View on Fidelity Moneybuidler Asset Allocator fund?

Question
Is the Fidelity Asset Allocator a good isa for cautious investment over a 5-10 year period?Answer
The concept behind the Fidelity Moneybuilder Asset Allocator fund is very sensible. It invests across stock markets, corporate bonds, commercial property, commodities and cash using tracker funds to keep costs down. Total annual charges are 0.92% (based on Fidelity's published total expense ratio) which is competitive.

But will it prove successful?

This is a bit harder to answer. The fund's manager, Trevor Greetham, has an indifferent track record of running multi asset funds for Fidelity to date. So it's hard to get enthused about the positive impact he might have on the fund. My other main negative would be that property trackers track property company share prices, not actual bricks and mortar, which loses some of the diversification benefit - although it obviously helps reduce costs.

In order to assess risk it's important to look at how the fund invests its money and this is where Fidelity is really unhelpful - it still hasn't published these details on its website despite the fund being launched in October 2011. Given the fund sits in the IMA Mixed Investment 20-60% shares sector - the stock market exposure could range between 20-60%,which is a significant variance in potential risk.

Because of the above I can't answer your question on whether it would suit a cautious investor, but provided it's not taking excessive stock market exposure then I think it's worth considering. It's not the sort of fund that will likely be a top performer, but it provides a simple low cost way to access a variety of asset types - albeit probably without much flair.

But I must re-iterate, until Fidelity starts to publish the underlying holdings I'd steer clear. It's never to wise to buy funds when you don't know how they're investing your money.

Read this Q and A at http://www.candidmoney.com/questions/question591.aspx

Can I find a good IFA?

Question
I'm new to investment and suddenly have something over £50K to invest. I have some other savings, ISAs and a few shares in the likes of Glaxo, British Gas and BT. I need advice I can trust to review what I have and plan investment for income and tax-efficiency.

How do I find an adviser I can trust and who can help me take my decisions - and who is not just offering standard products to deliver commission? I know I can look up lists of independent advisers, but how do I chose? I am aware of Bestinvest and others mentioned on your site : will they just give me their corporate plan, and is any of them to be preferred?Answer
It's sad to say, but I think the most realistic answer is 'with difficulty'.

The trouble is a lot of IFAs are not that clued up on investments. They're generally proficient at tax planning and looking at the big picture, but many resort to expensive funds of funds or rudimentary portfolios made up of popular funds rather than constructing a decent bespoke portfolio to suit your needs.

Then there's the conflict of interests in how they're paid. Commission based advisers have an incentive to sell (although in fairness the rates across unit trusts tend to be fairly uniform) while fee based advisers might want to clock up the hours (unless they offer you a fixed price) - plus you won't usually get to see the quality of their advice until you've handed them a cheque for the work.

And perhaps the worst of both worlds are the supposedly independent advisers who are incentivised to flog their company's own range of funds - I'd avoid these at all costs.

I'm sure there are some good IFAs out there who offer excellent value for money advice and service, the trouble is I just don't know of any...

Bestinvest offers an investment advisory service, where an adviser will review your portfolio and make suggestions for new investments (paid for by trail commission). When I used to work there the minimum for this service was £50,000, but they seem to have stopped publishing the minimum amount required, which suggests they move the goalposts depending on how keen they are for the business. If you only want to focus on investment advice it would be worth speaking them so you can compare to others, but bear in mind if you want advice on other areas you'll need to pay extra fees to one of their IFAs.

Otherwise, all I can suggest is getting a list of local advisers from the likes of www.unbiased.co.uk and asking some rigorous questions to help you form an opinion. For more guidance on the types of questions to ask (and pitfalls to watch out for) take a look at or financial advice page.

Incidentally, my struggle to answer your question had reminded me to re-focus some energy on a desire I've long had of launching a high quality low cost IFA. There's a lot to grapple with (and time has unfortunately been incredibly precious lately), but I'll obviously update the site if/when I progress it further.

