Trackers

I've a better option for you, one that you won't hear recommended by IFAs, because half of them haven't heard of them, and the other half wouldn't touch them, as they get no commission.

Exchange-Traded Funds. ETFs, for short.

They're traded like shares, so you get the spot price, not a price fixed at the end of the day by some fund manager. Spreads are very narrow. They don't attract stamp duty; the stamp duty in the underlying equities is absorbed into the spread, I believe. They're based on, and track, indices. You do get dividends, at a level appropriate to the underlying equities. You can hold them in a self-select ISA.

Tracking errors are usually pretty small: they have to be, as institutions holding big (£1m+) quantities can get them converted to the underlyings, and that's not an option the operators much like them to take.

Basically, if you're after a tracker, I can't find a single reason to invest in anything other than an ETF, but I'd love to be set right by the wise heads here. The only thing I'd be concerned about is whether the major indices are likely to move upwards over the next few months and years. Intelligent stock-picking may yield better, if you've the time to research.

Check out

for more details. As with all such advice: it's just information. Don't rely on it: do your own research. I don't want to be held responsible if things go pear-shaped.

Jon (who has no vested interest in ETFs)

You might like to try

where you can compare funds in various categories. They don't include tracker funds as a category, but when you find them, you should compare their performance with equity income funds.

Wouldn't it be better to invest in a fund that aims to outperform the index rather than one that just tracks it? In my view, if you are paying someone to invest in the market for you, you should get something better than the market average.

To answer your question, go to google and search for uk investment fund. There are numerous sites with fund information.

_________

The question is, can someone do better than chance? Can they do better than the difference between the cost of a managed fund (5%??) and a tracking fund (1%)? What are the chances of them doing worse than a tracker?

cd

Thanks everyone for your advice.

I thought I would try a small investment in a tracker after reading that managed funds, which charge more, don't always beat the FTSE

less if you use an ETF (0.1%?). Also if you use a discount broker like Intelligent Money you can get all the commission refunded and pay a flat fee instead.

I'm persuaded by the argument that income funds are better, as the average income fund beats trackers over longer periods due to the disipline imposed by the quest for higher yielding shares. But since it's a game of averages you would require a portfolio of income funds.

Daytona

Good judgement will beat chance. There are, of course, funds managed by people who do not possess good judgement that rely on luck. If you see it all as luck you may as well invest directly in footse companies yourself. A typical managed fund might charge 5% on entry and 1% per year.

Which fund are you thinking about that only charges 1%? That sounds a good deal if you get in and out easily.

________