Question
Like most poeple my funds have lost money at present, as the index is down I was thinking of getting a tracker fund which will hopefully go up when the index improves. Do you think this is a good idea, and if so could you suggest a fund. I normally go through Hargreaves Landsdown.Answer
It's very difficult gauging when stock markets will stabilise and subsequently rise (so that we all start making some money again!). My concern is that the root causes - worries over debt and sluggish economies - won't vanish overnight and could be here to stay for several years.
By all means consider betting on a recovery, but just be prepared for lots more volatility over coming months and potentially well into next year and beyond. I think you'll probably be fine if you can invest for 5-10 years and, of course, there's always the chance you'll turn a decent profit far more quickly. But, as you can probably tell, I'd be inclined to err on the side of caution.
Trackers would be a cost effective way to bet on a recovery, just bear in mind that around 20% of the FTSE 100 is accounted for by the oil/gas sector and about the same again by financials, so big movements in these sectors will have a large impact on the index. Given financial stocks have borne the brunt of recent falls this may be no bad thing when markets do pick up.
Alternatively, you could consider investing in an aggressively run actively managed fund on the basis they've probably been harder hit by the recent downturn hence may have more upside during recovery - albeit this is obviously a higher risk route and you may well hold such funds already.
Or, if you'd rather be more cautious, consider high yielding equity income funds. You might not benefit as fully from any upturn (versus the index or more aggressive growth funds), but the dividends and nature of the underlying investments (probably fairly dull cash rich companies) might help better weather any shorter term storms.
While Hargreaves Lansdown have their merits they don't cater that well for trackers, because most trackers don't pay trail commission meaning HL will charge you 0.5% a year (capped at £200). Nevertheless, according to their website you can invest in HSBC trackers (which charge 0.25% a year) without having to stump up the extra 0.5%, so this could prove a viable option.
Like most poeple my funds have lost money at present, as the index is down I was thinking of getting a tracker fund which will hopefully go up when the index improves. Do you think this is a good idea, and if so could you suggest a fund. I normally go through Hargreaves Landsdown.Answer
It's very difficult gauging when stock markets will stabilise and subsequently rise (so that we all start making some money again!). My concern is that the root causes - worries over debt and sluggish economies - won't vanish overnight and could be here to stay for several years.
By all means consider betting on a recovery, but just be prepared for lots more volatility over coming months and potentially well into next year and beyond. I think you'll probably be fine if you can invest for 5-10 years and, of course, there's always the chance you'll turn a decent profit far more quickly. But, as you can probably tell, I'd be inclined to err on the side of caution.
Trackers would be a cost effective way to bet on a recovery, just bear in mind that around 20% of the FTSE 100 is accounted for by the oil/gas sector and about the same again by financials, so big movements in these sectors will have a large impact on the index. Given financial stocks have borne the brunt of recent falls this may be no bad thing when markets do pick up.
Alternatively, you could consider investing in an aggressively run actively managed fund on the basis they've probably been harder hit by the recent downturn hence may have more upside during recovery - albeit this is obviously a higher risk route and you may well hold such funds already.
Or, if you'd rather be more cautious, consider high yielding equity income funds. You might not benefit as fully from any upturn (versus the index or more aggressive growth funds), but the dividends and nature of the underlying investments (probably fairly dull cash rich companies) might help better weather any shorter term storms.
While Hargreaves Lansdown have their merits they don't cater that well for trackers, because most trackers don't pay trail commission meaning HL will charge you 0.5% a year (capped at £200). Nevertheless, according to their website you can invest in HSBC trackers (which charge 0.25% a year) without having to stump up the extra 0.5%, so this could prove a viable option.
Read this Q and A at http://www.candidmoney.com/questions/question554.aspx
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