Read this Q and A at http://www.candidmoney.com/questions/question584.aspx

Cost of buying US shares?

Question
I'm familiar with the cost of buying and selling UK shares ie stamp duty, dealing cost, capital gains (via Halifax).

What is the case with US shares eg Microsoft, Walmart?Answer
Let's look at each cost in turn.

Some UK online stockbrokers now offer US share dealing at the same price as UK shares, so the dealing fees can, in theory be the same. For example, Halifax Sharedealing charges a fixed £11.95 per trade.

There's no UK stamp duty to pay when buying US shares and the US doesn't have an equivalent tax. However, you'll incur some foreign exchange charges, as the shares must be bought and sold in US dollars. For example, Halifax adds a 1% margin to the exchange rate, so buying then subsequently selling the shares will effectively cost you 2%.

Also bear in mind that currency movements will affect the value (in £) of your shares. For example, buy $1,000 of shares at an exchange rate of £1 = $1.6 and it'll cost you £625. If the exchange rate moves to £1 = $1.5 you'll make a £42 profit, but if the pound strengthens to £1 = $1.7 you'll lose £37.

Tax on dividends and gains is subject to tax in the UK, not the US. However, the US normally withholds 30% tax on dividends unless you complete form W8-BEN (which should be supplied by your stockbroker), in which case it's reduced to 15% and deemed to be paid net of UK basic rate tax by HMRC. So you can make your income and capital gains tax calculations as normal.

Good luck!

Read this Q and A at http://www.candidmoney.com/questions/question593.aspx

Finding historic fund prices?

Question
Can you recommend a website which lists historical daily prices of funds over the past 12 months . Many Thanks.Answer
The closest to what you're looking for is the FT funds website, which provides historic prices for funds over the last 7-8 months. Search for a particular fund then click on the 'historical prices' tab displayed at the top of the fund factsheet.

If you want to go back further, some fund managers publish this information, but obviously only for their own funds. Examples include Henderson and Standard Life.

Hope this helps.

Read this Q and A at http://www.candidmoney.com/questions/question588.aspx

Sell RBS step-up bond?

Question
I own a 20 year step-up bond from RBS which I bought earlier this year. My plan was to use it for retirement revenue stream. However I see par is down below 80 now which concerns me if I chose to sell before maturity. Do you see this getting worse due to European mess and would you sell to cut losses or sit tight?Answer
I'm afraid I can't find a 20 year version of this bond, so have answered on the basis of the 7 year version. If there is a 20 year version perhaps you could post details below and I'll append my answer, thanks.

The RBS Step Up Bond is a corporate bond issued by the bank that promises to pay a fixed return over 7 years before redeeming the bond. The fixed return comprises interest of 3.3% in year, rising to 8.55% in year 7, averaging 5.3% p.a. over the period.

I'm afraid it's taken me a while to answer your question, but on the bright side the bonds are now trading at 105p (at the time of writing). The bond's price between now and maturity depends primarily on the market's perception of the likelihood tat RBS can afford to make all interest payments and redeem the bond in full at maturity. The recent rises in price suggest fears over default have subsided, but more economic turmoil could see them re-surface. Inflation and interest rates are the other key factors affecting price. If inflation and/or interest rates is expected to rise this would likely push down demand for the bonds, hence their price. And, of course, vice-versa.

Provided interest rates remain low (which looks likely for at least the next year or two) then the bond will become increasingly attractive as the interest payments rise, which is a strong argument for holding onto them. However, further eurozone trouble looks likely and this might hit price, which is an argument for cashing in.

Provided this investment is only a small part of your portfolio I'd be inclined to take the risk of staying put. I think there's a fairly good chance everything will work out fine over the remaining 6 years.

However, if it represents a big investment then perhaps consider taking some risk off the table by selling part of your holding, just in case the worst happens.

Read this Q and A at http://www.candidmoney.com/questions/question586.aspx

Is Cavendish Online safe?

