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What form of investment should I take for my family?
matt berry
Posted: 12 November 2012 17:12:11(UTC)

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Hi Everyone,

I'm completely new to investing and would really appreciate a little advice if anyone can spare 5 minutes.

I'm looking to invest £5k per year for me and my wife and also £2k per year for my 2 year old daughter. Both investments will be long term and I'm willing to take on some risk with both funds.

Please give me your thoughts, but I am planning on a higher risk stratergy for both investments and I'm thinking of utilising an ISA and maybe investing in a global emeging market fund (maybe Aberdeen Asset).

Any advice would be much appreciated.


Posted: 12 November 2012 18:04:17(UTC)

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This question could be debated until the cows come home.
Top of my head, in a nutshell response - emerging markets for your daughter, or a global fund or investment trust (lower costs). Aberdeen and First State (funds) are top performers as is Templeton (trust) long term.
For you and your wife - more complicated, endless possibilities!
£10k per year is 5 x £2k - the makings of a nice, well diversified portfolio.
Diversification is important, as is the compounding effect of dividends, and not least the long term effect of charges.
Tracker funds have very little cost, as do ETFs, investment trusts come next, then unit trusts - but you could go mad considering all the permutations of a proposed portfolio.
It's an educated gamble on the future anyway, so my opinion would be to stick with rated and regarded managers and get stuck in.
Good UK Equity Income fund or funds (to diversify sectors), or growth and income investment trust(s), ditto global/emerging market/flexible income fund/trust, emerging market growth fund/trust, and a fixed income element (such as M&G Optimal or Jupiter Strategic for example).
Happy to enlarge, but I cannot guarantee I know what I'm talking about.
matt berry
Posted: 12 November 2012 21:45:00(UTC)

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Thanks for your reply TJL,

Would you open up a different fund each year in a different area to diverify your portfolio or split the initial investment into a few different funds to begin with?

The Liontrust UK equity fund also looks good on citywire
Posted: 13 November 2012 06:32:49(UTC)

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Even if you have the £12k available to invest right now, there is an argument that you should drip feed your money into the market. You also have the choice of making monthly investments into funds/trusts (normally minimum £50 I think?), or doing it in lump sums - normally minimum £1000. So, you could do either depending on how available your cash is and which funds/trusts you fancy.
Funds are convenient and easy to understand, investment trusts are harder to get your head around but are generally cheaper and can do better for several reasons. Somebody somewhere once said something like; 'funds are sold, investment trusts are bought'.
By Liontrust I don't know if you mean the income fund or special situations fund - I don't know about the income fund, but I have about £10k in the special situations fund and add £250 to it per month by direct debit; it is a top performer, the managers are highly rated and it gets frequently recommended; I think the TER might be on the high side if I remember right, but you could argue it is worth it.
Don't rule out investment trusts, if you have a little bit of time to read up on how they differ to funds - or trackers for that matter (fairly uncomplicated). I invest mainly in funds with a few investment trusts but am moving more towards investment trusts for the future.
It is easy to get bogged down by the decision making process, the more you look the more bewildering it can be, which is why I said make a decision and go for it. My opinion would be identity a fund/trust you like the look of and get started - one step at a time. If you choose a fund/trust with a rated and regarded manager who has a good track record you stand as much chance as anyone of doing alright.
Hope this helps, remember I am just a fellow DIY investor and could be talking rubbish!
Posted: 13 November 2012 17:20:14(UTC)

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.........or Liontrust UK Growth, or UK Smaller Companies - they all seem to be worth considering (see Trustnet article today).
matt berry
Posted: 13 November 2012 21:05:12(UTC)

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Thanks for your help TJL, I'll have a read up on the funds and take action.

Thanks again

Posted: 14 November 2012 08:20:52(UTC)

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Regardless of what you decide to invest in make sure you're not paying for advice you've not had - ie you should not be paying any initial charges (or near 0) and also aim to get a rebate on the fund AMC (up to 0.5%).

