Can You buy shares in the FTSE as a whole

Doshwaster · 15 March 2009 at 10:32AM

Personally, i rather go for a FTSE All Share tracker than a FTSE 100 one as there is more diversity.

Despite their loses of the last 6 months, I'm still a fan of trackers as a cheap & easy way of entering the market and they should be a part of all portfolios. It is true that tracker cannot beat the market, but that's not their aim. A managed fund can beat the market, but most don't, so you need some skill and lots of luck to back the right fund.

With a tracker you are going to get the market average (up or down) with zero effort. Stick £50-200 a month in one and forget about it. They just shouldn't be considered short term investments but for an absolute minimum of at least 5-10 years.

Tim_Nicholas · 15 March 2009 at 11:02AM

Thanks Guys...

Added ISF into my portfolio... I have been watching 11 FTSE shareprices since October, all of which are on a slight decline. Just waiting for the right time to start buying.. I thinking June / July time ??

Any thoughts ?

cepheus · 15 March 2009 at 11:41AM

Doshwaster wrote: »

Personally, i rather go for a FTSE All Share tracker than a FTSE 100 one as there is more diversity.

Despite their loses of the last 6 months, I'm still a fan of trackers as a cheap & easy way of entering the market and they should be a part of all portfolios. It is true that tracker cannot beat the market, but that's not their aim. A managed fund can beat the market, but most don't, so you need some skill and lots of luck to back the right fund.

With a tracker you are going to get the market average (up or down) with zero effort. Stick £50-200 a month in one and forget about it. They just shouldn't be considered short term investments but for an absolute minimum of at least 5-10 years.

There is a FTSE250 ishare as well, this in combination with the iFTSE100 will provide something similar to the Allshare. However ishares can provide more diversity than either, consider a world index.

iShares MSCI World offers you exposure to companies listed around the world in around 23 countries. This fund provides a diversification away from a UK or European based equity portfolio and can be used to gain a wider exposure to world equities, and therefore help manage risk/return allocation.
MSCI international equity indices are fully consistent across geographical markets and industries, making them ideal for use in a range of investment strategies.

My view is that world equities can be highly correlated and to get true diversity you need to buy products which are inherently uncorrelated, such as Bonds, high yield shares, Gold, commodities or even shorting the market. However, if the stockmarket has bottomed out or interests rates rise this might not be a good idea.

Another point is why do you think the western stockmarkets will increase at all long term? Japan has been stuck in the doldrums for a generation, and all empires rise and fall. Perhaps the hard working Eastern economies who make real things are the best long term bet?

barny_100 · 15 March 2009 at 10:47PM

This seems relevant to this thread: http://www.timesonline.co.uk/tol/money/investment/article5907530.ece

Any comments? I know it's an old subject.

Aegis · 15 March 2009 at 11:02PM

barny_100 wrote: »

This seems relevant to this thread: http://www.timesonline.co.uk/tol/money/investment/article5907530.ece

Any comments? I know it's an old subject.

If you invested your annual Isa allowance of £7,200 in a cheap tracker every year for 30 years you would have a pot of £508,534, after 5% annual growth and a low 0.27% charge. However, if you invested in an active fund with total charges of 3.04%, you would have just £309,098 — £199,436 less.

Yes, it's a load of rubbish. The assumption is that the managed fund will have the same underlying performance before charges as the tracker, which is almost never going to be the case. As such, the differences in charging structure are secondary to their relative performances, which have been ignored.

All in all, it reads like a very poorly researched article with a bias towards trackers, which are unfortunately rather common these days.

cepheus · 15 March 2009 at 11:33PM

Aegis wrote: »

Yes, it's a load of rubbish. The assumption is that the managed fund will have the same underlying performance before charges as the tracker, which is almost never going to be the case. As such, the differences in charging structure are secondary to their relative performances, which have been ignored.

All in all, it reads like a very poorly researched article with a bias towards trackers, which are unfortunately rather common these days.