Question
How safe is an ISA investment with Cavendish Online (i.e. what would happen if Cavendish Online were to go bankrupt?).Answer
Cavendish Online doesn't hold your money or investments, it simply acts as a broker to collect sales commissions and pass them onto you. So, if they were to go bust, your ISA investments would be unaffected.

I suppose you could theoretically lose any trail commission refund that Cavendish was holding for you at the time of going bust, but this would be the extent of your exposure.

You would have the inconvenience of having to appoint another discount broker as 'agent' for your ISA(s), so that you could continue receiving commission rebates. And at present the other brokers out there aren't as generous as Cavendish, so the rebates would likely be lower.

What happens if the fund supermarket (e.g. FundsNetwork) goes bust? Provided they haven't illegally dipped their fingers into your investments, then again your ISA would be safe. This is because the funds within your ISA are ring-fenced by a 'custodian' (usually a third party bank) from both the fund manager and fund supermarket, meaning it's held separately from their businesses.

If something illegal does happen, the Financial Services Compensation Scheme (FSCS) currently provides cover of £50,000 for the fund supermarket and £50,000 per underlying fund management company. More details in my answer to this question.

All in all, there's very little to worry about, but if you want to ere on the side of caution then restrict your fund investments to £50,000 per fund group and use a well established fund supermarket/platform.

Read this Q and A at http://www.candidmoney.com/questions/question585.aspx

Obliged to buy a pension annuity?

Question
My husband has been paying into a private pension with Standard Life for the past 25 years, paying about £250 per month. He is self employed.

It is doing really badly: at the last review he would only get £3000 a year. He is 66 and plans to keep working because the anticipated pension is so poor, Even if he works till 75 he will only get around £5000 - that was until recently when we heard that people who have not yet sorted out an annuity might get a third less than three years ago!

My question is: does he HAVE to take out an annuity with the accrued money, or could he just get back the total cash sum he has invested?

I know you can shop around for annuities, and he might be eligible for an impaired life annuity because he had a heart attack eight years ago, but he feels that at £3000 a year he would never get "value for money" from the money he has paid into the pension.Answer
Unfortunately it's not generally possible to take all of a pension fund as cash at retirement. The one exception is if you have overall pension rights (which includes the value of all your pension fund(s)) of less than £18,000 (for 2012/13 tax year), in which case you can withdraw it all subject to three quarters of the amount being taxed as income in the year you take it.

In your husband's case he can take up to a quarter of his pension fund as a tax-free lump sum, but the remainder must be used to provide a retirement income. The usual route is to buy an annuity, although it's possible to leave the money invested and draw an income instead (technically called an 'unsecured' pension).

Drawing an income can make sense if the pension pot is large enough to provide sufficient income while weathering difficult markets. But on smaller funds big market falls could leave too little money to sustain a reasonable income, making this approach too risky.

I'm afraid your husband has suffered from the double whammy of poor investment performance and falling annuity rates. The poor performance is likely due to falling stock markets while rising gilt prices have reduced annuity rates (as insurers buy these to back the annuities). Unfortunately it's been a vicious circle, as the key driver of rising gilt prices has been volatile stock markets...

High pension charges may also be a culprit, as they're generally quite horrific on pensions taken out 25 years ago - primarily due to the extortionate levels of pension sales commissions that prevailed in that era.

As you mention, his best bet will be to shop around for an impaired life annuity. It would certainly worth speaking to a few independent annuity brokers such as William Burroughs and MoneyMinder to compare quotes.

Read this Q and A at http://www.candidmoney.com/questions/question583.aspx

View on Fisher Investments UK?

Question
First I'd like to congratulate you on your website. Next, may I ask whether you or your readers have any views (good or bad, so long as they are publishable) on the services of Fisher Investments UK.Answer
Glad you like the site.

I'm afraid I don't know much about Fisher Investments UK, but hopefully the following might be of some help.

Fisher Investments is a successful business in the US, run by the prolific Ken Fisher - who's written a number of books on investing and is a high profile media pundit. However, the UK business is far lower key, although it obviously trades on Fisher's profile and investment philosophies.

