FTSE100 tracker

[Ari]

Feeling that I have enough in 'rainy day' savings, I feel it's time to start putting money into something that will hopefully return a little more than 1% a year, but is reasonably safe in the long term (appreciating that it might go down as well as up in the short term).

So my feeling is to start drip feeding money monthly into a FTSE100 tracker, one where the dividends go back into the account to continue accruing.

Having had a look around, this one seems to offer a good blend of a cheap rate but with a respectable company.

https://www.vanguardinvestor.co.uk/investments/van...

Before I kick it off (and accepting that I really know nothing at all about this) I thought I'd post it up here in case anyone could offer any thoughts that I might not have considered?

[Ari]

rockin said:

The name "FTSE 100 index" makes it sound like 100 similarly sized big companies. It's not. A handful of humungous companies at the top dominate the index, making it very lopsided towards banks, pharmaceuticals and oil.
http://www.stockchallenge.co.uk/ftse.php

My own preference would be a managed fund of some kind, but if I was going to choose tracking the UK market as a main strategy I'd want to track a broader index such as FTSE 350. This could be achieved by, say, splitting your money between well regarded FTSE 100 and FTSE 250 trackers.

Remember,

• FTSE 100 is the top 100
• FTSE 250 is the NEXT 250, not the top 250
• FTSE 350 is the top 350. In other words, it combines both of the two above.

And make sure you do it in an ISA for tax free capital gains and tax free accumulation of reinvested income.

That's really helpful, thanks.

My logic (such as it is) comes from reading somewhere that over the long term it's rare for a managed fund to beat the FTSE100.

Obviously you always hear about the two years Fund X performed spectacularly, and the following two years Fund Y was the one to be in, but of course you only know that after the event.

Overall it seems that the FTSE100 is a pretty safe and steady bet - less of a gamble (but of course less of the big returns you might get if you hit the right fund at the right time).

But yes, maybe I should be considering the FSTE250 as well (and I didn't realise that it was the top 100-350, I assumed it was the top 250, so thanks for explaining that).

As you've no doubt gathered, I'm no shrewd investor. I'm just looking for somewhere to start to build up some cash toward retirement (10-20 years).

[Ari]

xeny said:

Why FTSE 100 rather than whole world?

http://monevator.com/why-a-total-world-equity-inde...

may be worth a read.

That's a really interesting read!

[Ari]

Good advice, thanks. It seems to me that this fella might be a good place to start (via an ISA account of course).

https://www.vanguardinvestor.co.uk/investments/van...

And then I can always diversify into other accounts should I wish in future.

[Ari]

Finally got my Vanguard FTSE 100 Index Unit Trust Accumulation fund up and running. Set up a monthly direct debit for the 1st of each month but decided to stick a small amount in straight away just to watch and see what happened.

A fortnight in and I'm 1.52% up! That sure beats 1% in a year from a savings ISA!

But yes, I do appreciated it can go the other way too. Interesting though...

[Ari]

FredClogs said:

I got out of the ftse tracker in September, personally I'm not optimistic about the ftse 100 until the full ramifications of the brezit deal is done. Like someone said about the ftse 100 is quite heavily skewed toward a couple of dozen very large international corporates.

I have a lot of sympathy with that logic, but my feeling is that I'm dripping in at two or three hundred a month so it's not like I've stuck £50K in and stand to lose half of it.

Plus it is a very long term investment, lets say it does halve - well then my couple of hundred each month will be buying twice as much until it recovers.

As a savings account it's too much of a gamble because you can't necessarily time when you need the money, but assuming there are seperate 'rainy day' savings I feel that long term it is unlikely it will dip and never recover.

(He says from a position of zero knowledge..! )

[Ari]

xeny said:

Pretty much.

Questions to ask yourself are

Am I happy 100% in equities? ie you’re in for over say 5 years, you’re after more return and am prepared to accept volatility in order to get it.

If you think at some point you may want to hold individual companies or funds not from vanguard then using someone other than vanguard as a broker, even if right now you only want to hold vanguard funds, is worth considering.

I found it very easy (and I'm not generally good with this sort of stuff).

I personally can only see individual funds making sense if you have an 'edge', if you feel you're better placed to price those funds than 'the market'. I don't, hence the FTSE100 tracker.

[Ari]

Ari said:

Finally got my Vanguard FTSE 100 Index Unit Trust Accumulation fund up and running. Set up a monthly direct debit for the 1st of each month but decided to stick a small amount in straight away just to watch and see what happened.

A fortnight in and I'm 1.52% up! That sure beats 1% in a year from a savings ISA!

But yes, I do appreciated it can go the other way too. Interesting though...

Now 2.43% up and wishing I'd put a lot more in!

This investing is dead easy with hindsight isn't it? All I need now is a time machine...

[Ari]

I'd be interested too.

[Ari]

Okay so, one month in and the current return is 4.25%!