Are you saying managed funds perform better than trackers? I thought the opposite.

a study by research firm WM Company found that 82% of managed funds failed to beat the market over the course of twenty years. While you may think that sounds bad, this figure only includes funds that managed to survive for the whole twenty years. Many poorly performing funds are shut down or get merged into other funds. This means that the chances of picking a fund now that will do worse than the market over the next twenty years is likely to be a lot higher than 82%, and is probably well in excess of 90%. Some people believe however that it's possible to consistently pick one of the few funds that will beat the index, although this too is hotly debated and not backed up by research.

http://www.fool.co.uk/Your-Money/guides/Index-Trackers-Vs-Managed-Funds.aspx

Aegis · 15 March 2009 at 11:45PM

cepheus wrote: »

Are you saying managed funds perform better than trackers? I thought the opposite.

I'm saying that it ignores the core issue, which is that of total performance after charges. Some managed funds are awful and will underperform compared to the index. Most bank funds and passive managed funds are like this, and the higher charges on these funds will cause them to lag behind trackers. However, the good managed funds in several sectors outperform the indices on a fairly regular basis, and buying them through a discount broker just makes them even better when compared to tracker funds.

http://www.fool.co.uk/Your-Money/guides/Index-Trackers-Vs-Managed-Funds.aspx

It always boils down to the Fool website in the end, and their flawed articles just don't improve as time goes on. They have still failed to address the fact that their core data is all taken from the USA, where different tax laws apply to index trackers than for managed funds, completely invalidating their transfer of the same results to the UK where the two types of fund are taxed identically. In the US this tax treatment gives trackers a distinct advantage when comparing performance that simply doesn't exist over here. Over here the performance tables are everything, and they speak for themselves: trackers are usually found on the border between the 2nd and 3rd quartiles of their respective sectors, and usually they mostly have the bank managed funds and passive funds beneath them.

The Fool know that there are flaws in their articles and they refuse to address the criticisms. The fact that they sell trackers through their website and get paid a commission for doing so might have something to do with that.

barny_100 · 16 March 2009 at 12:27AM

Aegis wrote: »

I'm saying that it ignores the core issue, which is that of total performance after charges. Some managed funds are awful and will underperform compared to the index. Most bank funds and passive managed funds are like this, and the higher charges on these funds will cause them to lag behind trackers. However, the good managed funds in several sectors outperform the indices on a fairly regular basis, and buying them through a discount broker just makes them even better when compared to tracker funds.

Problem is though how to identify the funds that don't under perform compared to an index. Not asking how pick the top 10% funds as that seems to be 90% luck IMO. Would like to know how to, in theory at least. avoid the turkeys though?

Aegis · 16 March 2009 at 8:26AM

barny_100 wrote: »

Problem is though how to identify the funds that don't under perform compared to an index. Not asking how pick the top 10% funds as that seems to be 90% luck IMO. Would like to know how to, in theory at least. avoid the turkeys though?

In both theory and practice, if you ignore the funds run by retail banks and anything with the goal of passively tracking the index then you should eliminate most of the funds that will lie beneath the tracker performance level. After that it's a matter of finding a fund that matches your investment goals with a decent management team. You should find that this simple process eliminates most of the worst-performing funds instantly without even needing to look at performance tables.

cepheus · 16 March 2009 at 9:11AM

In both theory and practice, if you ignore the funds run by retail banks and

anything with the goal of passively tracking the index then you should eliminate most of the funds that will lie beneath the tracker performance level. After that it's a matter of finding a fund that matches your investment goals with a decent management team. You should find that this simple process eliminates most of the worst-performing funds instantly without even needing to look at performance tables.

Well here's another view, part of which agrees with you.

http://www.thisismoney.co.uk/investing/article.html?in_article_id=451023&in_page_id=166

However, as far as I can see Hargreaves Lansdowne includes some of the retail banks in it's recommendations. Have you got a list of the names to include or strip out, or better still the complete statistics to support your argument?

Can You buy shares in the FTSE as a whole

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