For flexibility most people opt for using a platform (fund supermarket) which allows you to easily switch funds - such as fundsnetwork, cofunds, hargreaves lansdown, Alliance trust plus many others. Also buy through a discount broker - cheapest execution only broker is probably Cavendish online at the moment, who operate via Fundsnetwork. For small deals brokers that apply per deal pricing are not generally cost effective. (check out Candid Money website)

If you are confused as to which funds to buy I would suggest you start out with simple low cost index trackers and adopt a straight forward asset allocation strategy in which you allocate a % into each core market UK, USA, Europe, Asia, Uk Fix Interest and then add a bit of spice with a few active funds covering Uk/Euro smaller Companies, Emergying market funds, resources, proprerty etc. That's basically how I started, dripping in a few hundred every month into a number of trackers. The important thing is to almost forget about it and try and get into the mind set that market crashes at this moment in time are your friend and the lower it goes the better.

Look at HSBC, Fidelity, L&G, Aviva if you decide to use index trackers as they are generally lowest cost. However index trackers are not all identical, cost is probably the most important but not the only factor. However anything over 0.5%.

1 user thanked P L for this post.
matt berry on 24/11/2012(UTC)
n cotton
Posted: 14 November 2012 10:36:01(UTC)

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I am a self-taught investor who has learned the hard way by trusting others. I had to wise up quickly after having lost money over several years through professional managers and managed funds.
I can honestly say that the best investments are shares. The best shares are consumer goods companies who have brands with pricing power. Its what has made Buffett his fortune.
I would suggest buying in equal proportion Unilever, Reckitt Benkinser, Diageo, Nestle.
All these companies are either the biggest or second in all their markets. Their profit histories are of consistent growth (extrapolating exceptional items ,sales of businesses etc). They keep going up over time as do their dividends. They are so well spread around the world and generate huge free cash flows that they can grow by price increases and by acquisition -a position most businesses can't.
They area not cheap -but thats because the best quality isn't. If you invest consistently over time you will average out your investment cost and measured over time you should make over 10% per annum or wait for some dips in the market -the US fiscal cliff early next year might be one .
So if you want the safest investments with a broad geographical spread in growing markets I would strongly suggest you invest in these. Its high returns on assets that makes a great company.
I have .For example my Nestle shares bought 12 years ago have triple and the dividend is now 12% of my investment. i have no reason to believe this won't continue.
Am alternative is to invest in Fundsmith -run by terry smith .Invests the same way but you pay him 1% per annum. I have some for my kids.

Hope that helps
Ps Don't buy utilities or energy companies whose pricing power is limited by legislation or commodity prices.
3 users thanked n cotton for this post.
Narendra Dhariwal on 18/11/2012(UTC), normski 2nd on 20/11/2012(UTC), matt berry on 24/11/2012(UTC)
Posted: 17 November 2012 20:47:16(UTC)

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I agree with n cotton.
I am a self taught investor who started out in 1967 buying directly into the market.
Find quality and with a lot of luck along the way, hold for the long term.
Two examples:
In 1980 I bought £ 3,000 worth of Tesco shares when it was a small, cheap and cheerful supermarket.
I have since trebled my original holding by buying during the 80's.
Now my Tesco shares are worth over 400K and give me a good pension.

Secondly, I bought £ 10,000 worth of BAT in 1998 and my holding is now worth just over 200K and also gives me an excellent retirement as I now take the dividends in income.

Incidently my first purchase was £ 800 of Martins Bank shares in 1967 (funded by a legacy from my Godmother).
I turned that into £ 4,600 in 1968 when Barclays Bank took Martins Bank over. That gave me the bug. I did sell my Barclays Bank shares back in the late 90's when they were riding extremely high.