Fisher Investments UK seems to target individuals with £250,000 or more to invest in Fisher's discretionary investment service, i.e. you give them your money and they run the portfolio as they see fit. I believe Fisher uses their own range of funds to achieve this (much like Towry) rather than running a truly bespoke portfolio service. Reading their investment literature suggests a high bias towards global equities, the US in particular. I don't know how well they diversify across other asset classes such as bonds, commodities and property.

The key with discretionary management is obviously performance and in this respect I'm afraid I can't help - Fisher doesn't publicly publish any sample portfolio figures (which sadly tends to be the norm), although I gather they supply these if you meet with them in person. They also don't publish details of charges on their website, I'm always wary of financial advisers/investment managers who don't do this. if you're competitive then why not let everyone see...

My only contact with the Fisher Investments UK has been bumping into a couple of ex-colleagues when they were working there (they've since left). I think it's fair to say both are quite sales orientated individuals rather than technicians, so I suspect the company's approach is to employ advisers (salesmen?) to pull in clients with other investment professionals within the company running the portfolios. Nothing necessarily wrong with this, in some ways it's a sensible delegation of labour and an approach used by a number of discretionary management companies, but it means your adviser won't be the person running your portfolio.

Provided you're comfortable with a company that sells its own investment service and don't require a fully bespoke portfolio then I can't see the harm in meeting them to find our more. But, as with any investment company, be sceptical, ask lots of questions about the investment process and service you can expect to receive and ensure you fully understand all charges involved.

Read this Q and A at http://www.candidmoney.com/questions/question581.aspx

Have I been sold funds of funds?

Question
I read in Money Mail an article on "funds of funds". I have seven Standard Life funds invested with Skandia
on the advice of my Financial Adviser
.
Could these be thought of as "funds of funds"?Answer
Standard Life offers 25 funds (at the time of writing) via the Skandia fund platform, but none of these are funds of funds.

The simplest way to think of Skandia is as a company providing a 'wrapper' around funds from numerous different fund managers (of which Standard Life is one). This wrapper makes it straightforward to switch investments from one fund group to another and mix lots of different funds within an ISA or pension. Skandia charges for the privilege, charging customers £68.50 a year for use of the wrapper and charging the fund providers around 0.25% a year.

This is not the same thing as a fund of funds, which is when a fund manager invests their fund into a number of other funds, rather than directly into shares or corporate bonds etc.

In effect, the aim of a fund of funds is to try and offer a ready-made fund portfolio, saving you (or your financial adviser) from having to select and monitor a range of funds yourself. In this respect, they're not necessarily a bad idea.

However, customers end up paying for the privilege, as they have to pay management charges levied by both the fund of funds manager and the underlying funds held. Typically this means an annual fee of 1.5% to the fund of funds manager plus around 0.75 - 1% to the underlying funds (which tend to be charged at cheaper 'institutional' rates), so total annual charges will usually be between 2-3%, which is steep.

My other gripe is that some financial advisers use these funds because it makes their lives easier, not because it's best for their customers. Researching and recommending funds of funds is far easier than building bespoke portfolios of conventional funds. Yet financial advisers generally receive the same amount of sales commission whichever route they choose. It's not surprising some take the easier option.

Anyway, Skandia is a decent wrapper/platform on which to hold your funds and it doesn't look like you own any funds of funds. But I'm a bit surprised your adviser has recommended seven Standard Life funds. Yes, they have a few good funds, but a key benefit of using a wrapper is the ease with which you can spread money across different fund providers, i.e. pick the best funds for the job rather than being shackled to just one company. So it's strange your adviser seems so loyal to Standard Life. I'd ask him/her to justify their advice.

Read this Q and A at http://www.candidmoney.com/questions/question580.aspx

How to invest in REITs?

Question
I wish to start investing into Commerical Proeprty REITS, however, I am not sure how best to go about this - i.e. to actually start trading.

I am looking to invest approx £200 per month on REITS, as I have knowledge in Commercial Property.

