Advice Mutual Funds

[Cerb]

So I've been thinking lately about investing some of the money that I've got in my savings account.....say 10-15K in a mutual fund like Vanguard off the advice of my new father in law.

Honestly I know fuck all about investing, and obviously I'm going to do some reading up on it first. But I was just wondering if any of you lot in here have any experience with them and if so any advice someone had given you?

Thanks!

 

[Chilly]

Whatever you do, only invest a portion in any given fund/asset. Split your cash up into 10 or 15 chunks and put them in various places. Long term, if you keep steady with the FTSE100, you're doing better than the vast majority of funds.

 

[Scouse]

I'd disagree with that.

I'd wang it into 3 or 4 at most. It's riskier - but you stand to gain more (or lose more)...

 

[Chilly]

I'd disagree with that.

I'd wang it into 3 or 4 at most. It's riskier - but you stand to gain more (or lose more)...

That's a high risk strategy which is fine if you dont mind the real (>25%) chance of doing your nuts.

 

[Cadelin]

With any investment the most important thing is to know what you want from your money. Is this something you are putting away for when you retire in 30+ years or for when you buy a house in 2 years from now? Once you know that you will be able to select an appropriate product to invest in.

I also think Chilly and Scouse are missing the point of a Mutual fund. These funds spread your investment in a sensible manner for you in exchange for a fee. While it is possible for the scheme you invest in to be a ponzi scheme, this is fairly unlikely. By all means spread the risk in a couple of funds but if you are that paranoid that you can only trust a fund with 1k then investing in stocks/shares at all is probably too risky for you.

 

[Cerb]

Thanks for the advice.

I guess I really should have put more information in my original post. This is an investment that I'm looking to make for about 1-2 years, for exactly the reason you state Cadelin. Myself and the missus currently have about 30k in a savings account that we intend to use as our down payment when the time comes (soon if I have my way). The amount of interest it's making is making me sick and I mentioned this to my father in law who suggested we look at Vanguard mutual funds as a possbiel investment. So what I'm looking at is something of a low to medium risk over a 1-2 year period.

 

[Cadelin]

I am afraid your best bet is almost certainly cash in an interest account for that period of time. Interest rates suck at the moment, but even a brilliant investment will maybe get you a few percent more which on 15k is £300 extra. But if something bad happens you might not be able to afford that deposit on your house.

 

[opticle]

I've just started to try to put some money away each month now I've started working.

I have no idea if this is any use to you but here goes: My Dad's advice was first to open a Stocks and Shares ISA with an Investment company and he recommended Hargreaves Lansdown (www.hl.co.uk).

So I did

I put money away each month into a couple of different Multi-Manager funds they run (http://www.hl.co.uk/funds/multi-manager-funds) which spread out your investments for you without requiring any micromanagement which is beyond my time and abilities. They've got different funds depending on how much risk you want to expose yourself to. It's dead easy and seems to work well for me.

I'm pretty sure they offer similar services for other kinds of savings.

I've heard http://www.moneysavingexpert.com/ offers a lot of good advice too.

Interest rates do suck royally at present.

 

[Scouse]

Stick it all on red m8. Red.

It's a sure winner.

RED.

 

[Tilda]

Thanks for the advice.

I guess I really should have put more information in my original post. This is an investment that I'm looking to make for about 1-2 years, for exactly the reason you state Cadelin. Myself and the missus currently have about 30k in a savings account that we intend to use as our down payment when the time comes (soon if I have my way). The amount of interest it's making is making me sick and I mentioned this to my father in law who suggested we look at Vanguard mutual funds as a possbiel investment. So what I'm looking at is something of a low to medium risk over a 1-2 year period.

You're assessing yourself as low risk, which going on that means you need to make safe investments. ie, bonds, gold, low risk shares.
If you want a quick buck for a house in 2-3 years, thats a far higher risk and therefore you should invest in riskier stuff. But, that said, dont invest more than you can afford to lose. If you work on the basis that anything you invest is lost, then what you get back is obviously a bonus.
Its certainly possible to win big, but equally possible to crash and burn and lose everything.

 

[Cerb]

I am afraid your best bet is almost certainly cash in an interest account for that period of time. Interest rates suck at the moment, but even a brilliant investment will maybe get you a few percent more which on 15k is £300 extra. But if something bad happens you might not be able to afford that deposit on your house.

But really with the fund I'm looking at...something like this - https://personal.vanguard.com/us/funds/snapshot?FundId=0071&FundIntExt=INT then It looks like if I invest say....10k for example.....the only time it's lost money in the past 10 years (6% loss) was in 2008 when the market tanked and every other year it's been at least 4% and at times closer to 10-15% interest. Right now the savings account is netting me something like 0.5% interest.

I'm not really looking to make this investment to MAKE the money to put down a down payment per say....it's more that I want to be getting more out of that money while it sits there waiting to be used.

So I think I can stomach a loss of maybe 5-600 for the opportunity to more likely make 6-7 hundred.

 

[rynnor]

My advice is dont take anyone elses advice - better than getting screwed by some idiot fund manager and you may find you are good at it.

 

[taB]

I've been in a similar situation over the last couple of years (sold flat, had cash, now bought house with wife) and I used a good savings account rather than getting bogged down in investment stuff.

I think the big problem you have is that your money is sitting there doing naff all at .5%. The immediate solution is to get it into an account paying 2.5-3% interest at the moment. See http://www.moneysavingexpert.com/savings/savings-accounts-best-interest for an up to date list. Only once that is done would I start looking at the other options.