Good Luck
2 users thanked JEL G for this post.
Narendra Dhariwal on 18/11/2012(UTC), matt berry on 24/11/2012(UTC)
Dividend Income
Posted: 20 November 2012 10:10:06(UTC)

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If you truly consider yourself a long-term investor, and I mean really long-term i.e. at least 25 years plus, in addition to opening a Junior ISA you may also want to consider setting up a low cost SIPP for your daughter and deposit up to the maximum each tax year and benefit from the free contributions offered by subsequent governments (get your family involved in funding both accounts; both JISA and 'Kids' SIPP's are great ways to minimise inheritance tax - you see I am thinking really long-term here i.e. trans-generational!)

For more on this read: A Little Savvy Report on Helping Your Children to Get Rich at at http://www.littlesavvyre...r-children-to-get-rich/ - a present each grand parent should consider giving to their adult children for Christmas in order that their grandchildren are spared from years of financial struggles and at the same time become money savvy.

As a long term dividend income investor, I primarily invest in high quality dividend paying companies when they are historically undervalued as well as are financially strong based on our in-house developed dividend share valuation and financial strength investment methods at Dividend Income

Successful long-term dividend income investing is depended on the price at which you buy your dividend paying shares and re-invest those increasing dividends in the same and/or similar high quality dividend paying companies, but only if and when they are historically undervalued. This mean you may not invest in new companies for periods if and when none of such companies are around. Also re-read the contribution, above, of the writer talking about his investment in British American Tobacco.

Instead, many investors buy shares when they are 'safe' and therefore by definition 'expensive'. generally, the end result is that you are unlikely to generate good long-term returns when you invest in shares when they are not priced 'right' (based on our long-term historical undervaluation perspective).

Unfortunately many investors do not focus on the price of shares they buy. Instead they get seduced by the media, etc regarding companies with a low price earnings ratio. Always remember that earnings do not provide you with any information whether a company is truly 'profitable' - cash rich - and, are able to pay and increase its dividends on a regular basis (preferably) above inflation rate.

If you don't need the dividends now, re-invest those dividends on a regular basis in such a way that you incur low trading costs i.e. forget about drips etc if your dividend income is limited as the cost of reinvesting is exorbitant; rather gross all your dividend income and wait for the next historically undervalued dividend paying company to have a temporarily bad period or when there is a substantial drop in share prices because the market is generally selling off, and consider buying but only if that/those company(ies) has(ve) the financial strength to turn around.

Steven Dotsch
Managing editor
Dividend Income

2 users thanked Dividend Income for this post.
normski 2nd on 20/11/2012(UTC), matt berry on 24/11/2012(UTC)
veselka todorova
Posted: 20 November 2012 12:24:15(UTC)

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matt berry
Posted: 24 November 2012 13:40:01(UTC)

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Thanks for all of the great information here everyone.

I'm looking for long term investments here (25 years for my daughter, 20 years for me and my wife).

I now realise the power of compounded interest but I'm unsure of what is the best investment for this now.

How does compounding the growth and dividedend payments compare against compounding the growth of funds?

I like your site Steven Dotsch, and I'll be interested in your service if I do go down the shares route because if I'm honest I have no idea what I would be looking at to pick a good share.

Thanks for your advice everyone,

Posted: 24 November 2012 21:24:50(UTC)

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Hi Matt,
I'm not sure what you mean by compounding the growth?
There is no right or wrong answer when it comes to where or in what to invest - everyone will give you a different opinion (for that is all it is).
Conventional wisdom says a long term investor can take more risks (i.e. emerging markets, small companies for example), but conventional wisdom also advises diversification.
Based upon what you say (and my own experience - I was in your position about 15 years ago), I suspect the decision making process is going to be difficult for you, because the choice is bewildering; shares, ETFs, trackers, funds, trusts, which country, region, sector, in what proportion? - everyone has their own ideas, professionals and amateurs alike.
My opinion would be, as I've already said, identify a rated, regarded manager with a good track record and get stuck in - an investment trust would be a good start.
Happy to enlarge if you wish.
Dividend Income
Posted: 25 November 2012 11:48:20(UTC)

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An introduction on the benefits of dividend re-investment is here at: http://dividend-income-i.../dividend-reinvestment/

Long-term, re-investment of dividends in the same or other (historical undervalued) dividend paying companies allows you to grow your portfolio from which you secure income exponentially, as the example on British American Tobacco in the link shows.

