Nest Egg advice please!

[The Handler]

A while ago, I inherited some money and decided (after some advice) to invest it into the British stock market through an investment manager.

Having done some reading around, I learnt that I may be better off investing it into an index tracker fund directly and avoiding the costly management fees.

I guess I have three questions:

1) Does this sound like a good idea?
2) If so, how should go about finding a suitable tracker fund to invest into?
3) Should I diversify my portfolio by investing in bonds as well?

Thanks very much for people's advice in advance.

 

[amit1986]

A while ago, I inherited some money and decided (after some advice) to invest it into the British stock market through an investment manager.

Having done some reading around, I learnt that I may be better off investing it into an index tracker fund directly and avoiding the costly management fees.

I guess I have three questions:

1) Does this sound like a good idea?
2) If so, how should go about finding a suitable tracker fund to invest into?
3) Should I diversify my portfolio by investing in bonds as well?

Thanks very much for people's advice in advance.

Don't waste your money on these sort of things. Most fund managers lose money over time. Those who are actually able to make any money usually cost YOU money by their hefty commissions. Why would you just hand over your money to someone and think they would have any incentive to protect it?

Unless you're willing to manage your money yourself and make all the decisions as to where it goes, I suggest you invest in real estate. Not only are the returns greater, but you'll have something physical to represent your cash. Focus on finding property in prime areas - no matter how bad the economy, those places will not fall in value.

Don't just throw your money in an index tracker fund and hope the market will give you 10% a year for the rest of your life - it simply doesn't work like that.

 

[donaldduke]

A while ago, I inherited some money and decided (after some advice) to invest it into the British stock market through an investment manager.

Having done some reading around, I learnt that I may be better off investing it into an index tracker fund directly and avoiding the costly management fees.

I guess I have three questions:

1) Does this sound like a good idea?
2) If so, how should go about finding a suitable tracker fund to invest into?
3) Should I diversify my portfolio by investing in bonds as well?

Thanks very much for people's advice in advance.

We had lows in the stock market in 2002 and 2008, i reckon we are going to another chance to buy stocks cheap before this secular bear market in stocks comes to an end.
I would recommend keeping your powder dry until then.

 

[The Handler]

Thanks for the responses guys.

With regards to real estate, I probably should have mentioned that the inheritance is mid 5 figures, which doesn't seem enough to purchase a worthwhile property. I also prefer the liquidity of stocks.

Donaldduke, could you explain what you mean by 'keeping your powder dry'? Forgive my ignorance. Are you suggesting I should stay with the investment manager? If so, what would be the advantages of that compared to investing in a tracker fund? From what I've been led to believe, if they are, more or less, investing in the same thing, you're better off avoiding the management fees by taking the tracker fund.

Thanks again.

 

[donaldduke]

Donaldduke, could you explain what you mean by 'keeping your powder dry'? Forgive my ignorance. Are you suggesting I should stay with the investment manager? If so, what would be the advantages of that compared to investing in a tracker fund? From what I've been led to believe, if they are, more or less, investing in the same thing, you're better off avoiding the management fees by taking the tracker fund.

I was suggesting that if you do decide to go down the tracker route you might consider waiting for a large correction in the stock market before you invest in a tracker fund.
Only do this if you share my belief that there will be another correction similar to what we saw in 2002 and 2008. The risk of course is that the correction never happens.

 

[Pazienza]

It depends. Some managers are rubbish, some are mediocre, and some are excellent. Do your reasearch.

Personally, I think trackers are a waste of time. Find a good manager, or trade ETFs if you prefer. But sticking it in a tracker is for bummers.

Thanks for the responses guys.

With regards to real estate, I probably should have mentioned that the inheritance is mid 5 figures, which doesn't seem enough to purchase a worthwhile property. I also prefer the liquidity of stocks.

Donaldduke, could you explain what you mean by 'keeping your powder dry'? Forgive my ignorance. Are you suggesting I should stay with the investment manager? If so, what would be the advantages of that compared to investing in a tracker fund? From what I've been led to believe, if they are, more or less, investing in the same thing, you're better off avoiding the management fees by taking the tracker fund.

Thanks again.

 

[Pazienza]

I was suggesting that if you do decide to go down the tracker route you might consider waiting for a large correction in the stock market before you invest in a tracker fund.
Only do this if you share my belief that there will be another correction similar to what we saw in 2002 and 2008. The risk of course is that the correction never happens.

Secular bear market my arris DD. Fiver says you'll be waiting for your 08-style correction until the Book of Revelations starts happening.

 

[donaldduke]

Secular bear market my arris DD. Fiver says you'll be waiting for your 08-style correction until the Book of Revelations starts happening.

There is always the possibility we keep going up.

