 to invest monthly
£500 to invest monthly
£1000 to invest monthly
lump sum of £3000
lump sump of £10000
lump sum of £50000
These sums are purely for discussion so what would the board members do with the funds for investment.

Al_Mac

Too vague;)

£100 a month = ING, probably, or similar.
£500 a month = ING + Premium bonds. Hoping for a winner.
£1000 a month = Mrs Mac where are you going at night?

What is a lump sum

Darryl

I'd suggest you look at the www.fool.co.uk website for advice on how to pick/value investments before buying them. they also have a good article on monthly versus lump sum investments.

hth

Darryl

cheerfulcat

rangers_fc wrote:

Im not going to mention sums as it seems recently any mention of monetary value puts people of replying. So I have a good holding in my current account and saving account that I can dip into as I require. Now I need something to do with my bukshee cash. I am willing to take a longer term view and invest for over 5 years. Although the stock market is currently flying high I would consider shares however how do you pick a investment trust or unit trust that looks good value for your pound? I currently have a mini cash ISA for this financial year thus reducing my options what products do the knowledgable people out there think would be worth considering for a lump sum or a monthly investment opportunity.I have specifically not mentioned amonuts however if I give some options this may benificial to the disccusion.
£100 to invest monthly
£500 to invest monthly
£1000 to invest monthly
lump sum of £3000
lump sump of £10000
lump sum of £50000
These sums are purely for discussion so what would the board members do with the funds for investment.

Hi,

It's not that the amounts mentioned in other posts have put people off replying; part of the problem is that any kind of discussion of specific investments is jumped on by board monitors. As Darryl suggests, you'd be better off asking the question at the Motley Fool, which is a more investment oriented site.

More generally, I would say that as a rule investment products and managed funds are not good value for money; mostly they charge large fees for doing no more than tracking an index, something which you can do yourself far more cheaply. Investment trusts are a slightly different animal.

More here -

http://boards.fool.co.uk/messages.asp?mid=9553938&bid=50097

http://incademy.com/training/Investment-trusts/Introduction/1006/10002/

http://incademy.com/training/Unit-trusts-and-OEICs/Introduction/1007/10002/

Investing directly in shares gives a far better return than collective investments ( but make sure, if you go down this route, that you have a well diversified portfolio ). Two boards which might be of interest are TMF's High Yield Portfolio and PaulyPilotsPub - bear in mind that PPP regulars discuss mostly small cap companies, which are inherently riskier than larger ones.

http://boards.fool.co.uk/Messages.asp?mid=9556442&bid=51166

http://boards.fool.co.uk/messages.asp?mid=9558445&bid=51144

and the investment strategies board

http://boards.fool.co.uk/Messages.asp?mid=9488981&bid=50090

As to the amounts - they don't really matter that much except in the case of very small sums ( less than £500, say ) where dealing costs/fees are really going to bite.

There are people who argue that pound cost averaging gives regular investment an advantage over lump sum investing, because when prices are low you can buy more shares/units, and because timing the market is then not an issue. Others would argue that by investing small amounts spread over time you will dilute returns. My personal preference is for lump sum investing, keeping some funds aside for when a good opportunity presents itself.

HTH

Cheerfulcat

dunstonh

More generally, I would say that as a rule investment products and managed funds are not good value for money; mostly they charge large fees for doing no more than tracking an index, something which you can do yourself far more cheaply. Investment trusts are a slightly different animal.

But then managed funds will include areas where they are no trackers and these areas may offer potentially better or potentially lower or higher risk investments. i.e. Latin America, China, Emerging Asia, Property, Gilts etc. Managed funds also tend to offer some downside protection which is not normally present on trackers. So, whilst things are going up, trackers can do very nicely. When things are going down, trackers will perform worse. Just compare 5 year performance on a tracker to an equivalent managed fund.

Personally, both trackers and managed funds should be considered and used where appropriate but limiting yourself to just one or the other can do more damage than good.