 

[Cadelin]

But really with the fund I'm looking at...something like this - https://personal.vanguard.com/us/funds/snapshot?FundId=0071&FundIntExt=INT then It looks like if I invest say....10k for example.....the only time it's lost money in the past 10 years (6% loss) was in 2008 when the market tanked and every other year it's been at least 4% and at times closer to 10-15% interest. Right now the savings account is netting me something like 0.5% interest.

The problem is the length of time you have to invest. A good rule of thumb is for investment in stocks and shares you want to be able to put your money away for at least five years. From reading the webpage you linked to it says:

Risks associated with Conservative to Moderate funds
Vanguard funds classified as moderate to conservative are subject to low-to-moderate fluctuations in share prices. In general, such funds are appropriate for investors with medium-term investment horizons (four to ten years), for those seeking an investment that emphasizes income rather than growth, and for investors who have a low tolerance for the risk of short-term price fluctuations.

That particular fund does appear to have low fees although it doesn't perform as well as the benchmark. Personally I would try and find a higher interest paying account and then look to invest when you have got your house. It's of course your choice, just remember there is no such thing as a free lunch, if the rewards are higher then the risk will be higher as well, even if it isn't immediately obvious.

 

[Scouse]

Keeping your money in a bank account means that it's losing value because of inflation.

 

[Chilly]

Unless you're actively researching the market, only bother with stuff like FTSE-100 trackers or cash ISAs. Anything else is, literally, gambling. If you *need* the money in 2 years, you can live with losing a few quid and sticking it in a savings account.

If this was pension-grade investment it would be very different.

 

[opticle]

Unless you're actively researching the market, only bother with stuff like FTSE-100 trackers or cash ISAs. Anything else is, literally, gambling.

That's why Stocks & Shared ISA managed by a decent company is a good idea, no ?

I seem to get much better interest rates with it - obviously there's more risk than a Cash ISA, but I'm planning on Saving over a long period of time and they have lower risk managed funds too (different % of equity, capital, etc.) so I can keep a ratio of risk/safety.

I'm pretty new to it so my knowledge and understanding is pretty teeny I just do as my dad tells me as he's been pretty successful with careful (not risk taking) investment.

 

[Chilly]

That's why Stocks & Shared ISA managed by a decent company is a good idea, no ?

I seem to get much better interest rates with it - obviously there's more risk than a Cash ISA, but I'm planning on Saving over a long period of time and they have lower risk managed funds too (different % of equity, capital, etc.) so I can keep a ratio of risk/safety.

I'm pretty new to it so my knowledge and understanding is pretty teeny I just do as my dad tells me as he's been pretty successful with careful (not risk taking) investment.

Fund managers are the most useless people in finance. Let me tell you why. If you look at hedge funds, pension funds, mutual funds...any fund... and you look at their performance over the long term (decades) there are effectively none that beat the growth in the London stock market. Certain funds will do well for 5 years because they spot a trend or fluke (the latter is *way* more likely) but then start underperforming. The problem is that the fund managers get paid no matter what. So even if they do actually match the growth in the stock market over a long period, they still take their 1.5% out a year when you could pay a third of that for a vanilla market tracker and get a better result.

By investing in the stock market as a whole, and not pretending to be able to pick winners, you trust the management of some of the largest companies on the planet to get more greedy and grow and invest. They are better placed than fund managers to sniff out new commercial opportunities and are properly incentivised to do so (options, bonuses, etc). Fund managers, with a few extremely rare exceptions (Mr Buffet, for example, who plain old whoops everyone) do worse than the market and somehow get paid to do it. But people like you and I rarely get access to that kind of rare winning fund (minimum $50m buyin, etc).

I cannot reiterate enough just how much of a scam the fund management market is. I'm not a financial adviser, and I've seen people make loads with cunning fund choices, but, really..it's all just a fluke. It's making money in a rising market a bit faster than the next guy.

 

[Chilly]

And another point. Our parents had it fucking *easy* with investments. They've enjoyed, on average, 15% year on year growth in the stock market since they were in shorts. I'd take whatever someone of that age band says (for me, 60s) with a massive pinch of reality salt.

 

[opticle]

you could pay a third of that for a vanilla market tracker and get a better result.

Ta for that mate When you say vanilla market tracker, what sort of things are you referring to ? I am a total nub, but keen to learn a bit more - not necessarily to do anything about it, but just so I know what my options are

 

[Chilly]

Ta for that mate When you say vanilla market tracker, what sort of things are you referring to ? I am a total nub, but keen to learn a bit more - not necessarily to do anything about it, but just so I know what my options are

Just a plain old FTSE-100 tracker. Index trackers they are more formally called. You can track any kind of index you like (oil prices, forex rates, etc) but you just want a basic uk equities one. Seriously, though, I'm not a financial advisor. If you're handling a lot of money, hire one, don't listen to nutters on the internet.

 

[opticle]

Just a plain old FTSE-100 tracker. Index trackers they are more formally called. You can track any kind of index you like (oil prices, forex rates, etc) but you just want a basic uk equities one. Seriously, though, I'm not a financial advisor. If you're handling a lot of money, hire one, don't listen to nutters on the internet.

Hehe don't worry - I'm not handling a lot of money or making any decisions based on this, just trying to learn a bit more

6 weeks down the road:
OptiCle: OMFG CHILLY ITS ALL GONE WHAT HAVE YOU DONE ????? :O

 

[opticle]

http://forums.moneysavingexpert.com/showthread.php?t=1211441

If you ignore the bits about the spam bot, it's quite interesting, I don't understand all of it but

the FTSE100 tracker has managed to finish nearly bottom over the last 10 years with mostly managed funds ahead of it

They seem fairly down on trackers, but say that if you go for one, take an FTSE Allshare tracker rather than a FTSE100.