ISA tracker fund where commissions are refunded

It's one of my favourite bandwagons, but consider buying Exchange Traded Funds into your Maxi ISA. Bought and sold as shares, they're trackers without the painful fee structure. Most are provided by Barclays iShares. Because they're effectively shares, not funds, you can chop and change as often as you like, but you don't pay Stamp Duty on your purchase, because that's already been paid by the fund itself buying its underlying instruments, and is factored into the buy/sell price spread. You get divis, based upon those from the underlying instruments.

There's a fair few quoted on FTSE, but many more on NYSE. Can't remember offhand if there's any problem holding US stocks in an ISA; any specialists here know?

Jon

In message , Guttorm Christensen writes

I dont see how investing in a tracker matches your high risk/reward strategy.

How can you select a 'tracker' without defining what index you want to track?

Trackers = mediocrity and an over exposure to 2-4 shares.

Dont get messed up with charges, just compare funds using post charges absolute performance.

I think you should disregard the 100s of useless funds and look at some decent bottom up stock pickers with long term performance such s Jupiter (Income & European), Fidelity Special situations, Gartmore UK Focus (which works well for me when saving monthly and benefiting from pound cost averaging), Invesco Perpetual Income etc.,. Go for £50 each into 4 of these type of funds and £50 into a UK FTSE tracker and see what happens.

I have one a Legal & General UK Index:

Bear in mind that for equities, there is little advantage in putting them in an ISA unless you are a higher rate tax payer. You no longer get any tax rebates on dividends, and capital gains are in any case only taxable to the extent that they go over your annual exemption. In some cases the management fee is more expensive in an ISA than outside.

If you are planning to invest in gilts or bonds, then it is beneficial to put them in an ISA to save paying tax on the interest.

You can have several mini-cash ISAs, but only one can be active in each financial year.

You might like to look at

and see what they have to say about UK Equity funds, comparing them with the indices. You may find that the average equity income fund is better than trackers.

Depends on the tracker. iShares FTSE/Xinhua on NYSE (FXI.A), for example, is definitely in that category.

True for FTSE 100 and Dow 30; less so for minor UK/US indices (think Techmark, NASDAQ small caps, etc.), and volatile overseas indices (dragon, South American and subcontinent economies in particular).

Jon

Yes, doesnt all of this show that trackers can only ever be mediocre for their market? By their very nature?

In message , Jonathan Bryce writes

Most UT/OEIC based ISAs give you the wrapper for free.

What you say about tax etc., is true, but if the wrapper is free you may as well take advantage of it because there is no need to mention them on tax returns or record any details of them whatsoever during their existence; it means they are definitely out of the CGT net no matter what, so (for e.g.) if your parents are still alive and you eventually inherit a wodge of dosh, you dont have to subsequently make loads of back calculations over many years to check you have no CGT on that monthly savings of £250 (which would be a nightmare without the wrapper), and finally (and a very important one) - if you are using ISA wrappers for you post retirement planning (and in my view this is hugely preferable to a formal Pension Plan) then at some future time you may wish to convert your equity UT/OEICS into fixed interest funds, and at that time the interest will still be free of tax. If you had invested in bare UT/OEICS then when you switch to fixed interest, the income derived would be taxable.

Overall, if you are investing in collective investments, then always go for an ISA wrapper.

In message , Terry Harper writes

Sorry to be a pain, but perhaps you should say that you can only CONTRIBUTE to one in each financial year. (you still withdraw form the others)

Yes, that's a better definition of "activity".

compared

• john boyle, Nov 24, 2:48 pm:

Sorry I was thinking high risk / reward in equities rather than bonds or cash etc.

I appreciate that there are alternatives that would allow allow higher rewards and risks, for example single shares or issuing options (oh dear) but I feel rather uneasy with these...

Do you think it's a bad time buying US shares due to potential of the dollar to fall in value at the moment? Of course in a few years (4?) it may well recover...

cd

You won't get two consistent answers to that question! Right now, the dollar's pretty weak against both sterling and Euro; gut feel is it could go either way in the short term, and maybe recover in the medium term, but fercrissakes don't make an investment based on my opinions of FX movements!

Jon

Sure, but that still beats the vast majority of non-tracker funds, which on average underperform the underlying indices.

The trick, if you want high risk/high reward, but with a little protection against individual equity failures, is to pick ETF trackers in markets or sectors with those risk profiles. Conveniently, that seems precisely to match the OP's specific requirements.

Jon

In message , Guttorm Christensen writes

OK, that makes sense.

Yes, if you feel uneasy, then avoid them.

BUT, trackers arent the answer for decent collective investment in the market. Look at the funds Ive already mentioned, you may be surprised.

Im glad you agree that point.

Yes, you are absolutely right - but this is a meaningless statistic because the vast majority of managed funds are either complete crap and only an imbecile or a victim of a tied salesman would buy one, OR the fund sets out to do something other than provide UK 'equity' style returns, such as Fixed Interest or Property Funds or other geographical sectors.

But because the majority of cars are crap doesn't mean there isn't a Ferrari here or there.

There are only a few 'decent' fund managers who are consistently good and, in general, they are 'bottom up stock pickers', not 'top down asset allocators'. I have already mentioned some names. If you go back in this newsgroup, say 7 or 9 years (?) then you will see I was naming three of those funds then.

Again, if you are tracking an index, you are investing in mediocrity, as you have already admitted. An index consists of risers, and fallers.

Although I don't have these numbers for hand, my memory tells me that it is the other way around if you consider management charges etc? Do you have any stats?

I won't labour the point as everyone has an option, but mine is that a tracker fund is riskier that a well managed fund - a tracker will fall as the index does, whereas a manage fund will be able to seek opportunities or go more defensive.

There are a lot of quotes around about trackers outperforming x amount of actively manage funds, but it comes down to choosing the right investment house/manager/fund - I personally rate artemis and rathbones. I'd personally avoid fidelity special sits, it has the history and a good name, but is consistently outperformed by similar funds and is becoming too large a beast to handle - that isn't to knock Bolton, he's done a good job, I just feel it's had its day (or years!).

Regards,

Matt.

I'm not keen on the term "mediocrity". It's an emotionally-loaded term.

I certainly concede the point that an ETF tracker is never going to be as volatile (or expensive, in terms of spreads) as the smaller-cap equities that it includes.

A really good fund manager should be able to beat the index or sector they're investing in, but -- as you agree -- there are few enough of them around. I do agree with your list of funds as good general investments; they're certainly peer-beaters, although only the Gartmore fund is anywhere near high risk.

What I don't understand about the majority of fund managers, and maybe you've some insight -- why the heck is anyone paying them real, folding money to invest less competently than a well-versed amateur, or even (this is the shocker) the *average* amateur?

So does a fund! Bit of a shame that the more inertial fund managers don't remember to offload bad performers...

Jon