But its ONLY a 50% drop from current levels to take out the 2008 lows.

When the VIX goes to 50, the market falls 5% a day, day after day.

 

[Pazienza]

There is always the possibility we keep going up.

But its ONLY a 50% drop from current levels to take out the 2008 lows.

When the VIX goes to 50, the market falls 5% a day, day after day.

Enough of your prevaricatin'. Are you puttin' up the 5 note or not?

(Serious response - look at what it took to get us down there in 2008. We'd need to be looking at some bad sh1t to take us that far down again).

 

[donaldduke]

(Serious response - look at what it took to get us down there in 2008. We'd need to be looking at some bad sh1t to take us that far down again).

Maybe, or it could be that the market is in a multi decade range.. and was going to go down anyway, regardless of the news.

Anyway i accept your bet!

 

[Pazienza]

Maybe, or it could be that the market is in a multi decade range.. and was going to go down anyway, regardless of the news.

Anyway i accept your bet!

Goody! Let it be entered in the T2W betting book.

I'll let you choose the closing date.

 

[shewolf]

We had lows in the stock market in 2002 and 2008, i reckon we are going to another chance to buy stocks cheap before this secular bear market in stocks comes to an end.
I would recommend keeping your powder dry until then.

Agree 100% with this.

 

[Pazienza]

Agree 100% with this.

Want to put a fiver on it?

 

[shewolf]

Want to put a fiver on it?

I don't bet with people that are too poor to pay. You can't afford a fiver

 

[Jack o'Clubs]

I guess I have three questions:

1) Does this sound like a good idea?
2) If so, how should go about finding a suitable tracker fund to invest into?
3) Should I diversify my portfolio by investing in bonds as well?

Second post on here made me smile - gloom and doom about fund management / managers, but why not stick it all in property - nevermind that it's still a hugely over-valued asset class by most measures at least in the UK (which I assume is where you're based).

As to whether Pazienza or DD are right in whether to invest now or wait for a correction, who knows (although my opinion is in Pazienza's camp) - market timing is notoriously difficult for long term investing. Pazienza was also right about fund managers. A bit like anything, some are poor, most are average, a few are excellent. If you don't know that much about the markets or investing, then paying someone 1.5% to do it for you doesn't seem unreasonable and you don't pay any more for a good fund manager as you would a duff one. You just need to find them...

First, try and be as tax efficient as possible - if you open an ISA this year (ie to April 5th) and one on April 6th, you can get more than £20k squirreled out of the way of the tax man. If you've got a missus, you can both do it and get £40k in ISAs in the next month or so. Also think about pensions, another source of tax relief.

Second, make sure you go through a discount provider, personally I'd avoid an IFA as their advice is conflicted, and they don't know much more than you would after a weekend of reading up. I use Hargreaves Lansdowne who are excellent, although there are many others, basically you should not have to pay any of the 4-5% entry charges that are commonly quoted.

Third, if you want a balanced portfolio (you mention bonds) then, you may be better off in a fund where the manager is making those asset allocation decisions as well, ie a balanced managed, cautious managed, or absolute return fund. Again, a personal view, but the Ruffer Total Return fund (or similar) is worth looking at.

Fourth - www.trustnet.com is a very good online resource to get you going.

Hope that helps.

 

[donaldduke]

Secular bear market my arris DD. Fiver says you'll be waiting for your 08-style correction until the Book of Revelations starts happening.

lol paz.. the correction didnt take that long to start did it? We remain in a Secular bear market. I dont know if we are going below the 08 lows, but i think we going to at least re test them.. Also hard to say when exactly as QE3 might delay the bottom until next year.

I hope the OP kept his powder dry like i suggested.

 

[Pazienza]

lol paz.. the correction didnt take that long to start did it? We remain in a Secular bear market. I dont know if we are going below the 08 lows, but i think we going to at least re test them.. Also hard to say when exactly as QE3 might delay the bottom until next year.

I hope the OP kept his powder dry like i suggested.

What correction is this? Are you talking about last week's buying opportunity? A little shake out, then resume. Just watch.

 

[donaldduke]

What correction is this? Are you talking about last week's buying opportunity? A little shake out

I agree, we only had one 500 day drop in the dow.. pretty lame.

A few consecutive 1000 point down days and we might actually see the bottom.

Also the VIX is only 32 at the moment. Lets see if we can get it to double

 

[shewolf]

What correction is this? Are you talking about last week's buying opportunity? A little shake out, then resume. Just watch.

We will see DJIA break 10,000 within 2 months.

 

[Pazienza]

We will see DJIA break 10,000 within 2 months.

I'd be amazed, but we'll check back at the beginning of October. Either way, it doesn't matter much.