Question
I have a lump sum to invest. Is it worth putting it in a OEIC and just leaving it there as I will not be able to add to it on a monthly basis?Answer
Maybe, but the key thing to consider is how your money is invested within the oeic.
Open-ended investment companies (oeics) are similar to unit trusts, i.e. they’re funds that combine your money with that from others and invest it according to an agreed objective.
There are lots to choose from and you’ll find oeics and unit trusts that invest in most areas, ranging from cash and corporate bonds to property, commodities and stockmarkets. So whether or not investing is worthwhile for you really depends on how comfortable you are owning the underling investments and the likelihood you’ll make more money versus leaving the cash in the bank.
The problem right now is that markets are so volatile and the outlook so uncertain I think the next year will be a particularly tough one in which to make money.
You should also bear in mind that the majority of fund managers who run oeics and unit trusts often struggle to beat the market, which gives rise to the argument for using index-tracking funds – although these don’t fare well in all markets.
If you’re happy to invest for 10+ years you’ll probably do better than cash, but you’ll need to be comfortable with the possibility of losing money, especially in the shorter term. If this will give you sleepless nights then consider a good fixed rate savings account or National Savings Index-Certificates instead.
Should you decide to invest then think carefully about how much risk you’re comfortable taking and do some homework to help pick a fund manager that’s likely to be successful, or opt for a tracker fund if available for the type of investment you choose. You could also consider drip feeding your money into a fund over a period of time to lessen the pain should markets fall just after you invest.
Finally, unless you need advice then using a discount broker should prove cheaper than buying direct from a fund manager. Take a look at our ISA Discounts Action Plan for more details.
I have a lump sum to invest. Is it worth putting it in a OEIC and just leaving it there as I will not be able to add to it on a monthly basis?Answer
Maybe, but the key thing to consider is how your money is invested within the oeic.
Open-ended investment companies (oeics) are similar to unit trusts, i.e. they’re funds that combine your money with that from others and invest it according to an agreed objective.
There are lots to choose from and you’ll find oeics and unit trusts that invest in most areas, ranging from cash and corporate bonds to property, commodities and stockmarkets. So whether or not investing is worthwhile for you really depends on how comfortable you are owning the underling investments and the likelihood you’ll make more money versus leaving the cash in the bank.
The problem right now is that markets are so volatile and the outlook so uncertain I think the next year will be a particularly tough one in which to make money.
You should also bear in mind that the majority of fund managers who run oeics and unit trusts often struggle to beat the market, which gives rise to the argument for using index-tracking funds – although these don’t fare well in all markets.
If you’re happy to invest for 10+ years you’ll probably do better than cash, but you’ll need to be comfortable with the possibility of losing money, especially in the shorter term. If this will give you sleepless nights then consider a good fixed rate savings account or National Savings Index-Certificates instead.
Should you decide to invest then think carefully about how much risk you’re comfortable taking and do some homework to help pick a fund manager that’s likely to be successful, or opt for a tracker fund if available for the type of investment you choose. You could also consider drip feeding your money into a fund over a period of time to lessen the pain should markets fall just after you invest.
Finally, unless you need advice then using a discount broker should prove cheaper than buying direct from a fund manager. Take a look at our ISA Discounts Action Plan for more details.
Read this Q and A at http://www.candidmoney.com/questions/question206.aspx
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