Of course, the best results of such a strategy are secured if one would be able to re-invest ones dividends if one is able to re-invest at a price when the shares of the particular company are below the initial purchase price.
Dividend Income
Posted: 25 November 2012 11:51:54(UTC)

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Hi Matt

Thank you for your kind words.

If you are potentially considering our service, may I suggest you wait a few days before acting as we will be announcing our Christmas discount with regards to our two year subscription early next week.

All the best

Posted: 25 November 2012 12:27:55(UTC)

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Thanks, I understand about compounding dividends, but was confused about compounding the growth? You buy x number of units in a fund or shares in a company and they rise or fall, there's nothing to compound?
Dividend Income
Posted: 25 November 2012 13:04:34(UTC)

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Apologies of being unclear; hopefully not talking 'double-Dutch here being a Dutchman

What I mean: using the income from stocks and shares to 'compound'

You buy additional (the same or other historically undervalued) stocks and shares - so the number of stocks and shares you own start to increase, i.e. compound - see the example in our BAT link previously, than the amount of income start to increase (you own more shares now) from which you purchase more of the same, etc, etc . . . do as long as possible and consider selling only once their share prices has become historically overvalued. Sell and repeat the process with than historically undervalued dividend paying shares, etc, etc. to maximise your long term returns.

Note: we only focus on dividend paying shares, not funds or shares related ETF's, etc. which we can't value properly as they consist of a pool of shares in other companies, (if dividend paying) each with their own historical undervalued and overvalued levels and also each with different financial strengths.
Chart Trader
Posted: 25 November 2012 14:11:27(UTC)

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Let's start with the choices, unless u are prepared to monitor your investments single shares are a no go area, remember safe investments as BP, Royal Bank etc., where investing in safe yielding shares would have used up all your other dividends received for years to come.

Unit trusts > charges will use up most of your first year's dividend so unless u are willing to forgo the first year's dividends, maybe another no go area.

Investment Trusts that are managed to provide a progressive dividend may be an option although whilst u will receive the dividends yearly the capital invested will fluctuate could and will most probably decrease more than the dividend. So once committed only for the long haul, so for any capital that u will not need to touch.

Lets look at the Edinburgh UK tracker

Edinburgh UK Tracker Trust PLC 8.90 7.90 7.85 10.35 8.65 7.65 6.50 5.70 5.40 3.38

the last eight year dividends paid, u will notice the progressive dividend policy until four years ago when they had to decrease the amount of dividend paid before starting to progressively increase the dividends. Current yield 3.38%, timing is important if u had been investing at the bottom of the market u could have locked in a yield of 5% which should progressively increase.

Another thing to consider, lots of Investment Trusts are still not got back to the price they were in 2007 and some not back to the prices in 2001, so timing is important, unless u are lucky with your entry point. If u want to receive the dividends to spend maybe a way to go, depends on your view if interest rates will return to normal in a couple of years, u may have left it too late to buy with the view of re-investing the dividends.

U will find generally that any Investment Trusts that pays regular dividends and increase their share price the yield is lower than the less well managed trusts, although a well managed trust can become next years less well managed trust and vice versa.

Good luck with your search, u will find it difficult as most safe sources of income have already been bought up and the returns now are dire.


I've posted the above on the wrong link, but my answer to your question would to be to invest in a general Investment Trust that has a progressive dividend policy and re-invest the dividends in the same share when u have enough to invest. This way u will receive dividends when the market is falling and u will be able to take advantage of cost price averaging.
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