As for size of investment, it is important. There are fund supermarkets/wraps available which discount charges based on the size of the investment.

Also, there are about 11 tax wrappers in the UK and depending on your personal circumstances and investment goals, the type of wrapper you should use will vary. Most of the tax wrappers have access to the same or same type of investment areas. This is a good reason why investment advice cannot be given.

Investment sites like the Fool do contain some useful information but they also suffer with a fair amount of total rubbish posted. Experienced investors will spot the rubbish and ignore it but inexperienced investors may get carried away and that could lead to trouble. I personally find some of the articles as being very opinionated and inflexible. Almost an assumption that one option would suit everyone.

cheerfulcat

dunstonh wrote:

But then managed funds will include areas where they are no trackers and these areas may offer potentially better or potentially lower or higher risk investments. i.e. Latin America, China, Emerging Asia, Property, Gilts etc.

Not so. There are trackable indices of all of those and also others, including commodities, which are difficult to find in fund form.

Personally, both trackers and managed funds should be considered and used where appropriate but limiting yourself to just one or the other can do more damage than good.

Which is why I was very careful to say that *most* managed funds, ( not all ), are poor value. I actually agree that funds can be useful but for the most part they are closet trackers.

Also, there are about 11 tax wrappers in the UK and depending on your personal circumstances and investment goals, the type of wrapper you should use will vary. Most of the tax wrappers have access to the same or same type of investment areas. This is a good reason why investment advice cannot be given.

I'm sorry dunstonh, this is once again disingenuous IFA stuff. Most of these so-called tax wrappers sold by the industry are purely and simply a handy way for the providers and salesmen to get their sticky mitts on the investor's money. The only relevant "tax wrapper" for most people is an ISA ( and a self-select one at that) and/or a SIPP.

Investment sites like the Fool do contain some useful information but they also suffer with a fair amount of total rubbish posted. Experienced investors will spot the rubbish and ignore it but inexperienced investors may get carried away and that could lead to trouble. I personally find some of the articles as being very opinionated and inflexible. Almost an assumption that one option would suit everyone.

A lot of the Motley Fool daily articles are very light on information and, sadly, increasingly heavy on advertising. But the sections on investing are spot on. BTW, I have seen very little in the way of "rubbish" posted on the boards and what little there has been has been quickly exposed; could you give me some examples? You're not coleyfish in disguise, are you? :-)

dunstonh

I'm sorry dunstonh, this is once again disingenuous IFA stuff. Most of these so-called tax wrappers sold by the industry are purely and simply a handy way for the providers and salesmen to get their sticky mitts on the investor's money. The only relevant "tax wrapper" for most people is an ISA ( and a self-select one at that) and/or a SIPP.

ISAs only allow 7k. SIPPs are better with larger values but stakeholders and personal pensions can be cheaper alternatives. S32s, EPPs and RACs (legacy) can offer greater tax free lump sums or options not present with a SIPP.

Investment bonds can be used to avoid significant inheritance tax bills or can use other trusts for specific purposes. Or for higher rate tax payers wishing to avoid higher rate tax. Or for those who regulary use up their CGT allowance. (amongst other things). Some investment areas are cheaper than OEICs and UT funds.

OEICs/UTs/ITs offer alternatives for those using their ISA allowance or to invest in areas which cannot be utilised within an ISA.

To say that SIPPs and ISAs are the only relevant "tax wrapper" is naive and the sort of thing I would expect from a novice and not an experienced investor. Or perhaps one with a small portfolio and limited tax issues to be concerned about who thinks everyone else is the same as them.

Certainly I would agree that ISAs/OEICS/UT should account for a very large proportion but to rely on them solely for every purpose would be foolish and expensive.