4.25% in a month versus 1% in a year from a savings ISA! Yes, I know, it can go the other way too.

My first monthly direct debit (£250) went in at the beginning of this month on top of my original £300 and I'm £13.68 ahead.

I know it's only piddling amounts that I'm playing with here, but it is fascinating.

Part of me wants to take a big chunk of savings and put it in, but a bigger part is saying 'don't be stupid, you're basing this on four weeks of having got lucky in the timing of when you went in, you could be £13.68 down in another four weeks'.

[Ari]

fk it - just put £5,000 in. This is my logic, tell me I'm wrong (not that it'll make any difference now, but genuinely interested in more experienced views on this, it's all brand new to me, and I find it fascinating!)

There are three possible scenarios:

1. It does absolutely nothing = I’m £50/year worse off compared to having it in savings.
2. It dives = I lose money on paper but with no short to medium plans to take it back out, hopefully it will eventually come back eventually and in the meantime it’s an opportunity to buy more at a lower price should I choose.
3. It goes up = I win

PS. I'm not trying to be Billy Big bks posting this, I fully realise that £5,000 is not exactly the stuff of high finance. But I am genuinely interested in peoples views, even if it's to tell me I've been an idiot. I see this as a gamble, but hopefully a cautious one. We'll see.

[Ari]

GT03ROB said:

Is a fair assessment!

Thanks, that's reassuring. My concern is that I've bought in at what is currently the very top of the market, but it's so easy just to sit on the sidelines thinking up reasons not to get involved (not that that is necessarily a bad strategy - a fool and his money and all that!)

[Ari]

xeny said:

Ari said:

2. It dives = I lose money on paper but with no short to medium plans to take it back out, hopefully it will eventually come back eventually and in the meantime it’s an opportunity to buy more at a lower price should I choose.

This is IMHO the critical thing to appreciate about the market - until you sell you've not lost - ergo you need to arrange things so you're not a _forced_ seller, which means having some kind of cash "roof fund" and a sufficiently long investment horizon.

Totally. I certainly wouldn't be doing this with money I might need in a fortnight.

[Ari]

MWM3 said:

With 5k in I would be investing in a few funds. Or if you wanted the ease of only having one fund, I would be buying a fund of funds i.e Vanguard Life Strategy 80

That's interesting, spreading the load I guess? I went for the FTSE100 because I figured they were likely to be amongst the most stable of companies, but as I've said, I'm very new and very green so interested in your thoughts.

[Ari]

bhstewie said:

Ari I found these useful for what it's worth http://www.kroijer.com

Just watched the whole series - very interesting and mirrors my thoughts exactly, other than I have gone with the FTSE100 instead of a world tracker. But maybe that is something I should seriously think about.

I guess instinctively a FTSE100 tracker feels (relatively) reassuring, big British companies. But he makes good points about the world tracker.

[Ari]

Personal rate of return -£8.15%

Your investment returned you -£37.58

That went well then!

I know I know, long term...

Anyone got a link to one of those 21 year old Forex traders?

[Ari]

The one I started initially, not opened any others yet - FTSE 100 Index Unit Trust Accumulation fund.

Totally get that it will yoyo up and down, hopefully more up than down. But it is ironic that other than one day early on when it dipped by something like 0.02%, it's made steadily in the month I have had it, and the actual day I buy in with thousands instead of hundreds is the day it goes into reverse!

I guess the fact that it's been going up so steadily should have made me think it can't last - but then if you spend your life trying to second guess these things you never do anything.

[Ari]

Totally. But you know what it's like..!

[Ari]

Not sure whether to continue updating this thread or not as hard to gauge whether it's interesting for people (obviously it is to me, but whether anyone else is interested in how this goes I don't know).

But anyway, as of the end of this week, it rallied after that initial loss and I've ended up £48.60 up, with a personal rate of return since the account opened of +5.36%.

Happy to drop in the odd update if anyone wishes me to, otherwise I'll let the thread die. Been a very interesting 'toe in the water' for me though, and have appreciated everyone's thoughts and advice.

[Ari]

bhstewie said:

Don't, keep it updated as I find it interesting as a "normal person" simply trying to work out how to make their money work a bit harder for the medium to long term future.

I'm especially interested what you'd have in "cash" if you cashed out right now i.e. is it real profit after any fees?

No problem, will do. And that is exactly what I am, so am trying to understand the simplest way of investing, which I think this probably is.

To answer your question - there is no entry charge or exit charge, so no fees for converting it into cash. The only charge is a 0.06% 'ongoing charge', which (I believe) is annual (so having £10,000 invested for one year will cost £6). This is the real beauty of investing this way, it takes the gamble out of trying to find a super successful fund manager that can outperform the market, and reduces to a bare minimum the costs involved in investing (I've no idea how much managed funds cost, perhaps someone can tell us?)

More info here: https://www.vanguardinvestor.co.uk/investments/van...