Are you able to reocommend how I go about this process - all these different / brokers (etc) confuse the hell out of me !!Answer
As I'm sure you already know, REITs (Real Estate Investment Trusts) are simply a special type of investment company that invest in commercial property. The key benefit over traditional property companies is that provided they adhere to a set of rules (primarily that they distribute at least 90% of income to shareholders) then the company is exempt from corporation tax and capital gains tax on its property portfolio.

REIT investors receive 'Property Income Distributions' (PIDs) instead of dividends. They're paid net of basic rate tax, with higher and top rate taxpayers having to pay the balance at their marginal rate, e.g. if a higher rate taxpayer receives £80 they'll have to pay a further £20 of tax (gross PID was £100, £20 basic rate deducted then £80 paid out, further 20% of £100 owed). However, PIDs can be received gross, hence tax-free, by pension funds and ISAs.

As REITS are companies traded on the stock market you can buy and sell them via a stockbroker. As you want to save on a monthly basis I'd consider a broker who offers a low cost regular monthly dealing option, such as Interactive Investor or Halifax Sharedealing, who charge £1.50 and £2 per monthly trade respectively. Alternatively you could trade ad-hoc with low cost stock brokers like x-o.co.uk or jpjshare who charge under £6 per trade, although this would obviously add up on a £200 monthly investment.

I guess my main word of caution regarding REITs is that although they're fundamentally property investments, they're more correlated to stock market movements than bricks and mortar, i.e. the share price of the underlying property companies might be affected by general stock market movements independently from the value of the underlying property portfolio.

Many UK REITs are (at the time of writing) trading at a discount to their net asset value (NAV), i.e. the value of the company based on share price is lower than the value of the property it owns. The average discount to NAV is around 17% (you can view details on the REITA website). If the discounts narrow this will be good news for existing investors, but if there's a downturn in sentiment for the sector, or stock market generally bomb, they may widen further.

Rather than buy a specific REIT you also have the option to track an index of REITs, either in the UK or overseas. There are a number of Exchange Traded Funds (ETFs) that do so, for example take a look at iShares.

Finally, you can also invest in managed funds that in turn invest in a selection of REITs. This provides diversity and makes investing in overseas property straightforward (as does the ETF route), but you'll have the pay the fund manager around 1.5% or more in annual fees and they might have bad judgement.

I hope my answer points you in the right direction.

Read this Q and A at http://www.candidmoney.com/questions/question577.aspx

View on DB Capital bonds?

Question
I have received following message from Interactive Investor. It is too good to be true. Your suggetion please
Invest in High Yield Two Year Bonds*

Minimum investment £2,000

Click here to register FREE on the exclusive DB Capital plc Private investor Platform

DB Capital is authorised and regulated by the Financial Services Authority and Registered with the information Commissioner's Office

Registering does not commit you to anything at all now or in the future.

EITHER Earn high interest of 12%+ per annum**

OR Earn 6%+ interest per annum **
Plus a capital gain from the RISE or FALL in
Gold, Silver, Oil, FTSE, Dow Jones, DAX, CAC, Euro, US$, Yen**

OR Earn 6%+ interest per annum, inflation protected **
With the capital and interest index linked to the UK RPI or CPI **Answer
I'm struggling to find any information about this supposed investment opportunity. DB Capital Plc has applied to cancel its FSA authorisation and the company's website is 'under construction'. So I think it's fair to say it's no longer trading, at least as a FSA authorised investment company.

Based on the sketchy details in the email it does all look a bit too good to be true, with the advertised returns suggesting a fair amount of risk may be involved.

From the limited amount of information available on the Internet it appears the company was aiming to raise money from private investors and lend to businesses, using the interest paid by businesses to provide returns for investors (although the email extract above suggests an artificially constructed investment element too). Lending to businesses can be as safe or risky as the prospects for those businesses, I suspect this might have been at the higher risk end of the scale.

Anyway, looks like the company never got off the ground...probably just as well given the spurious nature of the product they were trying to flog. Interactive Investor is a decent website, so it's disappointing to see them pushing junk emails like this.