A lot of the Motley Fool daily articles are very light on information and, sadly, increasingly heavy on advertising. But the sections on investing are spot on. BTW, I have seen very little in the way of "rubbish" posted on the boards and what little there has been has been quickly exposed; could you give me some examples? You're not coleyfish in disguise, are you? :-)

I havent been visiting fool for some time now. I didnt see the need to visit it as it was of no benefit for me. I do recall the name coleyfish though and I can confirm that it certainly isnt me.

cheerfulcat

dunstonh wrote:

ISAs only allow 7k. SIPPs are better with larger values but stakeholders and personal pensions can be cheaper alternatives. S32s, EPPs and RACs (legacy) can offer greater tax free lump sums or options not present with a SIPP.

Investment bonds can be used to avoid significant inheritance tax bills or can use other trusts for specific purposes. Or for higher rate tax payers wishing to avoid higher rate tax. Or for those who regulary use up their CGT allowance. (amongst other things). Some investment areas are cheaper than OEICs and UT funds.

OEICs/UTs/ITs offer alternatives for those using their ISA allowance or to invest in areas which cannot be utilised within an ISA.

To say that SIPPs and ISAs are the only relevant "tax wrapper" is naive and the sort of thing I would expect from a novice and not an experienced investor. Or perhaps one with a small portfolio and limited tax issues to be concerned about who thinks everyone else is the same as them.

Certainly I would agree that ISAs/OEICS/UT should account for a very large proportion but to rely on them solely for every purpose would be foolish and expensive.



I havent been visiting fool for some time now. I didnt see the need to visit it as it was of no benefit for me. I do recall the name coleyfish though and I can confirm that it certainly isnt me.

I repeat; the "tax wrappers " sold by IFAs are vehicles for the extraction of money from investors. IHT can be mitigated by the judicious use of trusts. For normal use, the fees and charges involved in investment "bonds" are so injurious to performance that on the whole it would be better to invest directly and pay tax as necessary. I am well aware of the tax issues involved, btw; I have found it infinitely more profitable to handle my own investments and pay CGT than to leave my affairs in the hands of the financial industry. This is not entirely the result of my investing genius :-); it is also in large measure due to the lack of fees paid to third parties.

dunstonh

For normal use, the fees and charges involved in investment "bonds" are so injurious to performance that on the whole it would be better to invest directly and pay tax as necessary. I am well aware of the tax issues involved,

I repeat, some investment funds with investment bonds can be lower (often quite a bit) than the same/equivalent funds offered within the Unit Trust/Oeic range.

Indeed, i recently arranged an investment bond that had a negative reduction in yield over 5 years. i.e. there were no effective charges in that 5 year period. In another case, the use of the investment bond saved around £200k in IHT that would have been paid if unit trusts/OEICs been used.

You may feel your situation doesnt require an alternative tax wrapper but you seem to assume that your situation matches everyone elses. Also, your opinions on the charging structure of investment bonds is dated. Sure some providers still exist with the old high charging structures but there are enough decent providers offering low cost solutions. Much the same as OEICs/UTs/ISAs and SIPPs.

whiteflag_3

Hello Cheerfulcat

Back on the 16th August you wrote the following

Hello, oceanblue, dunstonh,

Thank you both very much for your comments. I think that I will keep the Skandia product until I can cash it in without penalty fees. I have come to the conclusion, having read your various posts, that investment bonds may well be suitable for some, but that the Skandia one is rather too expensive.



I'm glad to know that I have given you something to think about :-). I am a great fan of direct investing. I didn't so much opt for the investment; I was sort of pushed into it by an IFA at a time of crisis.

May I say that the IFAs here have restored my faith a little - I wish that the ones I meet in real life were as helpful.

What has happened to change your mind and why all the hostility?

rangers_fc

Ok some good replys here. If I could get my head round whats good. Are we saying Investmenty Trusts are a good investment because they often trade a discounts to NAV and the charges are so much lower than a Unit trust? I realise a monthly investment may be better than a lump sum investment so you get a mid market price in what you buy.Just not sure if now is a good time to buy, as the share prices are high with the markets preforming well recently.