ETF suggestions anyone?

dllive · 20 February 2010 at 9:15PM

Hi,
I have £2k that I wish to invest. I have existing investments in blue chip funds, but theyre performing pretty badly. Ive recently found out about ETFs. Im fed up with Fund Manager's charges (which I guess everyone says when the fund is performing badly!) and ETFs sound like a cheap alternative. I know that they just track an index and arent 'actively managed', but considering only a fifth of managed funds actually out perform the relevant index, I think ETFs are a good alternative.
My question is - which one!? Shall I just get one that tracks the FTSE 100? Are 2 ETFs that track the same index exactly the same, or are there slight differences? Is there a chart that shows me how ETFs have performed over the past few years? I want an ETF which is going to provide a safe-ish environment for my money because I think we're going to see some heavy falls in the markets (in my naieve opinion).
thanks for your suggestions.

dunstonh · 20 February 2010 at 9:58PM

Shall I just get one that tracks the FTSE 100?

Do you want to track the FTSE100? (the old reasons not to may not apply going forward)

Are 2 ETFs that track the same index exactly the same, or are there slight differences?

There are very slight differences.

Is there a chart that shows me how ETFs have performed over the past few years?

Does it matter? If you are tracking an index then its what happens going forward that matters. Not what has gone before.

I want an ETF which is going to provide a safe-ish environment for my money because I think we're going to see some heavy falls in the markets (in my naieve opinion).

A FTSE100 tracker is medium/high risk. That isnt consistent with someone wanting a safe-ish environment. If you think heavy falls are coming then why are looking to invest in those areas?

tradetime · 21 February 2010 at 12:25PM

My question is - which one!? Shall I just get one that tracks the FTSE 100?

That's a bit like saying "I want to buy a vehicle, but which one should I buy?"
It depends a lot on what you hope to achieve by it, how you believe various assets are going to perform in the future.

Are 2 ETFs that track the same index exactly the same, or are there slight differences?

It seems from casual observation of discussions that the term "tracker" has come to be applied to things other than a tracker, ie to seek to outperform an index. A "tracker" simply tracks, that's all it does, that's all it's supposed to do, the clue's in the name. There are variations between trackers, depending on how they are composed. Some things are more difficult to track. In the main the simplest way to construct a tracker is to buy the underlying stocks, or constituents of the index, some trackers, however us derivatives, such as futures contracts and swaps.
In general the latter variety tend to track most indices more accurately over time, however there are risks associated with these in terms of counterparty default..
In general I would say, if what you are trying to track is uncomplicated, such as the FTSE100 as you mention, or any other index composed of company stock, then you should go for an ETF that buys the component stocks and holds them, these will be safest. By and large, certainly for major indices they will all perform more or less the same, so you should look at the management fees being charged, I also like to look at volume traded, I don't like to hold thinly traded ETF's if I can help it.

Is there a chart that shows me how ETFs have performed over the past few years? I want an ETF which is going to provide a safe-ish environment for my money because I think we're going to see some heavy falls in the markets (in my naieve opinion).
thanks for your suggestions.

If you know the ticker symbols of the ETF's you are interested in, you can compare them on sites such as Yahoo financial.
This chart shows, for example the FTSE100 against two index trackers, the iShares FTSE100 tracker (ISF.L) and the Deutsche Bank FTSE100 tracker (XUKX.L) as you can see there is little difference over time.

I am, somewhat puzzled like dunstonh, as to why you would want to put money into the market if you

think we're going to see some heavy falls in the markets

That is contradictory to most normal logic.

Totton · 21 February 2010 at 12:53PM

These links are worth looking at for ETF ideas, they are straight to the point and fit the ethos of low cost simple investing -

Nine Lazy ETF Portfolios for UK Investors

UK Ivy League ETF Portfolio

Hope this helps,
Mickey

dllive · 22 February 2010 at 9:18AM

Thanks for all your replies. Its hard asking questions such as 'suggest an ETF' or 'what fund should I buy into' because its basically asking people to predict the future. But its interesting to hear peoples opinions.
I do believe that the market will drop, but I have my S&S ISA allowance to use up. I dont want to lose my ISA allowance, and have 30 odd investing years in front of me, so even though I may see short terms falls, hopefully in the long term Ill see a return - and if its sheltered from tax then so much the better!
thanks

tradetime · 22 February 2010 at 10:24AM

but I have my S&S ISA allowance to use up. I dont want to lose my ISA allowance

You can move money into your S&S ISA to secure your allowance without committing it to stocks immediately, you will earn next to nothing on cash in an ISA, but that is better than suffering falls, if you believe there are sharp drops ahead.

Personally I doubt there are any significant falls on the horizon, corrections, yes, but all markets have periodic corrections. I believe we will be higher at the end of the year than where we are now.inline with a debt fueled recovery.

cloud_dog · 22 February 2010 at 11:17AM

dllive wrote: »

....but I have my S&S ISA allowance to use up. I dont want to lose my ISA allowance, ...

You don't need to invest now, you don't need to even deposit cash in to a S&S ISA account now. Under the ISA rules you are allowed to deposit the cash in to a ISA Savings account and transfer it in to a S&S ISA account whenever you wish. You cannot do it the other way round, and I'm not suggesting that is the course to follow as interest rates are soooo low atm.

dougz_2 · 22 February 2010 at 1:29PM

A cash ISA will only do for half the S&S allowance though.

I have noticed previous years near the deadline HL tend to do a special interest offer for new cash deposited into their S&S ISA, to entice bearish investors as above, maybe other providers do similar.

cloud_dog · 22 February 2010 at 2:38PM

dougz wrote: »

A cash ISA will only do for half the S&S allowance though.

Yes but, the OP only has £2k to invest.

Its not an option I would pursue (would rather have the cash on hand realising little to no interest in a S&S ISA account but ready to invest) but it is an option.

ETF suggestions anyone?

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