Read this Q and A at http://www.candidmoney.com/questions/question574.aspx

Should I sell my investments?

Question
I have four investments. One with halifax (just a small stocks ISA) one with Co funds, one with Aberdeen and one with the cooperative. All have lost considerably over the last few months, what is the the best action to take, or do I sit tight? they are all small lump sums, I am not currently paying in to any of the funds.Answer
It's difficult to give a fuller answer without knowing the specific funds you own, but I guess the bigger picture question is should you remain invested in stock markets while they're so volatile?

On the one hand, better to get out now if markets are likely to fall, on the other remaining invested means you'll benefit if they rise.

Trying to accurately predict whether markets will rise or fall over shorter periods of time (i.e. a year or two) is something of a fool's game - it's very hard to get right. But, at the risk of being proved a fool, I can't see much upside for stock markets over the next year. The Eurozone likely still has some big problems in store and many global economies remain fragile.

However, common sense and markets don't always go hand in hand. My views have been unchanged for at least a couple of years (and nothing much has really changed since then) during which time stock markets have generally risen - proving me wrong. Nevertheless, I still feel there's another downturn on the cards, which will probably be triggered by further Eurozone economies hitting the rocks.

Should you sell? If you were intending to invest for 10+ years then I'd be inclined to sit tight and ride the storm. Selling now might avoid future falls, but if markets surprise with healthy rises you'll lose out. And even if you sell now and markets do fall, timing your re-entry can also be difficult, as large rises often happen quickly.

It would certainly be worthwhile reviewing the specific funds you own, switching to potentially better alternatives if appropriate.

Read this Q and A at http://www.candidmoney.com/questions/question578.aspx

Can I save for children without access at 18?

Question
I'm a little confused over the best way to invest for our children. We are looking for a long term investment so guess stocks and shares the best option and to pay a monthly sum to try and balance the ups and downs of the market. We aren't interested in the new Junior ISAs as we know how we would have wasted money if we had access to it at 18!

At the moment I'm a bit blinded by the variety of options out there and not sure where to start!

Do you have any suggestions?

Answer
It sounds as though the key point is preventing your kids from blowing the money when they turn 18. Unfortunately, the only practical ways to stop them getting access to the money at 18 are to either hold it via a trust or hold it in your name (then gift it to them when you decide).

Using a trust will allow you to name the age at which the children will have access to the money. There are various types of trust available, but a discretionary trust is the most common for this purpose. However, using one will incur expense (you'll need a solicitor to set it up, which could cost a few hundred pounds) and any interest/income within the trust will be taxed. Your children may be able to reclaim the tax when income is distributed, but it means time consuming form filling. Unless the sums involved are large, a discretionary trust would probably be overkill and certainly not very cost effective.

Holding investments in your name is much simpler and cheaper, the main downside being that you'll be liable for any tax until the money is gifted to your children - although you could avoid this by holding savings/investments for your children via your own ISA allowance, if available. Another issue (from your children's point of view) is that you might change your mind in future and decide not to give the money to them!

You could make pension contributions on behalf of your children, which has worthwhile tax perks and can be cost effective using a stakeholder pension. However, they won't then be able to get their hands on the money until age 55 (and this might increase in future), which I suspect is longer than you have in mind.

Personally I'd use a Junior ISA or hold shares/funds in a simple 'bare trust' (just needs a simple form and savings/investments taxed as child's to make use of their allowances). Both give the child access to the money at age 18, but with a bit of money education hopefully they won't squander it all - especially if the money is invested as withdrawals won't be as easy as popping to an ATM.

Whichever route you use, the big decision is then what to invest in. I could write pages on this, but to keep things simple perhaps consider combining a low cost UK tracker fund with modest exposure to an emerging markets fund (assuming you have 10+ years until the children reach 18). It might be a roller coaster ride over the next few years but, as you point out, a monthly saving could help smooth this.

Read this Q and A at http://www.candidmoney.com/questions/question575.aspx